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Freeman v. Wachovia Bank

A-0928-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

BANKS — The relationship between a bank and one of its depositors is contractual, and the bank’s right to make a deduction from its depositor’s account is wholly dependent on whether a particular transaction is authorized.

A consumer used a bank-issued debit card to pay an $800 deposit for her son’s prom limousine rental. The contract required payment of the rental balance in cash. The prom was held on a hot evening and the limousine did not have air conditioning. After one hour, she sent the limousine away because the vehicle was uncomfortably hot, and then retained another limousine company for the remainder of the evening.

Without her authorization, the terminated company charged the balance of the price on the same debit card. The consumer protested, and the bank-issuer temporarily credited the account pending an investigation. Ultimately, the bank determined the charge was proper because the merchant was willing and able to provide the service. Its investigation failed to determine whether the company was authorized to charge the remainder on the debit card.

The consumer sued the bank, but the lower dismissed the complaint. On appeal, the Appellate Division reversed and remanded for further proceedings, concluding that the lower court record did not support the lower court’s finding that the second payment to the company had been authorized.

On remand, the lower court conducted a second trial at which the consumer again testified that she never authorized the bank to charge her debit card for the balance of the limousine company’s charges. The court found the second debit was unauthorized, but dismissed the complaint, finding the consumer failed to show that the bank was negligent in its investigation of the contractual dispute.

In the second appeal that followed, the Appellate Division reversed the judgment of no cause of action for the consumer’s claim based on the bank’s charging of an amount for an unauthorized transaction. The Court said that the relationship between a bank and one of its depositors is contractual, and the bank’s right to make a deduction from the depositor’s account is wholly dependent on whether a particular transaction is authorized. The Court pointed out that its prior opinion had held that the transaction was unauthorized, and so the bank breached its debit card agreement with the consumer in charging that second amount to her account. Thus, the consumer was entitled to judgment against the bank for the amount of the second charge.


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