SUPREME COURT - STATE OF NEW YORK

Transcription

1 Short Form Order SUPREME COURT - STATE OF NEW YORK Present: HON. JOSEPH COVELLO Justice FRANKLIN STAINLESS CORP., TRIAL/lAS, PART 24 NASSAU COUNTY Plaintiff Index No.: /04 -against- Motion Seq. No. : 01, 02 P. MORGAN CHASE BANK and ANGELA RODRIGUEZ Defendants. Motion Date: 11/15/04 The following paper read on this motion: Notice of Motion... Notice of Cross Motion and Opposition... Briefs.... Upon the foregoing papers, the motion by defendant, J.P. Morgan Chase Bank pursuant to CPLR 3211(aHl), (7) for an Order partially dismissing the plaintiffs complaint, is granted. The unopposed cross-motion by plaintiff, Franklin Stainless Steel Corp., pursuant to CPLR 3215, for a default judgment as against defendant, Angela Rodriguez, is granted. Plaintiff, Franklin Stainless Corp. (Franklin or the plaintiff), commenced this action in June 2004, against J.P. Morgan Chase Bank (Chase) alleging, inter alia that Chase improperly honored and paid a series of forged checks written against Franklin business account with Chase. More particularly, Franklin alleges that its former employee, defendant, Angela

2 , ", ", ", " Rodriguez, forged 136 checks in the amount of$ , between November of2001 and May of Prior thereto, and upon opening the account in question, the plaintiff s president Mark Talve, executed signature cards which provided, in part, that "the Depositor has received and agrees to the Terms and Conditions for Business Accounts and the Business Banking Card Agreement currently in effect * * *" (Defs Exh' Notably, the Terms and Conditions contain a provision stating that "(ujpon receipt of your monthly or periodic statements * * * (yjou shall notify Chase in writing within sixty (60) days of the mailng or transmission of the Statement * * * of any errors discrepancies or irregularities, including but not limited to, unauthorized or missing drawer s signature or alterations * * * or unauthorized transfers or withdrawals of funds * * *" (Defs Exh. 6" at 10-19; Defs Exh. 7" at 7-19; Exh. 9" at 10-19). The Terms and Conditions further state that failure to provide notice within the prescribed, 60-day period, precludes the depositor from commencing "any legal proceeding or action * * * for any such error, discrepancy or irregularity in the Statement * * * or that any indorsement was unauthorized * * * The signature cards recount that Franklin "has reviewed the information contained in this Signature Card and Business Account Application and finds it accurate on this

3 , " ). date. After Franklin discovered the forgeries in May of 2004 (Cmplt. ~ 8), it demanded repayment from Chase by letter dated June, 29, 2004 (Cross Mot., Exh. When payment was not forthcoming, Franklin commenced the within action to recover the sums in question. The plaintiff s complaint contains six causes of action interposing claims against Chase sounding in inter alia negligence, money had and received, conversion, and breach of contract. Upon the instant notice, Chase moves pursuant to CPLR ~3211(aH1), (7) to dismiss: (1) the first, second, third and sixth causes of action in their entirety; and (2) those portions of the fourth and fifth which seek recovery based on checks appearing on bank statements up to and including the April 1, April 15, 2004 statement. The plaintiff opposes Chase s motion and cross-moves for an Order, pursuant to CPLR ~3215, for a default judgment as against co-defendant Angela Rodriguez, who has defaulted in appearing and / or answering the plaintiff s summons and complaint. In support of its application, Chase annexed, among other documents, the affidavit of Audrena Best, Chase s Assistant Treasurer and Evening Shift Manager at the Brooklyn Metrotech Chase Service Department who asserts that: (1) she is personally familiar with the Chase s customs and practices concerning the mailng of bank statements; and (2) that

