Can a person sue over a check where a stop payment was placed?

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Can a person sue over a check where a stop payment was placed?

In May, we wrote a check to a friend for $500 – as a loan – as the check also memo’s. We were contacted by his family and asked not to loan him any money, as he has become a severe alcoholic. On their advise, we put a stop payment on the check within 2 days. He eventually found someone to cash the check for him. That person is threatening to sue us, unless we compensate him the funds he lost. He states that we are only able to put a stop payment on a check in the event that it was stolen or fraudulent etc. He should be seeking compensation from the guy who received the funds not us.

Asked on September 21, 2010 under Bankruptcy Law, Utah

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Stop payment laws in each state differ but the bottom line is those laws concern individuals who essentially to pay for items with checks and either have no intention of paying at all or know that are insufficient funds in the account.  In your situation, you are loaning your money with the intention of it being paid back (arguments may differ in a gift situation).  When you found out from the recipient's family that the money would be used for less than honorable intentions, you had every right prior to acceptance by the individual (I would argue prior to cashing) that you intended to stop payment.  Did your bank receive your request to stop payment prior to the check actually being cashed? If so, and your funds have not been returned to you, I would file a complaint against your bank with the agency who regulates it.  In terms of the person who cashed it, if that person had it cashed fraudulently, you can find out by looking at the back of the cancelled check on who cashed it and file a complaint with the attorney general in your state.  Your contract extended to only the recipient in this situation.  You did not envision this person attempting to cash it with a third party.  Even if you did envision this scenario, the check casher should be suing the borrower, not you. 


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