Mr. Scott D. Liebling, P.C. (hereinafter ‘‘Plaintiff’’) is an attorney at law. Plaintiff maintains an attorney trust account (‘‘Account’’) at Mellon Bank (NJ) National Association (‘‘Mellon’’) * * *. Mellon uses a computerized system to process checks for payment.

   Plaintiff represented defendant Fredy Winda Ramos (‘‘Ramos’’) in a personal injury action which resulted in a settlement. On or about May 19, 1995, plaintiff issued Check No. 1031 in the amount of $8,483.06 to Ramos representing her net proceeds from the On or about May 24, 1995, plaintiff mistakenly issued another check, Check No. 1043, to Ramos in the same amount of $8,483.06. Realizing his error, on or about May 30, 1995, Plaintiff called Ramos in Puerto Rico and advised her that the Check No. 1043 was issued by mistake and instructed her to destroy the check. Thereafter, Plaintiff called Mellon and ordered an oral stop payment on the check.

   On December 21, 1996, some nineteen months after plaintiff issued the Check No. 1043, Ramos cashed the check from Puerto Rico. Plaintiff filed this complaint against both Ramos and Mellon. Ramos was served and defaulted. Plaintiff’s comChapter 30 Bank Deposits, Collections, and Funds Transfers 585 negligence, breach of fiduciary duty, payment of a stale check, and breach of contract as a result of Mellon honoring the second check, Check No. 1043.

 ***
Issue

Whether the defendant bank acted in good faith when it honored a check that was presented for payment nineteen months after it was issued and subsequent to the expiration of an oral stop payment order.

 Discussion 

It is important to consider the relevant New Jersey statute sections before discussing what actions constitute ‘‘good faith.’’ Under [UCC] 4–403(b): 

[a] stop-payment order is effective for six months, but it lapses after 14 calendar days if the original order was oral and was not confirmed in writing within that period. A stop-payment order may be renewed for additional six-month periods by a writing given to the bank within a period during which the stop-payment order is effective.

In addition, [UCC] 4–404 states:

A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer’s account for a payment made thereafter in good faith.

   Thus, the issue in the present case turns on whether Mellon acted in good faith when it honored plaintiff’s check. Good faith under N.J. Uniform Commercial Code has been defined in [UCC] 3–103(a)(4) as ‘‘honesty in fact and the observance of reasonable commercial standards of fair dealing.’’ Since there is no New Jersey case law directly on point, it is necessary to consider alternate sources. One law review article [citation] addressed the present issue. Specifically, the article explained that ‘‘Article 4 of the Uniform Commercial Code imposes on all banks the responsibility to act in good faith and to exercise ordinary care. The drafters of the Code chose not to provide an explicit definition of ‘ordinary’ care, stating only that the term is to be used ‘with its normal tort meaning and not in any special sense relating to bank collections.’’’ [Citation.] * * *

   In addition, the Third Circuit case of [citation] appears to be analogous to the present issue. In [that case], an insurance company brought a subrogation action against a payor bank to recover on an altered check that the bank had paid. On April 17, 1984, the plaintiff placed a written stop-payment order on a certain check, and under applicable state law the stop-payment order was good for six months. On December 26, 1984, two months after the stop payment order had expired, the bank honored the check. Before concluding that the payor bank had acted in good faith, the court analyzed the definition of ‘‘good faith.’’ The court stated that ‘‘[UCC] §1–201 defines good faith as ‘honesty in fact.’ This definition must be viewed subjectively; a finding of bad faith must be predicated on a showing of dishonesty. Likewise, mere negligence does not preclude a finding of good faith.’’ [Citation.] In holding that the bank had acted in good faith, the court stated:

[a]s a result of the expiration of the order, [the bank] cannot be said to have the actual knowledge that would deny it the status of a good faith payor * * *. The obligations which a bank incurs as a result of its customer’s imposing a stop order on a check do not continue in perpetuity * * *. [The bank] was neither negligent nor reckless and certainly cannot be said to have been subjectively dishonest * * *. A finding of bad faith requires actual knowledge on the part of the payor. An objective inquiry into what the circumstances should have revealed to [the bank] is simply not germane to the analysis.

 [Citation.] 

*** 

   In contrast, plaintiff’s argument centers on the proposition that the bank’s duty of good faith required it to inquire or consult with plaintiff before honoring a stale check that had a previous oral stop payment order on it. * * *

   However, in the Uniform Commercial Code Treatise, Mr. Hawkland stated that the above cases are not consistent with the Uniform Commercial Code, specifically, ‘‘[t]he duty [of inquiry] is inconsistent with the provisions of subsection 4–403(2) on the expiration of the ‘effectiveness’ of stop orders. Such a duty is hardly practical today.’’ Moreover: ‘‘[t]o require that a payor bank check the date of every check received via the collection process would unreasonably increase the cost of processing every check written today.’’

*** 

   The Commercial Code was initially adopted in November, 1961 in New Jersey. In 1990, Articles III and IV of the Code were substantially revised relating to, among other things, bank deposits and collections to become effective on June 1, 1995. The court is satisfied as pointed out by the defendant that those Amendments were enacted in order to address the effect of automated systems utilized by banks with the substantial increase in check usage after the original enactment of the Code. The Official Code Comment to the 1995 Amendments for §[UCC] 4–101, states as follows:

1. The great number of checks handled by banks and the country-wide nature of the bank collection process require uniformity in the law of bank collections. There is needed a uniform statement of the principal rules of the bank collection process with ample provision for flexibility to meet the needs of the large volume handled and the changing needs and conditions that are bound to come with the years. The Article meets that need.

2. * * * An important goal of the 1990 revision of Article 4 is to promote the efficiency of the check collection process by making the provisions of Article 4 more compatible with the needs of an automated system and, by doing so, increase the speed and lower the cost of check collection for those who write and receive checks. * * *

[Citation.]

***

   Thus, in determining whether the defendant bank in the present action acted in good faith, the above cited material must be analyzed and applied. First, it appears clear that the Uniform Commercial Code acknowledges that computerized check processing systems are common and accepted banking procedures in the United States. [Citation.] Therefore, it cannot be said that defendant bank acted in bad faith by using a computerized system when it honored plaintiff’s ‘‘stale’’ check. Furthermore, it appears that the test for good faith is a subjective test. Thus, based on all of the foregoing material, as long as the defendant bank used an adequate computer system for processing checks (here there is no proof to the contrary), it appears to have acted in good faith even though it did not consult the Plaintiff before it honored the ‘‘stale’’ check that had an expired oral stop-payment order on it * * *. [T]he obligation of a bank to stop payment on a check does not continue in perpetuity once the stop payment order expires.

   The bank’s conduct was fair and in accordance with reasonable commercial standards. Accordingly, it appears that the defendant bank is not liable and should prevail. A finding of no liability is entered for the defendant bank.