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Liebling v. Mellon PSFS (NJ) National Association

DC-5440-97 (N.J. Super. Law Div. 1998) (Unpublished)

BANKS; CHECKS—A bank’s obligation to stop payment on a check does not continue in perpetuity once a stop payment order has expired, even if the check is “stale.” A bank does not violate its obligation to handle checks when it relies on commonly accepted computerized check handling procedures.

An attorney settled a client’s personal injury action and then issued a check to the client representing the client’s net settlement proceeds. The attorney’s bank honored this check. Five days later, the attorney mistakenly issued another check and asked the client to destroy the mistakenly issued check. The attorney then contacted the bank and ordered an oral stop payment on the check. Nineteen months later, the client cashed the check. The attorney filed a claim against both the client and the bank. The client was served and defaulted.

The attorney’s complaint alleged that the bank was liable for the second payment because of its: (a) breach of a duty of good faith, (b) negligence; (c) breach of a fiduciary duty; (d) payment of a stale check; and (e) breach of the depositor’s contract. The attorney faulted the bank’s automated system and also asserted that the bank had a duty to contact him before the check was cashed because of the prior stop payment order. The Court found in favor of the bank, basing its decision on the Uniform Commercial Code and accepted banking procedures in the United States. It found the bank’s use of a computerized check processing system to be within common and accepted banking procedures in the United States. Since it appeared that the bank used an adequate computer processing system for processing checks, the Court held that the bank acted in good faith even though it did not consult with the attorney before honoring the stale check. As case law had established, the obligation of a bank to stop payment on a check does not continue in perpetuity once a stop payment order expires.


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