Question

Following the devastation of Hurricane Katrina, numerous contractors came from out of state to repair the damage in the Mississippi Gulf Coast. One such contractor, Bret Gibson, leased a storage space from Paige Electric, LLC. Gibson accumulated over $80,000 in fees for the storage space.

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In June 2006, Gibson tendered an insurance check he had received as payment for working on a resident’s home. The check was in the amount of $83,972.08 and was issued by HomeEq Service Corporation, a corporation owned by Wells Fargo. The tendered check was enough to pay Paige Electric in full.

Before accepting the check as payment, Paige Electric contacted the original party to whom the check was made out to and verified that it had been properly endorsed and that it was negotiable. Paige Electric deposited the check into its Bancorp checking account the same day Gibson tendered it.

Five months later, HomeEq submitted an affidavit alleging that the check in question had been wrongfully endorsed and Wells Fargo contacted Bancorp. Bancorp placed a hold on Paige Electric’s checking account but eventually released it after rejecting Wells Fargo’s forged-endorsement claims.

Two years later, Bancorp placed another hold on Paige Electric’s account, and, in March 2008, Bancorp deducted the entire amount of the check from Paige Electric’s checking account. Paige Electric sued Bancorp, HomeEq, and Wells Fargo in 2010. Although the first case was dismissed for want of prosecution, a subsequent suit filed in 2014 wended its way to the appeals court. Identify the warranty liabilities each party has, if any, and who is liable to whom. How did the appellate court rule and why? [Paige v. Wells Fargo and Company, Miss: Court of Appeals (2017).]

Answer 1

Q1) Identify the warranty liabilities each party has if any, and who is liable to whom.

Solution:-

• In the first instance, Gibson was liable to Paige Electric LLC for an amount of $80,000 in fees for the storage space. when Gibson received an check it was tendered to the Paige electric.
• Paige electric before accepting the check as payment, it contacted the original party to whom the check was made out to, and verified that it had been properly endorsed and that it was negotiable.
• At that moment if the check endorsement is questionable it should have informed the Paige electric long before but coming back after 5months is a mistake on the Wells Fargo side.
• In this case, wells forgo are liable to Paige Electric, and Bancorp should not have deducted entire amount from the checking amount in that way now Bancorp is also liable to the Paige electric.

Question-2 How did the appellate court rule and why?

The appellate court has ruled out the case as it required more evidence to prove the point. there was no strong evidence to sued Bancorp, HomeEq, and Wells Fargo. it just another claim but in 2014 Paige Electric have gathered more information and evidence so it made its way to the appeals court.

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