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Triffin v. Chase Manhattan Bank

A-6508-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

CHECKS; UCC; MIDNIGHT DEADLINE—An assignee of a bad check lacks standing to make a claim that a payor bank or a depository bank missed its midnight deadline to dishonor or give notice of dishonor of a check.

An investor sued various depository banks, seeking to collect on checks he purchased from various check cashing companies after the checks had been dishonored. The investor knew they had been dishonored. He asserted that the banks had not dishonored the checks in a timely manner in compliance with the midnight deadline rule, N.J.S.A. 12A:4-302 and 12 C.F.R. 229.34. He also asserted that the banks should not have debited the check cashing companies’ accounts because the payor banks failed to dishonor or give notice of dishonor before the midnight deadline.

While these consolidated actions were pending, the parties entered into a consent order in which they agreed to stay further proceedings pending a final disposition by the Appellate Division or the New Jersey Supreme Court in another case involving the same investor. The Appellate Division issued an unpublished opinion in that case, holding that its decision in yet another case involving the same investor was dispositive and that the investor-assignee lacked standing to bring his action under either state law or federal regulation. The Court noted that the case, which involved payor banks, was equally applicable to depository banks and that acceptance of the investor’s argument to the contrary would undercut the earlier court’s holding. The Supreme Court then denied the assignee’s Petition for Certification seeking review of the decision.

The investor then filed a motion to vacate the stay and requested oral argument. A Special Civil Part order was then entered, denying the request since the issues had been resolved by the upper courts. The Appellate Division affirmed the order denying the request. The Court held that its decision in the case involving payor banks was controlling, and that the investor lacked standing to sue either payor or depository banks on dishonored checks based upon a payor bank’s alleged failure to dishonor a check in a timely manner. In its view, the investor who purchased the checks with full knowledge that they had previously been dishonored, lacked standing to bring the actions against either a payor or depository bank. A person who purchases a check as a holder in due course and becomes an assignee with full knowledge of its dishonor has no vested interest in the timely payment or return of these check in the collection process. Statutory duties, which confer rights between banks and their customers, are not applicable to actions for collection on a negotiable instrument by “down stream” holders, claiming “holder” in due course status, who purchase an instrument with knowledge that it has been dishonored.

Moreover, as the same person who was a party in the case previously decided, the investor-assignee was bound by the earlier holding even though the decision was unpublished. Additionally, the investor was bound by the consent order in which he agreed that either the Court’s decision or the decision of the Supreme Court in the earlier case would be controlling on matters that were subject to the appeal. According to the Court, it didn’t matter that the earlier case was not published.


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