KARAM AYAD v. FLEET BANK et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2135-04T52135-04T5

KARAM AYAD,

Plaintiff-Appellant,

v.

FLEET BANK and FLEETBOSTON

FINANCIAL CORPORATION, t/a

FLEET,

Defendant-Respondent.

_____________________________________

 

Argued December 14, 2005 - Decided May 10, 2006

Before Judges Wefing, Wecker and Fuentes.

On appeal from the Superior Court of New

Jersey, Law Division, Hudson County,

L-4472-03.

Alan T. Friedman argued the cause for

appellant (Bagolie-Friedman, attorneys;

Mr. Friedman, on the brief).

Thomas J. Monroe argued the cause for

respondent (Meyner and Landis, attorneys;

Mr. Monroe, on the brief).

PER CURIAM

Plaintiff, Karam Ayad, appeals from a summary judgment dismissing her Consumer Fraud Act claim against defendant, Fleet National Bank. We reverse.

Plaintiff held two certificates of deposit that were issued in 1995 by Collective Federal Savings Bank at its Jersey City branch. Defendant is the successor to Collective by successive mergers of Collective into Summit Bank, which in turn merged with Fleet. The first certificate was issued to plaintiff on June 23, 1995, in the principal sum of $1,206.88. The second certificate was issued on June 26, 1995, in the principal sum of $25,000. Each was issued for a term of seven months at 5.6% interest, and each provided for automatic renewal at maturity on conditions not here relevant. Late in 2002, plaintiff appeared at the former Collective branch, which by then had become a Fleet branch, and presented the two certificates for payment. Employees of Fleet informed plaintiff that the bank had no record of her deposits.

Fleet admits that plaintiff returned to the bank on "approximately six occasions" between late 2002 and 2003, seeking payment of principal and interest on both certificates. Each time, she was told that the bank had searched but found no record of her deposits. She then retained an attorney to pursue her claim for payment. By letter dated May 16, 2003, Fleet responded to Ayad after a written request from her attorney. That letter again stated that Fleet had searched but was "unable to locate any information regarding" the two certificates. The letter continued:

This would lead us to believe the account was closed prior to our 7-year record retention period. If you would like us to perform further research please provide documentation proving this account was open within the past 7 years.

[Pa191]

At that point in time, plaintiff had presented the two original certificates, both issued in June 1995.

Plaintiff filed her complaint and jury demand on August 20, 2003. The first count sought payment due on the certificates, including interest. The second count alleged an unconscionable commercial practice under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -166. Plaintiff was granted partial summary judgment on the first count, and defendant then paid the total principal and interest due on both certificates as ordered. Defendant moved for summary judgment dismissing the second count. A different judge heard defendant's motion. The judge initially denied defendant's motion but almost immediately reversed herself, explaining that she had concluded that "[t]he Consumer Fraud Act is clearly not applicable to matters which are breach of contract . . . . which is what it appears . . . that this matter is." The judge found that "plaintiff engages in surmise and conjecture, but . . . advances no evidence of unconscionable . . . commercial practice" or any other affirmative act not requiring intent, and that plaintiff did not evidence "any omissions or knowing or intentional acts" that could establish a violation of the Act. The judge denied plaintiff's motion for reconsideration, noting that "Fleet Bank was not the bank from which Mrs. Ayad got the CD," and that "[t]here is no evidence here that the defendant was not actively investigating this as it could properly do under [N.J.S.A. 17:16W-4]."

The statute the judge relied on, N.J.S.A. 17:16W-4c, provides in pertinent part:

The following rules shall apply if a passbook is presented to a financial institution for payment and the financial institution has no record of the account and there is no record of payment of the account to the State pursuant to any applicable escheat or unclaimed property act:

. . . .

c. If the presentation of the passbook[] is made by the owner, and the presentation is accompanied by a sworn certificate of the owner that the owner never received payment of the account nor transferred the account, there shall be a rebuttable presumption that the account exists and that the financial institution is holding the account for the benefit of the owner.

In so doing, the judge failed to recognize the context of that statute as part of an enactment respecting the record retention obligations of financial institutions. N.J.S.A. 17:16W-1 to -11, enacted by L. 1999, c. 257.

N.J.S.A. 17:16W-3c provides the record retention requirements for passbook accounts, including certificates of deposit. If those requirements had been met here, the records of plaintiff's certificates would have been available.

