Wondering how other jurisdictions are dealing with two party checks, specifically, payroll checks that are being cashed at grocery stores. The employee gets the cash, the store is left holding the bag(pun intended). Usually a Mom and Pop operation to whom $500 is a big deal. I am assuming they are a holder in due course and I can prove who wrote the check.
Any thoughts would be appreciated.
Mike Hartman
Scurry County Attorney

[This message was edited by mhartman on 01-21-03 at .]

Mike, we accept two-party hot checks, but only if we have identification on both the hot check writer and the intervening party. If the actual writer has other outstanding hot checks,we may try to collect on the check through prosecution of the others. In any event, we may try to collect with the merchant understanding that we likely will not prosecute without adequate identification.

Rick Miller
Bell County Attorney

Rick, that is typically my position as well. Setting aside the ablility to ID the check writer etc. I am dealing with a defense lawyer that is raising the issue of it being a payroll check and therefore not issued contemporaneously with the exchangeof the goods or services. I have been unable to find a good answer to that argument. Also curious if you accept rent checks, i.e. payment of rent for a month, paid at the beginning of the rental period, by the time the check has been run through and the notice letter sent the month has almost past and the renter has effectively stolen that service.
any thoughts?
Thanks
Mike

Mike, Paragraph (a) of PC 31.06 accommodates two-party hot checks. The check was originally written contemporaneously for services rendered, and the original maker is the one with insufficient funds. You might also consider a theft of services, rather than a hot check charge. Also, it can still be a Class C Issuance, and you can recoup restitution.
With respect to rental services, we require the landlord to verify that the check was for a full rental period. If only a partial period is covered, we file it as a Class C Issuance. If no period is covered, we do not accept the check.
Hope that helps.

The giving of a hot check after completion of the service in payment for a service that the actor knows is provided only for compensation should be prosecuted under Sec. 31.04(a)(4) and not (a)(1). The check was not used to secure performance. See e.g., Gibson, 623 S.W.2d 324. Rather, it was the express or implied promise of payment. The check is evidence of the actor's knowledge of when payment was expected and that he understood compensation was to be made, but the only fact which must be proved is that no payment was made after receipt of notice demanding payment. This offense is even easier to prove than standard theft because mere failure to pay is all that is required- no other form of deception or pre-existing intent not to perform need be shown. The grade of the offense is determined according to the value of the service, whether its a full month, partial month, whatever. I am not certain permitting use of a residence qualifies as a "service" though. I think all we have on that score is an attorney general opinion. H-356 (1974).

I think (a)(4) could probably be used even if the check was given before performance. I realize this statute essentially makes the failure to pay a debt a crime and gives greater protection to purveyors of services than to sellers of goods, but its on the books and should be enforced and utilized.

The fact that the original payee does not take the check directly to the drawee bank and learn for himself that it is worthless should not change the liability of the drawer (though it makes the proof slightly more convoluted). The case has to be made from the viewpoint of the original payee (was property or service belonging to that person appropriated unlawfully, even though a third party may have made them whole and be the one actually holding the bag). The party who cashed the check and the original payee are the alter egos of each other and there should usually be no difficulty in identifying them. Getting the payee to cooperate in the prosecution is, of course, another story.

In theory the taking of a two-party check should be no riskier than any other. In fact, one could argue your position is improved because now you have two persons who are liable to pay. See sec. 3.414 and 3.415, UCC. I certainly do not think a prosecutor should have a blanket policy of refusing a theft prosecution just because an indorser has become a necessary witness.

Payroll checks that bounce are very difficult to prosecute. Do you file on the payroll clerk who is told to prepare the payroll checks but is unaware that the company is temporarily short of funds? Do you file on the owner who did not sign the checks? I seldom touch any of these cases for these reasons. I warn my merchants not to take two party checks.

Once again thanks for the imput. On a slightly related matter, what is your position on unreturned video tapes? I usually take the case but will only go after the vaule of the tape, not the past due rentals as requested by the store. Same applies on rent-to-own furniture that is not returned and payments have stopped. The purchase price is the figure I use, not the interest that the store would have realized if the contract was paid in full. Is anyone else accepting these cases or are they being refused as a civil matter?
Mike

Generally the value of the service of renting the tape/DVD for a specified time is paid up front. Thus the value of that service has not been stolen (assuming good funds were received by the owner). But the renter usually also promises to pay an additional amount if the tape/DVD is not returned at the end of the rental period. Does this create an extended rental period or new "service"? Does the mere failure to return on time mean this service was secured by deception? If you choose the (a)(3) theory instead, when does the continued exercise of control become without consent of the owner, since late return (for a price) was contemplated from the start. The value of this service would seem to exceed the value of the tape/DVD since it is tied to the depriving of the owner of the use of the property in further rentals. To use the value of the tape as the basis for grading the offense, the case must be prosecuted under 31.03 rather than 31.04. That does not mean you could not choose to limit restitution to a lesser amount, but value of the service and not the value of the property is what you would have to prove at trial. (a)(4) again becomes a catch-all in this situation. The actor secured the performance (an extended rental period) by failing to timely return, he agreed at the time of the rental to provide compensation, and he failed to pay after notice. This theory eliminates the need to prove lack of effective consent, that the actor was the one actually "holding" or controlling the property, and so forth. If you want to start a collection agency, (a)(4) is a wonderful tool. The people who got it passed are likely to demand its use. All victims of these "offenses" should at least be made aware that they can now collect attorneys fees if they pursue their civil remedy. Sec. 134.005(b) Civ. Prac. & Rem. Code.

[This message was edited by Martin Peterson on 01-23-03 at .]

