On appeal from the Ocean County District Court.
Allcorn, Seidman and Botter. The opinion of the court was delivered by Botter, J.A.D.
Defendant Peoples National Bank in Lakewood (Peoples) appeals from a judgment against it for $1,100 plus interest in favor of plaintiff Western Union Telegraph Company, in an action based upon Peoples' mistake in cashing a Western Union money order in an amount corresponding to its numerals, $1,200, rather than its words reading "one hundred dollars." Ultimately, Western Union's drawee bank charged Western Union's account $1,200, and that sum was paid to Peoples. The principal issue is whether in these circumstances Western Union can sue Peoples directly or is limited to its claim against its drawee. This issue has not been decided previously in this State, and no reported case on this precise issue has been found in any sister state.
The facts presented in the scant record are simple and undisputed. On November 15, 1974 a Western Union telegraphic money order was sent by someone named Anthony Palma of Rockville, Connecticut, to Katherine Plomatoes of Brick Town, New Jersey, payable to her order. The money order was signed and issued by Christine Lester, Western Union's agent at its Lakewood, New Jersey, office. It was drawn on The Chase Manhattan Bank, N.A., of New York City.
Plainly, the money order called for the payment of "ONE HUNDRED 00/100 DOLLARS," stated in words, but also "$1200.00," stated in numerals. Since words in an instrument "control figures," except when the words are ambiguous, N.J.S.A. 12A:3-118(c), only $100 should have been paid to a holder of the instrument. Instead on November 15, 1974, when presented with endorsements in the names of Katherine Plomatoes and, curiously, plaintiff's
agent Christine Lester, Peoples' teller paid the holder (allegedly Katherine Plomatoes or Christine Lester) $1,200. Peoples received $1,200, presumably through normal collection channels, and Western Union asserts that it ultimately "paid" the money order in the amount of $1,200. For the purposes of this opinion we assume that the instrument or item, N.J.S.A. 12A:4-104(1)(g), passed through the normal collection process whereby defendant received $1,200 from the drawee, Chase Manhattan, who, in turn, charged plaintiff's account in the same amount. See N.J.S.A. 12A:4-204; Life Ins. Co. of Va. v. Snyder , 141 N.J. Super. 539 (Cty. D. Ct. 1976); Stone & Webster Eng'g Corp. v. First Nat'l Bank & Trust Co. , 345 Mass. 1, 184 N.E. 2d 358 (Sup. Jud. Ct. 1962); Allied Concord Financial Corp. v. Bank of America Nat'l Trust & Savings Ass'n , 275 Cal. App. 2d 1, 80 Cal. Rptr. 622 (D. Ct. App. 1969); Rosenthal, "Negotiability -- Who Needs It?" 71 Colum. L. Rev. 375, n. 61 at 390 (1971).
More than two years later, by letter dated December 2, 1976, Western Union demanded reimbursement from Peoples of its $1,100 loss. Peoples rejected the claim and this action was commenced. Peoples then filed a third-party complaint against Plomatoes and Lester but could not locate or serve them.
Both parties moved for summary judgment. We were advised that the trial judge treated the case as if it had been tried on stipulated facts. Finding Peoples negligent, see N.J.S.A. 12A:4-103(1), in cashing the money order in violation of N.J.S.A. 12A:3-118(c), he entered judgment in favor of plaintiff. The trial judge rejected Peoples' contention that Chase Manhattan's negligence in charging $1,200 against Western Union's account precluded Western Union's recovery against Peoples. He reasoned that it was Peoples' negligence "which resulted in" the $1,100 damage to Western Union. Since we find no express provision in the Uniform Commercial Code which controls the result, we
base our conclusions on general legal principles, N.J.S.A. 12A:1-103, and we reverse.
Peoples reminds us that it was the negligence or misconduct of Western Union's own agent in issuing an instrument with conflicting words and figures that set into motion the errors that were later committed. Nevertheless, our disposition of this case makes it unnecessary for us to determine if plaintiff should be precluded on that count alone. Cf. N.J.S.A. 12A:3-406, which bars recovery by one whose negligence substantially contributes to a material alteration of an instrument or the making of an unauthorized signature as against a drawee, providing the drawee acts in good faith "in accordance with the reasonable commercial standards" of its business. See Transamerica Ins. Co. v. United States Nat'l Bank of Oregon , 276 Or. 945, 558 P. 2d 328 (Sup. Ct. 1976); Bank of S. Md. v. Robertson's Crab House, Inc. , 39 Md. App. 707, 389 A.2d 388 (Ct. Spec. App. 1978). We will determine the outcome of this case on the assumption that Peoples and Chase Manhattan were negligent in paying out more than $100 on the instrument without regard to plaintiff's negligence.
It does not follow, however, that Peoples' negligence was the "proximate cause" of plaintiff's loss. N.J.S.A. 12A:1-103 provides that "principles of law and equity" supplement the provisions of the Code unless displaced by particular provisions. See Salsman v. National Community Bank of Rutherford , 102 N.J. Super. 482, 492-494 (Law Div. 1968), aff'd per curiam 105 N.J. Super. 164 (App. Div. 1969). To the extent that plaintiff relies on negligence law as the source of defendant's obligation, plaintiff must ...