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Leonardo v. Bank of America

A-2841-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

CONSUMER FRAUD ACT; BANKS; CHECKS — Where a bank customer has no reasonable expectation that checks it writes would clear after checks are deposited have cleared, and where the bank has acted reasonably, a customer has no claim against the bank under the Consumer Fraud Act.

A bank customer deposited two checks into her bank account. The checks were out-of-state checks made payable to “Janet Polachek Racing Stables.” There was no such entity, but the customer’s mother was Janet Polachek and she endorsed the checks to her daughter. The customer’s bank sent her a letter advising her that since she deposited out-of-state checks, it would take six business days for the checks to clear. A day after receiving the letter, the customer was told by a bank manager that the funds would be available the next day. However, on the day she thought the funds would be available, she was told the funds would not be available because the checks were improperly endorsed.

Prior to depositing the checks into her account, the customer had a negative account balance. The bank dishonored several of the customer’s checks that were written after the deposit was made, but before the funds were available for use. A hold was then put on the customer’s account pending investigation by the bank’s fraud unit. The payor’s bank made a written claim against the customer’s bank regarding one of the checks, and the bank sent the payor bank the funds. The bank did not repay the other check to the payoff bank pursuant to a separate request because there were insufficient funds in the customer’s account at the time.

The customer sued the bank for conversion, unjust enrichment, breach of implied covenant of good faith and fair dealing, and unconscionable business practices under the Consumer Fraud Act. The customer’s theory was that the Personal Deposit Account Agreement makes deposits available after three business days and makes the first $100 of a deposit available the next day. The customer claimed that the funds should have been credited to her before the checks were returned to the payor bank. She also claimed that her bank improperly maintained the other funds and had use of those funds until the litigation. She claimed that the bank’s conduct constituted an unconscionable business practice within the Consumer Fraud Act.

The customer claimed, as her damages: (a) insufficient funds charges imposed by the bank; (b) the cancellation of her boyfriend’s automobile insurance policy for his car, which she borrowed, because her check for the policy bounced; (c) the cancellation of her boyfriend’s motor vehicle registration because another of her checks bounced; and (d) her loss of summer income because she did not have a car to use to get to or from work. The lower court granted the bank’s motion for summary judgment and the customer appealed, and the Appellate Division affirmed.

The lower court found that the bank customer was not a consumer within the Consumer Fraud Act and that the bank acted in accordance with reasonable commercial practices. The Appellate Division noted that, with respect to the Consumer Fraud Act claim, the bank’s Personal Deposit Account Agreement with the customer specifically stated that deposits from non-local checks would be available on the third business day after deposit and in some instances not until the fifth business day after deposit. The deposit agreement also stated that fund may be delayed for longer periods if the bank “believe[s] a check you deposit will not be paid,” the depositor has “overdrawn [the] account repeatedly in the last six months” or checks are deposited totaling more than $5,000 on any one day. The Court noted that, at the time the customer deposited the checks, her account was already overdrawn. Therefore, any check she wrote at the time she deposited the two checks was at her peril. Furthermore, the Court noted that she had no reasonable expectation that the checks she wrote would have cleared, especially when they were written prior to her first communication from the bank as to when the deposited funds might be available. The Court also found that even if the customer was deemed to be a consumer within the meaning of the Consumer Fraud Act, the customer still failed to prove that the bank engaged in an unconscionable commercial practice in its handling of the funds when the customer was already overdrawn at the time.

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