Opinion
No. CV97 034 84 70 S
January 27, 1999
MEMORANDUM OF DECISION RE: PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DREYFUS' CROSS-MOTION FOR SUMMARY JUDGMENT
The plaintiff, Nayan Champaigne, filed a fourteen-count amended complaint against the defendants, Richard Scarso (Scarso), The Polaris Group, Inc. and Polaris Financial Services, Inc. (Polaris), and Dreyfus Service Corp. a/k/a Dreyfus Family of Funds (Dreyfus) on April 20, 1998. The plaintiff alleges that Scarso was an investment advisor employed by Polaris, and that Scarso misappropriated money he was supposed to be investing for the plaintiff. The plaintiff has brought causes of action against Scarso for conversion, fraud, breach of fiduciary duty, violation of the Connecticut Uniform Securities Act (CUSA), and violation of the Connecticut Unfair Trade Practices Act (CUTPA) (counts one through five). The plaintiff has also brought causes of action against Polaris for negligence, for CUSA, under the doctrine of respondeat superior, and CUTPA (counts six through eleven). In addition, the plaintiff has brought causes of action against Dreyfus for negligence in count twelve, conversion in count thirteen, and violation of CUTPA in count fourteen.
On March 17, 1998, the plaintiff filed a motion for summary judgment against Dreyfus with respect to count eleven of the original complaint, which is identical to count thirteen of the amended complaint. The plaintiff also filed a memorandum in support and an affidavit. On April 27, 1998, Dreyfus filed a cross-motion for summary judgment as to counts ten, eleven, and twelve of the original complaint. Counts ten, eleven, and twelve of the original complaint are identical to counts twelve, thirteen, and fourteen of the amended complaint. Dreyfus filed a memorandum in opposition to the plaintiff's motion and in support of its cross-motion. In addition, Dreyfus has attached the affidavit of Walter T. Harris (Vice President of Dreyfus Service Corporation, Vice President-Operations of Dreyfus Transfer, Inc., and an employee of The Dreyfus Corporation). The plaintiff has filed a memorandum in opposition and the defendant has filed a reply memorandum.
Dreyfus' opposition to the plaintiff's motion for summary judgment and its cross-motion for summary judgment refer to the original complaint dated October 31, 1997. The original complaint was revised on March 12, 1998. On March 23, 1998, the defendant filed a motion to strike, which was denied. On April 20, 1998, the plaintiff filed a motion for request for leave to amend. The defendant filed an objection to this motion on April 29, 1998, which was subsequently overruled.
Because both parties have failed to re-file their motion for summary judgment as to the amended complaint, pursuant to Practice Book § 10-61, and in the interest of judicial economy, the court will regard the motions for summary judgment as applicable to the amended complaint. Thus, the plaintiff's motion for summary judgment will be applied to count thirteen. Dreyfus' motion for summary judgment as to counts ten, eleven, and twelve of the original complaint will be applied to counts twelve, thirteen, and fourteen of the amended complaint.
Practice Book § 10-61 provides that, "[w]hen any pleading is amended the adverse party may plead thereto within the time provided by Section 10-8 or, if the adverse party has already pleaded, alter the pleading, if desired, within ten days after such amendment or such other time as the rules of practice, or the judicial authority, may prescribe, and thereafter pleadings shall advance in the time provided by that section. If the adverse party fails to plead further, pleadings already filed by the adverse party shall be regarded as applicable so far as possible to the amended pleading." (Emphasis added.)
Summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Doty v. Mucci, 238 Conn. 800, 805, 679 A.2d 945 (1996). Although the moving party has the burden of presenting evidence that shows the absence of any genuine issue of material fact, the opposing party must substantiate its adverse claim with evidence disclosing the existence of such an issue. Haesche v. Kissner, 229 Conn. 213, 217, 640, A.2d 89 (1994). The existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence. 2830 Whitney Avenue Corp. v. Heritage Canal Development Associates, Inc. 33 Conn. App. 563, 567, CT Page 86 636 A.2d 1377 (1994). Mere assertions of fact are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court in support of a motion for summary judgment. Home Ins. Co. v. Aetna Life Casualty Co., 235 Conn. 185, 201, 663 A.2d 1001 (1995).
