Tuzzio v Simuro

[*1] Tuzzio v Simuro 2007 NY Slip Op 52586(U) [22 Misc 3d 1111(A)] Decided on May 31, 2007 Supreme Court, Nassau County Woodard, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 31, 2007
Supreme Court, Nassau County

Patricia Tuzzio as Administrator of the Estate of Marie Merna, Plaintiff,

against

Valerie T. Simuro and J.P. MORGAN CHASE BANK, N.A., Defendants.



9256/05

Michele M. Woodard, J.

MS. TUZZIO PATRICIA TUZZIO, hereinafter referred to as "MS. TUZZIO", as Administratrix of the Estate of MARIE MERNA, hereinafter referred to as "THE ESTATE", commenced this action to recover funds allegedly embezzled by co-defendant VALERIE T. SIMURO, hereinafter referred toas "MS. SIMURO". In February, 2003, MS. TUZZIO retained MS. SIMURO to act as attorney to handle THE ESTATE. MS. TUZZIO had retained MS. SIMURO to act as attorney to handle THE ESTATE. MS. TUZZIO alleges that she never retained an attorney before and that she did no possess a sophisticated business background or an extensive education background. In June, 2003,

MS. SIMURO advised MS. TUZZIO that she, the MS. TUZZIO, needed to open a bank account.

MS. SIMURO and MS. TUZZIO opened the account at a J.P. MORGAN CHASE BANK, N.A., hereinafter referred to "CHASE BANK", branch near MS. SIMURO's. MS. TUZZIO contends that MS. SIMURO sought to speak to a specific bank employee. MS. TUZZIO states that she learned that MS. SIMURO had her own accounts at this CHASE BANK, i.e., MS. SIMURO was a "regular" and well known at this branch. MS. TUZZIO opened the checking account for the estate, and MS. TUZZIO was designated as the sole authorized signatory. MS. SIMURO was never authorized as a signatory and MS. TUZZIO never authorized MS. SIMURO to sign checks on MS. TUZZIO's behalf. MS. TUZZIO alleges she signed the signature account cards with the only information about the cards given to MS. TUZZIO by the bank was that the signature cards were necessary to verify her signature on the checks. MS. TUZZIO also contends the typewritten material at the top of he card, the title of the account, the contact person and phone number were not added until after MS. TUZZIO signed the cards and left the bank branch. MS. TUZZIO stated she never received a copy or an explanation of the terms and conditions of the account such as MS. TUZZIO' s obligation to examine the bank statements promptly, and the time constraint within which the MS. TUZZIO had to act/report any alleged discrepancies. Also, the signature card directed all statements to be sent to MS. SIMURO's office. Thus, MS. TUZZIO states she never saw the statements. MS. TUZZIO alleges from June, 2003 to December 2004 MS. SIMURO forged the signature of MS. TUZZIO on various checks drawn on the estate account in the amount of $600,000 (Morgan CHASE BANK has the amount as approximately $523,000). On January 5, 2005, MS. TUZZIO learned that MS. SIMURO had been illegally taking the funds [*2]from the estate account, and she notified Morgan CHASE BANK in writing on January 7, 2005. MS. TUZZIO alleges MS. SIMURO has been convicted of embezzling this account and a few others. MS. SIMURO is currently incarcerated and will not cooperate with MS. TUZZIO.

Morgan CHASE BANK contends all but $2,400 of MS. TUZZIO's claim for funds is time barred under UCC 4-406(4) and by the terms and conditions of the checking account (see Exhibit F, pgs. 11-12, ¶ 19, annexed to Morgan CHASE BANK's motion) which reduced the time period of UCC4-406(4) to sixty (60) days. MS. TUZZIO alleges no discovery has been held yet. She contends discovery will show Morgan CHASE BANK did not exercise ordinary care in dealing with the estate account.

Under the UCC, a bank is strictly liable to its customer when it pays a check on a forged instrument (Robinson Motor Xpress, Inc. v HSBC Bank, USA, 37 AD3d 117).

