Decided: January 20, 1995.
MARTIN GLENNON, INC., PLAINTIFF-RESPONDENT, CROSS-APPELLANT,
FIRST FIDELITY BANK, N.A., DEFENDANT-APPELLANT, CROSS-RESPONDENT, AND LIVIO RUSSO, AMERICAN NATIONAL B&T OF CHICAGO, AMERITRUST, N.A., BANCOHIO NATIONAL BANK, BANCO CENTRAL, BANK ONE, COLUMBUS, N.A., BANK OF AMERICA NT & SA, BARNETT BANK OF SOUTH FLORIDA, N.A., BAYBANK BOSTON, N.A., CALIFORNIA UNITED BANK, N.A., CHITTENDEN TRUST COMPANY, CITIBANK DELAWARE, CITIBANK, N.A., CITIZENS BANK & TRUST COMPANY, CITIZENS FIRST NATIONAL BANK OF NJ, CITIZENS & SOUTHERN NATIONAL BANK OF FLORIDA, CONSOLIDATED BANK, N.A., DELAWARE TRUST COMPANY, DOWNERS GROVE NATIONAL BANK, EAGLE NATIONAL BANK OF MIAMI, FIDELITY BANK, N.A., FIRST UNION NATIONAL BANK OF FLORIDA, FIRST WISCONSIN NATIONAL BANK OF PRINCETON, FLEET NATIONAL BANK, JEFFERSON NATIONAL BANK, KEY BANK OF EASTERN, NEW YORK, N.A., LA SALLE NATIONAL BANK, LIBERTY NATIONAL BANK & TRUST CO. OF LOUISVILLE, MARINE MIDLAND BANK, N.A., MIDLANTIC NATIONAL BANK NORTH, MITSUI MANUFACTURE'S BANK, MORGAN BANK (DELAWARE), MORGAN GUARANTY TRUST OF NEW YORK, NBD BANK, N.A., NCNB NATIONAL BANK N.A. OF FLORIDA, NCNB TEXAS NATIONAL BANK OF DALLAS, TEXAS, NCNB OF NORTH CAROLINA, NATIONAL WESTMINSTER BANK USA, NORSTAR BANK, NORTHERN TRUST BANK/DUPAGE, OCEAN BANK, PUGET SOUND BANK/BANCONE, SAFRA BANK (CALIFORNIA), THE BANK OF NEW HAVEN, THE BANK OF NEW YORK COMPANY, THE CHASE MANHATTAN BANK, N.A., THE DAIWA BANK LIMITED, THE HUNTINGTON NATIONAL BANK, UNION BANK, WACHOVIA BANK & TRUST COMPANY, WELLS FARGO, N.A., ABC BANKS 1 THROUGH 20, NAMES BEING FICTITIOUS, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County.
Before Judges Dreier, Villanueva and Wefing. The opinion of the court was delivered by Dreier, P.J.A.D.
The opinion of the court was delivered by DREIER, P.J.A.D.
Defendant First Fidelity Bank, here sued as the depository bank of checks bearing allegedly forged endorsements, appeals from a summary judgment for conversion and holding it responsible to the named payee for the proceeds of the instruments. Plaintiff, Martin Glennon, Inc. as the successor in interest to S.S. Koppe & Co., Inc., claimed in its complaint that First Fidelity and Koppe's erstwhile bookkeeper, Livio Russo, as well as the various drawee banks, were liable to plaintiff on the ground of conversion. Plaintiff also claimed that First Fidelity and the various drawee banks were liable to it for negligence and for violations of the Uniform Commercial Code. Plaintiff cross appeals from the court's denial of plaintiff's motion to dismiss for defendant's failure to answer interrogatories. There was no issue in the case concerning defendant Livio Russo's criminal liability, and the claims against the various drawee (payor) banks were severed, leaving only plaintiff's claims against First Fidelity for adjudication.
Plaintiff success fully moved for summary judgment, but unfortunately we have been given no assistance from the trial Judge concerning the reasons for its entry. See R. 1:7-4; 2:5-1 (b) (requiring an opinion from the Judge). The Judge merely found that the bank was "solely responsible for everything" as a matter of law. His only elaboration to counsel was that he did not want to "bore [them] with a long detailed opinion" because the "facts speak for themselves." Such an opinion is of no aid to appellate review. As we have the briefs and certifications that were available to the trial Judge, we have reassessed the matter and have determined independently that summary judgment was proper.
Plaintiff contends on its cross appeal that defendant's answer should have been stricken with prejudice for failure to answer interrogatories, and therefore none of the issues raised by defendant should be considered. Although we find this question to be a close one, we determine that the earlier motion Judge who reviewed this case was within his discretion to find that exceptional circumstances existed to relax R. 4:23-5(a)(2).
There is no question that there was first a dismissal without prejudice pursuant to R. 4:23-5(a)(1) for defendant's failure to respond to discovery demands. There then was a proper motion on notice to defendant to strike defendant's answer with prejudice. The exceptional circumstances alleged here were set forth in representations made to the court in the eleven-page letter from defendant's counsel of record. While it would have been better had this letter been put in certification form, we note that it was accepted by the Judge. It explained that although McCarter & English was counsel of record for defendant, the law suit had been tendered through the bank's insurance carrier to an "insurance company selected law firm" which was responsible for discovery. This attorney was later fired due to inaction, and defendant allegedly then provided the discovery.
