Best v. Dreyfus Liquid Assets, Inc.

• Decision Date: 29 January 1987
• Parties: , 3 UCC Rep.Serv.2d 704 Kerry N. BEST, Plaintiff-Appellant, v. DREYFUS LIQUID ASSETS, INC. and the Bank of New York, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 76

215 N.J.Super. 76

521 A.2d 352, 3 UCC Rep.Serv.2d 704

Kerry N. BEST, Plaintiff-Appellant, v. DREYFUS LIQUID ASSETS, INC. and the Bank of New York Defendants-Respondents.

Superior Court of New Jersey Appellate Division.

Submitted Jan. 14, 1987.

Decided Jan. 29, 1987.

Karl A. Fenske, Morristown, for plaintiff-appellant.

Griffiths & O'Connell, Hackensack, for defendants-respondents (David Griffiths, on the letter brief).

Before Judges FURMAN and SHEBELL.

The opinion of the court was delivered by

SHEBELL, J.A.D.

Plaintiff, Kerry M. Best, filed a complaint against defendant, Dreyfus Liquid Assets, Inc., for failure to stop payment on a check in the amount of $2,034, asserting negligence and breach of contract and of state banking laws. Defendant denied plaintiff's allegations and asserted defenses of failure to state a cause of action, ineffective notice and unjust enrichment. The trial court found for defendant and ordered involuntary dismissal at the close of plaintiff's case. Plaintiff appeals.

Plaintiff formulated plans in February 1984 to take a trip to Europe during May 1984 and in mid-March scheduled her vacation for the first three weeks of May. Plaintiff placed a deposit with a London based tour group for a one week trip to Florence beginning May 16, 1984, the last of her three weeks. She paid the balance of $2,034 for herself and her sister by check dated April 17, 1984.

Although plaintiff denied signing a contract with the tour group, she did sign and send to it a terms of booking form. She indicated that "if this [booking form] came to me beforehand which probably it did then I'm sure that I noticed that there were cancellation charges depending on how far in advance you cancelled the trip."

The check in question was drawn on plaintiff's Dreyfus investment account, on which she could write checks of $500 minimum. No means to record check transactions was provided to her, but she received cancelled checks as they were written, with account statements. She kept her own record of checks by amount and payee, but not by preprinted check number because "[t]hey came back as you wrote them."

Shortly before her vacation began, plaintiff learned that her employer would not allow her a three weeks vacation. Therefore, she decided against the week in Florence and on April 24, 1984 placed a telephone call to Dreyfus to stop payment on her check. She advised the Dreyfus representative of the amount, account number, the payor and the payee of the check. She erroneously stated that the date of the check was April 16, 1984 instead of the 17th and indicated that the check number, of which she was uncertain, was between 14 and 17. She claims she was not told the exact date and check number were essential and that she was advised the check would be stopped and written confirmation sent.

Upon receipt of the stop payment confirmation, plaintiff signed and returned the original together with a $5 check. A photocopy of the original confirmation and plaintiff's carbon copy were introduced at trial. The check number on the photocopy is "17," although the carbon appears to reveal a "17" superimposed on a "14." The correct check number was "15." The term of the confirmation statement stipulates that the signor agrees

that this stop payment order shall not be effective as to any check which is not accurately described above, or which has previously been paid or certified by the Bank. I agree that the Bank shall have a reasonable time to process this stop payment order.

Plaintiff subsequently called the New York office of the travel group to cancel her tour plans. On May 2, 1984, she called Dreyfus to confirm the stop payment order and was told that the check "hadn't come through and if it did they would call me." On May 5, 1984 plaintiff left on her trip, returning on May 15 or 16.

After her return, plaintiff received a 40 percent refund check from the tour group with a letter explaining there was a 60 percent penalty fee for cancellation. She called Dreyfus and was informed that the check had been paid because she had not indicated the proper check number or date. No stop payment was carried out on any check written on her Dreyfus account. She testified that if she was informed that payment of the check had not been stopped, she could have changed her plans and taken the Florence trip.

Our review of the trial court's order to dismiss requires us to determine whether upon the facts and law plaintiff has shown any right to relief. R. 4:37-2(b). That rule articulates the standard as follows:

Whether the action is tried with or without a jury, such motion shall be denied if the evidence, together with the legitimate inferences therefrom, could sustain a judgment in plaintiff's favor. [R. 4:37-2(b) ].

