Wilton Enterprise, Inc. v. Cook's Pantry, Inc.
| Decision Date | 26 October 1988 |
| Citation | 230 N.J.Super. 126,552 A.2d 1031 |
| Parties | , 8 UCC Rep.Serv.2d 128 WILTON ENTERPRISE, INC. A Corporation, Plaintiffs, v. The COOK'S PANTRY, INC. A Corporation, Defendants. |
| Court | New Jersey Superior Court |
Arthur L. Nudelman, for plaintiffs (Nudelman, Nudelman & Ziering, West Orange, attorneys).
Robert S. Underhill, for Nat. State Bank (Mackenzie, Welt, Duane & Maher, Woodbridge, attorneys).
No appearance by defendant.
This is a motion for summary turnover of funds pursuant to N.J.S.A. 2A:17-63 following an execution and levy made upon the checking account of defendant, The Cook's Pantry, Inc. ("defendant") maintained at the National State Bank ("Bank") upon a default judgment entered in favor of plaintiff, Wilton Enterprise, Inc. The bank objects to the turnover of funds, claiming that at the time of the levy there were no funds in the account. Defendant has not appeared in the action and did not respond to the notice of motion. The facts have been developed by stipulation, through submission of affidavits, and the parties have waived their right to a plenary hearing. 1
On December 9, 1987 plaintiff, a trade creditor of defendant, obtained a default judgment in the sum of $2,165. On Monday, January 11, 1988, at approximately 11:30 a.m., pursuant to a duly issued writ of execution, a levy was made on defendant's checking account in the sum of $2,403.94, this being the amount of judgment entered in favor of plaintiff together with interest, court, and execution, costs. The levy was made by Theodore Solodare, an officer of the Superior Court, Special Civil Part, Union County, by serving the writ upon Sarah Glick, customer service representative, at the bank's Kenilworth branch. Although the levy was made at the Kenilworth branch, defendant's account was actually handled by a loan officer at the bank's Woodbridge branch.
It is the standard procedure of the bank when served with a writ of execution to have the branch where the levy is served call the branch or the account officer in charge of the customer's account to advise of the levy and, thereafter, send the writ of execution to that branch or officer. This procedure was not followed in this case inasmuch as no telephone notice was given by the Kenilworth branch to the Woodbridge branch. Instead the writ was mailed to the Woodbridge branch which did not receive it until Thursday, January 14, 1988. By that time defendant's account showed a zero balance.
On the date of the levy, a check drawn on defendant's checking account in the sum of $8,177.87 was presented to the bank for collection by Fidelity Union Bank which had paid the check on January 8, 1988 to the payee shown thereon. According to the bank, after a banking day begins, there is no way to determine if an account has a positive balance. The only data available is the amount on deposit as of the close of business on the preceding banking day. Although the bank claims it paid the check on January 11, 1988, it cannot state the exact time the check was presented for payment or the precise hour the check was actually paid. The levy, as we know, was made at 11:30 a.m.
The motion for a turnover order was filed pursuant to N.J.S.A. 2A:17-63 which provides as follows:
After a levy upon a debt due or accruing to the judgment debtor from a third person, herein called the garnishee, the court may upon notice to the garnishee and the judgment debtor, and if the garnishee admits the debt, direct the debt, in an amount not exceeding the sum sufficient to satisfy the execution, to be paid to the officer holding the execution....
In the instant case, the bank, as garnishee, does not admit the debt to defendant. Essentially the bank's position is that at the time the levy was made, it had already disbursed all of the funds in defendant's account. If the funds were so disbursed, then the order must be denied. If, however, there were funds in the account at the time of the levy, then the bank must turn the funds over to the officer for payment to plaintiff.
The Uniform Commercial Code ("code") offers fairly exact guidelines for resolving this dispute. N.J.S.A. 12A:4-303(1) essentially provides that any knowledge, notice, stop order, legal process or setoff comes too late with respect to a particular item if, by the time the knowledge, notice, stop order or legal process is received or served, the bank has made final payment of the item and a reasonable time for the bank to act thereon had expired. Conversely, such knowledge, notice, or, as in this case, legal process is considered timely with respect to a particular item if it is received or served before the bank has made final payment of the item.
The code addresses itself to the concept of "final payment" by providing that an item is "finally paid" when the bank has done any of the following, whichever happens first:
(a) paid the item in cash; or
(b) settled for the item without reserving a right to revoke the settlement and without having such right under statute, clearing house rule or agreement; or
(c) completed the process of posting the item to the indicated account of the drawer, maker or other person to be charged therewith; or
(d) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing house rule or agreement. [ N.J.S.A. 12A:4-213...
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...from the bank. Therefore, in reading the statute [§ 2A:17-63], the bank is the garnishee."); Wilton Enter., Inc. v. Cook's Pantry, Inc., 552 A.2d 1031, 1033 (N.J. Super. Ct. Ch. Div. 1988). The relevant statute under New Jersey writ of execution procedure is § 2A:17-63, which provides in pe......
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