On appeal from an interlocutory order of the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8301-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Payne and Sapp-Peterson.
Defendant, First Hope Bank, appeals from the March 30, 2007 Law Division order of Judge Daniel Mecca granting summary judgment to plaintiff, Wawel Savings Bank, and denying its cross-motion for summary judgment. We affirm.
Defendant, First Hope Bank, is the drawer bank that issued two certified checks drawn from the account of Show Shine, LLC (Show Shine) made payable to plaintiff, Wawel Savings Bank. Plaintiff loaned Frederick Hatem, who is not a party to this action, $285,000. Hatem defaulted on the note, which was secured by a mortgage on Hatem's home. Plaintiff instituted a foreclosure action but apparently reached an agreement with Hatem to cure the default. As part of the agreement, Hatem paid $14,916.11, delivered in two Show Shine checks, certified by First Hope, which plaintiff's attorney was to place in an escrow account. When Hatem later filed lost check affidavits with First Hope, the $14,916.11, was credited back to Show Shine's account and two new checks were issued made payable this time to Andover Township, which defendant claimed Hatem used to pay real estate taxes on Hatem's home.
On August 15, 2006, Hatem filed for Chapter 13 bankruptcy. Plaintiff filed a proof of claim in the bankruptcy action for $33,081.09, which represented Hatem's total arrears on the note up to that point. Hatem's bankruptcy plan was approved without objection from plaintiff, who, in addition to filing a proof of claim when it learned of Hatem's bankruptcy petition, also presented the two initial certified checks to defendant for payment. Defendant informed plaintiff that on the basis of having received the lost check affidavits from Hatem, the funds were credited back to Show Shine's account. Plaintiff advised defendant that the checks were not lost and were being held in trust by plaintiff's counsel. Defendant nonetheless refused to honor payment on the checks. Consequently, as well as pursuing relief against Hatem in the bankruptcy action, plaintiff commenced an action in Superior Court against defendant seeking payment of the two dishonored checks pre-judgment interest, consequential damages, attorneys' fees, and costs.
Thereafter, plaintiff moved for summary judgment against defendant, arguing that as a matter of law, under the Uniform Commercial Code, N.J.S.A. 12A:1-101 to 12A:12-26 (UCC), defendant had no right to refuse to stop payment on the two certified checks. Defendant opposed the motion on the grounds that there were genuinely disputed issues of fact sufficient to defeat summary judgment, and also cross-moved for summary judgment. Defendant argued that as a creditor claimant in the bankruptcy proceeding, plaintiff had filed no objection to the debtor's proposed plan and was receiving payments on the note from Hatem in accordance with the approved plan; therefore, plaintiff's claims against it were barred and, further, plaintiff had sustained no damages.
Judge Mecca granted plaintiff's motion and denied defendant's cross-motion. The court agreed that under the UCC, defendant did not have the right to deny payment to plaintiff when the checks were presented for payment. Although raised as an issue by defendant, the judge did not address what credit, if any, defendant was entitled to receive for payments to plaintiff arising out of the bankruptcy plan. The judge specifically limited his ruling to whether plaintiff had a cause of action against defendant for dishonoring the two certified checks. The present appeal ensued.*fn1
We first dispense with defendant's argument that there were genuinely disputed factual issues that warranted denial of plaintiff's motion for summary judgment. Our standard of review of a trial court's grant of summary judgment is the same as that employed by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boyland, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Summary judgment is appropriate where there is no genuine issue as to any material fact challenged. R. 4:46-2(c). Here, plaintiff claims defendant had no right to dishonor payment on the two certified checks. Since there is no dispute that the checks were certified for payment by defendant and there is no dispute that defendant refused payment when the checks were presented, no additional discovery was necessary for the court to address the purely legal question of whether, as a matter of law, defendant had the right to dishonor payment.
Because the certified checks are negotiable instruments, the court turned to the UCC to answer the question. In our review of the motion judge's grant of summary judgment, we owe no deference to his "construction of the legal principles," Lombardo v. Hoag, 269 N.J. Super. 36, 47 (App. Div. 1993) certif. denied, 135 N.J. 469 (1994). We are, however, in complete accord with Judge Mecca's determination that defendant had no right to refuse payment when the certified checks were presented.
Under the UCC, a certified check is "a check accepted by the bank on which it is drawn." N.J.S.A. 12A:3-409(d). When a bank certifies a check and the check is later presented for payment, the bank becomes obligated to pay the check according to its terms at the time it was accepted. N.J.S.A. 12A:3-413(a). This obligation is owed to "[the] person entitled to enforce the draft or to the drawer or an indorser who paid the draft[,]" N.J.S.A. 12A:3-413(a), unless that person has procured the check by fraud. Sutter v. Sec. Trust Co., 96 N.J. Eq. 644, 648 (1924).
Here, the certified checks in question were made payable to the order of Wawel Savings Bank, SLA. Defendant made no allegation that Wawel, as payee, procured the checks by fraud. Consequently, Wawel was a bona fide holder for value of the instruments and entitled to payment, despite the lost check affidavits executed by Hatem. Id. at 648 (holding a drawer may not unilaterally stop payment on a certified check unless the ...