Jacobs, Eastwood and Bigelow. The opinion of the court was delivered by Jacobs, S.j.a.d.
This is an appeal from a judgment for plaintiff entered in the Passaic County Court.
The plaintiff was a depositor with a checking account in the defendant bank and on November 16, 1949, issued her check No. 6267 to the order of T.A. O'Loughlin, Inc., in the sum of $1,970.61. Thereafter she telephoned the bank to stop payment on the check and was told to appear in person. She went to the bank and signed a card dated December 16, 1949, and captioned "Request to Stop Payment of Check." The card contained a provision that "Should the check be paid through inadvertence, accident or oversight, it is
expressly agreed that the Bank will in no way be held responsible. The Bank receives this request upon the express condition that it shall not be in any way liable for its act should the check be paid by it in the course of its business." The foregoing provision was in small type and the plaintiff testified that she had not read it. Compare Peter W. Kero, Inc., v. Terminal Construction Corp. , 6 N.J. 361, 368 (1951) with Demarest v. Palisades Realty, &c., Co. , 101 N.J.L. 66, 72 (E. & A. 1925). On January 25, 1950, the plaintiff sent a letter to the defendant bank reading as follows:
"You have at present a stop payment notice against our check No. 6267 in the amount of $1970.61, issued on November 16th, 1949, to T.A. O'Loughlin Company.
Please be advised that we have cancelled out this check entirely and that it will under no circumstances be ordered paid in the future."
On February 1, 1950, the defendant paid check No. 6267 notwithstanding the request to stop payment and the letter of January 25, 1950. Miss Casey, a bookkeeper employed by the defendant, testified that the stop payment notice was duly recorded on the jacket over the ledger sheet of the plaintiff's account but that she "must have missed it" when she posted the check on February 1, 1950. She acknowledged that she had not read the jacket carefully. Mr. Decker, in charge of the defendant's bookkeeping department, testified that after the original stop payment notation is placed on the jacket there is no occasion for further notation because of a follow-up letter; in his language, "The more you put on there, the more confusing it becomes; and it is plain enough there. The girl should catch it. We don't deny that." When the plaintiff learned of the payment of the check she unsuccessfully sought to have its amount credited to her account and later filed her complaint in the County Court against the defendant bank. In due course both parties moved for summary judgment but their cross-motions were denied. The defendant also moved for leave to make T.A. O'Loughlin & Co., Inc., a party to the action, although apparently it did
not submit or file any proposed third-party complaint. Cf. Rule 3:14-1. This motion was likewise denied. Thereafter the matter came on for trial, the pretrial order was amended in open court, and the testimony was duly taken. At the close of the trial and pursuant to the plaintiff's motion the court entered judgment in her favor in the sum of $1,970.61 with interest and costs. In support of its appeal therefrom the defendant urges several points of error but relies primarily upon the release clause set forth on the card dated December 16, 1949.
It is well settled that a bank's relation to its depositor is that of debtor and its obligation is to disburse in conformity with his order. Slavin v. Passaic National Bank & Trust Co. , 114 N.J.L. 341, 344 (E. & A. 1935). Where the bank receives timely notice from a depositor to stop payment on an outstanding check it is under obligation to respect it. Watson v. Merchants & Manufacturers Bank , 1 N.J. Misc. 104 (Sup. Ct. 1933). Oral notice has been held sufficient (Shude v. American State Bank , 263 Mich. 519, 248 N.W. 886 (1933)) but under our Banking Act an oral stop payment order is not effective after the first business day following its receipt and a written order is not effective for more than three months but may be renewed from time to time. R.S. 17:9 A -225.
In view of the obligation imposed upon banks by the common law to refrain at their peril from making disbursement after receipt of a stop payment notice, they have often sought to restrict their liability by release clauses, as in the instant matter. See 39 Yale L.J. 542 (1930); 15 Corn. L.Q. 256 (1930). The validity of such release clauses has been the subject of conflicting judicial opinions. Thus, they were held to be effective in Gaita v. Windsor Bank , 251 N.Y. 152, 167 N.E. 203 (1929); Tremont Trust Co. v. Burack , 235 Mass. 398, 126 N.E. 782 (1920); and Hodnick v. Fidelity Trust Co. , 96 Ind. App. 342, ...