Levi E. Robertson VS Sun Life Financial, Sun Life Assurance Company of Canada, and/or Sun Life Administrators (U.S.), Wachovia Bank, N.A., Capital One Bank, N.A. and Matthew Pizzolato
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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NUMBER 2009 CA 2275 LEVI E ROBERTSON VERSUS SUN LIFE FINANCIAL SUN LIFE ASSURANCE COMPANY OF CANADA andor SUN LIFE ADMINISTRATORS U INC S WACHOVIA BANK N CAPITAL ONE BANK N and MATTHEW A A PIZZOLATO Judgment Rendered June 11 2010 Appealed from the Twentyfirst Judicial District Court In and for the Parish of Tangipahoa Louisiana Docket Number 2008 003165 Honorable Douglas M Hughes Judge Presiding Jeffrey C Cashe Counsel for PlaintiffAppellant Hammond LA Levi E Robertson Thomas J Lutkewitte Counsel for Defendant Appellee Capital One Bank N A Brad P Scott New Orleans LA Edward W Trapolin Counsel for Defendants Sun Life Financial Sun Life Assurance New Orleans LA Co andor Sun Life Administrators Richard E McCormack BEFORE WHIPPLE HUGHES AND WELCH JJ l Q G lbI l K r CiGI M tiQ Bf G WHIPPLE J This is an appeal from a judgment maintaining one defendant speremptory exception of no cause of action and dismissing plaintiff suit against that s defendant with prejudice For the following reasons we affirm in part reverse in part and remand FACTS AND PROCEDURAL HISTORY On October 9 2008 Levi Robertson filed a Petition for Damages against defendants Sun Life Financial Sun Life Assurance Company of Canada and or Sun Life Administrators U Inc collectively referred to as Sun Life S Wachovia Bank N Wachovia Bank Capital One Bank N Capital A A One and Matthew Pizzolato In original and amended petitions Robertson alleged that he an unlearned and trusting offshore worker was deceived into transferring his entire lifetime retirement savings from his company trust to one managed by defendant Pizzolato Additionally Robertson alleged that Pizzolato then placed Robertson money into an account in Robertson name with Sun s s Life which in turn had an account with Wachovia Bank According to s Robertson allegations Pizzolato was engaged in a massive fraudulent scheme to embezzle defendants funds and those of many others to the tune of many millions of dollars Robertson further alleged that on or about October 21 2005 defendant Sun Life issued a check in the amount of 99 which was drawn on defendant 999 Wachovia Bank and made payable to Robertson According to Robertson defendant Pizzolato gained possession of the check and forged Robertson s signature on the instrument Robertson further alleged that in turn defendant Capital One cashed the check over a forged endorsement Wachovia Bank paid the sum of the forged check without verifying the endorsement and Sun Life withdrew 99 from Robertson account based on the negotiation of the 999 s 2 forged instrument According to Robertson sallegations Robertson was not aware that the check which was attached to the petition as an exhibit was issued or cashed until approximately July 8 2008 Thus Robertson asserted claims against the various defendants based on the forgery and the payment on the forged instrument In response to Robertson ssuit Capital One filed peremptory exceptions of no cause of action and prescription In support of its exceptions Capital One asserted that Robertson claim against it was a claim for conversion pursuant to s LSAR 10a S 3420 iiiwhich provides that an instrument is converted when a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment Capital One further asserted that pursuant to LSAR 10 b an action for conversion cannot be brought S 3420 by a payee unless the payee received delivery of the instrument Thus Capital One argued because Robertson did not receive delivery of the check at issue Louisiana law does not recognize a cause of action for conversion in Robertson favor s Accordingly Capital One contended that Robertson had failed to state a cause of action against it in his original and amended petitions Additionally Capital One contended that pursuant to LSAR 10 f S 3420 an action for conversion prescribes one year from the date of the conversion and that suspension of prescription pursuant to the doctrine of contra non valentum was inapplicable under the facts alleged Thus Capital One also asserted that even if a cause of action existed Robertson claims against it based on an instrument s negotiated on October 21 2005 were prescribed Following a hearing on the exceptions the trial court issued reasons for judgment finding that Robertson was not the proper plaintiff to bring a claim for conversion against Capital One apparently based on the assertion by Capital One that Robertson had never taken delivery of the check Accordingly by judgment K dated July 9 2009 the trial court maintained Capital One exception of no cause s of action and dismissed with prejudice Robertson claims against it s The judgment was silent as to Capital One exception of prescription s From this judgment Robertson appeals listing eight assignments of error DISCUSSION At the outset we note that in assignments of error three four five six and seven Robertson asserts various arguments as to why the trial court erred in finding that Robertson claims against Capital One had prescribed However as s noted above the trial court judgment was silent as to Capital One exception of s s prescription Silence in a judgment as to any issue that was placed before the trial court is deemed a rejection of that demand or issue Hayes v