N.J. SUPERIOR COURT, APPELLATE DIVISION

Triffin v. Liccardi Ford Inc.

BANKING — Negotiable Instruments

New Jersey Law Journal

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Triffin v. Liccardi Ford Inc., A-1849-09T1; Appellate Division; opinion by Reisner, J.A.D.; decided and approved for publication January 12, 2011. Before Judges Lisa, Reisner and Alvarez. On appeal from the Law Division, Union County, DC-018008-09. DDS No. 06-2-xxxx [11 pp.]

Plaintiff Robert Triffin appeals from an order dismissing his complaint seeking to collect on a dishonored check originally issued by defendant Liccardi Ford Inc.

The underlying dispute concerns a check dated Aug. 10, 2007, that was made payable to one of Liccardi's employees, Charles Stallone Jr. The company withheld the check from Stallone because he was suspected of embezzlement. However, the check disappeared, and when the disappearance was discovered, Liccardi immediately placed a stop payment on it.

JCNB Check Cashing Inc. (JCNB) cashed the check for Stallone before the issue date and then deposited the check in its own bank account on or before Aug. 9, 2007. However, the issuing bank refused to honor the check. Triffin acquired the dishonored payroll check from JCNB and sued Liccardi and Stallone for the amount of the check plus interest.

The Special Civil Part judge granted Liccardi's summary judgment motion. The judge reasoned that JCNB was not a holder in due course because the fact that the check was postdated should have put JCNB on notice that there was a claim or defense against collection.

Held: Because the check Triffin purchased from a check-cashing service was post-dated, and the check-cashing service from which Triffin purchased it had made payment in violation of the Check Cashers Regulatory Act of 1993, the service was not a holder in due course. Therefore, Triffin took the check subject to the issuer's defense that the check was stolen, and his complaint was properly dismissed.

Under the New Jersey Uniform Commercial Code (UCC), to be a holder in due course one must take "an instrument for value, in good faith, and without notice of dishonor or any defense against or claim to it on the part of any person." "Good faith" includes "the observance of reasonable commercial standards of fair dealing." Further, the document must not be "so irregular or incomplete as to call into question its authenticity."

Triffin did not take the Liccardi check as a holder in due course, because he purchased the instrument with notice that it had been dishonored. However, if JCNB was a holder in due course when it obtained the check from Stallone, it could assign its interest in the check to Triffin and he in turn could enforce JCNB's rights as its assignee. If Stallone attempted to collect on the check from the obligor, he would be subject to Liccardi's defenses. Therefore, the critical question is whether JCNB took the check as a holder in due course and can thereby avoid the defenses to enforcement that Liccardi has against Stallone.

The Appellate Division has previously held that "a holder in due course must satisfy both a subjective and an objective test of good faith, requiring a consideration of the holder's honesty in fact and observance of reasonable commercial standards." Under the express terms of the Check Cashers Regulatory Act of 1993, a check-cashing service is prohibited from "cash[ing] or advanc[ing] any money on a postdated check." Therefore, the act requires that a licensee, such as JCNB, examine the face of a check and refrain from cashing it if the check is postdated. The appellate panel concludes that in this case the act defined the "reasonable commercial standards" that JCNB was required to follow, and having failed to follow those standards, JCNB was not a holder in due course.

Relying on Valley National Bank v. P.A.Y. Check Cashing , Triffin argues that Liccardi cannot assert a defense based on the act, because the act was intended to protect check payees and not obligors. The language on which Triffin relies appears in a portion of the Law Division opinion holding that a bank cannot assert a private right of action for a check casher's violations of the act. However, in a later portion of the opinion, the Law Division held that a violation of the act is relevant to whether a check-cashing service has acted in good faith under the UCC. The court rendered judgment for the bank for the defendant's UCC violations. In rejecting defendant's appeal, the Appellate Division specifically agreed with the Law Division that defendant's conduct in cashing the check in violation of the provisions of the Check Cashers Regulatory Act of 1993 did not, as a matter of law, satisfy defendant's obligation of "good faith" under the UCC. That is the pertinent holding for purposes of this case. Like the check casher in Valley National Bank , JCNB clearly violated a provision of the act and, therefore, failed to observe reasonable commercial standards of the check-cashing industry as established by the act. Thus, JCNB cannot qualify as a holder in due course.

Because the check-cashing service from which Triffin bought the Liccardi check violated the act by paying on a postdated check, Triffin could not, by taking an assignment of the check, assert the rights of a holder in due course.

— By Debra McLoughlin

Appellant appeared pro se. Respondent has not filed a brief.

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