The plaintiff moves for summary judgment on her conversion claim. The defendant contends that it is entitled to judgment on the conversion claim as well as the negligence and CUTPA claims because it is a holder in due course of the plaintiff's checks.
I.) Choice of Law
Dreyfus argues that New York law applies in this case. Dreyfus contends that the Supreme Court of Connecticut has abandoned the lex loci delicti approach to choice of law questions in tort cases in favor of the most significant relationship test as set forth in the Restatement (Second) of Conflict of Laws (Restatement Second). See O'Connor v. O'Connor, 201 Conn. 632, 519 A.2d 13 (1986). Dreyfus further argues that New York law is more appropriately applied to these claims because Dreyfus' principal place of business is in New York and it processed the plaintiff's checks in New York. In addition, Dreyfus argues that a consistent and uniform rule should be applied to its conduct because it is part of a multistate and multinational mutual fund industry.
The plaintiff counters that the lex loci delicti doctrine has not been abandoned. Rather, the plaintiff maintains that O'Connor v. O'Connor stands for the proposition that the doctrine of lex loci delicti need not be categorically followed under all circumstances. The plaintiff further contends that Connecticut law applies in this case regardless of whether this court applies the lex loci doctrine or the "most significant relationship" test utilized in O'Connor v. O'Connor. In support of her argument that Connecticut has the greatest interest in applying its law, the plaintiff notes that Dreyfus does business in Connecticut and emphasizes that the checks at issue in this case were drawn on a Connecticut bank. Thus, the plaintiff maintains that she had a reasonable expectation that Connecticut law would apply.
In its reply memorandum, Dreyfus argues that New York law should be applied so as to avoid the application of several states' laws to the same conduct. Dreyfus also maintains that the plaintiff's residence in Connecticut is fortuitous. Furthermore, Dreyfus contends that the plaintiff's expectation that Connecticut law would be applied to her checks is unreasonable because she intended that the checks would be used to open an account with Dreyfus, an entity whose principal place of business is in New York.
The choice of law question is paramount because New York and Connecticut apply different standards of notice in their application of the holder in due course defense. New York has adopted section 3-304(7) of the Uniform Commercial Code, which provides, "[i]n any event, to constitute notice of a claim or defense, the purchaser must have knowledge of the claim or defense or knowledge of such facts that his action in taking the instrument amounts to bad faith." Hartford Accident Indemnity Co. v. American Express Co., 74 N.Y.2d 153, 578, 542 N.E.2d 1090, 544 N.Y.S.2d 573 (1989). "The purpose of UCC 3-304(7) — unique to New York and Virginia — was to require that questions of notice would be determined by a subjective test of actual knowledge rather than an objective test which might involve constructive knowledge. . . ." (Citations omitted; footnote omitted.) Id. Under New York law, holders in due course are to be determined by the simple test of what they actually knew, not by speculation as to what they had reason to know, or what would have aroused the suspicion of a reasonable person in their circumstances. Id. Conversely, Connecticut law applies an objective test of constructive knowledge and provides that a holder has "notice" when "from all the facts and circumstances known to him at the time in question he has reason to know that it exists." General Statutes § 42a-1-201(27). Thus, this court must determine which states law is applicable here.
This court has traditionally adhered to the doctrine that the substantive rights and obligations arising out of a tort controversy are determined by the law of the place of injury, or lex loci delicti. O'Connor v. O'Connor, supra, 201 Conn. 637. Nevertheless, the court in O'Connor v. O'Connor abandoned "categorical allegiance to the doctrine of lex loci delicti in tort actions" and moved toward the "most significant relationship" analysis advanced by the Restatement Second. Id., 648.
