Opinion
No. CV 08 5021486
March 27, 2009
MEMORANDUM OF DECISION
On July 21, 2008, the plaintiff, Brookview Rehab Funding, LLC, a Connecticut corporation, commenced an action against the defendant, Bank of America, alleging two counts of conversion of a negotiable instrument for depositing and paying a check indorsed by only one of three payees. The first count is against the defendant as the depositor and the second count is against the defendant as the payer, as the successor to LaSalle Bank. The defendant filed a motion to strike the complaint, with an accompanying memorandum of law, on October 14, 2008, arguing that the check was ambiguous on its face and therefore payable in the alternative.
The complaint alleges that the checks were deposited in violation of the Uniform Commercial Code (U.C.C.) § 3-420, which provides in relevant part: "The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment." The complaint also references Md. Code Ann. Conn. Com. Law I § 3-420, which adopts verbatim the U.C.C. section cited above. See n. 4, infra.
The complaint alleges the following facts. The plaintiff mortgagee made a loan to Casual Development and Investment Services, LLC (the mortgagor) secured by a mortgage on certain real property known as 18128 Joseph Campau Street, Detroit, MI. As required under the mortgage, the plaintiff is named as an additional loss payee on the casualty insurance obtained for the real property. Following a fire at the property, the insurer, Zurich American Insurance Company, issued a check in the amount of $61,008.35, made payable as follows:
The complaint states that the check is made payable to "Brookview Rehab Funding, LLC, Casual Development and Investments Services, LLC and Todd Cook." Attached to the complaint is a copy of the check, revealing that the list in the complaint is out of order. The defendant acknowledges this error in its memorandum in opposition to the motion to strike.
Casual Development and Investment Services, LLC[,]
Brookview Rehab Funding and Todd Cook
Todd Cook is a contractor retained to perform work on the mortgaged property.
5612 COOLIDGE ST.
Capital Haights, MD 20743
The mortgagor indorsed the check and deposited it at a Maryland branch into an account held with the defendant. The defendant as payer honored and paid the check. The plaintiff did not indorse the check and did not receive any of the proceeds. The real property was not restored, and the plaintiff suffered damages due to not receiving funds it was entitled to and because the value of the unrestored property is substantially less than the indebtedness of the mortgagor, who has ceased making payments on the mortgage note.
The parties do not address whether the law of Connecticut or Maryland should apply to the analysis of this case. "Under modern conflicts-of-law theory, where there is a `false conflict' such that the laws of both states relevant to the set of facts are the same, or would produce the same decision in the lawsuit, there is no real conflict between them . . . In such a case, the case ought to be decided under the law that is common to both states." Haymond v. Statewide Grievance Committee, 45 Conn.Sup. 481, 488-89, 723 A.2d 821 (1997) [ 21 Conn. L. Rptr. 123], aff'd, 247 Conn. 436, 723 A.2d 808 (1998).
The parties do not aver and research does not reveal any contrary authority on the substantive questions of law in the present case. Thus, the case will be decided under the law that is common to both states.
Standard of Review
"A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 771, 802 A.2d 44 (2002). "[F]or the purpose of a motion to strike, the moving party admits all facts well pleaded." RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 383 n. 2, 650 A.2d 153 (1994); see also Ferryman v. Groton, 212 Conn. 138, 142, 561 A.2d 432 (1989). Accordingly, "[i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007).
Analysis
The defendant argues in the motion to strike that the face of the check is ambiguous as to whether the payees were intended as joint payees or alternative payees. The Uniform Commercial Code (U.C.C.) § 3-110(d) provides that "[i]f an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively." See General Statutes § 42a-3-110(d); Md. Code Ann., Conn. Law § 3-110(d).
The defendant puts forth two alternative arguments that depend on whether the court determines that the first named payee is followed by a comma or not. The copy of the check attached to the complaint is not clear enough to determine whether there is actually a comma or not, but in the complaint, the plaintiff does include a comma after the first payee. The court will, therefore, assume that there is a comma after the first named payee for purposes of resolving the motion to strike.
