Diaz vs Manufacturers Hanover trust Co. Essay Examples & Outline

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Diaz v. Manufacturers Hanover trust Co.


Diaz v. Manufacturers Hanover trust Co. is one of the most famous cases that deals with negotiable instruments. Diaz was given two certified Checks that became lost. The bank that the checks were drawn refused to honor any of them and argued that they be reissued until the Diaz placed an indemnity bond in twice the amount of the original checks. Diaz had posted the sum of 37,000 dollars as security for a bond in behalf of a defendant of criminal proceedings. When a criminal proceeding concluded, Diaz demanded the money back from the bail bondsman (Newman).

Newman then went ahead to draw two checks in the amount of 12,000 dollars and 25,000 dollars drawn on the defendant, Manufacturers Hanover Trust. The checks then got lost, and the Diaz then notified Newman, who in turn notified Manufacturers Hanover trust who stopped payments on the checks (Casenotes, 2008). Diaz then proceeded to contact the defendant who in turn informed him that that the bank would not honor the replacement checks issued unless an indemnity bond posted that was twice the amount of the original checks.

The query in this case was whether the court may order payment on a lost negotiable instrument without the requirement of the beneficiary to post security as a prerequisite in the Uniform Commercial code Section 3-804 (Casenotes, 2008).The Court argued that when a bank certifies a check it accepts it and consequently, it is the obligation of the court to pay the amount drawn. However, the UCC section 3-804 categorically states that ‘the court shall require security, in an amount fixed by the court that is not less than twice the amount that is allegedly unpaid on the instrument.

Therefore, for this reason, the court stated that if it was to determine the amount of security to be posted, it was the express purpose of the legislature was to make the security mandatory rather than discretionary. Therefore, because the legislature had considered the matter and corrected the decree in order to make the furnishing of security not only mandatory but also it went ahead to establish a minimal total of not less than double the amount that was allegedly on the instrument. For this reason, the court had no doubt but to support manufacturers Hanover Trust Co in their bid to ask for a minimal amount that was not less than twice the amount paid on the instrument (Casenotes, 2008).

In conclusion, the court stated that the legislative history of the section of the code had set the requirement as well as the limit of the amount to be paid. However, the court noted with great concern that the amount of time the security shall remain posted was not clear. Therefore, it was the thoughts of the court that the further revision of the section of the UCC was necessary, or the legislation that dealt with the valid life of certified checks should be enacted. The Court for this reason had to support Manufacturers Hanover Trust Co. to be right because of the security that was mandatory and had to be twice.

References
Casenotes. (2008). Casenote Legal Briefs Commercial Law: Keyed to Warren and Walt. Aspen Pub.