4 monthly account statements were mailed to the plaintiff in accord with Chase s regular business practices for the period between January 2003 through July of 2004 (Best Aff., '1 9). The motion and the plaintiffs unopposed cross-motion should be granted. The Uniform Commercial Code * * * makes a bank strictly liable for any item which it charges against a customer s account that is not properly payable" (Matin v. Chase Manhattan Bank, 10 AD3d see UCC ~ 4-401; Monreal v Fleet Bank 95 NY2d (2000); CNA Holdings, Inc. v. Citibank, N.A., 10 AD3d 517). However, the UCC also imposes certain duties upon the customer to limit the bank' exposure to liabilty" (Matin v. Chase Manhattan Bank, supra; Josephs v. Bank of New York, 302 AD2d 318; Radon Const. Corp. v. Colwell, 248 AD2d 366). Specifically, "UCC (4) bars suit to recover amounts paid by a bank on a forged instrument unless the customer gives written notice of the forgery within one year of the time the account statement was made available" (Woods v. MONY Legacy Life Ins. Co., 84 NY2d (1994); Putnam Rollng Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d (1989); James v. Albank, 307 AD2d 1024, 1026; Catalano v. Marine Midland Bank, 303 AD2d 617; Ryan v. Fleet Bank of New York 286 AD2d 923). Courts have uniformly enforced the contractual provisions in bank account agreements which decrease the one-year period prescribed by UCC ~ 4-406(4) see e.g. Gluck v. JPMorgan Chase Bank 785 NYS2d 17 (Ist Dept. 2004); Catalano v.

5 , _ Marine Midland Bank, 303 AD2d 617; Radon Const. Corp. v. Colwell, supra). While it is true that on a motion pursuant to CPLR ~3211(a) (1), (7), allegations are to be liberally construed and the documentary evidence submitted must conclusively dispose ofa plaintiffs claim (Leon v. Martinez, 84 NY2d83, 88 (1994); Manfro v. McGivney, 11 AD3d 662), it is also true that "allegations consisting of bare legal conclusions as well as factual claims flatly contradicted by documentary evidence are not entitled to any such consideration * * *" (Maas v. Cornell University, 94 NY2d 87, 91 (1999); Morris v. Morris, 306 AD2d 449). Here, the documentary record establishes that Franklin - a sophisticated commercial entity - agreed to the Terms and Conditions containing the 60-day notice period; that it received the relevant bank statements for the checks in question; and that it nevertheless failed to register any written complaint or objection until June of Significantly, the plaintiffs president has not denied that he received the written account Terms and Conditions. Rather, he asserts that he misunderstood the import of the signature cards he executed (Talve Aff. ~ 7), a purported defense which is lacking in merit especially in light of the provision contained therein stating that the applicant has reviewed the information contained in this Signature Card and Business Account Application and finds it accurate on this date (see generally, Ahmed v. Getty Petroleum Marketing, Inc. AD3d Dept. 2004); Aventine Inv. Management, Inc. v.

6 Frankin v lp Morgan Canadian Imperial Bank of Commerce, 265 AD2d ; Freda v. McNamara, 254 AD2d see also Pimpinello v. Swift & Co., 253 NY 159 (1930)). Further, and contrary to the plaintiffs contentions, the bar imposed by UCC ~ 406(4) precludes a depositor from " asserting any claims against the bank based upon the forged signature" (Matin v. Chase Manhattan Bank, supra (emphasis added)), thereby encompassing all theories of recovery presently asserted by the plaintiff (cf., Gluck v. JPMorgan Chase Bank, supra). Additionally, contractual provisions decreasing the length of the one-year period set forth in UCC ~ 4-406(4) are enforceable (e.g. Gluck v. JPMorgan Chase Bank, supra; Catalano v. Marine Midland Bank, supra; Radon Const. Corp. v. Colwell, supra). In light of the foregoing, all claims based upon checks appearing on statements up to and including the April 1, April 15, 2004-statement are barred by both UCC ~ 406(4) and the terms of the parties' Account Agreement. With respect to the 11 remaining checks amounting to $ , upon which recovery can be potentially based (see, Chase Main Brief at 13), the Court agrees that the plaintiffs first cause of action - which demands restoration of the disputed proceeds - is duplicative of, and effectively identical to, the sixth cause of action alleging entitlement to money had and received (Cmplt., ~~ 47- compare to Cmplt. ~~ 19-22). Significantly, the plaintiff makes no attempt to' distinguish between the two causes