Superior courts cite to O'Connor as the case that provides the appropriate choice of law rules in tort cases. See Howe v. Stuart Amusement Corp. , Superior Court, judicial district of Hartford/New Britain at Hartford, Docket No. 343407 (December 10, 1991, Hennessey, J.) ( 7 C.S.C.R. 132). Nevertheless, it should be noted that O'Connor does not clearly state what choice of law rules are to be applied in tort cases. Id. See also Greenidge v. Volvo Car Finance Inc., Superior Court, judicial district of New London at New London, Docket No. 539447 (April 15, 1998, Handy, J.) (finding that the court in O'Connor did not "discard the doctrine of lex loci entirely, but, rather, only where `reason and justice require the relaxation of its stringent insistence on determining conflicts of law solely by reference to the place where a tort occurred'"). But see Aflerbach v. Furry, Superior Court, judicial district of Hartford, Docket No. 367207 (November 9, 1993, Hennessey, J.) (finding that the O'Connor court's "mandate is to apply the most significant relationship test to all tort cases involving the conflict of laws"). Because Connecticut law should be applied under both the lex loci and the Restatement approach, it is not necessary for the court to determine which choice of law rules are to be applied.
Using the lex loci delicti approach, Connecticut law would be applied because Connecticut is the place of the injury. The plaintiff is a resident of Connecticut and the checks at issue were drawn on the plaintiff's bank, which is located in Connecticut.
Similarly, under the most significant relationship test, Connecticut law would be applied. Section 145 of the Restatement Second provides, in pertinent part, that "[t]he rights and liabilities of the parties with respect to an issue are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6." O'Connor v. O'Connor, supra, 201 Conn. 650. Section 6 of the Restatement Second provides that: (1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. (2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied. Id., 651.
Section 145(2) of the Restatement "establishes black-letter rules of priority to facilitate the application of the principles of § 6 to tort cases." Id., 652. Section 145(2) provides, "[c]ontacts to be taken into account when applying the principles of § 6 to determine the law applicable to an issue include: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. These contacts are to be evaluated according to their relative importance with respect to the particular issue." O'Connor v. O'Connor, supra, 201 Conn. 652.
The factors found in § 145(2) suggest that New York's contacts with the occurrence and the parties are, at most, equal to those of Connecticut. Here, the plaintiff suffered pecuniary loss. The injury occurred in Connecticut because the plaintiff is a Connecticut resident. The defendant argues that the plaintiff's residence is completely fortuitous. However, the defendant misconstrues the meaning of "fortuitous." The place of injury can be said to be fortuitous when the injury occurs in a particular location by chance or accident. This is the case, for example, when the parties are merely "passing through" a particular location and a motor vehicle accident occurs. See O'Connor v. O'Connor, supra, 201 Conn. 655. Contrary to the defendant's argument, the plaintiff's residence in Connecticut was not merely by chance, and does not constitute an unplanned event. The plaintiff was a Connecticut resident during the period of time that she delivered the checks to Scarso for investment with Dreyfus. Furthermore, the checks at issue in this case were drawn on the plaintiff's account at a Connecticut bank.
The place where the conduct causing the injury occurred is New York. Dreyfus received the checks after they were deposited into a lock box maintained by the defendant at a financial center in New York. (Defendant's Affidavit of Walter T. Harris, ¶ 9). The checks were then taken to a facility in Harrison, New York to be processed. (Defendant's Affidavit of Walter T. Harris, ¶ 9).
The plaintiff is a resident of Connecticut and although the defendant's principal place of business is New York, it has places of business throughout the United States, including a financial center in Connecticut. Thus, factor (c) of section 145 (2) is inconclusive. At all times, the plaintiff dealt exclusively with Richard Scarso, an employee of Polaris. The plaintiff delivered the checks directly to Scarso and Polaris and never had direct contact with Dreyfus. Thus, there was no relationship between the parties, and therefore factor (d) of § 145(2) is irrelevant.
