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C & F, Inc. v. East Coast Truck Parts & Sales

July 23, 2010


On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. DC-12837-08.

Per curiam.


Submitted June 22, 2010

Before Judges Carchman and Parrillo.

Defendant, East Coast Truck Parts & Sales, Inc. (East Coast or defendant), appeals from summary judgment in favor of plaintiff C & F, Inc., t/a The Check Store (Check Store or plaintiff), in the amount of $9,840. We reverse and remand.

East Coast is an automotive repair facility with a business office in Newark. Its principal owners and officers, brothers Michael and Alan Kane, have sole responsibility for the company's bookkeeping and financial operations. Company checks and business records are maintained in a drawer in Michael's desk.*fn1 In August 2007, East Coast hired Jazmin Echandy to serve as the company's receptionist, replacing Sandra Araujo, who left the company several weeks earlier. According to Michael Kane, prior to hiring Echandy, he contacted several of her former employers, receiving confirmation that she was a responsible worker. East Coast was also unaware of any interactions between Echandy and Araujo, as their employment did not overlap.

Echandy's job responsibilities as a receptionist did not include bookkeeping or accounting or involve any of the company's financial affairs. Moreover, she was not allowed access to the company's checks, and was not provided a key to the desk. Approximately one week after Echandy's hiring, Michael Kane noticed that two company checks were missing. He immediately contacted the Newark Police Department, and placed a stop-order on the checks. Although East Coast's bank complied with the stop-order, Echandy, over the course of four days, had already cashed the checks at the Check Store, a licensed check-cashing establishment.

Echandy had stolen two checks, sequentially numbered 32047 and 32048, forged Kane's signatures, and made the checks payable to herself. The numerically consecutive checks, however, were not presented or dated in proper order. Check 32048, for $6,600, was presented on August 6, 2007. The reverse side of this check stated that it was verified by "Sondra," apparently referencing East Coast's former employee, whom Echandy had been hired to replace. Check 32047, for $3,200, was presented on August 10, 2007. The reverse side of this check also stated that it was verified by "Sandy." Neither of the Kane brothers was contacted by plaintiff's employees to verify the authenticity of the checks. Check Store presented the checks to defendant's bank for payment, but the checks were refused because of the stop-order. The bank required Check Store to pay $40 in fines.

Consequently, plaintiff filed a complaint against both East Coast and Echandy on June 24, 2008, in the Special Civil Part, claiming that it was entitled to payment as a holder in due course (HDC) under the Uniform Commercial Code (UCC), N.J.S.A. 12A:3-302, and because of East Coast's alleged negligent maintenance and supervision of the stolen checks. East Coast failed to answer, and default judgment was entered on September 15, 2008. Following entry of default judgment, plaintiff served an information subpoena upon East Coast, which went unanswered. It was not until plaintiff later moved to enforce litigant's rights that East Coast first learned of the lawsuit, and as a result, on April 7, 2009, East Coast filed a cross-motion to vacate the default judgment. East Coast's certifications established that service had been improper, and the court vacated the default judgment, reinstating the matter.

East Coast filed its answer on May 21, 2009, denying plaintiff's allegations, claiming, among other things, that Check Store was comparatively negligent under N.J.S.A. 12A:3-406(b) and N.J.S.A. 2A:15-5.1, and demanding discovery in the form of interrogatory questions and documents. Pertinent here, defendant's discovery request included: all of Check Store's procedures for check verification; the identity and personnel records of the employees who serviced Echandy; copies of Check Store's training documents related to fraud monitoring and verification procedures; all audio or videotapes pertaining to the subject transactions; and all phone records for August 6, 2007, through August 11, 2007.

In lieu of providing discovery, plaintiff moved for summary judgment, contending that "when [p]laintiff cashed the check, it do so for value, in good faith, and without notice that it was overdue, or had been dishonored, or that there was any defense against or claim to the instrument on the part of any person." Plaintiff also argued that defendant was negligent per se in leaving the checks in an unlocked drawer. Defendant opposed the motion, maintaining that to the extent plaintiff's summary judgment motion was based on defendant's alleged negligence under N.J.S.A. 12A:3-406, plaintiff's comparative fault was factually in dispute. On this point, defendant argued:

The defendant submits that the plaintiff didn't act properly in verifying the authenticity of the checks. They were brought two checks [totaling about] $9,000, payroll checks with no deductions. The signatures are different. The checks are out of sequence. The handwriting is different. The person that was alleged to have been called to verify them by the check cashing company was no longer in the employ of the defendant. She could have never verified it, because she physically wasn't there.

So all of those factors leads to . . . a[n] issue of material fact as to whether or not the plaintiff is comparatively at fault . . . .

[The checks] were in an unlocked drawer; we're not disputing that. But there is also some fault that can be attributed to the plaintiff for not taking the proper steps to verify the authenticity of [the checks] before cashing them.

Defendant also argued that the summary judgment motion was premature since defendant's discovery request remained outstanding: "Certainly the discovery would at least help us get to that point, or at least . . . get to . . . those issues." Defendant cross-moved for dismissal of ...

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