7 of action, but merely asserts that by not replacing the embezzled proceeds, Chase is wrongfully retaining" those funds (Raptakis Aff. ~ 23). Accordingly, and since the first cause of action merely repeats and recasts the same factual theory and underlying allegations advanced in the sixth cause of action, it should be dismissed as redundant (see generally, Levi v. Utica First Ins., Co., _AD3d (I st Dept. 2004); Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hils, Inc. AD3d 267; Tabner v. Drake, 9 AD3d ; Malarkey v. Piel, 7 AD3d 681 see also Squire Records, Inc. v. Vanguard Recording Soc., Inc., 25 AD2d 190, 193 affd, 19 NY2d 797 (1967)). In addition, the plaintiff s second, third and sixth causes of action sounding in negligence, conversion, and money had and received, should be dismissed. With respect to conversion (e.g. State v. Seventh Regiment Fund, Inc., 98 NY2d (2002)), it is settled that "(a) checking account * * * does no more than create a debtor-creditor relationship* * * (and) cannot be converted " since it "is merely a debt owed to it by the bank and funds deposited are not sufficiently specific and identifiable, in relation to the bank's other funds, to support a claim for conversion against a bank" (Luxonomy Cars, Inc. v. Citibank, N. A., 65 AD2d 549, 550; Tevdorachvil v. Chase Manhattan Bank, 103 F.Supp.2d (E. Y. 1999); Calisch Associates. Inc. v. Manufacturers Hanover Trust Co., 151 AD2d 446, 448 see also Fundacion

8 Museo de Arte Contemporaneo de Caracas v. CBI-TDB Union Bancaire Privee, 160 F3d 146, 148 (2 Cir. 1998); Murray Hil Investments, Inc. v. Adas Yereim, Inc., 205 AD2d ; Chemical Bank v. Ettinger, 196 AD2d ; Wells v. Bank of New York Co., Inc. 181 Misc.2d (Supreme Court, New York County, 1998)). The Court notes that the plaintiffs opposing affirmation cites no case law in support of the claim that the third (conversion) cause of action is viable, and does not address - must less analysis and distinguish - the authorities relied upon by Chase. With respect to the second cause of action sounding in negligence, it is settled that a checking account creates a contractual debtor - creditor relationship between the drawee bank and its customer" (Calisch Associates. Inc. v. Manufacturers Hanover Trust Co. supra, at 447see also Merril Lynch, Pierce, Fenner & Smith, Inc. v. Chemical Bank 57 NY2d (1982) cf, Call v. Ellenvile Nat. Bank, 5 AD3d 521). In light of this contract - based relationship, it has been held that "a depositor may not sue his bank in negligence based solely on the contractual relationship between bank and depositor (Tevdorachvil v. Chase Manhattan Bank, supra, 103 F.Supp.2d at 643; Calisch Associates. Inc. v. Manufacturers Hanover Trust Co., supra, at 447 see also Stella Flour & Feed Corp. v. National City Bank of New York, 285 App. Div. 182 (1954), affd 308 NY 1023 (1955); Wells v. Bank of New York Co., Inc., supra, 181 Misc.2d at 579).