The rebuttable presumption created by N.J.S.A. 17:16W-4c allows a person in plaintiff's position to meet her initial burden of production to establish a prima facie case of entitlement to payment of her deposits upon "presentation" of the certificate of deposit "accompanied by a sworn certificate . . . that the owner never received payment of the account nor transferred the account." Defendant never requested plaintiff, on any of her visits or communications with the bank, to file such a "sworn certificate"; defendant has never contended that the statutory presumption did not arise or that the bank did not have an obligation to honor the certificates because plaintiff did not present a "sworn certificate." The statute obviously shifts the burden of production to the financial institution because it is the party in control of the records. Unless a financial institution in Fleet's position presents evidence to rebut the presumption "that the account exists and that [it] is holding the account for the benefit of the owner," which Fleet eventually admitted it could not do, the owner has proved her claim and is entitled to payment.

The certification of Fleet's employee, Vaughn Nichols, submitted in support of Fleet's motion for summary judgment, includes these facts:

5. In late 2002, I provided assistance to Karam Ayad regarding certain certificates of deposit she wished to redeem.

6. During Ms Ayad's initial visit to the Fleet Branch located on Route 440 in Jersey City, New Jersey, I attempted to locate Ms Ayad's certificate of deposit Accounts within Fleet's system.

7. Upon my initial search of Fleet's system, no reference was provided as to Ms. Ayad's Accounts.

8. Thereafter, I performed several searches of Fleet's system seeking information related to Ms Ayad's certificate of deposit Accounts. These searches included the use of (1) the relevant certificate numbers, (2) Ms. Ayad's social security number, and (3) the social security numbers of other individuals listed on the face of Ms. Ayad's certificates of deposit.

9. Despite these searches, no information regarding Ms. Ayad's certificate of deposit Accounts appeared on Fleet's system.

10. I advised Ms. Ayad that I discovered no information regarding the certificates of deposit which she presented for redemption. I further advised Ms. Ayad that I would submit a research request to Fleet's research department. Ms. Ayad then left the Fleet Branch and I submitted the research request.

11. Fleet's research department advised me that no information regarding the certificates of deposit for which Ms. Ayad sought redemption was available.

12. Thereafter, Ms. Ayad returned to the Fleet Branch on approximately six occasions seeking information regarding the status of her certificate of deposit Accounts.

13. On each occasion I advised Ms. Ayad that Fleet had no information regarding her certificate of deposit Accounts.

14. During Ms. Ayad's last visit to the Fleet Branch, where she sought redemption of the certificates of deposit in question, I advised her that I had done everything in my power to attempt to find information regarding her certificiates of deposit.

15. At that time, Ms. Ayad indicated that she would contact an attorney regarding the redemption of her certificates of deposit.

[Emphasis added.]

Fleet has invoked the record retention statute in its defense of the consumer fraud claim, contending that the statute entitled it to investigate plaintiff's claim, thereby insulating it from liability for consumer fraud. In the present posture of the case, that is, on appeal from a summary judgment dismissing plaintiff's consumer fraud claim, the statutory presumption no longer has any procedural role. Its role was to establish plaintiff's prima facie case on count one, and it was fulfilled when the Law Division held that plaintiff was entitled to the return of her deposits with interest, a ruling defendant does not challenge.

Fleet never presented (and presumably never found) any evidence to challenge the authenticity of plaintiff's claim. Without any evidence to rebut the statutory presumption, Fleet nonetheless repeatedly ignored plaintiff's demands for her money over a period of more than six months and forced her to litigate her entitlement. Fleet did not turn over the funds it held until after plaintiff brought suit and obtained partial summary judgment in May 2004.

It is Fleet's retention of plaintiff's funds until ordered to pay over those funds that is the crux of the consumer fraud issue in this case. The Consumer Fraud Act provides, in pertinent part:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; provided, however, that nothing herein contained shall apply to the owner or publisher of newspapers, magazines, publications or printed matter wherein such advertisement appears, or to the owner or operator of a radio or television station which disseminates such advertisement when the owner, publisher, or operator has no knowledge of the intent, design or purpose of the advertiser.

[N.J.S.A. 56:8-2].

Unconscionability has been described as "an amorphous concept obviously designed to establish a broad business ethic," and implies lack of "good faith, honesty in fact and observance of fair dealing." Kugler v. Romain, 58 N.J. 522, 543-44 (1971). Although the Consumer Fraud Act is intended to be liberally and broadly construed, e.g., Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999); Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 264 (1997), not every breach of contract is an unconscionable practice or a violation of the Act. Cox v. Sears Roebuck & Co., 138 N.J. 2, 18 (1994).

Because consumer transactions are generally contractual in nature, an underlying breach of contract, such as Fleet's failure to return its depositor's funds, does not preclude a consumer fraud action. Defendant's contention that Fleet's contractual obligation to plaintiff somehow insulates the bank from liability under the Act is entirely without merit.

