December 2001

MEMORANDUM TO CLIENTS

BOUNCED CHECKS: TRIPLE GRIEF FOR WORTHLESS RUBBER

How many times have you received a check back from the bank with the dreaded stamp AInsufficient Funds@ or AN.S.F@? Have you once again been stiffed? Did you know that the penalty for writing a bad check can be three times the value of the check - in addition to the amount of the worthless check?

Up until now, most associations believed you accepted a post-dated check at your own risk. That may no longer be the case, in light of two decisions from different appellate courts dealing with worthless checks. In Alvarez v. Alvarez, 26 Fla. L. Weekly D2506 (Fla. 3^rd DCA, October 17, 2001), the Third District Court of Appeal recently held that the maker of a worthless post-dated check was liable not only for the amount of the worthless check, but for triple the amount of the check. As part of a real estate transaction, Felipe Alvarez gave Elsa Alvarez, who was unrelated to Felipe, but coincidentally had the same last name, a $34,000 post-dated check. He testified at trial that he told Elsa Alvarez he had insufficient funds in his account, but he intended to fund the check with his share of the profits when a house on one of the lots was sold.

The Alvarez decision was based on Florida=s bad check statute. Section 68.065, Fla. Stat. (2001) provides that the payee of a worthless check may bring a civil action against the maker if the maker does not pay the amount of the check in cash within 30 days following a written demand. The maker is the person who writes the check and the payee is the person to whom the check is written. If the payee wins, he is also entitled to three times the value of the worthless check.

At trial, Felipe Alvarez testified he told Elsa Alvarez, AI don=t have the money in the bank. I=m giving you a check for you to have this like an asset.@ The appellate court did not buy Felipe=s argument that he never intended for Elsa to negotiate the check. The court explained, if Felipe really believed that Elsa would never cash the check, then the check was basically a worthless piece of paper, and would not be an Aasset.@

The second decision applied the same law with a vengeance. As pointed out in a recent decision by the Fourth District Court of Appeal, the maker of a bad check can avoid triple damages by claiming economic hardship, but the defense is not automatic. In F & A Dairy Products, Inc. v. Imperial Food Distributors, Inc., 26 Fla. L. Weekly D2548 (Fla. 4^th DCA, October 24, 2001), the appellate court ruled the trial court abused its discretion in waiving the triple damage penalty because the maker did not raise economic hardship as an affirmative defense and did not present any evidence that payment of the damages would be an economic hardship. The appellate court reinstated the triple damage award.

Section 68.065(1) allows the trial court to waive all or part of the statutory damages if the court or jury determines the failure to satisfy the dishonored check was due to economic hardship. There is, however, some question whether the economic hardship defense is limited to businesses, as opposed to individuals who may wish to raise it as a defense. Although the reported appellate decisions deal with businesses, it is likely a court would apply the statute to individuals who can satisfy the test.

Whether an association decides to pursue triple damages from owners who Abounce@ their assessment checks should depend on the particular circumstances. Does the owner have enough money to pay not only the amount of the bad check but three times its value? Generally, associations choose to pursue delinquent owners through the lien assessment procedure in order to avoid the delay of pursuing the bad check. The bad check statute provides that an association must first send a 30 day notice, by certified or registered mail, to the maker of the bad check.

If you do decide to pursue the bad check, just be aware that the maker may be able to avoid triple damages by claiming economic hardship.

SECURITY GATES: IS IT TIME TO UPDATE YOUR MODEL?

The last thing the association wants is to have a child killed or maimed by a malfunctioning security gate. The Consumer Product Safety Commission has issued a warning about the dangers of automatic security gates. Why? Gates trap, injure and kill people. According to the CPSC, thirty-two people have died since 1985 from accidents related to the sliding or swinging gates, twenty of which were children.

Underwriters Laboratories, the company that provides safety certifications, adopted a new gate standard last year. To be certified, a gate is required to have a sensing device that will reverse the gate if it hits an obstruction when opening or closing. Many older gates do not have sensing devices or reversing mechanisms. This may be the time for associations to have older gates replaced with new models or updated with sensors meeting the current safety standard.

FIRM NEWS

Happy holidays. In observance of national holidays, the firm=s offices will be closed on Monday, December 24 and Tuesday, December 25, 2001, and Tuesday, January 1, 2002. Please note the firm=s offices will also be closed on the afternoon of Tuesday, December 11, 2001. May the new year be a year of peace for all.

8 2001 by Gelfand & Arpe, P.A.