It is the significance, and not the number, of § 145(2) contacts that determines the outcome of the choice of law inquiry under the Restatement approach. O'Connor v. O'Connor, supra, 201 Conn. 652. The concluding sentence of § 145(2) provides that "[t]hese contacts are to be evaluated according to their relative importance with respect to the particular issue." Thus, in order to apply the § 6 guidelines to the circumstances of this case, the focus must be on the particular issue of whether the defendant's holder in due course status should be evaluated under an objective or subjective notice standard.
Under § 6 of the Restatement Second, the relevant policy interests of Connecticut and New York must be considered to determine which of these states has the most significant relationship to the occurrence. The first factor to consider under § 6 of the Restatement Second is the relevant policy interest of the forum state, Connecticut. Connecticut has a policy of protecting its consumers from fraud, conversion, and negligence. Connecticut's objective test of notice is designed to protect consumers and the economy from unfair and unscrupulous business practices of large finance companies which often hold superior risk-bearing power. As evidenced by the enactment of General Statutes § 42a-1-201(27) and CUTPA, Connecticut has a strong interest in promoting reasonable business practices and the exercise of due diligence by organizations.
General Statutes § 42a-1-201(27) provides that "[n]otice, knowledge or a notice or notification received by an organization is effective for a particular transaction from the time when it is brought to the attention of the individual conducting that transaction, and in any event from the time when it would have been brought to his attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless such communication is part of his regular duties or unless he has reason to know of the transaction and that the transaction would be materially affected by the information." (Emphasis added.)
The next factor to consider under § 6 of the Restatement Second is the relevant policy of other interested states. The New York Legislature's addition of a nonuniform subjective test to the code's uniform notice provision signals a deliberate, unmistakable choice to give added protection to good-faith purchasers in New York. Hartford Accident Indemnity Co. v. American Express Co., supra, 544 N.Y.S.2d 578. In applying a less stringent standard for notice, New York nevertheless did not intend to facilitate fraud, conversion or negligence. To apply New York law in this case would undermine Connecticut's interest of protecting its citizens because multi-state, multi-national finance companies such as Dreyfus could easily escape liability for allegedly negligent business practices by claiming lack of actual notice. Utilizing an actual notice standard in this case would permit Dreyfus to maintain a system of check processing that would allow them to remain ignorant of any alleged infirmities in the checks. Conversely, Connecticut's constructive notice test fulfills New York's policies, albeit to a lesser degree than the actual notice test, by providing protection for a holder in due course while still guarding the consumer from unfair and unscrupulous business practices of large finance companies. Because Connecticut's and New York's contacts with the occurrence and the parties under Restatement Second § 145(2) are equal, Connecticut's law of constructive notice should be applied because failure to do so would undermine Connecticut's policies. The next factor to be considered under Restatement § 6 is the protection of justified expectations. In this case, the plaintiff hired Polaris to manage and advise her on her investments. Polaris is comprised of corporations organized and existing under Connecticut law and authorized to transact business in Connecticut as investment advisors. At all times, the plaintiff dealt exclusively with Scarso, who held himself out as an employee of Polaris. It is unclear whether the plaintiff had notice of the fact that Dreyfus was located in New York and would be processing her checks in New York. Thus, the court cannot determine the plaintiff's expectations regarding the applicable law to be applied to her transactions. Conversely, Dreyfus had an expectation that New York law would apply. The checks were processed in New York and Dreyfus principal place of business is in New York.
Another factor to be considered is the basic policies underlying the particular field of law. The majority of states use a constructive notice test in determining questions of notice. Only New York and Virginia utilize an actual notice test. Thus, the field of commercial paper law evidences a basic policy of providing extra protection for a maker or drawer of a negotiable instrument.