9 , ~ Frankin v lp Morgan Although "a tort may arise from the breach of a legal duty independent of the contract, * * * merely alleging that the breach of contract duty arose from a lack of due care wil not transform a simple breach of contract into a tort" (Sommer v. Federal Signal Corp., 79 NY2d (1992); Quail Ridge Associatesv. Chemical Bank, 162 AD2d 917; Luxonomy Cars, Inc. v. Citibank, N. A., supra, 65 AD2d 549 see Fort Ann Cent. School v. Hogan, 206 AD2d ; see, Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co. 70 NY2d (1987)). Here, the plaintiffs claim that Chase negligently paid the forged checks (Cmplt. 25), does not plead the existence and breach of an independent duty of care, but merely asserts violations of the contractual relationship which already existed between the parties (Tevdorachvil v. Chase Manhattan Bank, supra, 103 F. Supp.2d at 640; Quail Ridge Associates v. Chemical Bank, supra; Luxonomy Cars, Inc. v. Citibank, N. A. supra, at 550; Wells v. Bank of New York Co., Inc., supra, 181 Misc.2d at 579). Accordingly, the second cause of action should be dismissed. The sixth cause of action asserts a claim purportedly sounding in money had and received (e.g., Board of Educ. of Cold Spring Harbor Cent. School Dist. v. Rettaliata 78 NY2d 128, 138 (1978)), and alleges inter alia that as result of the forgeries, Chase became indebted" to the plaintiff in the amount demanded (Cmplt. ~ 48). The Cour agrees that the sixth cause of action is defective as there is no sustainable

10 , ~ " assertion in the complaint that Chase received and retained money belonging to plaintiff (Calisch Associates. Inc. v. Manufacturers Hanover Trust Co., supra, 151 AD2d at 448 see, Parsa v State of New York, 64 NY2d 143 (1984) cf., Kings Premium Service Corp. v. Manufacturers Hanover Trust Co., 115 AD2d 707, ; Banco De Desarrollo Agropecuario, S.A. v. Gibbs, 709 F.Supp. 1302, 1307 (S. Y. 1989) "bank depositors are merely bank creditors, not the owners of the money on deposit" Moreover, here it was Rodriguez who allegedly embezzled and ultimately retained the plaintiffs funds. Lastly, while the plaintiff has interposed a general claim for attorney s fees (Cmplt. Wherfore Clause ), New York law is clear that "attorney s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule" (Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 NY2d (1989); A.G. Ship Maintenance Corp. v. Lezak, 69 NY2d 1, 5-6 (1986); Mighty Midgets, Inc. v. Centennial Ins. Co., 47 NY2d (1979); E. R. Management Corp. v. Halstead Harrison Associates, 299 AD2d 393 cf, Baker v. Health Management Systems, Inc., 98 NY2d (1998)). Plaintiffs sole comment in opposition to Chase s arguments, is a brief statement to the effect that the counsel fee issue should be "determinated at the time at trial" (Raptakis Aff. ~ 29) - a non-responsive reply which fails to offer any substantive analysis of, or support for, the award of counsel fees sought.

11 Frankin v lp Morgan Therefore, it is hereby ORDERED, that the motion by defendant, J.P. Morgan Chase Bank, for an order partially dismissing the plaintiff s complaint, is granted. It is further ORDERED, that the first, second, third and sixth causes of action contained in the plaintiff s complaint are dismissed in their entirety. It is further ORDERED, that the fourth and fifth causes of action contained in plaintiffs complaint which seek recovery based on checks appearing on bank statements up to and including the April 1, 2004-ApriI15, 2004 statement, are dismissed. It is furher ORDERED, that the plaintiffs cross-motion pursuant to CLR ~3215 for a default judgment as against defendant, Angela Rodriguez, is granted and plaintiff shall have judgment against defendant Angela Rodriguez for the sum of $ , with interest from April 30, 2001, together with costs and disbursements. It is further ORDERED, that the plaintiffs complaint against defendant, JPMorgan Chase Bank, the remainder of the fourth and fifth causes of action which seeks recovery based on the 11 disputed checks after the April 1, 2004-ApriI15, 2004 statement, is severed and continued. It is furher ORDERED, that counsel for counsel for plaintiff and defendant, Chase are to appear in IAS Part 24 on January 19, 2005 at 9:30 a., in Supreme Court Nassau County for a Discovery Conference. At that Conference counsel for the parties are to advise the Court what if any discovery is needed regarding the remaining causes of action.

12 ~~~~ If no discovery is requested the case wil be certified ready trial. This constitutes the decision and Order of the Court. Settle judgment on notice. Dated: December 22, e.f\ 1\\\\ J SEPH COVELLO, J. S. C. f\ssttu COUt'1'f C\"e. f\ce