Interpreting this rule in Dolson v. Anastasia, 55 N.J. 2, 5-6, 258 A.2d 706 (1969), our Supreme Court held that the motion must be denied

if, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ.... The point is that the judicial function here is quite a mechanical one. The trial court is not concerned with the worth, nature or extent (beyond a scintilla) of the evidence, but only with its existence, viewed most favorably to the party opposing the motion. [ (citations omitted) ].

An appellate court must reverse "if there is any legitimate view of the proofs that would sustain a judgment for plaintiff...." Lyons v. Hartford Insurance Group, 125 N.J.Super. 239, 243, 310 A.2d 485 (App.Div.1973), certif. den. 64 N.J. 322, 315 A.2d 411 (1974).

This case is governed by N.J.S.A. 12A:4-403:

(1) A customer may by order to his bank stop payment of any item payable for his account but the order must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it prior to any action by the bank with respect to the item described in 12A:4-303.

(2) An oral order is binding upon the bank only for fourteen calendar days unless confirmed in writing within that period. A written order is effective for only six months unless renewed in writing.

(3) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a binding stop payment order is on the customer.

This provision is identical to the corresponding provision of the Uniform Commercial Code, U.C.C. § 4-403, 2A U.L.A. 170, 170-171 (1977 & Supp.1986), whose drafters intended that

stopping payment is a service which depositors expect and are entitled to receive from banks notwithstanding its difficulty, inconvenience and expense. The inevitable occasional losses through failure to stop should be borne by the banks as a cost of the business of banking. [ N.J.S.A. 12A:4-403 at 520, Uniform Commercial Code Comment 2].

All provisions of the Commercial Code "shall be liberally construed and applied to promote its underlying purposes and policies." N.J.S.A. 12A:1-102(1).

The New Jersey commentary to § 4-403 notes that the law enunciated in the pre-Code case of Reinhardt v. Passaic-Clifton National Bank and Trust Co., 16 N.J.Super. 430, 84 A.2d 741 (App.Div.1951), aff'd, 9 N.J. 607, 89 A.2d 242 (1952), was in part "continued as law by the adoption of the Commercial Code ...":

In that case the drawee bank induced the drawer to sign a stop-order form containing an exculpatory clause providing, in effect, that the bank should not be liable if it paid the check through inadvertence or mistake. The court held that the clause was not effective to relieve the bank from liability because it was not supported by consideration. The same result would be achieved under article 4, but on grounds of public policy. See, section 4-103(1). Thomas v. First National Bank of Scranton, 376 Pa. 181, 101 A.2d 910 (1954) (Stop-order clause exempting bank from liability if check "be paid through inadvertence, accident or oversight", held to violate section 4-103(1) of the Commercial Code). [ N.J.S.A. 12A:4-403 at 519, New Jersey Study Comment 1].

See also N.J.S.A. 12A:4-403 at 521, Uniform Commercial Code Comment 8. Cf. Tusso v. Security National Bank, 76 Misc.2d 12, 349 N.Y.S.2d 914 (Civ.Ct.1973).

The customer has the burden of proof of "establishing the fact and amount of loss ...," i.e., causation and damages. N.J.S.A. 12A:4-403(3). A binding order to stop payment must be received "in such manner as to afford the bank a reasonable opportunity to act on it...." N.J.S.A. 12A:4-403(1). The Code makes no further provision for how accurate the information must be.

The reasonableness standard, on which § 4-403(1) is based, does not rise to the level of certainty as is required by a minority of jurisdictions which have deviated from the Uniform Commercial Code. See, e.g., Capital Bank v. Schuler, 421 So.2d 633, 35 A.L.R.4th 976 (Fla.Dist.Ct.App.1982) (strictly construing Fla.Stat. § 674.403(1) (1977) of the Florida Commercial Code which provides that an effective order must describe "with certainty the item on which payment is to be stopped...."). See also U.C.C. § 4-403, 2A U.L.A. 170, 172-174 (1977 & Supp.1986) (setting forth similar statutory provisions of California, Nevada and Texas).

The reasonableness of the description is a factual question which may in part be related to the institution's method for flagging customer accounts and searching for stopped checks. See 10 Am.Jur.2d Banks: Format and Sufficiency of Countermand or Notice § 645 at 617 (1963 & Supp.1986); Holahan, Stop Orders, 1 Rutgers-Camden L.J. 31, 38-39 (1969). Cf. Chute v. Bank One of Akron, N.A., 10 Ohio App.3d 122, 460 N.E.2d 720, 722-723 (1983) (evidence of a bank's computerized system supported the validity of a customer's oral stop payment order). One commentator observes:

There is certainly an argument that general banking usage permits...