ROBERT J. TRIFFIN v. MELLON BANK, N.A. et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5085-05T15085-05T1

ROBERT J. TRIFFIN,

Plaintiff-Appellant,

v.

MELLON BANK, N.A. and BANK OF

AMERICA, N.A.,

Defendants-Respondents.

__________________________________

 

Argued: March 27, 2007 - Decided April 20, 2007

Before Judges Coburn, Axelrad and R.B. Coleman.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, CAM-DC-14100-05.

Robert J. Triffin, appellant, argued pro se.

Kristin A. Potdevin argued the cause for respondent Mellon Bank, N.A. (McCarter & English, attorneys; B. John Pendleton, Jr., of counsel; Ms. Potdevin, on the brief).

Hubert C. Cutolo argued the cause for respondent Bank of America, N.A. (Sodini & Spina, attorneys; Mr. Cutolo, on the brief).

PER CURIAM

Plaintiff Robert Triffin purchased the rights of Pyramid Finance Group, a check cashing agency, in a truncated copy of a dishonored check under an assignment of rights dated September l5, 2005. Plaintiff thereafter filed suit against Mellon Bank, the drawee, and Bank of America, the collecting bank, alleging they breached the warranties owed to his assignor under l2 C.F.R. 229.51 and 229.52, by returning an illegible substitute check, from which he could not identify the name of the drawer and payee, and which did not set forth the payee's endorsement, thereby thwarting his ability to recover from the drawer on the check. l2 C.F.R. 229.51(a)(1) requires that a substitute check returned by a bank, which is the legal equivalent of an original check for warranty purposes, must "[a]ccurately represent[] all of the information on the front and back of the original check as of the time the original check was truncated." Plaintiff sought damages for the face amount of the check ($685.72) and other fees, totaling $804.90, plus pre-judgment interest and costs, pursuant to l2 C.F.R. 229.56. Under this provision, any person that breaches a warranty described in l2 C.F.R. 229.52, which references that a substitute check meet the requirements of 229.51(a), is liable "for an amount equal to the sum of (i) The amount of the loss suffered by the person as a result of the breach or failure, up to the amount of the substitute check; and (ii) Interest and expenses . . . related to the substitute check."

Defendants filed answers to the complaint. Plaintiff served discovery on Mellon Bank. Request for Admissions Number 2 asked defendant to "[a]dmit or deny that you returned the attached illegible facsimile check copy, and which has the date 07/14/2005." The response was "Mellon admits that it returned the attached facsimile check copy." Request for Admissions Number 3 asked defendant to "[a]dmit or deny that the attached illegible facsimile check copy, and which has the date 07/14/2005, was not allegeable [sic] when you first received it." The response was "Mellon admits that when it received the check copy, it was more legible than the copy attached to plaintiff's Complaint. After reasonable inquiry, the information known or readily obtainable by this defendant is insufficient to enable an admission or denial of the remainder of this Request." In response to Interrogatory Number 5 requesting "the name and address of the party who is the payee on the attached illegible facsimile check copy," Mellon stated, while incorporating its objections, "the name of the payee on the check appears to be 'Flowers' or 'Powers' based on the more legible copy attached hereto as Exhibit A. After reasonable inquiry, the address of the payee is unknown."

The check that was attached to plaintiff's complaint and discovery requests is stamped in three places diagonally across the front "RETURN REASON-S REFER TO MAKER." From what we can ascertain from the copy of the check in the appellate record, which is poorly reproduced, the stamps do not obscure the payee's name but intrude on a portion of the drawer's identification in the top left hand corner, and the payee's endorsement is not visible. In its interrogatory answer, Mellon apparently attached a copy of the check that did not contain bank stamps and which may have provided a clearer copy of the back of the check. No explanation was provided as to the origin of the document.

The case was tried in the Special Civil Part on February 21, 2006. Plaintiff requested to present copies of Notices in Lieu of Subpoena that he had sent to defendants' counsel on February 1, 2006, to produce documents and knowledgeable employees to address "underlying factual issues in the action." Plaintiff informed the court that neither counsel had complied and neither had filed a motion to quash prior to trial. He moved to suppress their answers, noting he was being prejudiced in his ability to present his case because of defendants' "willful noncompliance" with his subpoena. The court did not rule on plaintiff's motion.

Plaintiff then presented Mellon's discovery responses and argued that, as a matter of law, defendant banks were jointly and severally liable for the face amount of the check and costs as damages under l2 C.F.R. 229.56 because in discovery requests, Mellon conceded it returned an "illegible" check and it could not identify whether the payee's name was "Flowers" or "Powers." Plaintiff contended the check was apparently misprocessed because the first part of the payee's name was missing and the full name of the drawer in the top left corner was not visible, the check was stamped in a way that material information was obliterated, and the endorsement was not visible. Plaintiff urged that the purpose of the regulation was to provide his assignor with the same rights it would have had if the original check had been returned, and because he could not identify either the drawer or the payee on the truncated check because it was illegible and he could not see the endorsement, he was thwarted in his ability to sue on the check. The essence of his argument appeared to be that in order to be an accurate representation under the regulation, the substitute check must be legible in all material respects.