Louisiana State Penitentiary 20060553 La App I Cir 8970 So 2d 547 554 n writ 07 15 9 denied 2007 2258 La 1 973 So 2d 758 08 25 Thus the silence in the judgment as to Capital One exception of prescription is deemed a denial of that s exception Accordingly because the trial court in its judgment did not find that sclaims against Capital One had prescribed we decline to address the Robertson arguments raised in assignments of error numbers three four five six and seven Additionally in assignment of error number eight Robertson contends that the trial court erred when it found that Capital One exercised reasonable banking industry standards when it negotiated a forged instrument As set forth above the trial court sjudgment was based strictly on its finding that Robertson was not the proper plaintiff to bring a claim for conversion against Capital One The court below made no findings regarding the underlying merits of any of Robertson s asserted causes of action and specifically made no finding as to the reasonableness of Capital One actions in negotiating the check at issue Thus we also decline to s address the argument set forth in assignment of error number eight El Accordingly we turn to the issue raised in Robertson first and second s assignments of error i whether the trial court erred in maintaining Capital One e s exception of no cause of action We note as a procedural matter that while Capital One exception was labeled no cause of action a review of the s exception and memoranda in support thereof reveals that Capital One was actually challenging Robertson right to bring the action against it s As noted by the Louisiana Supreme Court although they are often confused or improperly combined in the same exception the peremptory exceptions of no cause of action and no right of action are separate and distinct LSA C art P 5 A 927 6 One of the primary differences between the two exceptions lies in the fact that a frequent focus in an exception of no cause of action is on whether the law provides a remedy against a particular defendant while the focus in an exception of no right of action is on whether the particular plaintiff has a right to bring the suit Industrial Companies Inc v Durbin 2002 0665 La 1 837 03 28 So 2d 1207 1213 1212 Specifically an exception of no cause of action questions whether the law extends a remedy against the defendant to anyone under the factual allegations of the petition Industrial Companies Inc 837 So 2d at 1213 Livaccari v Alden Engineering Inc 2000 0856 La App 0 Cir 12 808 So 2d 383 387 No 00 1 evidence may be introduced to support or controvert the objection that the petition fails to state a cause of action LSAC art 931 The exception is triable on P C the face of the pleadings and for purposes of determining the issues raised by the exception the well pleaded facts in the petition must be accepted as true Livaccari 808 So 2d at 387 388 Simply stated if the petition alleges sufficient To the extent that Robertson contends in his second assignment of error that the exception of no cause of action was improperly maintained because he learned of the forgery only three months prior to filing suit Robertson is in essence arguing for a suspension of prescription Because the trial court did not rule on the exception of prescription we decline to address in this appeal any arguments relating to that exception l facts to establish a case cognizable in law an exception of no cause of action must fail Livaccari 808 So 2d at 388 On the other hand with regard to the peremptory exception of no right of action generally an action can only be brought by a person having a real and actual interest which he asserts LSAC art 681 The exception of no right of action P C is designed to test whether the plaintiff has a real and actual interest in the action LSAC art 927 The function of the exception urging no right of action is P C 6 to determine whether the plaintiff belongs to the class of persons to whom the law grants the cause of action asserted in the suit Industrial Companies Inc 837 So 2d at 1216 The exception of no right of action assumes that the petition states a valid cause of action for some person and questions whether the plaintiff in the particular case is a member of the class that has a legal interest in the subject matter of the litigation Industrial Companies Inc 837 So 2d at 1216 Unlike the exception of no cause of action evidence may be received under the exception of no right of action for the purpose of showing that the plaintiff does not possess the right he claims or that the right does not exist Teachers Retirement System of Louisiana v Louisiana State Employees Retirement System 456 So 2d 594 597 La 1984 Teague v St Paul Fire and Marine Insurance Company 20061266R La App 1 Cir 4 10 So 3d 806 847 09 7 To prevail on the exception of no right of action the defendant has the burden of establishing that the plaintiff does not have an interest in the subject matter of the suit or legal capacity to proceed with the suit Talbot v C C Millworks Inc 97 1489 La App 1 Cir 6 715 So 2d 153 155 Where doubt exists 98 29 regarding the appropriateness of an objection of no right of action it is to be resolved in favor of the plaintiff Teague 10 So 3d at 847 In the instant case Capital One through its exception of no cause of action does not challenge the existence of a cause of action for conversion pursuant to rol LSAR 10 420 S 3a iiiwhere a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment as the original and amended petition allege Capital One did Rather Capital One contends that because Robertson did not receive delivery of the instrument he is not the proper party to bring an action for conversion herein Thus although its exception is labeled no cause of action Capital One has clearly raised an exception of no right of action Accordingly because every pleading shall be so construed as to do substantial justice LSAC art 865 we P C shall construe Capital One exception of no cause of action as an exception of no s right of action See Williams v Mumphrey 95 643 La App 5 Cir 1 96 30 668 So 2d 1274 1276 writ not considered 96 0569 La 3 670 So 2d 96 29 1240 and Vincent v Penrod Drilling Company 372 So 2d 807 810 La App 3 Cir writ denied 375 So 2d 646 La 1979 As stated above LSAR 10 420 establishes the cause of action for S 3 conversion of an instrument and it provides that an instrument is converted when a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment Regarding who may bring an action for conversion of an instrument LSA R 10 S 3420 further provides b An action for conversion of an instrument may not be brought by i the issuer or acceptor of the instrument or ii a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or copayee or iii by the drawer Emphasis added The basis for Capital One exception herein is its contention s that because as alleged in Robertson petition Pizzolato intercepted the check s Robertson did not receive delivery of the check and thus cannot assert a claim for conversion of the instrument against Capital One Thus the questions presented herein are what constitutes receiv ing delivery of the instrument pursuant to LSA R 10b and whether S 3420 ii 7 Capital One carried its burden of proving that Robertson did not receive delivery of the instrument due to Pizzolato alleged action of intercepting the check s Louisiana Revised Statute 10 420 which was enacted as part of the 3 amendment and reenactment of Chapter 3 of Title 10 by Acts 1992 No 1133 3 effective January 1 1994 is a modification of former LSAR 10 S 3419 LSA S 3420 Uniform Commercial Code Comment comment 1 Prior to the R 10 1992 amendment and reenactment of Chapter 3 of Title 10 former LSAR 10 S 3 419 had provided that when a person pays an instrument on a forged indorsement he is liable to the true owner In interpreting that statute Louisiana courts concluded that the statute gave a true owner of an instrument a direct cause of action against the party who paid the instrument on a forged endorsement Sunbelt Factors Inc v Bank of Gonzales 481 So 2d 648 649 La App I Cir 1985 In further determining what was meant by true owner this court ruled that actual or constructive delivery of the instrument was required to confer upon the payee the status of true owner Sunbelt Factors Inc 481 So 2d at 649 The rationale behind such a ruling was that a negotiable instrument had no legal inception or valid existence until it had been delivered in accordance with the purpose and intention of the parties and that until that was done the instrument was a nullity and not subject to ownership 649 see also Lincoln National Bank 2d F 392 398 5 Cir 1985 Sunbelt Factors Inc 481 So 2d at Trust Company v Bank of Commerce 764 Thus in Lincoln National the U Fifth Circuit S Court of Appeals in interpreting Louisiana sversion of Article 3 of the Uniform Commercial Code held that the mailing of checks to the payee at a false address provided by another did not constitute delivery to the payee and thus did not confer upon the payee an ownership interest in the checks Lincoln National Bank Trust Company 764 F at 397 398 2d I On the other hand this court in Patterson v Livingston Bank 509 So 2d 6 7 La App 1 Cir 1987 determined that an allegation by the plaintiff that the forged check was mailed to him was sufficient to constitute an allegation of constructive delivery Thus this court further determined that the plaintiff had a right of action pursuant to LSA R 10 S 3419 as the true owner of the instrument to assert a claim against the party who paid on the forged instrument Patterson 509 So 2d at 7 However the 1992 amendments to Chapter 3 of Title 10 deleted the true owner language in favor of the requirement that the payee must have receive d delivery of the instrument either directly or through an agent to be entitled to bring an action for conversion of the instrument LSA R 10 b S 3420 ii Comment 1 of the Uniform Commercial Code Comment to LSAR 10 420 S 3 explains that under former Article 3 there had been a split of authority on the issue of whether a payee who never received the instrument is a proper plaintiff in a conversion action The Comment further notes that under current Section 3 420 the payee has no conversion action where the check is never delivered to the payee such as when the check is mailed to an address different than that of the payee LSAR 10 S 3420 Uniform Commercial Code Comment comment 1 Similar to the rationale under the former true owner analysis the reasoning for this rule is explained in the comment as follows Until delivery the payee does not have any interest in the check The payee never became the holder of the check nor a person entitled to enforce the check Section 3 301 Nor is the payee injured by the fraud Normally the drawer of the check intends to pay an obligation owed to the payee But if the check is never delivered to the payee the obligation owed to the payee is not affected If the check falls into the hands