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Levitan and Frieland, PC v. Valley National Bancorp

MRS-L-1702-08 (N.J. Super. Law Div. 2011) (Unpublished)

CHECKS — A counterfeit check is treated as the equivalent of a forged check and only the malefactor can be liable on a forged or counterfeit instrument; moreover, acceptance of such a check by a bank only constitutes a provisional credit and a bank may revoke the credit when a check is discovered to be counterfeit.

A law firm specializing in collection matters received an unsolicited email message from a purported manufacturer of electrical fuses in Tokyo. It asked for help in collecting delinquent accounts in the United States. It claimed it located the firm through the Chamber of Commerce. After an email exchange, a signed retainer agreement was faxed to the law firm. Two days later, an email from the manufacturer said an unnamed customer who owed it money was planning to make a payment to avoid being sued. It said the customer, identified as “Total Electric,” had sent the payment to another customer by mistake, and the other customer, also not named, would mail a check to the law firm.

That day, a cashier’s check arrived by an overnight courier from an unknown party in Canada and purportedly drawn on a bank. Also that day, the check was deposited in the firm’s real estate trust account. At a later time, to see if the funds were available one of the partners called a telephone number on the face of the check. The partner believed that the person on the phone was the bank’s employee and that person told him the check was good. Within an hour, the firm had moved its fee into its business account. Later that day, it wired the money to the manufacturer’s purported South Korean supplier.

The next morning, the bank learned the check was counterfeit. It notified the law firm and charged back the amount of the check to the trust account, thereby causing “deposit monies belonging to another client of the firm to be invaded.”

The law firm sued the bank, but the Court granted the bank’s motion for summary judgment. A counterfeit check is treated as the equivalent of a forged check and only the malefactor can be held liable on a forged or counterfeit instrument. Moreover, acceptance of the deposit by the bank was only a provisional credit and the bank acted properly in charging back the amount of the check here, where there was no evidence that it failed to exercise ordinary care in handling the item, notwithstanding the law firm’s disputed claim that a bank’s employee had advised it that the check “cleared.” The Court also found that bank did not violate the Consumer Fraud Act.


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