Defendants argued that plaintiff failed to satisfy the elements of l2 C.F.R. 229.51 because the check his assignor received was legible and emphasized that plaintiff had been provided with a "clearer" copy of the check in discovery. They further urged that plaintiff was not entitled to damages because he did not suffer a loss as a result of any alleged failure by the banks to accurately reflect the information on the truncated check but, rather, the loss was sustained by Pyramid when it paid out the money on the check.

Over plaintiff's objection, based in part on the lack of testimony by the bank, the court then viewed the copy of the check that had been supplied by Mellon in interrogatory answers, which apparently had been enlarged, and made the following observations:

I'm looking at what appears to be a copy of the check. It looks like it says pay to the order of somebody by the name of Dowers, D-O-W-E-R-S. It looks that way. $685.72. It says Mellon Bank. It's got a Chicago, Illinois Merchandise Mart Plaza address on the top left. It's got a date of June l0, 2005 or June l4, 2005. It's got a stamp on the ba[c]k that says Bank of America. And then it's got "Flowers." Again, that is the last name. It looks like a telephone number of 856-768-0193. I assume that's a telephone number because it's got 856.

The copy that I'm looking at appears to be legible to me. It doesn't mean it's legible to everyone. Everybody has different eyesight. Some of this stuff on the back is a little blurred. The fact that I can read it doesn't mean it's legible to somebody else.

. . . .

It says the [signature of] the check drawer it looks to me like a Daniel Murphy and a somebody Short.

. . . .

It says somebody from the Merchandise Mart Plaza, Chicago, Illinois.

MR. TRIFFIN: But who's the somebody, Judge?

THE COURT: Well, I'm trying to figure it out. And it's got a telephone number clearly identifying whoever it is at the Merchandise Mart.

The court admitted into evidence plaintiff's assignment evidence and the two checks.

The court issued a written opinion on March l6, 2006, memorialized in an order of April 27, 2006, dismissing plaintiff's complaint with prejudice. The court described various portions of "the check in question," stating it "had no trouble reading these checks" and they appeared rather legible to it, concluding that "notwithstanding [its] finding of legibility, [plaintiff's] legal arguments seem to lack substance." The court further found the so-called violation of 12 C.F.R. 229.51 was not the proximate cause of the loss by the assignor check cashing agency because it sustained damages when it paid cash for the check, which was ultimately dishonored, and plaintiff suffered damages when he purchased the check, "knowing full well that it may not be as legible as he would have liked[.]"

On appeal, plaintiff contends, in combined point headings and legal arguments, the court committed reversible error in: (1) failing to rule on his motion to strike defendants' answers for failing to respond to his Notice in Lieu of Subpoena; (2) failing to deem the answers of Mellon Bank to plaintiff's discovery requests as conclusory established and as dispositive of the operative factual elements of his 12 C.F.R. 229.51 and 229.52 claims; and (3) viewing an enlarged copy of the check produced by Mellon Bank in discovery over plaintiff's objection and in the absence of testimony respecting the document and making findings with respect to that check. Plaintiff further contends the record is devoid of evidence upon which the court could have compared the information that appeared on the original check with the information that appeared on the truncated check copy that Mellon returned to plaintiff's assignor, and that by failing to honor the subpoena, defendants cannot argue that plaintiff did not carry his burden of proof to establish the material elements of his claim. Plaintiff further contends the court "mis-apprehended the material elements of a l2 C.F.R. 229.56 claim, and failed to find the operative factual issues for such claims." Plaintiff requests we vacate the court's dismissal of his complaint and remand the matter for entry of judgment in his favor.

Mellon argues that even if its answers had been deemed as conclusively established, plaintiff still failed to prove the substitute check was not an accurate representation of the original and that he suffered damages as a result of the check that was returned. More particularly, Mellon asserts that nowhere in its responses are there any admissions of liability -- it did not admit that it returned an inaccurate representation of the check -- nor could Mellon have made any admission sufficient to prove plaintiff's charges. Second, even if Mellon admitted illegibility of the check, which it did not, it contends that accuracy, not legibility is the standard under 12 C.F.R. 229.51. Both defendants contend that plaintiff failed to meet his burden of proof as he did not seek to obtain the original check. They further contend plaintiff suffered no damages because the funds were released by his assignor prior to any alleged breach, plaintiff was advised of identifying information about the payee and drawer when he received the clearer copy of the check from Mellon in interrogatory responses, and Pyramid and Triffin failed to provide a notice of their alleged claim within thirty days as required by l2 C.F.R. 229.56(d).

Both defendants make a point of mentioning several times in their briefs that plaintiff did not request production of documents, and argue they were entitled to summary judgment because plaintiff did not carry his burden of proof. Neither defendant mentions plaintiff's Notice in Lieu of Subpoena and the court's failure to rule on plaintiff's motion to suppress their answers. Nor do they respond to plaintiff's arguments pertaining to his claim of a potential adverse impact that defendants' failure to produce had on his ability to present his case.