of a thief who obtains payment after forging the signature of the payee as an indorsement the obligation owed to the payee continues to exist after the thief receives payment Since the payee s right to enforce the underlying obligation is unaffected by the fraud of the thief there is no reason to give any additional remedy to the payee 6 LSA R 10 S 3420 Uniform Commercial Code Comment comment 1 However as further noted in the comment the situation is different if the check is delivered to the payee Where the check is delivered to the payee the s payee rights are restricted to enforcement of the payee rights in the instrument s Thus the payee is injured by the theft and has a cause of action for conversion LSAR 10 420 Uniform Commercial Code Comment comment 1 S3 Significantly with regard to when the payee receives delivery of the instrument the comment additionally provides that tpayee receives delivery he when the check comes into the payee possession as for example when it is put s into the payee mailbox s LSAR 10 S 3420 Uniform Commercial Code Comment comment 1 emphasis added In the instant case because Capital One failed to present any evidence on the exception of no right of action this court must decide on the basis of Robertson s allegations alone whether Robertson belongs to the class of persons to whom the law grants the cause of action for conversion of an instrument Industrial Companies Inc 837 So 2d at 1216 The allegedly forged instrument which was attached to petition as an exhibit was made payable to Robertson and addressed to an address in Ponchatoula Louisiana However the petition does not specifically allege that the address to which the check was mailed or delivered was Robertson s address Moreover while the petition alleges that Pizzolato gain possession ed of the instrument the petition fails to allege that Pizzolato gained possession of the check after Robertson had receive delivery of it such as by Pizzolato taking d the check from Robertson smailbox after it had been delivered to Robertson s box See LSA R 10 S 3420 Uniform Commercial Code Comment comment 1 Robertson 2attached an affidavit to his memorandum in opposition to Capital One s exceptions which lists his home address as the address printed on the check at issue thus indicating that the check was sent to Robertson address rather than a false address He also s attached to his memorandum an Affidavit of Forgery wherein he had asserted that Pizzolato must have stolen the check from Robertson mailbox s 10 Accordingly Robertson petition does not set forth sufficient facts which would s allow a court to determine whether he belongs to the class of persons who may assert a claim against Capital One for conversion of an instrument pursuant to LSA R 10 S 3420 Simply stated there are no allegations that Robertson ever received delivery of the check such as by it being placed in his mailbox See Sunbelt Factors Inc 481 So 2d at 650 For these reasons we affirm the portion of the trial court judgment that s maintained Capital One exception which has been deemed an exception of no s right of action However we reverse that portion ofthe trial court sjudgment that dismissed with prejudice Robertson claim against Capital One without allowing s Robertson the opportunity to amend his petition to establish his right to pursue a conversion claim against Capital One LSA C art 934 Sunbelt Factors Inc P 481 So 2d at 650 CONCLUSION For the above and foregoing reasons the portion of the July 9 2009 judgment maintaining Capital One exception which has been deemed by this s court to be an exception of no right of action is hereby affirmed However the portion of the July 9 2009 judgment dismissing with prejudice Robertson claim s against Capital One is reversed The matter is remanded to the trial court with instructions that Robertson be allowed 30 days from finality of this judgment to amend his petition if he can to allege those facts supporting his right to pursue an action for conversion of an instrument against Capital One LSAC art 934 P C Sunbelt Factors Inc 481 So 2d at 650 This matter is remanded for further However Robertson failed to introduce these affidavits into evidence at the hearing on the exceptions Because these affidavits were not formally introduced into evidence they cannot properly be considered by this court herein at this stage in these proceedings See Cichirillo v Avondale Industries Inc 20042894 20042918 La 11 917 So 2d 424 428 n 05 29 7 11 proceedings consistent with the views expressed herein Costs of this appeal are assessed equally against Robertson and Capital One AFFIRMED IN PART REVERSED IN PART AND REMANDED FOR FURTHER PROCEEDINGS 12 STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2009 CA 2275 LEVI E ROBERTSON VERSUS SUN LIFE FINANCIAL SUN LIFE ASSURANCE COMPANY OF CANADA andor SUN LIFE ADMINISTRATORS U INC WACHOVIA BANK N S A CAPITAL ONE BANK N AND MATTHEW A PIZZOLATO HUGHES J concurring I concur and note that Louisiana has fact pleading The defendant does not get to designate the cause of action in order to more easily defeat it If plaintiff received delivery he apparently has a cause of action for conversion If he never received the check the obligation owed to the payee is not affected it continues to exist and can be sued upon directly under the contract as explained in the comments to L 10 S R 3420 Louisiana also allows the pleading of alternative theories ofrecovery
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