Bad Check Prosecution Basic Bad Check Law
Newspaper Articles Regarding Bad Check Prosecution
WHEN CAN BAD CHECKS BE PROSECUTED UNDER THE TENNESSEE WORTHLESS CHECK LAW?
Not every check that bounces can be prosecuted as a criminal bad check.
The Tennessee Worthless Check law [TCA 39-14-121] applies when a perpetrator receives something of value from a victim in exchange for a check given at the time the goods are surrendered, with the perpetrator representing the check to be good at the time of the exchange and the perpetrator knowing that the check will not be honored when it reaches the bank, due to insufficient funds or a closed account.
Imagine this scenario:
Perpetrator approaches the cashier at Grocery Store with a sack of groceries.
Perp: "I’d like you to let me take these groceries home, please."
Grocer: "Certainly, but only if you pay me for them. We do not operate on credit here; you must give me cash. Fifty dollars, please."
Perp: "I don’t have any cash on me, but instead I will give you this check for $50. It is just as good as cash."
Grocer: "Alright, on that basis I will let you have the groceries in exchange for that check."
If the bank in fact does not honor the check, due to a closed account or insufficient funds, the Grocer is "out" the bag of groceries because he relied on the check being good when he surrendered his property to the Perp. And if the Perp knew the check would not be honored, he is guilty of a crime for obtaining property by representing a worthless piece of paper to be as valuable as a $50 bill.
NO CRIMINAL PROSECUTION ON CHECKS FOR PRE-EXISTING DEBTS
If the perpetrator received the goods or services sometime in the past and makes a payment on his debt with a bad check, it is not a criminal matter. The victim is not "out" anything from surrendering anything in reliance on a fraudulent representation of the worth of the check. Essentially the perp owed a payment and just still has not made it, and can be sued or whatever as if he had made no payment at all.
NO CRIMINAL PROSECUTION FOR POST-DATED OR "HOLD" CHECKS
If the perpetrator asks the victim to hold the check for a few days before depositing it, and the victim agrees, the case is no longer a criminal matter. This amounts to the perpetrator saying , "This check is NOT as good as cash today. I plan to make it good, and you will be paid for your merchandise in the future." THAT is a debt, a civil case. The same applies if the perpetrator gives and the victim accepts a post-dated check. The legal significance of post-dating is that the check is not expected to be good until the date on the check. If the check bounces it is equivalent to the perpetrator not honoring an IOU.
For the above reasons, checks written in so-called "cash advance" transactions (where money is loaned in exchange for a post-dated check, which is returned on payment) are not covered by the criminal bad check law. There is essentially an understanding between the parties that the check is not good on the date the money is received, and that it is not expected to be good until the future time when it is post-dated. The check is essentially an IOU, or collateral for the loan.
The business can indeed sue civilly to collect the loan. But threats to file criminal charges are not appropriate.
(In the past, criminal charges on such checks have gotten filed without the D.A.’s knowledge or approval. They have been promptly dismissed when brought to the attention of this office.)
Al writes a check to Bob. Bob endorses the check to Grocer to buy a bag of groceries. The check bounces. Who can be prosecuted criminally?
Bob can be prosecuted criminally if he knows Al’s check is no good. Depending on the relationship between Bob and Al, it might or might not be possible to prove this knowledge.
Al might be prosecuted criminally but it would depend on the circumstances under which he wrote the check to Bob; that is, the check would have to have been for something of value received at the time, and would have to have been represented to be good at the time. In a sense, the middle party, Bob, is the victim of the bad check writer, even though the harm has fallen on the last person to receive the check. Before prosecuting Al, the Grocer would need to know the above information from Bob, and would need his cooperation in court as a witness. Due to these complications the District Attorney’s office strongly discourages merchants from accepting third-party checks.
Of course in the above scenario both Bob and Al can be pursued civilly on the check; the Grocer is not totally without remedy for the groceries he is "out."
A bad check is a criminal matter only when the perpetrator passes it knowingly or with fraudulent intent. This intent is one of the elements which must be proved in court. In the real world many people occasionally bounce a check due to carelessness, sloppy arithmetic, or various other innocent accidents. This does not excuse them from making the check good so that the victim is not "out," but the matter is nevertheless not criminal unless it is established that the perpetrator knew when he passed the check that it would be no good, and that he did so intending to defraud the victim.