Plaintiff carries the burden of proof to demonstrate that the substitute check returned by the bank did not accurately represent all of the information on the front and back of the original check as of the time the original check was truncated. 12 C.F.R. 229.51. If he proves the substitute check is inaccurate and thus a breach of warranty under l2 C.F.R. 229.52, plaintiff must then prove a loss caused by the inaccurate truncation in order to be entitled to damages, up to the face amount of the check, with interest and costs related to the check. l2 C.F.R. 229.56.

Plaintiff propounded discovery requests that he believed conclusively established the elements of his claim. Additionally, plaintiff served on the banks a Notice in Lieu of Subpoena to produce documents and witnesses at trial to enable him to present whatever proofs he felt were necessary respecting the truncating process and the payment instrument that served as the basis of his claim. Defendants did not move to quash or modify the notice, R. 1:9-2, and did not produce the requested documents or witnesses at trial. It was incumbent on the trial court to have first addressed plaintiff's request to suppress defendants' answers for failure to comply and to have ruled on the pretrial motion, with a full record having been made. Plaintiff should have been given the opportunity to make a proffer as to the proofs he was seeking to elicit and any potential prejudice he believed was caused by defendants' failure to comply, and defendants should have been given the opportunity to respond. Plaintiff may or may not have been able to elicit sufficient testimony and evidence to satisfy the elements of l2 C.F.R. 229.51 and 229.56 if defendants had complied with the Notice in Lieu of Subpoena, but it seems patently unfair to allow them to argue that he failed to sustain his burden of proof under these circumstances.

If the court determined the matter would proceed, it should have ruled on plaintiff's request to deem Mellon's responses to the Admissions and Interrogatories as "conclusively establishing the elements of his claim," or if it was reserving on that issue, it should have so stated, and conducted a trial with sworn testimony. That way, the parties could have put on their proofs and defenses and could have made a record with respect to issues such as the status of the original check and any attempt by plaintiff to secure it, whether plaintiff or his assignor gave the thirty-day notice to Mellon of the breach of warranty claim and any adverse impact on the bank caused by a failure to give such notice, and what was depicted on the front and back of the check that was returned to plaintiff's assignor. Furthermore, evidence such as the copy of the check produced by Mellon in discovery, which apparently differed from that sent to plaintiff's assignor, should not have been considered by the court without appropriate testimony and a proper foundation, in the absence of a stipulation by the parties as to its admissibility.

We cannot conduct a meaningful review on this record because of the cumulative errors and outstanding procedural and factual issues. Accordingly, we vacate the order dismissing plaintiff's complaint and remand the case for trial. If defendants do not file a motion to quash or fail to honor plaintiff's Notice in Lieu of Subpoena to produce the requested documents and witnesses at trial, and plaintiff renews his Motion to Suppress their answers, the court shall rule on that motion prior to the commencement of the trial. We do not retain jurisdiction.

 

"Truncate means to remove an original check from the forward collection or return process and send to a recipient, in lieu of such original check, a substitute check . . . or an electronic image of the original check[], whether with or without the subsequent delivery of the original check." 12 C.F.R. 229.2(ddd)

Plaintiff acknowledges that the truncated copy complies with C.F.R. 229.51(a)(2), in that it bears the legend: "This is a legal copy of your check. You can use it the same way you would use the original check."

Plaintiff's Notice, contained in the Appendix, requests an employee to testify and authenticate documents, including:

FACTUAL ISSUES TO WHICH [EACH BANK'S REPRESENTATIVE] NEEDS TO TESTIFY

. . . .

8. All of the truncation practices that [the respective bank] utilized with the substitute check that is attached to plaintiff's complaint.

. . . .

10. The names of the drawer(s) and payee(s) that appeared on the payment instrument that is attached to plaintiff's complaint at the time [the respective bank] first received the referenced substitute check.

. . . .

11. The names of the drawer(s) and payee(s) that appeared on the substitute check that is attached to plaintiff's complaint at the time [the respective bank] returned the referenced substitute check as a dishonored item.

. . . .

13. All of the information that appeared on both the front and back of the original check - at the time [the respective bank] truncated the referenced original payment instrument - , and which original check is reprinted by the substitute check which is attached to plaintiff's complaint.

. . . .

16. All of [the respective bank's] records which document [its] processing of the dishonored substitute check which is attached to plaintiff's complaint.

Defendants also contended that plaintiff had failed to provide a thirty-day notice of a claim to the bank, which failure would have discharged the bank of liability to the extent of any loss caused by the delay in giving notice under l2 C.F.R. 229.56(d). There was a colloquy between the court and plaintiff in which plaintiff stated that he had not given the notice; however, there was no testimony or evidence presented with respect to this issue and there was no finding made by the court on this issue during the proceeding or in its opinion.

Plaintiff also asserts in his "Point One" that he has standing as an assignee to assert a claim under 12 C.F.R. 229.51. This issue was not challenged at trial and has not been challenged on appeal and thus need not be addressed.

We assume plaintiff would proceed under the UCC and thus must demonstrate that the inaccurate copy inhibits his ability to exercise his remedies thereunder.

(continued)

(continued)

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A-5085-05T1

April 20, 2007