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Triffin v. Wachovia Bank, N.A.

2009 WL 112772 (N.J. Super. App. Div. 2009) (Unpublished)

CHECKS — The warranty given by banks under the 21st Century Act that a substitute check includes an accurate representation of all information on the front and back of the original check does not flow to an assignee of a dishonored check.

An investor was in the business of purchasing dishonored negotiable instruments and seeking collection as an assignee of all rights and interests in those instruments. The investor executed an assignment agreement with a company transferring to him all rights and interests in twelve separate checks previously dishonored by a bank. The investor sued the bank, alleging that the bank had obscured the information on six of the checks, which were substitute checks, so that the information differed from what was on the original check, in violation of federal regulations. The bank defended, arguing that the investor, as an assignee, lacked the right to pursue a statutory cause of action under the federal regulations. The lower court concluded that the investor was not a payor or payee, drawer, or drawee of any of the checks, and that he took knowledge of a dishonored check or instrument. It dismissed the investor’s complaint on summary judgment, finding that the investor did not come under the protection required by the federal regulations.

In a separate action filed by the investor, he alleged that he was the assignee of rights held by various assignors who had presented checks subsequently dishonored by another bank. As to each dishonored item, the investor claimed this second bank provided a substitute check that contained obscured information or lacked information that was apparent on the original check in violation of federal regulations. The bank defended by asserting that the investor lacked standing to sue and that the claim was based upon an assignment of a statutory right. The lower court concluded that the investor was seeking to recover under a statutory right rather than a contractual right, and therefore did not have standing to pursue the action.

Appeals followed from both matters and they were consolidated. The investor argued that the claims pursuant to the federal regulations were not statutory claims for relief but rather were contractual in nature and therefore assignable. The Appellate Division affirmed both lower court rulings. It held that any cause of action under the referenced federal regulations were for a breach of statutory duty and could not be assigned. The Court said the regulations at issue were adopted pursuant to the Check Clearing for the 21st Century Act (Act). The Act permits a bank to provide a substitute check in lieu of supplying an actual returned check if it meets certain criteria, including the accurate representation of all information on the front and back of the original check. The regulations require that any bank that passes a substitute check for consideration warrants that the check meets the required criteria. Then, the Court held that the warranty could not flow to an assignee under the clear language of the Act or its regulations, and so the investor had no standing to sue for alleged violations of the Act.


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