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Triffin v. Ameripay

May 13, 2004


On appeal from the Superior Court of New Jersey, Law Division, Essex County, DC-19850-02.

Before Judges Kestin, Axelrad and Lario.

The opinion of the court was delivered by: Axelrad, J.T.C. (temporarily assigned).


Argued: March 10, 2004

Defendant, Ameripay, LLC, a payroll services company for Nu Tribe Radio Networks, Inc. (NTRN) appeals from a judgment entered, following a bench trial, in favor of plaintiff, Robert Triffin, an assignee of several dishonored payroll checks. The issue before us is not whether a holder in due course who purchases dishonored checks has recourse against the drawer of the dishonored checks but, rather, the identification of the drawer who should be held liable. More specifically, the novel issue is whether a payroll services company that opened an account and signed and issued the checks in its representative capacity should be held liable for payment of the dishonored checks, rather than the employer in whose name the checks were drawn and whose identity and location were fully disclosed on the face of the checks. We hold that the Uniform Commercial Code (UCC) imposes liability for the dishonored checks on the disclosed principal, not the agent. Accordingly, we reverse.

The testimony at trial was as follows. As a payroll services company, Ameripay determines withholding obligations, calculates amounts required to be withheld, and issues payroll checks to employees of its clients. It also handles related taX filings for the employer. In July 2002, NTRN, a company located in New York City, retained Ameripay to perform payroll services. Under its agreement, Ameripay established an account on behalf of NTRN for all amounts required to be paid for employee compensation. NTRN wired funds to the account as necessary to cover its payroll obligations, and Ameripay issued payroll checks from the account to NTRN's employees. No Ameripay funds or funds of other clients were commingled in the NTRN account. Paul Bultmeyer, one of Ameripay's partners, testified as to the arrangement:

[T]he situation is that the client funds this account, this is not an account that is funded by us. It's an account that we establish as an agent, if you will, for the client to pay their payroll, and it's their obligation to fund it. When they fail to fund it, and a check or direct deposit is returned,... the client would have to pay it if it's paid at all, because we don't pay it.

According to Bultmeyer, in accordance with its standard practices, Ameripay opened an account at Commerce Bank as an agent for NTRN, bearing account number 3450032895. As part of the bank's standard operating procedures for opening accounts, Bultmeyer and his partner, Arthur Piacentini, the owners of Ameripay, signed an account card as authorized signatories on the account. Because all payroll functions were to be handled by Ameripay with funds provided by NTRN, no representatives of NTRN were authorized signatories or co-signers on the account.

On the bank's signature card, the title of the account holder was designated as"Account Holder Name(s): Ameripay LLC Client Payroll NRN." Bultmeyer testified that"NRN" represented"Nu Tribe Radio Network."

Ameripay submitted the required certificate of authority for a limited liability company to the bank, identifying the account holder at the top of the document as"Ameripay LLC Client Payroll NRN," consistent with the signature card. Further down on the document the account holder is identified as"Ameripay, L.L.C." On the face of the checks, NTRN's name, address, and telephone number were imprinted in the top left corner. Other than Commerce Bank as the paying bank, NTRN was the only company identified on the check. The payroll checks also contained a signature line, without any identification of the status of the signatory. The identity of Ameripay is not contained anywhere on the checks except in the faint watermark, which establishes authenticity.

On or about July 26, 2002, Ameripay issued payroll checks on behalf of NTRN, signed by Piacentini, based on NTRN's authorization for electronic transfer into the account of the amount necessary to cover the checks. Four NTRN employees cashed their payroll checks at A-1 Check Cashing Emporium, Inc., (A-1 Check Cashing).*fn1 A-1 Check Cashing then deposited the eight checks, which were returned dishonored with the notation"return to maker." According to its standard procedure, A-1 Check Cashing's employee had verified with the bank that there were sufficient funds in the account to pay the checks. The only reason Ameripay stopped payment on the checks is because it did not receive the funds from NTRN for disbursement through the NTRN account. According to Bultmeyer, Jonathan Harris, NTRN's principal, told him that NTRN's funds had been dishonored by its bank because the forms he filled out did not allow for electronic funds transfer. Harris represented that the funds were in its PNC bank account and would be transferred into the payroll account the next day.

After the checks were returned, Alex Neu, A-l Check Cashing's president, contacted a representative from NTRN and was told the funds for the checks had been placed with Ameripay. Bultmeyer relayed to Neu the information he had received from Harris about the problem with the electronic transfer and assured that Ameripay would honor the checks if it received the funds from NTRN to cover them. NTRN failed to transfer the necessary funds into the payroll account and the checks continued to be dishonored.

On August 22, 2002, A-1 Check Cashing assigned its interest in the checks to Triffin, who is in the business of purchasing dishonored negotiable instruments from licensed check cashers. See generally Triffin v. Johnston, 359 N.J. Super. 543 (App. Div. 2003); Triffin v. Somerset Valley Bank, 343 N.J. Super. 73 (App. Div. 2001). Triffin knew the checks had been dishonored when he purchased them from A-1 Check Cashing. Triffin commenced this action against Ameripay and the payees for collection of the dishonored checks, totaling $4400, along with pre-judgment interest and costs.*fn2 Triffin did not join NTRN as a defendant. Apparently, the payees were not served with the complaint and the matter was tried solely as to Ameripay. The judge found that A-1 Check Cashing was a holder in due course -- one who takes an instrument for value, in good faith, and without notice of dishonor or any defense against or claim to it on the part of any person -- at the time the checks were cashed. N.J.S.A. 12A:3-302a(2). Triffin acquired the same status by the assignment under the shelter provision of the UCC, which provides that"[t]ransfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course...." N.J.S.A. 12A:3-203b; Triffin v. Cigna Ins. Co., 297 N.J. Super. 199, 202 (App. Div. 1997) (emphasis omitted).

The judge found persuasive that the bank records identify Ameripay as the account holder. He concluded that the signature on the checks controlled, and because Ameripay's representative signed the checks, Ameripay was liable as a drawer to a holder in due course, or its assignee, for the amount of the dishonored checks. Moreover, the court adopted Triffin's argument that, as between two innocent parties, Ameripay and Triffin, the person who should be"blamed for... [NTRN's fraud] or the one who takes the loss, is the party who initiated the action," which the court found to be ...

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