Martin, thanks for the help. I have always been able to resolve these issues by agreement but have reached a point where I might have to proceed further and was not sure which way to go.I don't believe my office should be used as a collection agency but like to help the merchants when there is a legitimate case to be filed.The only real problem I have with this rental concept is the merchant who is not diligent in pursuing the delinquincy themselves and the rental amount is a hundred or more dollars on a video tape you can buy at walmart for $10.00. I understand that it is the loss of future rentals that is the real damage, but if we are successful at collecting those amounts, there is no incentive for the store to pursue on their own behalf, especially if there are 15 of the same tapes sitting on the shelf not beig rented.
Lastly, the rent-to-own furniture stores are the worst. Set the retail price of furniture well above market value, receive 85-90% of that price in payments and then want to file on the renter for the full amount of the restitution when the payment is missed and the property is not returned. I don't know at what point that becomes a civil breach of contract instead of a crime.
I hope these issues don't seem petty. In a one man office in the middle of nowhere I seldom get feedback on these type questions and most other small offices I talk with struggle to reslove them as well.
Thanks again,
Mike

Petty? Nope. These questions arise almost every week. And how you handle these cases could influence future elections. My only rule of thumb would be to examine each case individually and be prepared to explain as best you can why its not prosecutable. As you will observe, a far greater percentage of us rural prosecutors participate in this forum than our urban counterparts. There is a good reason for that.

1) In Houston, we do not categorically reject 3rd party checks, but we do require that the complainant track down the person who dealt with the maker of the check so that we can establish ID and the nature of that transaction.
2) Payroll checks are a problem from the ID perspective and also because in a company of any size, there is a time lag between the end of a pay period and the time a paycheck is expected. In effect, the employee is providing his services "on credit". Even if a check given today is bad, we have a big challenge in proving the employer intended last week not to pay for the work. 31.04(a)(4) [obtaining services + failure to pay after demand] would often be the only way to prove such a theft, and I'm not willing to be the first into that constitutional bog. All that said, we do file payroll checks from time to time-especially if the boss pays the staff and directs them to a specific Mom & Pop check cashing location. Deception and intent are pretty clear there, and the victims are Mom & Pop.
3)In property rental situations, we're looking mostly for the first month's rent check to be bad. In that situation it is clear that the deception in the check induced the rendition of the services[or the securing of the execution of a document affecting property].
4) The main thing is to look at each case. If it smells like a theft, there is usually a way to file it.

There you go. Just accuse them of being underrepresented or lackadaisical or timid and you can get a another big city prosecutor to join the group.

John, if you don't know Martin, you might not know he was complimenting you for joining the user group as a contributor (I think). Thanks for your input. Your office has probably seen it all when it comes to hot checks.

Congratulations, John B., you have temporarily, probably very fleetingly, turned into a 727 (translation: jetsetter). For me, on the other hand, posting something to this board is as easy as 1, 2, 3, er, make that 4, 5, 6. Posting something that makes sense is more difficult.

Yes, indeed, Mr. Boone, I was complimenting you and anyone else who will participate and show us the money on this board.

The civil law requires a party to take reasonable efforts to mitigate damages. Certainly in the case of the video owner that should be true. Once the rental value exceeds the replacement cost, the clock should not keep running indefinitely. After all, the thief can argue as soon as it became apparent the extended rental period was going to be beyond that originally contemplated by either party, the original owner had a duty to buy a replacement video. Furthermore, under the law of conversion, the thief becomes the owner of the property once he pays for it (and not the value of the continued deprivation). Gillette, 139 S.W.2d 646.

Pretty much the same thing ought to apply to the furniture owner. What I am saying is I like your idea of making the replacement cost equal the value of the service regardless of what the rental contract may say. That really serves to keep us out of the contract enforcement business.

That is my thought process. You just stated it more eloquently than I ever could. I usually make the officer go back and include in the report the retail price of the items in question and how much has been paid to date. After that it becomes a balancing act criminal V. Civil.

CCP, Article 42.037 'Restitution' gives some support to Martin's method of calculating restitution in the rental theft area. A "black letter" reading of section (b)(1) indicates that if property has been lost, and its return is impractical or an inadequate remedy, then the court may order restitution of the value of the property on the date of its loss. The article goes on to say that the order of restitution "shall" be as fair as possible to the victim, but I don't think that any of us could argue with a straight face that such a fair order includes more restitution than the complainant could get in civil court.

I am not sure we can say the "victim" could not recover more in civil court on a contract theory, but the tort theory and equitable principles should govern the amount of restitution in the criminal context. Otherwise it is pretty plain that we are attempting to make the breach of a contract a crime. My motto is "if you've taken the time to get a signature on the dotted line, you've taken the time to get taken."

About the time of this thread, my article on prosecution of hot check cases appeared in "The Prosecutor" (Vol. 33, No. 1 at page 26). I took the premise that theft by using a check depended on proving deception was used in promising performance that is likely to affect the judgment of the complainant in the transaction which performance the defendant knew would not be performed and/or which performance the defendant did not intend to perform at the time of the promise. Anyone handling these cases should read Leon, 102 S.W.3d at 783, 784. There the court said the deception was "creating a false impression that appellant was purchasing [the stolen property] with the check in accordance with a cash account," i.e. under sec. 31.01(3)(A). That should be quite a bit easier to prove. Furthermore, the court said "evidence of presentment, dishonor, notice and failure to pay may be utilized as a general assessment of the proof of culpable intent and mode of deception." The court further noted in support of the finding of guilt that "the checks were never made good and the drill bits were not returned to [the seller]." I believe this decision measurably improves the chances of successfully prosecuting hot checks as theft.