UCC 4-406(4) states that the customer bears the burden of notifying the bank of the unauthorized use of the customer's signature (Lichtenstein v Kidder, Peabody & Co., Inc., 777 F.Supp. 423).

The preclusion set forth in UCC 4-406(1) is not absolute. Even a customer failing in the one-year limitation may bring a claim against the bank if the customer can establish that the bank lacked ordinary care and good faith in paying the allegedly forced check or checks (UCC 4-406[3]; Monreal v Fleet Bank, 95 NY2d 204; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340; Herzog, Engstrom & Koplovitz, P.C. v Union National Bank, 226 AD2d 1004).

The Uniform Commercial Code provision barring a suit to recover amounts paid by a bank on forged endorsements unless the customer gives written notice of the forgery within one year of the time the account statement was made available is derived from the depositor' s common law duty to examine drats and statements furnished by the bank and report alterations or forgeries within a reasonable time (U.C.C. § 4-406[4]; Woods v MONY Legacy Life Insurance Co., 84 NY2d 280). The logic is that the depositor is in a better position to discover the alteration of the check or of any possible forgery.

The one year period begins to run when a bank sends to its customer a statement of the account accompanied by the items paid in good faith or holds the statement and items pursuant to a request or instruction of its customer or otherwise in a reasonable manner makes the statement and items available to the customer (U.C.C. § 4-406[1]; Martin v CHASE BANK Manhattan Bank, 10 AD3d 447). Bank statements sent to a customer's attorney at her request were "made available" to the customer under UCC § 4-406[1] (Woods v MONY Legacy Life Insurance, supra).

Generally, a bank may assume that the person acting as a fiduciary, such as MS. SIMURO, will apply entrusted funds to the proper purposes and will adhere to the conditions of the appointment (Matter of Knox, 64 NY2d 434).

The parties to a contract may agree to limit the period of time in which the action must be commenced to a shorter time than that otherwise provided by the applicable statute of limitations (Certified Fence Corp. v Felix Industries, Inc. , 260 AD2d 338). Clearly, the one-year limit set forth in UCC § 4-406[4] may be further reduced as was the case here (see Regatos v North Fork Bank, 5 NY3d 395 wherein the Court of Appeals held the one-year period for notification of wire transfers set forth under UCC 4-A-204 could not be shortened by agreement). [*3]

Absent proof that the contact is one of adhesion or the product of overreaching or that the altered period is unreasonably short, the abbreviated period of limitation will be enforced (Wayne Drilling & Blasting v Felix Industries, Inc., 129 AD2d 633).

The procedural element of unconscionability requires an examination of the contract formation process and the alleged lack of meaningful choice, the focus is on such matters as the size and commercial setting of the transaction, whether deceptive or high-pressured tactics were employed, the use of fine print in the contract, the experience and education of the party claiming unconscionability, and whether there was disparity in bargaining power (Gilman v CHASE BANK Manhattan Bank, N.A., 73 NY2d 1). MS. TUZZIO contends she got the "fast shuffle" from the bank employee who knew MS. SIMURO in that no time explaining anything to MS. TUZZIO was spent. MS. TUZZIO even goes so far as to allege the bank employee known to MS. SIMURO may have been involved with MS. SIMURO in her scheme or schemes to loot various bank accounts at Morgan CHASE BANK or the particular branch where MS. TUZZIO's account had been opened.

While a bank and its customer may agree to vary the provisions of Article 4 of the UCC concerning the risk of loss from a forged check, the agreement may not abrogate the bank's responsibility to exercise good faith and ordinary care (Sunshine v Bankers Trust Co., 34 NY2d 404). MS. TUZZIO contends the signatures on the checks should have been checked and that MS. SIMURO's conduct of putting estate funds in large round numbers into MS. SIMURO's personal account at Morgan CHASE BANK should have been a "red flag" to the Morgan CHASE BANK to further check MS. SIMURO's conduct.

