C & L Check Cashing Corp. v Fleet Boston Fin. Corp.

[*1] C & L Check Cashing Corp. v Fleet Boston Fin. Corp. 2004 NY Slip Op 51679(U) Decided on December 20, 2004 Civil Court, New York County Moulton, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 20, 2004
Civil Court, New York County

C & L CHECK CASHING CORP., Plaintiff,

against

FLEET BOSTON FINANCIAL CORPORATION, D/B/A/ FLEET, and SONJA D. ALRED, Defendant(s).



59451/03

Peter H. Moulton, J.

Plaintiff moves for an order pursuant to CPLR 3212 granting it summary judgment as against defendant Fleet Boston Financial Corporation d/b/a/ Fleet ("Fleet"). Fleet cross-moves for summary judgment.[FN1]

FACTS

Plaintiff commenced this action seeking recovery of $2,275.00 representing the face

value of a check it cashed, which defendant Fleet dishonored and returned. Plaintiff claims that on August 30, 2003, a person holding herself out to be defendant Sonja Alred entered its premises and presented a check in the amount above for payment. Sonja Alred was the named payee on the check, and Alred's purported endorsement was on the back of the check. The payor on the check was Gregory Gogan. The drawee bank was Fleet. According to plaintiff, the person claiming to be Alred presented proper identification in the form of a Social Security card and a New Jersey driver's license. The check also appeared to be sound on its face.

Based on unrebutted facts provided by Fleet, it is clear that the person who presented herself as Alred was an imposter. Gregory Gogan submits an affidavit in which he states that he made out the check to Alred at the request of a woman named Asa Jones. This check was intended to be a short term loan from Gogan to Jones so that she could pay Alred, her putative new landlord, the costs of securing an apartment. Gogan claims that soon after he delivered the check to Jones, he realized that he had been deceived by Jones. Gogan states that he then contacted Fleet in writing sometime over the 2003 Labor Day weekend and requested that a stop [*2]payment order be placed on the check. On Tuesday, September 2, 2003, upon the reopening of the Fleet branch, Gogan orally directed Fleet place a stop payment on the check. On September 5, 2003, Gogan signed another stop payment request form which included Gogan's indemnification of Fleet. However, the check had been cashed by plaintiff pursuant to the forged endorsement. The real Sonya Alred submits an affidavit in which she states that she was unaware of the transaction and that her ID had been stolen shortly before the check was presented to plaintiff.

When the check was presented by C&L for payment Fleet dishonored it based upon the stop payment instructions from Gogan.

Plaintiff then commenced this action arguing that it is an innocent party in this unfortunate chain of events. Plaintiff asserts that its employees exercised due diligence when honoring the payment of said check. There was, according to plaintiff, nothing on the face of the check to draw attention to the fact that defendant Fleet might have any reason not to honor the check. Plaintiff asserts that it accepted the check in good faith, without any notice that Fleet would contest payment. Therefore, plaintiff argues that it is a holder in due course of the instrument and should not be harmed as a result of its actions,

Defendant Fleet argues that plaintiff could not and did not acquire title to the subject check, as one cannot ever acquire good title to a negotiable instrument which has been converted. Defendant asserts that because an indorsement is necessary to transfer title and there can be no negotiation of an instrument without the authorized signature of the named payee, the person who accepts the instrument without an indorsement or with a forged endorsement cannot be a holder. According to defendant, plaintiff never became a holder in its own right, and because the instrument it took bore a forged endorsement, plaintiff never acquired good title and consequently plaintiff converted the instrument when it paid the check. Fleet also argues that C&L violated warranties set forth in the Uniform Commercial Code by presenting the check to it for payment with a forged endorsement. For these reasons, Fleet argues it had a right to refuse to honor the check.

DISCUSSION

On a motion for summary judgment, the moving party must establish its cause of action or defense sufficiently to allow the court to direct judgment in it favor (see Zuckerman v. New York City Transit Auth., 49 NY2d 557). Where a moving party so establishes its case, the opposing party must produce evidence sufficient to establish the existence of issues of material fact. (id). Courts will examine the evidence presented in the light most favorable to the nonmoving party (see Patterson v. Nassau Community College, 308 AD2d 519; Rifenburgh v. Wilczek, 294 AD2d 653).

Normally, a payor such as C&L will bear the loss resulting from cashing a forged check. (2 Brady on Bank Checks, Bailey & Hagedorn, ¶ 28.01, 29.10.) An exception to this principle is found in Uniform Commercial Code § 3-405(1)(b) the "fictitious payee" rule which makes a forged endorsement "effective", inter alia if "an imposter by use of the mails or otherwise has induced the maker or drawer to issue the instrument to him or his confederates in the name of the payee." A nonbank depository may rely on the fictitious payee rule to avoid a loss (see Getty Petroleum Corp., v. American Express Travel Related Services Company, Inc., 90 NY2d 322).

The facts of this case are squarely within the scenario set forth in UCC 3-405 (1)(a). Jones [*3]and someone calling herself Sonja Alred fraudulently induced Gogan to issue a check in favor of the putative Alred. Gogan was in a better position to judge the transactions' bona fides than was C&L. (See Shube v. Cheng, 157 Misc 2d 255; Murray Hill Investments v. Adas Yereim, Inc., 27 UCC Rep. Serv. 2d 1310.) "The effect of Code 3-405 is to put the loss on the drawer who was induced by an imposter to draw a check, and not on the drawee bank." (Shube 157 Misc 2d at 260.) Indeed Fleet has admitted that Gogan will indemnify it for any loss imposed upon it due to the transaction.

Defendant Fleet in this case does not argue that plaintiff should have known that the check might or would be dishonored, but alleges that facts may exist what should have led plaintiff to inquire whether or not the check would be dishonored. This speculation is insufficient to defeat summary judgment.

CONCLUSION

Plaintiff's motion for summary judgment is granted against defendant. Defendant is directed to pay plaintiff the sum of $2,275.00 together with interest from August 29, 2003, along with costs and disbursements.

Dated: December 20, 2004_____________________________

J.C.C. Footnotes

Footnote 1:In determining this motion, the court reviewed the following documents; 1) plaintiff's motion for summary judgment, 2) defendant's cross-motion and affirmation in support of summary judgment and memorandum of law, 3) plaintiff's affidavit in opposition to defendant's cross motion and 4) defendant's affirmation in reply to plaintiff's opposition and in support of its motion. Defendant Sonja D. Alred did not submit any motion papers.