The defendant argues that under Coregis Ins. Co. v. Fleet National Bank, 68 Conn.App. 716, 793 A.2d 254 (2002), the use of a comma on the face of a check introduces a patent ambiguity, allowing banks to treat it as payable in the alternative under U.C.C. § 3-110(d). In Coregis, the payees were listed as:
"TRUDY AVANTS ATTORNEY FOR MINOR CHILD JOSEPH WALTON, MOTHER DOLORES CARPENTER 1176 S. HARRELLS FERRY ROAD #E BATON ROUGE, LA 70816."
In Coregis Ins. Co. v. Fleet National Bank, supra, 68 Conn.App. 716, the appellate court upheld the determination of the trial court that the face of the check was ambiguous, but did not state that the use of a comma inherently creates an ambiguity. The trial court, similarly, did not reach such a broad conclusion and mostly focused its discussion on the question of whether the check was intended for multiple payees, stating that the comma created an ambiguity as to that issue. The court wrote that: "[T]he language concerning the payee(s) of the settlement check is ambiguous. One could reasonably conclude that Avants was the only payee or that there were multiple payees on the check. The evidence presented to the court indicates that the address on the check was Avants' address. However, the check easily could have included the words `both' and `and' in order to explicitly indicate that Avants acted as the sole payee. Instead, the check includes a comma, and adds Avants' address, thereby creating an ambiguity. Even if this court interpreted the language on the check as payable to two payees, there still exists an uncertainty as to whether the settlement check was payable alternatively or not alternatively." Coregis Ins. Co. v. Fleet National Bank, Superior Court, judicial district of Hartford, Docket No. CV 98 0580210 (July 15, 1999, Rittenband, J.) [ 25 Conn. L. Rptr. 141].
In the present case, there is no claim of ambiguity as to whether the check is made payable to multiple payees, but only whether it is jointly or alternatively payable. The plaintiff argues that the use of the grammatical connector "and" between the second and third payee gives the comma meaning. According to the plaintiff, the comma serves the grammatical purpose of making a list of payees, connected by the word "and," thereby unambiguously creating joint payees. Taking the facts in the light most favorable to the plaintiff, the court agrees that the plaintiff has alleged sufficient facts to state a cause of action for conversion.
The question of facial ambiguity presents an extremely fact specific inquiry. The parties have not referenced and research has not revealed any case considering whether the format in the present case, i.e., "A, B and C," is ambiguous. In Barco Auto Leasing v. Bourassa, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 96 0558681 (February 21, 1997, Sullivan, J.), the court denied summary judgment on a conversion claim related to a negotiable instrument where the payees on the instrument were listed in a stacked format with no connecting words or punctuation. In addition, the back of the check had language indicating that both parties needed to endorse the check. The court determined that a genuine issue of material fact existed as to whether the check was ambiguous.
By contrast to the Barco case, in Highland Tank Mfg. Co. v. First Union National Bank, Superior Court, judicial district of Hartford, Docket No. CV 00 596531 (October 30, 2000), the court granted the defendant's motion to strike the plaintiff's claim of conversion under the U.C.C. for depositing a check without the indorsement of both named payees. The payees were separated by a "virgule," also known as a "slash," which the court determined introduced inherent ambiguity as to whether it was payable jointly or in the alternative. The court distinguished Barco Auto Leasing v. Bourassa, supra, Superior Court, Docket No. CV96 0558681, on the basis that the latter case did not involve a virgule but did contain the specific requirement on the back of the check that all parties must indorse the check.
In the leading Maryland case on the issue, Pelican National Bank v. Provident Bank, 381 Md. 327, 849 A.2d 475 (2004), the court decided that a check without any grammatical connectors between the payee names was facially ambiguous and, therefore, payable in the alternative. Id., 341. The court emphasized that "[t]he subject check was drawn to the order of three payees, listed in stacked format, with no grammatical connector, punctuation or symbol indicating their relationship or how the check was intended to be paid." Id. Again, the facts as alleged by the plaintiff in the present case are dissimilar because of the use of the word "and" to modify the comma.
The defendant has not shown that the plaintiff has failed to allege a cause of action for conversion under U.C.C. § 3-420. The motion to strike is, therefore, denied.