This motion for summary judgment on behalf of defendant raises a novel question under the Uniform Commercial Code as enacted in New Jersey, N.J.S.A. 12A:1-101 et seq.: Is a collecting bank estopped from asserting its right to charge-back a depositor's account for the amount of two "raised" money orders drawn on another bank where the collecting bank's head teller has orally certified that the money orders are legitimate?
At the outset it must be noted that a factual question exists as to the exact nature of the conversation between plaintiff and defendant's head teller. Ordinarily the existence of a material question of fact precludes the granting of summary judgment. R. 4:46-2. However, in view of the uniqueness of the issue
presented it was necessary to first determine whether the factual question would materially affect the outcome of this case.
The pertinent facts are as follows: On April 30, 1979 plaintiff arranged to meet with a person who identified herself as Thelman Ellis for the purpose of offering for sale to Ellis a diamond ring which plaintiff kept in a safe-deposit box at defendant bank. The parties met at defendant bank, at which time the person who identified herself as Thelman Ellis offered to purchase plaintiff's ring for $1,600 by means of two money orders drawn on the Germantown Savings Bank and made payable to plaintiff in the amounts of $1,000 and $600, respectively.
Before accepting the money orders plaintiff alleges that she presented them to the head teller of defendant bank and requested that the teller certify as to their legitimacy. Plaintiff further alleges that upon being advised by the teller that the money orders were legitimate she accepted them and turned the ring over to Ellis. The money orders were then deposited by plaintiff in her checking account with defendant bank and were thereafter returned unpaid by the Germantown Savings Bank because the amounts thereon had been materially altered or "raised." As a result of the return of the checks defendant charged back the amount of $1,600 to plaintiff's account. Plaintiff contends that she relied to her detriment on the bank's expertise and as a result has suffered damages in the above amount.
Defendant, on the other hand, contends that its representative was not asked to certify as to the legitimacy of the money orders and that by depositing the money orders in her account plaintiff warranted to defendant that the items had not been materially altered. N.J.S.A. 12A:3-417.
A collecting bank's right of charge-back or refund is set forth in N.J.S.A. 12A:4-212(1):
If a collecting bank has made provisional settlement with its customer for an item and itself fails by reason of dishonor, suspension of payments by a bank or otherwise to receive a settlement for the item which is or becomes final, the
bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer's account or obtain refund from its customer whether or not it is able to return the items if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. These rights to revoke, charge-back and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final (subsection (3) of 12A:4-211 and subsections (2) and (3) of 12A:4-213).
A provisional settlement in the case of a deposit of a money order drawn on another bank amounts to a credit to the depositor's account for the amount of the item. This settlement becomes final when the item is finally paid by the payor bank. N.J.S.A. 12A:4-212, 4 211; 4-213. Once settlement becomes final the collecting bank is accountable to its customer for the amount of the item and any provisional credit given for the item becomes final also, N.J.S.A. 12A:4-213(3). When settlement becomes final and the collecting bank has had a reasonable opportunity to learn that ...