Opinion
DOCKET NO. A-3104-13T3
04-14-2015
DIANN L. KILCOURSE and JOSEPH KILCOURSE, Plaintiffs-Appellants, v. COMMERCE BANK, N.A., TD BANK, N.A., SUSQUEHANNA BANK, Defendants-Respondents, and GARY P. LEVIN, Defendant.
Thomas P. Lutz, attorney for appellants. Dilworth Paxson LLP, attorneys for respondent TD Bank N.A., successor-by-merger to Commerce Bank, N.A. (Benjamin W. Spang, on the brief). Monzo Catanese Hillegass, P.C., attorneys for respondent Susquehanna Bank (Andrew D. Catanese, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Alvarez and Waugh. On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-4971-13. Thomas P. Lutz, attorney for appellants. Dilworth Paxson LLP, attorneys for respondent TD Bank N.A., successor-by-merger to Commerce Bank, N.A. (Benjamin W. Spang, on the brief). Monzo Catanese Hillegass, P.C., attorneys for respondent Susquehanna Bank (Andrew D. Catanese, on the brief). PER CURIAM
Defendant TD Bank, N.A. (TD Bank), successor-by-merger to Commerce Bank, N.A., filed a Rule 4:6-2(e) motion to dismiss for failure to state a claim plaintiffs Diann L. Kilcourse and Joseph Kilcourse's complaint against them for conversion by accepting a check without their endorsement. TD Bank also filed opposition to plaintiffs' motion to amend. On February 4, 2014, the Law Division judge dismissed the complaint with prejudice and denied the motion to amend. We affirm.
In deciding the application, the judge issued not a word of explanation or analysis. Rule 1:7-4(a) states: "Required Findings. The court shall, by an opinion or memorandum decision, either written or oral, find the facts and state its conclusions of law thereon . . . on every motion decided by a written order that is appealable as of right . . . ." The omission of any explanation whatsoever for the judge's decision is very troubling.
Ordinarily, the lack of findings of fact and conclusions of law would prevent any meaningful review, and we would have no choice but to remand. In this case, however, the relevant standards allow us to render a decision without the necessity of returning the matter to the Law Division.
We apply "a plenary standard of review [to] a trial court's decision to grant a motion to dismiss pursuant to Rule 4:6-2(e)," owing "no deference to the trial court's conclusions." Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 114 (App. Div.), certif. denied, 208 N.J. 368 (2011). Given that standard, we can engage in meaningful review. We ask "whether a cause of action is suggested by the facts," searching "the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (internal quotation marks omitted).
Motions for leave to amend are left to the sound discretion of the trial court. Building Materials Corp. of Am. v. Allstate Ins. Co., 424 N.J. Super. 448, 484 (App. Div.), certif. denied, 212 N.J. 198 (2012). Where the amendment to the complaint, like the original cause of action, is so meritless that a motion to dismiss would have to be granted, no purpose is served by allowing the amendment. Notte v. Merchants Mut. Ins. Co., 185 N.J. 490, 501 (2006); Interchange State Bank v. Rinaldi, 303 N.J. Super. 239, 256-57 (App. Div. 1997).
The question in this case is purely one of law. Just as the law compels the dismissal of the complaint for failure to state a cause of action, so the law compels denial of plaintiffs' motion to amend the complaint.
We now turn to the facts. Plaintiffs settled their dispute with a building contractor who, pursuant to the negotiated agreement, forwarded their attorney a check for $75,000 drawn on Susquehanna Bank and made payable to "GARY P LEVIN[, ESQUIRE] AND JOSEPH KILCOURSE AND DIANNE KILCOURSE." Levin deposited the check on March 27, 2007, without informing plaintiffs that the contractor paid the money, and without obtaining their endorsements. The check was deposited into Levin's client trust account at defendant Commerce Bank. In October 2010, Levin was disbarred and charged with theft. It was not until November 2010 that plaintiffs learned of his disbarment. In 2011, when plaintiffs received a copy of the settlement check, they then filed a claim with the New Jersey Lawyer's Fund for Client Protection, which only partially compensated them for their loss.
By the time plaintiffs filed suit on July 19, 2013, the Uniform Commercial Code's (UCC's) three-year statute of limitations had run, barring the claim against defendants for conversion. That cause of action arose from defendant banks' acceptance of the check without plaintiffs' endorsements. See N.J.S.A. 12A:3-118. Since the discovery rule does not apply to the conversion of negotiable instruments, plaintiffs' ignorance of the wrongful taking of the settlement money did not toll the running of the statute. See N.J. Lawyers' Fund for Client Prot. v. Pace, 374 N.J. Super. 57, 67 (App. Div. 2005), aff'd, 186 N.J. 123 (2006). The time lapse from Levin's deposit of plaintiffs' funds to the date of filing of their complaint was more than six years. On appeal, plaintiffs do not dispute that point.