The Tennessee Worthless Check statute provides two handy ways to show in court that a checkwriter had fraudulent intent or knowledge of a check’s worthlessness at the time he passed it:
(1). If the perpetrator had no account at the bank at the time he passed the check; or
(2). If the perpetrator does not come and make the check good after being advised it has bounced for insufficient funds. In effect the perpetrator is given the benefit of the doubt that an insufficient funds check was an honest error; failure after notice to make the victim whole (that is, keeping the property, unpaid for, while the victim is still "out") erases that benefit of the doubt and creates an inference of fraudulent intent. The particular requirements of the notice are discussed below.
SENDING NOTICE OF INSUFFICIENT FUNDS CHECKS
The Tennessee Worthless Check statute states that fraudulent intent can be inferred if the bad check writer does not make the check good within ten (10) days of receiving notice of the problem. [Note that this applies if the check was presented to the bank and payment refused within 30 days of the writing of the check.]
The statute further states that "notice shall be in writing, and, if the address is known, sent by certified mail with return receipt requested, and addressed to the issuer or passer at the address shown: (1)On the check or similar sight order if given; or (2)If not shown on the check or similar sight order, on the records of the bank or other drawee if available."
[Note that it is a matter of some debate whether the notice must be by certified mail, rather than regular mail, and if either is legal which is preferable. There is a presumption in the law that people receive the regular mail sent to them, but this could be rebutted in court by the Defendant or a household member testifying the mail never arrived. With certified mail there is clear proof the Defendant received his mail, but also clear proof he did NOT if he is shrewd enough not to claim his certified mail. On balance it is probably better to go the certified route, and that is what this office recommends.]
Note further that TCA 39-14-122 provides immunity from liability for false arrest for anyone taking out bad check charges if the statutory procedures, including use of a CERTIFIED letter, have been followed.
See this suggested form for a notification letter.
The statute provides that there is no need to send notice to the checkwriter when the check is dishonored for the account being closed or non-existent. This supposes, apparently, that writing a check on a closed account cannot be an honest error, as can happen with insufficient funds checks, so there is no point in offering an opportunity to fix a mistake.
The statute in fact may not be in touch with contemporary realities. It is fairly common nowadays if there are certain problems with a bank account for a bank to close down the account without prior consultation with the customer and then mail him a notice. The customer goes on writing checks on the account, innocently unaware of the problem. Checks bounce, merchants, relying on the statute, file charges with the court without bothering to send notice, and the customer may well be found not guilty by showing he was unaware of problems with his account when he wrote the check.
This problem can be avoided by sending a notice letter in closed account cases just like in insufficient fund cases. But insofar as this involves not inconsiderable trouble and expense the District Attorney’s office neither requires nor recommends such a notice, but rather points out that it might serve as a bit of extra weight in a case where an assured conviction is especially desirable.
It is fine for merchants to assess a charge or fee against customers who pass bad checks, assuming notice of the fee is posted so that customers will be aware of this possible consequence as they write their checks. It is also fine for this fee to be included in the notice of bad check and demand for payment sent after a check bounces. However, if the customer comes in a timely fashion and makes good for the face amount of the check, without paying the service charge, then he cannot be prosecuted criminally for the check. The theory is that he has corrected his "honest error" and shown that he did not have fraudulent intent; the service charge not being part of what he contemplated at the time he passed the check (Recall that all of criminal law is about the circumstances and the Defendant’s intentions at the time the check is passed.)
It should be noted that if a criminal charge is filed and the check writer is found guilty of the criminal offense, the judges in Anderson County have traditionally ordered Defendants to pay the check AND the service charge.
It may or may not be a criminal matter when a check is dishonored because the writer put a "stop pay" order on it.
"Stop pay" is recognized in the Uniform Commercial Code as a legitimate procedure in cases where the purchaser of goods or services discovers after payment that what he has purchased is defective, or not what the contract called for, or otherwise such that he should not "have to" pay. Of course one would expect the purchaser to also complain about the problem or return the goods.
On the other hand, if there is no problem with the goods sold and the purchaser stops payment on his check so that he can obtain goods without paying for them, such action is criminally actionable.
It is suggested that victims of "stop pay" situations call the District Attorney’s office to discuss the specific facts of the case. The relevant facts include:
- Has the check writer complained that the goods/service were not what he bargained for? (And is such complaint made in good faith, even if the victim disagrees with its merits?)
- Has he returned or kept the complained-of merchandise, or given the merchant opportunity to fix any deficiency?
- Does the merchant have any verifiable information that the check writer’s bank account was such that the check would have bounced anyway, such that any "complaint" about the goods/service is in fact bogus.