The defendant argues that New York law should be applied in order to insure uniformity by avoiding the application of several states' laws to the same conduct. However, as the court inO'Connor states, "[a]lthough the principles of certainty and ease of application must be taken into account, the Restatement cautions against attaching independent weight to these auxiliary factors, noting that they are ancillary to the goal of providing rational, fair choice of law rules. As comment i to 6 states: "In a rapidly developing area, such as choice of law, it is often more important that good rules be developed than that predictability and uniformity of result should be assured through continued adherence to existing rules." See also Restatement (Second), Conflict of Laws § 6, comment j (policy in § 6[2][g] should not be overemphasized, since it is obviously of greater importance that choice-of-law rules lead to desirable result O'Connor v. O'Connor, supra, 201 Conn. 651-52. Nevertheless, the ease of applying Connecticut law, as opposed to New York law, in a Connecticut court weighs in favor of applying Connecticut law. See, R.A., Leflar, American Conflicts Law (93rd Ed. 1977), § 105, pp. 208-10.
In light of the foregoing analysis, the fact that New York is the place where the conduct causing the injury occurred is not a significant contact for purposes of this choice of law inquiry. Conversely, Connecticut's contacts with the litigation give it a legitimate interest in applying its law to the controversy. The plaintiff is a Connecticut resident and the checks at issue in this case were drawn on the plaintiff's account at a Connecticut bank. As demonstrated by the foregoing analysis, Connecticut has a substantial interest in protecting its citizens from the unfair and unscrupulous business practices of large finance companies. Based on these factors, this court concludes that it is proper to apply Connecticut law under either choice of law approach.
II.) Connecticut Law: Counts Twelve and Thirteen
In her memorandum in support of her motion, the plaintiff argues that the court should grant summary judgment as to count thirteen of the amended complaint, which sounds in conversion. Specifically, the plaintiff contends that Dreyfus wrongfully converted the plaintiff's funds by knowingly accepting those funds from co-defendant Scarso when it knew or should have known that Scarso was not authorized to deposit those funds into his personal Dreyfus account. The plaintiff further maintains that Dreyfus failed to meet its duty to notify the plaintiff and obtain the plaintiff's approval prior to permitting the deposit of the plaintiff's checks into Scarso's own personal Dreyfus account.
In its memorandum in opposition to the plaintiff's motion and in support of its cross-motion, Dreyfus maintains that it is entitled to summary judgment under New York law because it was a holder in due course of the plaintiff's checks. In addition, Dreyfus maintains that even if Connecticut law is applied, it is entitled to summary judgment on the conversion claim (count thirteen) and the negligence claim (count twelve). Specifically, Dreyfus argues that under Connecticut law, the standard for determining holder in due course status is no different than under New York law. Thus, the defendant argues that questions of notice would be governed by a subjective test of actual knowledge. Conversely, the plaintiff argues that Connecticut, unlike New York and Virginia, has adopted the test of objective knowledge.
Because Connecticut law should apply in this case, this argument will not be addressed.
In arguing that Connecticut follows a subjective test of actual knowledge, the defendant mistakenly relies on the definition of "good faith" set forth in Funding Consultants, Inc. v. Aetna Casualty Surety Co., 187 Conn. 637, 447 A.2d 1163 (1982). The issue in that case was whether a maker of a note may introduce expert testimony to challenge the good faith of a person seeking to enforce the note as a holder in due course. Focusing exclusively on the definition of "good faith" set forth in § 42a-3-302(1)(b) and § 42a-1-201, the court in that case did not address the element of "notice" which is at issue in this case. Furthermore, the decision in Funding Consultants, Inc. v. Aetna predates the 1991 revision to Article 3 of the UCC. "The revision changed the content of the term `good faith' for purposes of [Article 3 in § 42a-3-103], which mandates in addition to `honesty in fact' the `observance of reasonable commercial standards of fair dealing.'" 1 T. Quinn, Quinn's Uniform Commercial Code Commentary Law Digest (2d Ed. 1991), p. R3-43. "This radically changes the `good faith' standard as required in Article 3 and, as a result, the holder must now meet a far higher standard if holder in due course status is to be achieved under the Revision." Id.
