On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Essex County, DC-26349-05 (A-0513-06T5) and Middlesex County, DC-6834-06 (A-0514-06T5).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Sapp-Peterson and Messano.
These are back-to-back appeals that have been consolidated for the purposes of this opinion. Plaintiff, Robert J. Triffin, is in the business of purchasing dishonored checks. He in turn obtains an assignment of rights, in connection with the dishonored checks, from the check cashing entity. Plaintiff appeals the dismissal of two complaints following separate bench trials. The first complaint was filed in Essex County against American International Group Inc., a/k/a AIG; New Hampshire Insurance Company - NJ LAD Loss, and The Robert Plan (hereinafter all referred to as AIG). The trial judge dismissed the complaint after concluding that plaintiff's assignor, A-1 Check Cashing Emporium (A-1), was not a holder in due course because it knowingly cashed a check that was facially defective when it was presented for payment. In the second action filed in Middlesex County against Red Carpet*fn4 and David Ruddy (Ruddy), the trial judge dismissed plaintiff's complaint after finding that plaintiff's assignor, Check-X-Change of Perth Amboy (Check-X-Change), was not a holder in due course because it failed to exercise reasonable commercial standards before cashing the checks Ruddy presented to it that were later dishonored. We affirm the judgment dismissing plaintiff's complaint against AIG. We also affirm the entry of default judgment against Ruddy but reverse the dismissal of plaintiff's complaint against Red Carpet and remand for the entry of judgment in favor of plaintiff against Red Carpet.
In the AIG action, the trial proofs were as follows. In November 2002, AIG issued a check to Jermielem Merriwether in connection with a personal injury action. Merriwether presented the check to A-1 for payment on December 4, 2002. A-1's representative, John Carter, testified that "[he] forgot to have Mr. Mer[r]iwether sign the check." He indicated that it was "an oversight" on his part and that he wrote the name on the check probably about a half an hour after he left the store.
Because we deposit the check to the bank so we can g[e]t our money back. And I was left with a piece of paper for the $3,100 [and] when I attempted to call Mr. Mer[r]iwether I didn't get no answer. So, I printed his name so we could make the deposit to the bank. And later, some time later after that, I don't know if I'm talking too much here, you know, the check came back, and then we wound up receiving a[n] affidavit indicating that he didn't cash the check.
He meaning Mr. Mer[r]iwether. And I just think that it was conspiracy on his part to try to get over because he realized that he forgot to sign the check.
The trial judge, in granting a judgment of no cause in favor of defendant, concluded that "[b]y falsely endorsing the check A-1 did not become a holder in due course. Since plaintiff's rights derive from those of A-1, plaintiff has no claim against the payor AIG." We agree.
N.J.S.A. 12A:3-302(a) defines a holder in due course as the holder of an instrument that
(1) . . . when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
(2) the holder took the instrument for value, in good faith, without notice that the instrument . . . contains an unauthorized signature or has been altered[.]
There is no dispute that A-1's representative, Carter, cashed Merriwether's check without first securing Merriwether's signature and, according to his testimony, "[he] printed [Merriwether's] name [on the check] so we could make the deposit to the bank." Carter also testified that he told A-1's owner, Alex Neu, who later entered into the assignment/transfer agreement with plaintiff, what he had done prior to the assignment. Hence, at the time A-1 ...