Based on Pelican National Bank v. Provident Bank of Maryland, 381 Md. 327, 849 A.2d 475 (2004): Hartford Mutual Insurance Co. issued a check for $60,150 payable to "Andrew Michael Bogdan, Jr., Crystal Bogdan, Oceanmark Bank FSB, the Goodman-Gable-Gould Company." The check was written to pay a claim related to the Bogdans' commercial property. Besides the Bogdans, the payees were the mortgage holder (Oceanmark) and the insurance agent who adjusted the claim. The Bogdans and the agent endorsed the check and cashed it at Provident Bank of Maryland. Meanwhile, Oceanmark sold the mortgage to Pelican National Bank, which asked Provident to pay it the amount of the check. Provident refused. Pelican filed a suit in Maryland state court against Provident, arguing that the check had been improperly negotiated. Was this check payable jointly or in the alternative? Whose endorsements were required to cash it? In whose favor should the court rule?

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Jointly Payable vs. Payable in the Alternative

Note that the check was made payable to "Andrew Michael Bogdan, Jr., Crystal Bogdan, Oceanmark Bank FSB, the Goodman-Gable-Gould Company " with no connecting words or symbols. An ampersand or another connecting symbol or grammatical indication is required to specify that a check must be paid jointly. As a result, the terms of the check's payment were ambiguous.

Check Endorsements and Ambiguity

The court found that the Bogdens and the agent to whom the check was also made payable were justified in cashing the check in the alternative. The court also found that it was acceptable for any one of the people to whom the check was made payable to endorse the check. Therefore, the Bogdens and the agent were within their right to endorse and cash the check without any additional endorsements. If the check had been clearly made out to the Bogdens and other parties, as illustrated through the use of connecting words or punctuation, the check would have been required to be endorsed by all payable parties. Due to its ambiguous terms, only one of the payees listed on the check was required to endorse the check.

The Court's Ruling

In this case, the court ruled initially and on appeal in favor of Provident. You could argue that the court's decision to issue a summary judgment in favor of Provident Bank of Maryland was the correct one because, although the check was made payable to multiple parties, the law is ambiguous when it comes to specific restrictions as to who may cash a jointly payable check. In Maryland, only one payee on the check is required to endorse it to be cashed unless otherwise specified. UCC 3110(d) states that the payment terms of checks made payable to more than one party are ambiguous unless it is clearly specified that the check is not payable in the alternative. For example, a check that is made payable to "John Smith, Hellen Smith" is ambiguous and may be paid in the alternative or jointly, while a check written to "John Smith & Hellen Smith" must be paid jointly. In other words, the legal burden to specify the terms of who could cash the check did not belong to Provident.


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