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Triffin v. PNC Bank, N.A.

A-6489-04T2 and A-1949-05T2 (N.J. Super. App. Div. 2006) (Unpublished)

CHECKS — An assignee of dishonored checks, even if it knows the checks have been dishonored, has standing to sue banks that may have violated the midnight deadline rule.

Under Article 4 of the Uniform Commercial Code, a payor bank must either pay, return or dishonor a check presented to it by midnight of the banking day in which it was received. Here, an assignee of returned checks sued banks in several counties for violating this midnight deadline rule. The assignee was in the business of purchasing dishonored checks in bulk, at a discounted price, and suing the banks for collection. The lower courts found that the assignee did not have standing to sue for payment of the dishonored checks. Each relied on an earlier Appellate Division case that held that an assignee who accepted assignment of a check with notice of its prior dishonor had no basis to expect payment and therefore had no vested interest in the timely payment of the check. In that earlier appellate case, the assignee was assigned a check that was paid to the customer by a check cashing service but dishonored by the payor bank one month after it was presented.

In these cases, the Appellate Division reversed. In doing so, it relied on another case which held that an assignee had standing to sue. That other appellate court noted that the assignment, in bulk, of claims based on failure to abide by the midnight deadline was likely to secure compliance by banks, since the holders of a small check or checks would not find it worthwhile to sue a bank for failing to meet the midnight deadline. Here, the Court found that the assignment of dishonored checks to persons or entities in the business of suing for payment would enable those claims to be pursued more efficiently and might discourage future violations.

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