State v. Family Bank of Hallandale, 91-350
| Decision Date | 05 February 1992 |
| Docket Number | No. 91-350,91-350 |
| Citation | 593 So.2d 581 |
| Parties | STATE of Florida, Appellant, v. FAMILY BANK OF HALLANDALE as successor-in-interest to Seminole National Bank, Appellee. 593 So.2d 581, 17 Fla. L. Week. D419 |
| Court | Florida District Court of Appeals |
Robert A. Butterworth, Atty. Gen., and Kimberly J. Tucker, Asst. Atty. Gen., Tallahassee, for appellant.
Robert L. Hinkle of Aurell, Radey, Hinkle & Thomas, Tallahassee, for appellee.
In this appeal of a summary judgment favoring a holder for value of a state warrant, we are asked to determine whether state warrants issued prior to the effective date of chapter 91-216, section 1, Laws of Florida, are negotiable instruments, whether the endorsement on the warrant is valid, and whether the holder is entitled to prejudgment interest on the amount of the warrant. We answer all three questions in the affirmative.
There is no dispute here that Family Bank of Hallandale is a holder of the warrant for value in the face amount of the warrant and had no actual notice of any of the state's defenses to payment. The argument of the state that the endorsement on the warrant by the payee was improper has no merit. See Section 673.401(2), Florida Statutes (1987).
The trial court's ruling that a prevailing party against the state in an action on a state warrant is entitled to prejudgment interest is correct. Broward County v. Finlayson, 555 So.2d 1211 (Fla.1990); Argonaut Ins. Co. v. May Plumbing Co., 474 So.2d 212 (Fla.1985); Department of Health and Rehab. Services v. Boyd, 525 So.2d 432 (Fla. 1st DCA 1988).
The holding of the trial court that the state warrant is a negotiable instrument is also correct, although prior to adoption of the Uniform Commercial Code in Florida, warrants issued by sovereign governmental entities such as the state, counties, school boards and, in some instances, municipalities were non-negotiable. Such non-negotiability was grounded in public policy. Town of Bithlo v. Bank of Commerce, 92 Fla. 975, 110 So. 837 (Fla.1926); Marshall v. State ex rel. Sartain, 88 Fla. 329, 102 So. 650 (Fla.1924).
The enactment of chapter 65-254, Laws of Florida, however, brought state warrants squarely into the class of commercial paper unless the warrants clearly indicated on their face that they were not negotiable. The legislature turned away from a historic public policy of non-negotiability, announced through court decisions, and declared the policy of this state to be that government entities may issue negotiable paper that will move freely in commerce. The legislature preserved its role as conservator of state tax dollars (and the political subdivisions may do likewise) by continuing and expanding the statutory prerequisites to issuance of warrants.
Commentaries on the Uniform Commercial Code and Florida Code are found following sections 673.104 and 673.105 in Florida Statutes Annotated (1966). The point of those commentaries is that government warrants should be free to flow in commerce, and the government may restrict that flow in a particular instance if it wishes to preserve its defenses. See also, 64 Am.Jur.2d Public Securities and Obligations Sec. 23 (1972) (). The traditional forms of limitation are to forthrightly print on the face of the document that it is "Not Negotiable." The government may also forego the use of the words "pay to the order of" or "pay to bearer."
One must question the motivation of the state when it issues a warrant "pay to the order of," encodes all the statutorily mandated indicia of compliance with state appropriation and funding laws, turns the warrant loose in commerce and then denies negotiability. The warrant in this case for all purposes except the state's asserted public policy conforms to the definition of a negotiable instrument in section 673.104(1), Florida Statutes (1965). The summary judgment is therefore AFFIRMED.
I would reverse the summary judgment for error in its conclusion that Ch. 673, F.S., makes the appellee bank a holder in due course entitled to payment of the state warrant without regard to defenses against the payee Ted's Sheds. 1
The trial court's reasoning is essentially that the warrant is unconditional and therefore negotiable because "Sec. 673.105(1)(g) addresses the circumstances under which a promise or order in a government instrument is deemed 'unconditional' within the definition of negotiability." But the cited provision states only that a government instrument "otherwise unconditional is not made conditional by the fact that the instrument ... is limited to payment out of a particular fund." (e.s.) It therefore recognizes that government warrants may be otherwise conditional and nonnegotiable. In fact the provision simply incorporates prior decisional law in Florida on the "particular fund" issue. The Supreme Court sitting en banc in Wright v. Bd. Public Instruction, 77 So.2d 435 (Fla.1955), held that when time warrants lawfully provided that "the full faith, credit and resources of the said Board ... are pledged," then "a provision for payment from a certain source ... 'does not render the [instruments] non-negotiable if they are issued as general obligations of the maker.' " (e.s.) 77 So.2d at 437.
The Wright decision does not, as appellee contends, depart from prior decisions which, even absent a particular fund restriction, denied negotiability to government warrants not issued as general obligations of the maker. Town of Bithlo v. Bank of Commerce, 92 Fla. 975, 110 So. 837 (1926); authorities collected A.G.O. 073-101, Annual Report of the Attorney General, State of Florida. Instead of an inadequately explained public policy, those decisions appear to me to be properly grounded on the conditional nature of such warrants under numerous provisions of general law which have remained similar in substance and clearly are not altered by the adoption of Chapter 673. 2 Compare sections...
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