General Statutes § 42a-3-302(2) requires the "holder" to be "without notice" of various matters in order to satisfy the requirements for "holder in due course" status. "Notice" under the General Statutes requires something less than "actual knowledge." The General Statutes provide that a person has "notice" by definition when "(a) he has actual knowledge of it; or (b) he has received a notice or notification of it; or (c) from all the facts and circumstances known to him at the time in question he has reason to know that it exists. A person `knows' or has `knowledge' of a fact when he has actual knowledge of it." (Emphasis added.) General Statutes § 42a-1-201(25).
Further evidence of this objective standard for "notice" is found in § 42a-1-201(27) which provides that
"[n]otice, knowledge or a notice or notification received by an organization is effective for a particular transaction from the time when it is brought to the attention of the individual conducting that transaction, and in any event from the time when it would have been brought to his attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless such communication is part of his regular duties or unless he has reason to know of the transaction and that the transaction would be materially affected by the information." (Emphasis added.)
The plaintiff argues that under the objective notice test, Dreyfus should be denied holder in due course status because it failed to make reasonable inquiry after it obtained information which would put a reasonable person on notice of some irregularity or alteration with respect to the checks. First, the plaintiff contends that Dreyfus was put on notice of the irregularity because the checks were made payable to Dreyfus, not Scarso. Second, the plaintiff maintains that Dreyfus was put on notice because the checks were made out for substantial sums of money. Third, the plaintiff argues that the notation on the check, "Apply to the account 1010616386785," gave Dreyfus notice that Scarso altered the plaintiff's checks. Lastly, the plaintiff argues that the fact that only one of the four checks presented by Scarso had the note, "Apply to" on its face gave Dreyfus notice of the alteration.
Although the plaintiff notes several factors that may have provided constructive notice to Dreyfus of Scarso's wrongdoings, she fails to cite any cases that show such factors and circumstances are sufficient to provide constructive notice as a matter of law. Thus, the plaintiff has failed to provide support for her argument that Dreyfus was not a holder in due course and that she should prevail on the claim as a matter of law.
In further support of her contention that summary judgment should be granted as to the conversion claim, the plaintiff cites several cases which hold that a bank has a duty of inquiry and may be liable for conversion where the bearer of the check using the check to his personal benefit is not the maker or the owner of the check. See, e.g., Federal Ins. Co. v. NCNB National Bank of North Carolina, 958 F.2d 1544, 1549 (11th Cir. 1991); Federal Savings Loan Ins. Corp. v. Kearney, 151 F.2d 720, 725 (8th Cir. 1945); Wright v. Mechanics Bank of St. Joseph, 466 S.W.2d 174, 176 (Mo.Ct.App. 1971); Kaiser-Georgetown Community Health Plan v. Banker Trust Co., 442 N.Y.S.2d 48, 49 (N.Y.App.Div., 1941).
Every case cited by the plaintiff, with the exception ofAtwall v. Stifel, Nicolaus Co., Inc., No. CIV-91-107-C, 1991 U.S. Dist. LEXIS 20043 (D. Okla. Apr. 15, 1991), addresses a bank's duty to inquire as to the disposition of funds and governs the responsibility of banks to their customers. Banks and their depositors are bound by a special relationship. Because of this relationship, banks owe a duty of ordinary care to their depositors. Leaksealers v. Connecticut National Bank, Superior Court, judicial district of Hartford/New Britain at Hartford, Docket No. 517952 (June 20, 1995, Hennessey, J.).
Dreyfus is not a bank. Rather, it is a subsidiary of the Dreyfus Corporation which, among other things, is responsible for mutual shareholder servicing. Furthermore, the plaintiff did not have an account with Dreyfus. Because the cases relied on by the plaintiff deal with the special relationship between banks and their customers, they are inapplicable here.