By way of amended complaint, plaintiffs sought to assert claims for breach of UCC presentment warranties. They contend that the presentment warranty should work for their benefit in this scenario, since they are the parties who actually incurred a loss as a result of the breach.
The UCC is the comprehensive regulatory framework "for allocating and apportioning the risks of handling checks." City Check Cashing v. Mfrs. Hanover Trust Co., 166 N.J. 49, 57 (2001). Our statute codifies the UCC presentment warranties as follows:
If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, . . . warrant[s] to the drawee making payment or accepting the draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance
of the draft on behalf of a person entitled to enforce the draft;The first guarantee "is a warranty that there are no unauthorized or missing indorsements." N.J.S.A. 12A:3-417 cmt. 2.
(2) the draft has not been altered; and
(3) the warrantor has no knowledge that the signature of the drawer of the draft is unauthorized.
[N.J.S.A. 12A:3-417(a).]
The first bank accepting the check for collection (the depository bank) has the primary responsibility for checking the endorsements; it then warrants to each subsequent bank in the collection chain that the endorsements are valid. Mandelbaum v. P & D Printing Corp., 279 N.J. Super. 427, 437 (App. Div. 1995). In this case, Commerce Bank was the depository bank and Susquehanna Bank was the drawee. Since the settlement check named three payees but only Levin endorsed it, Commerce Bank breached the first presentment warranty to Susquehanna Bank.
On this basis, plaintiffs argue that Susquehanna Bank has an interest in recovering the $75,000 paid on the check and holding it in trust for them. Plaintiffs look to Mandelbaum for support, arguing that the payee in that case was able to pursue a claim for breach of the presentment warranties under similar facts. But Mandelbaum recognized only the payee's claim for conversion. 279 N.J. Super. at 432, 439-40.
Plaintiffs further argue that barring their claim for breach of the presentment warranties would contravene public policy, allowing bank collusion to thwart deserving claimants and eroding public confidence in the banking system. At the same time, plaintiffs do not allege any collusive behavior by the banks in this case.
As defendants correctly point out, plaintiffs cannot assert Susquehanna Bank's rights under the presentment warranties, nor could Susquehanna Bank assert plaintiffs' rights in an attempt to recover under the warranties. Abbott v. Burke, 206 N.J. 332, 371 (2011) ("a litigant typically does not have standing to assert the rights of third parties"); Jersey Shore Med. Ctr.-Fitkin Hosp. v. Estate of Baum, 84 N.J. 137, 144 (1980) ("standing to assert the rights of third parties is [only] appropriate if the litigant can show sufficient personal stake and adverseness so that the Court is not asked to render an advisory opinion"). The presentment warranties run only between the presenter and the drawee, making no mention of the payee. N.J.S.A. 12A:3-417(a). Their purpose is not to insulate payees from loss, but rather to protect drawee banks from damages flowing from their breach. N.J.S.A. 12A:3-417(b).
The New Jersey cases dealing with breaches of the presentment warranties disclose only drawee banks acting as plaintiffs. See, e.g., Hibernia Nat'l Bank v. Commerce Bank, 368 N.J. Super. 144, 146-47 (App. Div. 2004); Valley Nat. Bank v. P.A.Y. Check Cashing, 378 N.J. Super. 406, 416 (Law Div. 2004), aff'd o.b., 378 N.J. Super. 234 (App. Div. 2005); Bank Polska Kasa Opieki, S.A. v. Pamrapo Sav. Bank, S.L.A., 909 F. Supp. 948, 955-56 (D.N.J. 1995) (holding that the presentment warranties run only to drawees, not drawers). Other jurisdictions have held that a payee cannot assert a breach of the presentment warranties on behalf of the drawee bank. Pub. Citizen v. First Nat'l Bank, 198 W. Va. 329, 338 (1996) ("Because neither section contains mention of a payee, it appears the Legislature did not intend these warranties to extend to a payee and, indeed, that is how the statute has been interpreted by the authorities."); Nat'l Sur. Corp. v. Citizens State Bank, 41 Colo. App. 580 (1978) (same), aff'd, 199 Colo. 497 (1980).
Plaintiffs claim that both Susquehanna Bank and the contractor, the check's drafter, have interests at stake in their warranty-breach claim. But Susquehanna Bank apparently suffered no damages from Commerce Bank's breach of the presentment warranties, and thus could not recover even if it were to assert the claim. The contractor, meanwhile, fulfilled his obligation to plaintiffs by delivering the settlement check to their former attorney. N.J.S.A. 12A:3-310(a). He has no further interest in the matter.
Thus, as a matter of law, the grant of the motion to dismiss pursuant to Rule 4:6-2(e) was proper. Essentially, plaintiffs have no recourse against defendants. Just as we are compelled to affirm the dismissal, we are also compelled to affirm denial of the motion to amend. The statute of limitations bars plaintiffs' conversion claim. Precedent bars their claims under the UCC.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION