On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-3601-03.
Before Judges Newman, Axelrad, and Holston, Jr.
The opinion of the court was delivered by: Axelrad, J.T.C. (temporarily assigned).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This appeal involves the liability of a bank to its customer for paying on forged checks chargeable to the customer's account. The bank argued it was not liable for honoring the checks because they contained a facsimile signature resembling the specimen on file, which signature was binding on its customer. The court concluded, in the absence of the customer's negligence and where it reported the forgery within the statutorily required time after it received its bank statements, the checks were not "properly payable" within Section 4 of the Uniform Commercial Code ("UCC"), and thus the bank could not charge the amounts of the forged checks to its customer's account. On cross-motions, the court entered summary judgment in favor of the customer. We affirm.
Plaintiff, Lor-Mar/Toto, Inc. ("Lor-Mar"), a customer of defendant, lst Constitution Bank ("Bank"), maintained a business checking account at the Bank numbered "1501501412." The corporate banking resolution ("Resolution") between plaintiff and the Bank provided that checks drawn on plaintiff's checking account could be honored upon one authorized signature of the four named officers or employees of plaintiff stated in the Resolution, which included Loretta A. Van Middlesworth and Louis J. Toto, Jr., its president and vice-president respectively.*fn1 On May 28, 1997, plaintiff notified the Bank that the signatures of Van Middlesworth and Toto would be "stamped" on plaintiff's checks and provided the Bank with samples of their stamped facsimile signatures. Thus, from May 1997 forward, the Bank was authorized by plaintiff to honor checks bearing a stamped facsimile signature of either Van Middlesworth or Toto.
Beginning on June 19, 2002, a series of five allegedly unauthorized checks were drawn against plaintiff's account: Date Check No. Amount Payee Date Posted June 19, 2002 6443 $4900 Ali Aydin June 24 June 20, 2002 6482 $9750 Deniz Erdogan June 24 June 21, 2002 6481 $3700 Ali Aydin June 24 June 25, 2002 6572 $1200 Seyda Sengul July 3 June 27, 2002 6570 $4800 Seyda Sengul July 1 The total sum of the unauthorized checks equaled $24,350.00. All five checks bore what appears to be the stamped facsimile signature of Van Middlesworth as was provided to the Bank on May 28, 1997, and another signature which is illegible. However, the unauthorized checks were a different stock and color than plaintiff's regular checks. More particularly, based on our review and comparison at oral argument of samples of plaintiff's authentic checks issued during the same time period and the subject checks contained in the trial record, we noted that the former were light yellow in color and the type routinely purchased from banks. On the front, under the preprinted check number, they contained a numerical bank designation of "55-715/212 01." The back of the checks contained a repetitive pattern and the words "ORIGINAL DOCUMENT" with a security message at the bottom stating: "IMPORTANT: The back of this document has been printed with a patented security process in order to deter check fraud. If you do not clearly see the words 'Original Document' and the Security Weave pattern, or the word VOID appears to the right of this message, do not cash."*fn2 The sample checks contained the stamped facsimile signature of Toto and the actual signature of another corporate signatory, Maureen E. Zaleck. In comparison, the challenged checks were computer-generated and laser-printed on light blue paper and contained no bank designation number under the preprinted check number. Their purported security features are different from the legitimate checks; they contain the words "ORIGINAL DOCUMENT" in large letters once on the back with a boxed designation:
THIS DOCUMENT INCLUDES THE FOLLOWING VALUGUARD SECURITY FEATURES; EXCEEDING FSA GUIDELINES:
· INVISIBLE FLUORESCENT FIBERS
ATTEMPTS TO COPY OR CHEMICALLY ALTER THIS DOCUMENT WILL ACTIVATE VALUGUARD SECURITY FEATURES.
Significantly, these unauthorized checks contain repeated duplicate numbers from legitimate checks that had already been issued by plaintiff: Date Check No. Amount Payee Date Posted May 31, 2002 6443 $2490 Gino's Trucking June 5 June 6, 2002 6482 $3056 Dave's Excavating June 12 June 6, 2002 6481 $3290 CAS Contracting June 12 June 28, 2002 6572 $4905.71 Komatsu Financial July 3 June 28, 2002 6570 $584.63 Binder Machinery July 3
The Bank's threshold amount for a manual review of individual checks is $5,000. The Bank did not conduct a manual review of four of the checks below the threshold, and honored all five checks and charged plaintiff's account accordingly. The five checks were debited to plaintiff's account from June 24 to July l, 2002 and appeared on plaintiff's statements covering the periods May 31, 2002 through June 28, 2002, and June 28, 2002 through July 31, 2002. Upon reviewing the statements, plaintiff discovered and reported the unauthorized charges to the Bank in July 2002. For each of the five checks, Toto executed an "Affidavit For Forged or Lost Check/Money Order" to the Bank attesting that he never signed his name on the check, authorized any person to endorse his name, the endorsement of his name that appears on the check is a forgery and he never received any of the funds the check represented. Although no explanation was provided for the lack of an affidavit by Van Middlesworth, there are no allegations by the Bank of negligence on her part regarding her stamp or any involvement in the issuance of the challenged checks. Therefore, we can assume the forger produced the checks without making unauthorized use of Van Middlesworth's facsimile stamp or any other facilities under the control of the actual drawer and produced the counterfeit checks and reproduced Van Middlesworth's signature using modern desktop publishing technology with a genuine check of Lor-Mar as a model. Plaintiff filed a complaint with the state police but its investigation was unsuccessful. Plaintiff believed the incident was part of a string of forgeries in the central New Jersey area which remained unsolved.
Of the five checks at issue, two were presented and deposited into accounts maintained at First Union Bank and Fleet National Bank. Although the Bank disputed liability to plaintiff, it contacted both First Union Bank and Fleet National Bank in an effort to recover the funds paid on the unauthorized checks from the accounts at these financial institutions into which they were deposited. The Bank was successful in recovering $8,990.15, and forwarded to plaintiff checks in the amounts of $5,758.36 on August 12, 2002 and $3,231.79 on September 5, 2002. Plaintiff filed suit to recover the balance due on the forged checks that had been charged to its account in the amount of $15,359.85, plus interest and costs.
The parties filed cross-motions for summary judgment. Plaintiff contended that the Bank should have noticed the challenged checks drawn on the account were different and contained security features inconsistent with those that appeared on checks used in plaintiff's regular course of business, and they contained duplicate numbers to authentic checks previously issued by plaintiff several weeks prior which presumably had already cleared the account. Accordingly, pursuant to N.J.S.A. 12A:4-401, the checks were not "properly payable" and they should not have been honored by the Bank.
The Bank contended it exercised reasonable commercial standards in paying the checks. According to the Bank, there was an express contractual arrangement that it pay on the stamped facsimile signatures of either Van Middlesworth or Toto. The Bank claimed it did exactly as it had been authorized by plaintiff. The Bank presented a certification of Kevin Rowinsky, its vice-president and auditor, opining that the checks did not bear "any apparent evidence of any forgery and are not so irregular as to call into question their authenticity." Rowinsky further stated: lst Constitution's threshold amount for pulling individual checks and manually ...