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Kensil v. City of Ocean City

Decided: November 18, 1965.

THEODORE J. KENSIL, PLAINTIFF-APPELLANT,
v.
CITY OF OCEAN CITY: MAYOR AND COMMISSIONERS OF THE CITY OF OCEAN CITY; HOWARD STAINTON; WILLIAM S. LUFF; MARY OEHLSCHLAGER; AND JOHN A. BURRELL, DEFENDANTS-RESPONDENTS



Goldmann, Foley and Collester. The opinion of the court was delivered by Foley, J.A.D.

Foley

[89 NJSuper Page 343] Plaintiff appeals from a summary judgment entered in defendants' favor in the Chancery Division.

The central issue involved is whether a check, honored on presentment, but drawn and delivered at the time of the sale upon an account which at that time contained insufficient funds to cover its face amount, is a valid payment, as the Chancery Division held. In defense of plaintiff's appeal defendants contend that plaintiff was without standing to bring this action. We find it unnecessary to decide this question since we conclude that on the merits the granting of summary judgment in favor of defendants must be upheld.

A sale of public lands pursuant to N.J.S.A. 40:60-26 was conducted by defendant municipality on December 15, 1964 at or about 2 P.M., pursuant to a statutory notice published in various newspapers. One of the requirements so published was that the successful bidder pay 20% of the bid (together with advertising costs) at the time of the sale, the balance to be paid upon final settlement. The notice of sale also provided for a minimum bid of $100,000, and for the city to retain the 20% deposit of the successful bidder as liquidated damages in the event that such bidder should fail to make final payment in accordance with the terms of the notice.

The sequence of events pertaining to the sale follows: At about 1:30 P.M. on December 15, 1964 defendants Howard S. Stainton and William G. Luff went to Cape May County National Bank (Cape May bank) where an executive vice-president granted them a loan of $50,000. Since they did not then know how much money they would need in the event they became successful bidders, they did not open an account or draw upon the loaned funds.

Defendants Mary Oehlschlager and John A. Burrell appeared at the sale with Luff to bid as agents for Stainton and Luff. The bidding was begun by plaintiff, who had previously submitted by letter the minimum bid of $100,000 accompanied by a certified check for $20,000 as a deposit. As the bidding progressed plaintiff made his final bid of $146,000. (He admitted that at the time he did not want to go higher.) Defendants bid $150,000 and the property was struck off to

Burrell. Burrell then delivered to the city treasurer a check in the amount of $24,560.86 drawn on the account of Burrell Construction Co. in the Guarantee Bank and Trust Co. (Guarantee bank).

At about 3:15 P.M. the city treasurer took the check to Cape May bank to deposit it. In response to an inquiry by the city treasurer, the president of Cape May bank telephoned a bookkeeper at Guarantee bank and learned that the account of Burrell Construction Co. contained insufficient funds to cover the check. With knowledge of this situation the city treasurer deposited the check.

At about the same time Burrell apprised Stainton of the amount of his successful bid. Stainton and Luff then returned to Cape May bank where they spoke to the president shortly after the city treasurer had left. They opened an account and had a check in the amount of $35,000 certified and made payable to Burrell.

While Stainton and Luff were at the Cape May bank, Burrell telephoned Guarantee bank and told an officer that he wished to deposit a $35,000 certified check to cover the check he had just drawn to the order of the city. He was told that the bank was about to close for the day and that his deposit would be among those of the following day. The officer of Guarantee bank then telephoned the president of Cape May bank and told him that the check to the city would be honored when presented. Accordingly, Cape May bank sent the check through for collection that afternoon.

At 9:30 A.M. of the next day when Burrell deposited the $35,000 check at the Guarantee bank the bookkeeping department was authorized to honor his check to the city. When the president of Cape May bank was again informed that the check would be honored, he telephoned the city treasurer at about 12:30 P.M. and so informed him. The check was paid by Guarantee bank when it was presented on December 17, 1964.

Plaintiff took the position in the Chancery Division, as he does now, that because Burrell's ...


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