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Merchants Express Money Order Co. v. Sun National Bank

February 2, 2005

MERCHANTS EXPRESS MONEY ORDER COMPANY, PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
v.
SUN NATIONAL BANK, DEFENDANT-APPELLANT/CROSS-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Cumberland County, L-396-02.

Before Judges Axelrad, Holston, and Bilder.

The opinion of the court was delivered by: Bilder, J.A.D. (retired and temporarily assigned on recall).

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 1, 2004

Plaintiff Merchants Express Money Order Co. is a multi state money transmitter which is licensed in New Jersey as "MEMO Money Order Company" to sell money orders to the public through retail establishments. MEMO provides its agents with blank money orders as well as equipment necessary to convert the blank money orders to negotiable instruments and to count the number and amount of money orders sold. The agents earn a percentage fee on the money orders sold.

Thurlow Checking, Inc. and Chelsea Check Cashing, L.P., companies with a common ownership, operated a check cashing business from a number of sites in Atlantic City and, among other things, also sold money orders and lottery tickets. Beginning in September 1998 Thurlow/Chelsea acted as money-order sales agents for plaintiff.

In connection with their businesses, Thurlow/Chelsea had banking relationships with defendant Sun National Bank that included operating accounts and separate money order accounts. The former contained, among other things, funds loaned by the bank as part of a line of credit as well as general operating funds; the latter was an account from which money-order-sales proceeds were transmitted on a weekly basis to plaintiff.

In October 2000, Thurlow/Chelsea's line of credit being seriously overdrawn, defendant Sun froze their bank accounts, seizing and applying the monies in those accounts to satisfy Thurlow/Chelsea's debts to Sun. As a result Thurlow/Chelsea was unable to wire transfer to plaintiff money-order-sales proceeds totaling $485,930.23. Contending the seized funds included these money-order-sales proceeds, plaintiff sued defendant Sun for their recovery. Defendant Sun appeals from a summary judgment finding it liable to plaintiff, assessing damages at $458,930.23 and entering judgment for that amount together with costs and interest from October 22, 2000. We affirm.

I.

A proper understanding of this case requires familiarity with the trade practices of Thurlow/Chelsea and the New Jersey Money Transmitters Act, N.J.S.A. 17:15C-1 to -27.

Thurlow/Chelsea's trade practices. Proceeds from sales at Thurlow/Chelsea were initially deposited in general cash drawers at the sales sites. Moneys received from the sale of money orders were commingled with other receipts and cash received from the sale of money orders became available for use in Thurlow/Chelsea's principal business of check cashing. On a regular basis, the contents of the cash drawers were deposited in the general operating funds accounts at Sun and on a weekly basis the amounts owed to MEMO were transferred into the money order accounts and from there wire transferred to MEMO.

The New Jersey Money Transmitters Act. The Money Transmitters Act, N.J.S.A. 17-15C-1 to -27 provides for the licensing and regulation of persons engaged in the business of money transmission, a business which is defined as including, among other things, the sale or issuance of payment instruments for a fee. N.J.S.A. 17:15C-2.

Contained within that Act is a provision which makes funds received by agents such as Thurlow/Chelsea trust funds and continues the trust nature of the funds even if commingled until the ...


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