Inaction is usually an insufficient excuse. The "exceptional circumstances" are usually confined to "poor health or emergency" or the like. Rodriguez v. Luciano, 277 N.J. Super. 109, 112, 649 A.2d 87 (App. Div. 1994). It was the responsibility of defendant's attorneys of record to supervise discovery, even by outside counsel retained by it or its client. This was, however, more than the ordinary "administrative problems in [defendant's] attorney's office" discussed in Rodriguez, where the trial Judge reached the opposite decision. While we might also have reached a different result from the motion Judge in this case, there is some breadth of discretion encompassed within the "exceptional circumstances" language of the rule. We acknowledge that the motion Judge acted within the outer limits of his discretion in granting First Fidelity's application to reinstate its answer. We also note that the granting of the motion did not materially affect the outcome of the case. We therefore affirm on the cross appeal.
S.S. Koppe & Co., Inc. (Koppe) was purchased by Joleen and Thomas Martin in December 1982 and renamed Martin Glennon, Inc. It continued, however, to operate under the name S.S. Koppe & Co., Inc. with Joleen Martin as its president. The company's business was the obtaining of advertising from advertising agencies, individuals and companies in the United States for publication, broadcast and telecast in the Caribbean, Central and South America, the Arabic states and the Pacific rim. The company consisted of five individuals, four working in the advertising end of the business and one bookkeeper.
The facts governing defendant's appeal are not in dispute. When Russo was hired as plaintiff's bookkeeper, his authorized duties were limited to stamping the checks with a deposit stamp reading "S.S. Koppe & Co., Inc., For Deposit Only" and bearing the name of National Bank & Trust of Kearny. He was then required to enter the information concerning the check into the company's cash receipt book. The company also maintained an incoming mail log in which all incoming mail was recorded and, if checks were enclosed, the pertinent information concerning the checks. Unfortunately, no one in the corporation had the specific duty of comparing the mail log with the deposit slips or the individual account ledgers.*fn1 Apparently, it was assumed that all of the checks would find their way into plaintiff's bank account after suitable notations on the correct ledgers. Plaintiff's owners believed that they were adequately protected against embezzlement by Russo because he had no authority to sign checks, he rarely made the physical deposits at the bank and an accountant regularly reviewed the corporate books.
Russo's scheme was to appropriate various checks as they were given to him. Although the notation concerning the checks had been recorded in the incoming mail log, they were never entered on the customers' ledgers, and thus over a period of time a customer who was paying promptly would appear to have become more and more delinquent. Since Russo did not appropriate all the checks from any particular customer, this delinquency and apparent build up of the company's accounts receivable was gradual, making it appear that the general practice of plaintiff's customers was to make payment on a more extended basis. Over the years 1986 and 1987, the company's accounts receivable grew from $111,865 to $516,718. During this period Russo stole $451,045.22. Therefore, although the company's accounts receivable actually decreased during this period, it appeared from the company's books that Koppe was suffering from a serious payment problem from its customers. It was only when the company was sold and the owners remembered a particular $8,000 check which they thought should have been paid but did not show on the records that they inquired of their former customer. When they were told that the check had been paid and were read the payment information from the check, they began to inquire at the depository shown on the check, First Fidelity Bank, and the fraudulent scheme came to light.
Russo, in fact, had ordered a new deposit stamp merely stating "S.S. Koppe." He then had gone to First Fidelity, his own bank, and explained that he was opening a rent security deposit account in a different name since he did not want to comingle the security funds with his own. The name on the account was "S.S. Koppe." Notwithstanding the fact that the vast majority of the checks were made payable to "S.S. Koppe & Co., Inc." and thus clearly were checks made payable to a corporate payee, defendant permitted the deposit of these checks into Russo's bogus account. Despite Russo's explanation to the bank that the account was for rent security deposits, none of the formalities usually associated with such accounts were accomplished. See N.J.S.A. 46:8-19. The bank noted nothing unusual about the sizeable deposits payable to a corporate payee being made into this individual account and immediately withdrawn by Russo personally.
Defendant has raised four issues on this appeal: first, that N.J.S.A. 12A:3-404 should have been found available as a defense to plaintiff's conversion claim; second, that N.J.S.A. 12A:3-406 and 3-419(3) similarly provided a viable defense; third, that there were material questions of fact that precluded summary judgment; and, fourth, plaintiff should not have been held entitled to prejudgment interest. We will treat these issues in a different order.
Although defendant's third issue asserts that there were factual matters still in dispute, it has also raised alleged factual issues in the first two points of its brief. We have, of course, considered the record in a factual light most favorable to defendant, resolving all doubts against plaintiff. Ruvolo v. American Casualty Co., 39 N.J. 490, 499, 189 A.2d 204 (1963). From our review of the record we see no factual issues remaining in this case. There may be questions of legal construction, but the facts appear clear. Consequently, if the law supports plaintiff's claim and provides no defense to ...
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