On appeal from the Hudson County Court, Law Division.
For affirmance -- Chief Justice Weintraub, and Justices Wachenfeld, Burling, Jacobs and Francis. For reversal -- Justice Heher. The opinion of the court was delivered by Wachenfeld, J. Jacobs, J., concurring in result.
[25 NJ Page 333] The Housing Authority of the City of Union City is a public corporation organized by Union City under the authority of the Local Housing Authorities Law, N.J.S.A. 55:14 A -1 et seq., to supply safe and sanitary housing for persons of low income. In 1950 and 1951 the authority maintained checking accounts in its corporate name with two banks, the Commonwealth Trust Company and The Trust Company of New Jersey. During 1950 the Commonwealth Trust Company charged the authority's account with $1,716, representing the total amount paid by the bank on three checks issued by the authority which were cashed by means of forging the designated payee's endorsement. The Trust Company of New Jersey honored a similar forged check for $5,000 in 1951 and debited the authority's account. In the usual course of business, both banks returned
the canceled checks with the forged endorsements thereon to the authority and presumably enclosed the customary statement of account showing the charges which had been made.
The officials of the housing authority did not become aware of these forgeries until 1956, when they demanded that the banks recredit the respective accounts in the full amounts of the wrongful payments. The Commonwealth Trust Company and The Trust Company of New Jersey refused to comply with these demands, which resulted in separate actions against them, seeking judgment against Commonwealth Trust in the sum of $1,716 and against The Trust Company of New Jersey for $5,000.
Each of the defendant banks moved for summary judgment in its favor, principally upon the basis of N.J.S.A. 17:9 A -226(B) which provides:
"No banking institution shall be liable to a depositor for an amount charged to * * * him because of the payment by the banking institution of a check * * * upon which the signature of any party, other than that of the depositor, was forged * * * unless, within two years after the return of such instrument to the depositor, he shall notify the banking institution in writing that the signature of a party to the instrument, other than that of the depositor, was forged * * *."
The trial judge granted defendants' motions and the authority took a consolidated appeal. We awarded certification on our own motion before argument could take place in the Appellate Division.
The appellant concedes N.J.S.A. 17:9 A -226(B) would be dispositive if it were a private corporation. It urges, however, that the statute in question is one of limitation and contends that as a public corporation performing a governmental function it possesses the attribute of sovereign immunity which prevents the statute from running against it.
The fundamental premise underlying appellant's principal argument concerns the nature of N.J.S.A. 17:9 A -226(B). If this provision is a statement of substantive law rather than a statute of limitations which controls procedure and affects only the availability of a
remedy, Eureka Printing Co. v. Division of Employment Security, 21 N.J. 383 (1956), appellant's conclusion is invalid and there is no need to precisely define its status and the character of its function since the authority cannot claim that, unlike ordinary private corporations, it is immune from the effect of general provisions of substantive law. In our view, N.J.S.A. 17:9 A -226(B) does not establish a period of limitation. In wording, intention and effect it is essentially dissimilar.
A true statute of limitations prescribes a period within which suits must be brought upon claims or rights must be enforced. 1 Wood, Limitations (4 th ed. 1916), § 1. The limitation is frequently defined as being the time at the end of which no action can be maintained. 34 Am. Jur., Limitation of Actions, § 3. Thus, our general statute, N.J.S. 2 A:14-1 et seq., provides that various causes "shall be commenced" within a designated period "after the cause of any such action shall have accrued."
These statutes create repose. They are "practical and pragmatic devices to spare the courts from litigation of stale claims, and the citizen from being put to his defense after memories have faded, witnesses have died or disappeared, and evidence has been lost." Chase Securities Corp. v. Donaldson, 325 U.S. 304, 314, 65 S. Ct. 1137, 1142, 89 L. Ed. 1628 (1945), quoted in State by Parsons v. Standard Oil Co., 5 N.J. 281, 295 (1950). Their primary purpose is to compel the exercise of a right of action within a reasonable time so that the opposing party has a fair opportunity to defend. History shows the first statutes of limitations were passed by the English Parliament when "abuses from stale demands became unendurable." 1 Wood, supra, at § 2.
N.J.S.A. 17:9 A -226(B) has nothing in common with these enactments. It does not attempt to fix a period whose expiration will bar a depositor from maintaining an action to have his account recredited. Instead, the section under consideration goes to the very essence of the right by establishing a condition precedent to liability on the part of the
bank. A bank is not liable when it pays on a forged endorsement, contrary to the contract with its depositor, unless it is informed of such forgery within two years from the return of the forged instrument to the depositor. Thus, the purpose and effect of N.J.S.A. 17:9 A -226(B) are vastly different from a limiting statute which merely prevents the obtention of a remedy after a stated period of time. ...