Generally, on a motion to dismiss pursuant to CPLR § 3211(a)(7), the material allegations contained in the complaint are deemed true as are all the reasonable inferences implied from such allegations (Rovello v Orogino Realty Co., 40 NY2d 633). If the factual allegations taken together give notice of what is intended to be proved and manifest a cause of action cognizable at law, the motion must be denied (511 West 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144; Guggenheimer v Ginzburg, 43 NY2d 268). Clearly, the court is not required to evaluate the evidentiary merits of the complaint (Guggenheimer v Ginzburg, supra).

Under a CPLR § 3211(a)(7) motion herein, all MS. TUZZIO is required to set forth are allegations that Morgan CHASE BANK failed to exercise reasonable, ordinary care in paying the checks. She has done so.

To succeed on a motion to dismiss pursuant to CPLR § 3211(a)(1), the documentary evidence that forms the basis of the defense must resolve all factual issues as a matter of law, and conclusively dispose of the MS. TUZZIO's claim (Manfro v McGivney, 11 AD3d 662; Teitler v Max J. Pollack & Sons, 288 AD2d 302). From the record now before the court, defendants have not met the above standard.

A customer could show a bank lacked ordinary care by preventing any type of proof that the bank failed to act reasonably such as the bank's inspection procedures of checks were so superficial as to offer no realistic opportunity to detect forged checks (see Putnam Rolling Ladder co., Inc. v Manufacturers Hanover Trust, supra).

Finally, punitive damages are available only in those limited circumstances where it is necessary to deter a defendant and others like it from engaging in conduct that may be characterized as gross and morally reprehensible and of such wanton dishonesty as to imply a [*4]criminal indifference to civil obligations and to vindicate a public right (Rocanova v Equitable Life Assurance Society, 83 NY2d 603).

The complaint s a whole does not allege facts that demonstrate such a high degree of moral culpability as to warrant a recovery of punitive damages (Rose Lee Mfg. Inc. v Chemical Bank, 186 AD2d 548). Here, MS. TUZZIO's punitive damages request (see Exhibit A, pg. 7, "wherefore clause," annexed to Morgan CHASE BANK's motion) is deemed dismissed upon service of a copy of this order upon MS. TUZZIO.

A motion to reargue is addressed to the sound discretion of the court which decided the prior motion and said motion may be granted upon a showing that the court overlooked or misapprehended the facts or law or for some other reason mistakenly arrived at its earlier decision (Long v Long, 251 AD2d 631). Based on the determination above, as noted, that branch of CHASE BANK's motion to strike the MS. TUZZIO's complaint as to punitive damages shall be deemed stricken. Based on the sufficiency of MS. TUZZIO's allegations and the standards set forth above, the court feels the need for a hearing as previously scheduled, is not necessary at this stage of the proceedings. Thus, that branch of CHASE BANK's motion which seeks to cancel the hearing shall be granted. CHASE BANK's motion to reargue is denied in all other respects.

The court will also consider JPMorgan CHASE BANK's motion to reargue a prior determination of this court, dated April 5, 2007 wherein the court: 1) declined to grant CHASE BANK's motion to dismiss the MS. TUZZIO's entire complaint; 2) declined to limit the complaint to $2,400 in checks/transfers as well as strike MS. TUZZIO's request for punitive damages; 3) declined to cancel the hearing and/or trial previously scheduled; and 4) declined to strike MS. TUZZIO's jury demand.

The motion by defendant JP Morgan CHASE BANK Bank, N.A. ("Morgan CHASE BANK") to dismiss the MS. TUZZIO's complaint pursuant to CPLR §3211(a)(1), (7) is granted only to the extent that the MS. TUZZIO's request for punitive damages is stricken. Morgan CHASE BANK's motion is denied in all other respects for the reasons set forth herein.

This constitutes the DECISION and ORDER of the Court.

DATED: May 31, 2007

Mineola, NY

ENTER:___________________________________

HON. MICHELE M. WOODARD

J.S.C.