The plaintiff also relies on Atwall v. Stifel, Nicolaus Co., Inc., supra, 1991 U.S. Dist LEXIS 20043, to support her argument. Atwall addresses the duty of a securities brokerage firm in circumstances similar to those presented here. In Atwall, the plaintiff, on advice of her insurance agent, issued four checks payable to the defendant securities brokerage firm and delivered them to her insurance agent. The defendant opened an account in the insurance agent's name, although the plaintiff's name was displayed as the remitter, and never communicated with the plaintiff prior to opening the account. The court found the defendant liable for conversion and held that "[p]laintiff's name on the face of the checks gave rise to a presumption that [the bearer] did not have the authority to invest the funds in his name, and therefore [the taker was] under a duty to make a reasonable inquiry as to [the bearer's] authority." Atwall v. Stifel, Nicholaus Co., Inc., supra, 1991 U.S. Dist. LEXIS 20043, *10. The facts of Atwall can be distinguished from those presented here. In Atwall, the defendant securities brokerage firm used proceeds from checks payable to itself to open a new account in the insurance agent's name although the plaintiff's name was typed on the face of the checks as the remitter. In this case, Scarso already had an account with Dreyfus and the proceeds from the plaintiff's checks were funneled into Dreyfus' account because Dreyfus' account number was written at the bottom of the checks. The submitted affidavits do not clearly describe the method by which Dreyfus received and processed the checks. Thus, it is unclear whether the check processing system revealed that the name displayed as the remitter on the subject checks and the name corresponding with the account number were not the same. If the checks were simply processed and deposited according to account number, the circumstances may not have been sufficient to give Dreyfus notice that the name corresponding with the account number did not match with that displayed as the remitter.
The plaintiff argues that she does not have the burden of proving that Dreyfus was not a holder in due course. Rather, she contends that in order to prevail on her summary judgment motion, she must only prove the elements of conversion. She further argues that the burden is on Dreyfus, as holder of the checks, to demonstrate that it acted in "good faith" and without "notice" of the plaintiff's claims to the checks. The cases relied on by the plaintiff address the burden of proof where a holder brings a claim against the maker or drawer of an instrument. The court in those cases held that a person claiming the rights of a holder in due course has the burden of establishing his due course status once a drawer has shown that a defense exists. Casanova Club v. Bisharat, 189 Conn. 591, 458 A.2d 1 (1983).
The plaintiff also argues that Dreyfus is liable even if it is deemed a holder in due course because the UCC expressly subjects even due course holders to real and personal defenses in cases of direct dealing between immediate parties. Casanova Club v. Bisharat, supra, 189 Conn. 594. Here, the plaintiff and Dreyfus did not deal with each other directly. Scarso acted as an intermediary in facilitating the transaction between the two parties. Thus, if Dreyfus is found to be a holder in due course, it will not be subject to any personal defenses. See General Statutes § 42a-3-305.
The procedural [context] [posture] of this case is different. Here, the plaintiff maker has filed a motion for summary judgment against the defendant holder. Thus, it is the plaintiff's duty to submit pleadings, affidavits and any other proof showing that there is no genuine issue as to any material fact and that she is entitled to judgment on her conversion claim as a matter of law. Doty v. Mucci, supra, 238 Conn. 805. A material fact has been defined [adequately and simply]fn as a fact which will make a difference in the result of the case.Hammer v. Lumberman's Mutual Casualty Co., 214 Conn. 573, 578, 573 A.2d 699 (1990). Whether Dreyfus had constructive notice under the circumstances of this case is a material fact that could influence the validity of the plaintiff's conversion claim. Cf. SKW Real Estate Limited Partnership v. Gallicchio, 49 Conn. App. 563, 569, ___ A.2d ___, cert. denied, 247 Conn. 926, ___ A.2d ___ (1998) (trial court's finding on the evidence that the plaintiff was a holder in due course is a question of fact). In order to substantiate her adverse claim for conversion against Dreyfus, the plaintiff must prove as a matter of fact and law that Dreyfus had constructive notice and is not a holder in due course.
Dreyfus raises an issue of material fact with regard to notice which defeats both the plaintiff's motion and its own cross-motion for summary judgment. There is a question of fact as to whether the circumstances provided constructive notice to Dreyfus that Scarso did not have authority to invest the funds in his own personal account. A notice question ordinarily raises a question of fact inappropriate for resolution by summary judgment. Casanova Club v. Bisharat, supra, 189 Conn. 596. The plaintiff did not substantiate its adverse claim that the defendant had constructive notice, and a question of fact still exists as to whether the defendant is a holder in due course. Thus, the plaintiff's motion for summary judgment as to count thirteen must be denied.
Similarly, the existence of genuine issues of material fact preclude the granting of Dreyfus' cross-motion for summary judgment. The defendant has not proven as a matter of fact and law that it was a holder in due course. Specifically, Dreyfus has not shown that there is no genuine issue as to constructive notice or good faith. The affidavit of Walter T. Harris, submitted by Dreyfus, does not resolve these questions of fact. Harris fails to detail any facts describing how the checks were received and processed. For example, there is no evidence regarding how the checks were matched with the corresponding account number or how the account funds were recorded. Rather, the affidavit of Harris provides conclusory statements. For instance, Harris attests that the "[t]he fund processed the Checks in good faith and credited the proceeds to the account indicated." (Defendant's Affidavit of Walter T. Harris, ¶ 4). Harris's averments that "no irregularities appeared on the face of the Checks," (Defendants Affidavit of Walter T. Harris, ¶ 4), and that "at the time the Fund received and processed the Checks, it had no knowledge of the actions of Richard Scarso," (Defendants Affidavit of Walter T. Harris, ¶ 5), are mere conclusions, not statements of fact.
A party's conclusory statements, in the affidavit and elsewhere, may not constitute evidence sufficient to establish the existence of disputed material facts. Gupta v. New Britain General Hospital, 239 Conn. 574, 583, 687 A.2d 111 (1996). It similarly follows that a party's conclusory statement in an affidavit may not constitute evidence sufficient to establish that there is no genuine issue of material fact. Schafer Assoc. Lawrence RLT. v. PGM. MGR, Superior Court, judicial district of New Haven at New Haven, Docket No. 395158 (September 8, 1997, Zoarski, J.). Because the submitted evidence fails to describe how the checks were processed, it is unclear whether the circumstances gave Dreyfus constructive notice. Moreover, whether a holder possesses holder in due course status is a question of fact depending on the circumstances. Cf. SKW Real Estate Limited Partnership v. Gallicchio, supra, 49 Conn. App. 569 (trial court's finding on the evidence that the plaintiff was a holder in due course is a question of fact). Thus, a genuine issue of material fact does exist indeed and Dreyfus' cross-motion for summary judgment must be denied as to counts twelve and thirteen of the amended complaint.
III.) Connecticut Law: Count Fourteen
The plaintiff's CUTPA claim in count fourteen of the amended complaint is predicated on the negligence and conversion claims asserted in counts twelve and thirteen, respectively. As a result, Dreyfus' argument that the CUTPA claim is not viable because it is based on simple negligence is inapposite. Furthermore, because a genuine issue of fact exists as to these two counts, a genuine issue of fact exists as to the CUTPA claim as well. Accordingly, the defendants cross-motion for summary judgment as to the CUTPA claim asserted in count fourteen of the amended complaint must also be denied.
CONCLUSION
The plaintiff's motion for summary judgment as to count thirteen of the amended complaint and the defendant's cross-motion for summary judgment as to counts twelve through fourteen, are hereby DENIED for the reasons heretofore set forth.
MELVILLE, J.