Defendant contends, for the first time on appeal, that its responses to plaintiff's many demands were not affirmative acts, but at worst, acts of omission. As such, defendant further contends that its conduct was unintentional, and that plaintiff's complaint was properly dismissed for lack of proof of an essential element: knowing, intentional conduct. See Cox, supra, 138 N.J. at 18-19. In our view, defendant's conduct continuing to retain plaintiff's funds after its own investigation failed to produce any evidence of previous payment constituted affirmative acts that do not require proof of intent to establish an unconscionable commercial practice. We conclude that Fleet's conduct in retaining plaintiff's funds was an affirmative act that a rational jury could find to be an unconscionable commercial practice, potentially triggering the relief provided for in the Consumer Fraud Act.

Defendant also contends for the first time that plaintiff's claim was properly dismissed because she did not suffer an "ascertainable loss," citing Thiedemann v. Mercedes-Benz, USA, LLC, 183 N.J. 234 (2005). Thiedemann is distinguishable on its facts. There, the plaintiffs complained of a defective fuel gauge, which the manufacturer in each instance had replaced before any lawsuit was filed, at no out-of-pocket cost to any plaintiff. Id. at 238-39. The question is whether plaintiff suffered an ascertainable loss before she filed suit. Here, plaintiff did not recover her deposited funds until after she filed suit and won a partial summary judgment. A defendant cannot defeat a consumer fraud claim by negotiating a settlement after litigation has commenced, or by satisfying a judgment on the underlying claim, and then asserting that there was no requisite loss.

The Act provides for treble damages where both an unlawful practice and an ascertainable loss are proved, but even in the absence of an ascertainable loss, attorney's fees must be awarded in all cases in which a consumer fraud is established. See N.J.S.A. 56:8-19; Cox, supra, 138 N.J. at 24-25. Thus even if plaintiff cannot prove an ascertainable loss here, she would be entitled to an award of attorneys' fees. "A consumer-fraud plaintiff can recover reasonable attorneys' fees, filing fees, and costs if that plaintiff can prove that the defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss and thus cannot recover treble damages." Cox, supra, 138 N.J. at 24. The Court concluded in Cox that "[t]he fundamental remedial purpose of the Act dictates that plaintiffs should be able to pursue consumer-fraud actions without experiencing financial hardship." Id. at 25; see also Weinberg v. Sprint Corp., 173 N.J. 233, 251 (2002) ("[A]lthough we perceive a claim of ascertainable loss to be an essential element for a private cause of action under the Act, that does not mean that only a plaintiff who successfully proves ascertainable loss may have access to the Act's remedies of equitable relief and attorneys' fees"); Chattin v. Cape May Greene, Inc., 243 N.J. Super. 590, 610 (App. Div. 1990), aff'd o.b., 124 N.J. 520 (1991).

The record before us is limited. Other than an exchange of interrogatories, it appears that no discovery was undertaken. Even on this limited record, however, a material issue of fact is apparent and should have precluded summary judgment. The factual issue which remains for a jury to decide is whether the bank's conduct in retaining plaintiff's deposits for as long as it did, under the circumstances as they existed, rises to the level of an unconscionable commercial practice.

Reversed and remanded for further proceedings consistent herewith.

 

Respondent's brief states that defendant was incorrectly named in the complaint as "Fleet Bank" and "FleetBoston Financial Corp," and that the correct name is "Fleet National Bank." In this opinion, we therefore refer to "Fleet" or "defendant" in the singular.

In the Law Division, the parties disputed whether the certificates provided for renewal at the original rate of interest or at the prevailing date when renewed. That issue was resolved by partial summary judgment and is not before us on this appeal.

The term "passbook" includes a certificate of deposit. N.J.S.A. 17:16W-2.

The statute applies both to State-chartered banks and "to federally chartered banks" with respect to New Jersey accounts, to the extent that it is "not inconsistent with applicable federal law." N.J.S.A. 17:16W-11.

N.J.S.A. 17:16W-3c requires a bank to retain records of a passbook account, which by definition includes a certificate of deposit, N.J.S.A. 17:16W-2, according to the following schedule:

(1) Records of transactions in a passbook account sufficient to reconstruct the account shall be retained for a period of not less than six years.

(2) Account opening records shall be retained for as long as the account is open, plus not less than six years after the closing of the account.

(3) Account closing records shall be retained for not less than 15 years after the closing of the account.

(4) A record of the last transaction or contact with the owner, pursuant to section 1 of P.L. 1989, c. 58 (C. 46:30B-18), shall be retained for not less than 10 years after the date of the transaction or contact, as applicable.

The Rules of Court require that an argument not raised in the trial court be so noted in a party's Point Heading. R. 2:6-2(a)(1).

(continued)

(continued)

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A-2135-04T5

May 10, 2006