Again, a stop pay order entered solely to defraud a victim can be criminally prosecuted like any worthless check case. But if the stop pay was entered by the check writer in good faith for legitimate reasons, the problem must be worked out civilly between the parties, and with civil attorneys and lawsuits if necessary.
When the District Attorney’s office tries a bad check case in court, it is always necessary to put on witnesses to the essential facts: that the Defendant passed the check, that is was for contemporaneously delivered goods or services, that the check was returned dishonored by the bank, and that the writer did not make the check good after notice, if applicable. If the transaction merely involves two individuals, the receiver of the check is probably competent to testify to all that information.
What if the victim is a large store, with scores of sales clerks and various other personnel who handle bank deposits and collection matters? The general rule against hearsay testimony would suggest that all these persons must be brought to court to testify to their particular piece of the picture. This of course would be grossly inconvenient, if not impossible.
This problem is solved if regular records are kept concerning bad check transactions, and one employee is designated the custodian of these records. Ideally this employee would be the one who receives the bad checks from the bank, sends the notices, and keeps the records regarding these matters, the contacts with the check writer and any payments. But the designated Custodian of the Records is legally allowed to testify to the contents of records, even if they were made by someone else.
There is no legally prescribed form for the records. Many merchants start with a sheet of paper with the check writer’s identifying date, the date of the transaction, a checklist of all activities in the case (notice sent, response received, summons filed, etc., noting the date for each) and space to list and summarize all contacts and other activity. Other documents (the original check, copies of notice letter, mail receipt, copy of summons) are attached to this sheet. These are just suggestions; merchants might wish to contact each other to discuss systems they have found most practical.
PARTIAL PAYMENTS / NEGOTIATING WITH THE CHECK WRITER
A bad check writer may contact the victim/merchant after receipt of the notice letter and ask for more time than the 10 days to make the check good. The merchant may agree to this for good customer relations, but for criminal prosecution purposes he may insist on the 10-day deadline; the mere call by the check-writer does not affect the process. IF the merchant agrees to an extension of time, the terms must be clearly understood and recorded, because criminal charges cannot be filed while the writer is abiding by a plan the merchant agreed to.
There are various myths and misconceptions about the bad check law that just are not so:
- That if the check writer offers to pay installments, even a penny a month, the merchant must settle for that and cannot file charges.
- That if the merchant does agree to accept installments, the case becomes purely civil and can never be pursued criminally. Neither of these propositions is supported in the law.
When the time is appropriate for initiating charges on a worthless check (that is, the writer has not paid the check or worked out agreeable arrangements within 10 days of notice; or immediately if the check was on a closed account), the victim (individual or Custodian of Records, as the case may be) should take the check directly to the clerk of the appropriate General Sessions Court: at the Courthouse in Clinton or in the Municipal Building in Oak Ridge. Both courts have jurisdiction to deal with checks passed anywhere in Anderson County; the two locations are to serve the convenience of the parties. If everything is in order the clerk will assist in preparing a criminal summons. This is an order directing the check writer to appear in court; it is not a warrant which would call for his arrest, though this term, appropriate for most other cases in the criminal system, is often loosely applied to the summons-type case as well. If the check writer, now a Defendant, were to fail to appear in court pursuant to the summons he would then be arrested.
There is no charge for filing this criminal action. If a merchant has multiple checks on the same writer, and they are all "ripe" for prosecution, they should be brought in at the same time, and will be put together on one summons. There is no legal problem with a merchant "gathering up" a number of cases to bring to the court at one time. But see the following:
Criminal charges on bad checks for $500 or less must be brought within one year of the day the check is passed. Checks over $500 but less than $1000 must be prosecuted within two years. For larger checks the time grows longer still; but it is strongly encouraged that bad checks of such magnitude be brought to the attention of the police as soon as the violation is apparent, rather than waiting.
Worthless checks over $500 are felonies, and do not occur in the run of the mill grocery store/department store trade. There is a presumption against using the above-described summons procedure with such checks, and the court clerk may require communication with the D.A.’s office to OK such procedure. It may be determined that the check should be prosecuted by warrant instead.
If a bad check is exceptionally large (such as for the purchase of a car, for example) or there is good reason to believe the perpetrator will skip town or evade or defy a summons, it may be appropriate to commence the criminal charge by a warrant. Because this involves going out and arresting the subject, there are various technical and legal requirements, too involved to cover here. Merchants/victims should contact the appropriate police agency (i.e., for where the check was passed) and let the professionals take over.
If the notice letter or other communication causes the check writer to come and make the check good before charges are filed with the court, it is appropriate to return the check to him with or in lieu of a receipt.
