On appeal from the Superior Court of New Jersey, Law Division, Morris County.
Dreier and Havey. The opinion of the court was delivered by Dreier, J.A.D.
[231 NJSuper Page 59] The First Morris Bank (First Morris) appeals from a judgment entered in favor of plaintiff, Ronald R. Nutt, Sr., in the amount of $30,425.95.
In a previous action, Nutt brought suit against The Equitable Life Assurance Society (Equitable). His attorney in that action was Henry S. Gordon. As a result of that litigation, on April 26, 1984 Equitable drew a check for $21,639.00 on its account with The Chemical Bank (Chemical), payable to "Ronald R. Nutt and Henry S. Gordon, Esq." Gordon endorsed the check "Ronald R. Nutt by Henry S. Gordon agent and attorney in fact," and deposited it in his trust account with defendant First Morris, which through a collecting bank, First Fidelity Bank (First Fidelity), obtained payment from Chemical, the drawee.
The plaintiff complains that that money was rightfully his and he never received any of it. Nutt filed a complaint against Chemical stating that he was subrogated to the rights of Equitable and alleging that Chemical had breached its contract with Equitable by paying the check to First Morris "over an 'unauthorized signature,'" a violation of N.J.S.A. 12A:3-401. On March 4, 1985 Nutt amended that complaint to include the presenting bank (First Fidelity) and the depositary bank (First Morris) as defendants. Plaintiff's claims were based upon both conversion and breach of contract.
Chemical and First Fidelity each filed an answer and cross-claim for indemnification and contribution against First Morris, and First Morris filed a third-party complaint, and a claim for contribution, against Gordon. Thereafter, First Morris agreed to indemnify Chemical and First Fidelity, and the cross-claims were dropped.
Nutt made five unsuccessful motions for summary judgment; however, the sixth motion, the judgment which is here under review, was granted. The issues to be decided on this appeal are whether this summary judgment was properly granted on the liability issue, and, if so, whether summary judgment properly was entered on the damages question.
The standard by which an appellate court reviews a grant of summary judgment is the same as that by which the trial court
assesses the request: if, after reviewing the record, "there is no genuine issue as to any material fact," summary judgment will be granted or affirmed. R. 4:46-2. Even though the pleadings may raise some minor issue of fact, if there are no "material issues," then summary judgment can be granted. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75 (1954).
The amended complaint in this case alleges that First Morris is liable to the plaintiff for breaching its duties of presentment under N.J.S.A. 12A:4-207 and for conversion under N.J.S.A. 12A:3-419. Under N.J.S.A. 12A:4-207, a collecting bank must warrant that it has good title, and has no knowledge that the signature on the instrument is unauthorized. According to case law, a depositary bank presenting a check with a forged indorsement to a drawee bank may ultimately be held liable for a breach of the implied warranty that it had "good title." Clients' Sec. Fund v. Allstate Ins., 219 N.J. Super. 325, 329-330 (App.Div.1987). In addition, First Morris is specifically liable to all down-stream banks in the collection process by its guaranty of all prior indorsements. In short, N.J.S.A. 12A:4-207 places the burden of loss from forged indorsements on the bank which first accepts such forgeries. Clients' Sec. Fund, at 331; Perkins State Bank v. Connolly, 632 F.2d 1306, 1319-1320 (5th Cir.1980).
Most of the material facts in this case were stipulated. The check from Equitable was made out to "Ronald R. Nutt and Henry S. Gordon, Esq." (emphasis added); Ronald Nutt never signed the check; and Henry Gordon, in his own words, ...