On appeal from Superior Court of New Jersey, Chancery Division, MiddleseX County, Docket No. C-06-04.
The opinion of the court was delivered by: Fuentes, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lefelt, Alley and Fuentes.
In this appeal,*fn1 we are called upon to decide whether a bank may stop payment on a cashier's check or reverse a wire transfer against the wishes of its customer. The bank's actions were prompted by the insufficiency of funds in the customer's account, which was discovered by the bank after the issuance of the certified instruments. This is an issue of first impression in this State. The question comes before us by way of appeal by defendants Commerce Bank, N.A., Fleet Bank and Wachovia Bank, N.A., from the order of the Chancery Division, General Equity Part, enjoining them from dishonoring cashier's checks and wire transfers totaling $384,597.
After considering the record and relevant sources of law, we hold that, under the circumstances depicted, a bank does not have the legal authority to unilaterally stop payment on a cashier's check or wire transfer. Because a cashier's check carries the imprimatur of the financial institution that issues it, this instrument is viewed in the commercial marketplace as the functional equivalent of cash. The public also perceives wire transfers as electronic conveyers of cash, making funds disbursed in this fashion immediately available to their intended recipient. As our modern system of commerce becomes ever more dependent upon electronic transactions, we consider the preservation of the public's confidence in these types of financial instruments to be the overarching public policy principle guiding our review of this matter. This public policy is clearly reflected in the federal regulations discussed here.
These are the salient facts. Plaintiffs Bayway Auto, Inc. (Bayway) and Platinum Imports, Inc. (Platinum) are New Jersey corporations. Pierre Parks is the president and chief executive officer of both companies. Bayway is in the business of selling used motor vehicles. Platinum provided consulting services to individuals wishing to import motor vehicles from Europe. Parks testified that, due to customs restrictions, Platinum has been dormant for over two years. Parks owned Bayway with Anatoly Rybner but severed his business relationship with Rybner in December 2003, buying out his interest in the business. At the time this matter came before the trial court, Rybner was the sole owner of Good Guys Auto Sales (Good Guys).
At oral argument, we requested that the parties confer and stipulate to the chain of events that led to this litigation. The following transactional chart reflects this stipulation:
Paragon Account: refers to an account maintained by Good Guys with Paragon Federal Credit Union.
First Good Guys Commerce Account: refers to an account opened by Good Guys at Commerce Bank, N.A., Sheepshead Bay, New York branch on or about October 30, 2003.
First Bayway Commerce Account: refers to an account opened by Bayway at Commerce Bank's Woodbridge, New Jersey branch on or about November 4, 2003.
Second Bayway Commerce Account: refers to an account opened by Bayway at Commerce Bank's Woodbridge, New Jersey branch on or about December 2, 2003.
Fleet Account: refers to a checking account opened by Platinum in New Jersey at Fleet bank, or its predecessors (if any), prior to 2000.
Wachovia Account: refers to a savings account opened by Parks in New Jersey at Wachovia Bank, or its predecessors, in approximately 1998 or 1999.
Transactions by Rybner From Paragon to First Good Guys Commerce
On or about December 19, 2003, Rybner deposited a check drawn on the Paragon Account in the amount of $27,500 into the First Good Guys Commerce Account.
On or about December 22, 2003, Rybner deposited checks in the following amounts drawn on the Paragon Account into the First Good Guys Commerce Account: