Opinion
130692QCV2003.
Decided May 9, 2006.
Defendants move to vacate a prior order of this court entered on default which granted plaintiff's motion for summary judgment awarding plaintiff a judgment in the amount of $10,500.00 with interest from October 7, 2003.
UNDERLYING FACTS
Defendants maintained a joint checking account with the Ridgewood Savings Bank (hereinafter the "Account"). On October 1, 2003 the Account held a balance of $1,927.17. On October 2, 2003 the defendants deposited into the Account a check allegedly certified by JP Morgan Chase Bank in the amount of $10,500.00 payable to "Steven Grubb" and endorsed by Mr. Grubb (hereinafter the "Chase check"), as well as a check in the amount of $54.61. On October 2, 2003 the Account held a balance of $12,481.78.
On October 3, 2003, the defendants deposited $1,900.00 into the Account thereby resulting in a credit to the Account, and raising the balance to $14,381.78. On the same date, at defendants' request, the bank wire transferred $13,658.16 to "BDF Finance." Accordingly, the Account was debited in the amount of $13,658.16 thereby leaving a balance of $723.62 in the Account.
On October 7, 2003, JP Morgan Chase Bank informed the bank via facsimile notification that the $10,500.00 Chase Check payable to Steve Grubb would not be honored, and to "Refer to Maker". On the same day, the Bank called and informed defendants that the Chase Check had been dishonored by JP Morgan Chase Bank.
By letter, dated October 10, 2004, the Bank sent defendants written notification that the Chase Check was dishonored and demanded a refund of $10,500.00. Despite plaintiff's demands, defendants have not refunded the monies.
Contentions
Defendants contend that the order granting summary judgment should be vacated since the defendant has established excusable default based upon (1) meritorious defense and (2) reasonable a excuse for the default see, CPLR § 5015(a). Plaintiff opposes the motion stating that there is no showing of a meritorious defense due to defendant's breach a presentment warranty UCC 4-207 (2) due to the counterfeit nature of the check. Secondly, plaintiff contends that bare allegations of law office failure cannot constitute a reasonable excuse for vacating the default, Manuel Escobar v. Koeppel Volkswagen, Used Cars Inc. 10 Misc 3d [App. Term 2nd and 11th Jud Dist, 2005].
Conclusions of Law
Pursuant to CPLR 5015 (a) (1) Defendants must demonstrate (1) a meritorious defense and (2) a reasonable excuse for their default in order for this court to vacate the prior judgment entered. See, Beale v. Yepes, 309 AD2d 886 [2nd Dept 2003].
Defendants do not offer a reasonable excuse for their default. Defendants' explanation of the "law office failure" is vague and unsupported see, Abrams V. City of New York, 13 AD3d 566 [2nd Dept 2004] and Escobar v. Koeppel Volkswagen Used Cars Inc., supra).
In addition, defendants must set forth a meritorious defense. The court does not find a meritorious defense stated in defendant's papers.
Article 4 of the Uniform Commercial Code ("UCC") governs the actions of the bank and the depositor.
UCC 4-207(2) provides in relevant part:
Each customer and collecting bank who transfers an item and receives a settlement or other consideration for it warrants to his transferee and to any subsequent collecting bank who takes the item in good faith that (a) he has a good title to the item or is authorized to obtain payment or acceptance on behalf of one who has a good title and the transfer is otherwise rightful; and (b) all signatures are genuine or authorized; and () the item has not been materially altered; and (d) no defense of any party is good against him; and (e) he has no knowledge of any insolvency proceeding instituted with respect to the maker or acceptor or the drawer of an unaccepted item In addition each customer and collecting bank so transferring an item and receiving a settlement or other consideration engages that upon dishonor and any necessary notice of dishonor and protest he will take up the item.
In the case before the court, Ridgewood Savings Bank was the "Collecting Bank" within the meaning of the UCC for the subject check (UCC 4-105 [d]; and Hanna v. First National Bank of Rochester, 87 NY2d 107, 117). A collecting bank has no duty to go behind checks regular on their face and inquire into facts and circumstances surrounding their issuance Chartered Bank v. American Trust 48 Misc 2d 314 Affd 26 AD2d 623, App denied 18 NY2d 578. Ridgewood was the defendants' agent for the collection of the check until final settlement was made, i.e., until the check was finally paid by the payor bank, UCC 4-201 , 4-211 and 4-213; Hanna supra, Roslyn Sav. Bank v. Jude Thaddeus Glen Cove Marina, 266 AD2d 198; Allen v. Carver Fed. Sav. Loan Assn. 123 Misc.2nd 704 [App Term 1st Dept, 1984]. Until final settlement, the risk of non-collection remained with defendants and any settlement made on the check by the bank was provisional only. See, UCC 4-201 (1), Hanna, Supra; Roslyn Sav. Bank Supra; Chase v. Morgan Guarantee Trust Co. 590 F. Supp. 1137 [S.D.N.Y. 1984]. A provisional credit is one that is charged back if the crediting bank is unable to collect on the underlying item. (UCC 4-212 (1)). Once a bank learns of a counterfeit check, the bank may revoke the provisional credit charge back the account or obtain a refund from the depositor for the funds drawn on the check as long as final payment (UCC 4-213 ) has not been made (UCC 4-301 ) Regal Tour, Inc. v. European American Bank, 108 Misc 2d 699, 702 Civ. Ct. NY County, Levine, J.], Call v. Ellenville National Bank, 5 AD3d 521 [2nd Dept 2004]. The breach of a presentment warranty is based upon strict contractual liability (see, Perez v. Charter One FSB, 298 AD2d 447 [2nd Dept 2002]). In his decision Chemical Bank v. Ferst, [Sup. Ct. NY County, Greenfield, J] the court held that a depositary bank, could still pursue its remedies by way of a plenary action against the endorser and/or drawer of the check (citing 622 West 113th Street Corp. v. Chemical Bank N.Y Trust Co., 52 Misc 2d 444 [Civ Ct, NY County1966]). The decision states:
"Money paid under a mistake of fact may be recovered back, however negligent the party paying may have been in making the mistake, unless the payment has caused such a change in the position of the other party that it would be unjust to require him to refund." ( National Bank of Commerce v. National Mechanics' Banking Assoc., 55 NY 211, 213; Miller v. Schloss, 218 NY 400, 407 [1916]; Liberty Mutual Ins. Co. v. Newman, 92 AD2d 613 [2nd Dept. 1983]). An action for moneys had and received "lies for money paid by mistake or an undue advantage taken of the plaintiff's situation [The gist of this kind of action is that the defendant, upon the circumstances of the case, is obligated by the ties of natural justice and equity to refund the money." Friar v. Vanguard Holding Corp., 78 AD2d 83, 88 n. 2 quoting Mansfield Moses v. Macferlan, 2 Burr. 1005, 1 Wm Bl 219, 97 Eng. Rep. 676, All Eng. Law Rep. Reprint, 1598-1774 [1760], 581, 585).
See also Citybank v. Warner, 113 Misc 2d 749, 750."
Accordingly, as a matter of law defendants are obligated to reimburse the bank for funds credited to their account based upon the breach of the presentment warranty i.e. that the depositor warranted that the check was real and the account drawn on had sufficient funds (see, UCC § 4-201, and 622 West 113th Street Corp. v. Chemical Bank NY Trust Co., supra).
Therefore, based on the foregoing, defendants' motion to vacate the judgment is denied in its entirety.