BUT, after a charge is filed the check becomes evidence in a pending case, and should be held by the complainant until the case is completely over. It is OK to accept payment for the check after a case is filed; but KEEP THE CHECK, and give the writer a receipt. Hold onto the check until the case is over and all appeal time has expired and/or the check has been paid, which ever is later. The D.A.’s office can advise about these times.
If the check has accidentally been returned to the writer prematurely, the case is not necessarily doomed. Again, consult the D.A.’s office. But try to avoid this situation.
PAYMENT DOES NOT EQUAL DISMISSAL
Once a criminal charge has been filed, the case is not dismissed just because the Defendant comes and pays the check.
In a civil collection case, the only point is to get the check paid, and once it’s paid further pursuit of the case is pointless. In a criminal case, the real issue is whether the check writer committed a crime at the time he passed the check. While payment of the check is a desirable collateral goal, it does not resolve that ultimate issue in a criminal case.
So, even if the Defendant pays the check (and we’re talking about payment after the criminal charge is filed) he and the Victim must still come to court on the date assigned.
(This rule has exceptions, such as if the Defendant pays the check after the case is filed but before it is served on him or otherwise is brought to his attention; this may involve payment of court costs. Call the D.A.’s office to discuss these situations.
When a bad check case is filed with the court clerk it will be assigned a hearing date (often the first court day of the next month) and the Victim will be advised of the date. Cases initiated by the police will be scheduled differently, with a variety of factors involved; the officer should advise the Victim of the date.
It is recommended that the Victim contact the court clerk a day or two before the assigned date to make sure the case is still expected to be heard that date. Often the Defendant has not been served with the summons, he has not been found and arrested, or he has already arranged for a new date if he or his attorney has a scheduling conflict. The clerk should notify the Victim of the new date when the Defendant is served; sometimes this step can fall through the cracks, and the Victim in this situation would do well to check back with the clerk every few weeks for a status report. (Note this information is not in the D.A.’s office; it is an extra step for complainants to call the D.A., to call the clerk, to call them back.
On court date the Victim/Record Keeper should come at the appropriate time and bring the original check and the record of all communication with the Defendant. A representative from the District Attorney’s office will be present to present the Victim’s side of the case. [Remember that the District Attorney represents the State of Tennessee, as in State vs. Joe Defendant. Technically the Victim is "just" a witness on behalf of the State. Of course in most of these cases the interests of the State and the interests of the Victim will be very much the same.]
The majority of bad check charges are resolved by a guilty plea; a few are dismissed by the District Attorney’s office if it appears the case has some factual or legal flaw. Very few of the cases go to trial.
If the Defendant chooses to litigate the case, it begins a process which could turn out to be brief and simple or lengthy and complex, depending on a variety of factors. The Victim should work with the Prosecuting Attorney and follow his/her directions and counsel.
When bad check writers plead or are found guilty, they are typically sentenced by the Court to a suspended sentence of 11 months 29 days in jail (or possibly a term of years if the check is a large one and the case is in Criminal rather than General Sessions Court.). The Defendant is typically placed on probation and does not serve any time so long as he pays the check, pays the court costs, and does not commit any further violations during the probation term. If the Defendant does not pay the check that day he will be given a deadline for payment, and the Victim will be advised how to communicate to the court when it is paid, or if it is not.
If a Defendant was already on probation at the time he wrote the check at issue, or if he otherwise has a bad record or the case is aggravated, he may be required to serve jail time. Enforcing payment of the check can then become trickier. Discuss the matter with the District Attorney’s representative.
If the case is dismissed by the Court after hearing, discuss the matter with the prosecuting attorney. Sometimes the case will be in a posture that it can be refiled or presented to the Grand Jury. This, again, involves issues too involved for this web site to cover adequately.
Even if the criminal case is dismissed and cannot be rebrought, there is not necessarily a bar against collecting the money owed on the check, by a civil suit or otherwise. A private attorney should be consulted for this; the District Attorney is prohibited from giving advice about private civil suits.
If you have further questions or concerns about bad check prosecutions, feel free to call the District Attorney’s Office (865-457-5640) during business hours, or e-mail at dag7th@AttorneyGeneral.org. We are prohibited from advising or talking to criminal defendants or from giving general civil law advice.
The above information is a general guide. Every case has its own facts and peculiarities which may call for different procedures and results. This information should not be considered a substitute for independent legal advice in any specific actual case. If you are charged with a criminal offense you are advised to consult with a competent attorney.