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Villa Contracting Co., Inc. v. Summit Bancorporation

December 20, 1996

VILLA CONTRACTING CO., INC., PLAINTIFF, - VS - SUMMIT BANCORPORATION (IMPROPERLY PLEADED AS THE SUMMIT BANCORPORATION, A CORPORATION OF THE STATE OF NEW JERSEY D/B/A THE SUMMIT TRUST COMPANY AND/OR SUMMIT BANK), DEFENDANTS.


Menza, J.s.c.

The opinion of the court was delivered by: Menza

Defendant Summit Bank moves for summary judgment, contending that it is not obligated to reimburse plaintiff for amounts it charged to plaintiff's account when the bank made payment on checks that were later found to be forged. Plaintiff Villa Contracting opposes the motion.

The facts are these:

Plaintiff's employee, Lisa Tso, and her friend Kevin J. Vargas, were arrested, and eventually prosecuted, for forging company checks and converting the funds to their own use. The forged checks included at least two that were drawn on an account plaintiff Villa Contracting maintained with defendant Summit Bank. Defendant bank paid these checks in April of 1994.

In August of 1994, plaintiff commenced an action against Tso and Vargas, attempting to recover some of the embezzled funds, which allegedly remained in accounts with United Jersey Bank and First Fidelity Bank. The action resulted in a settlement on December 9, 1994, in which plaintiff received 53% of the funds from said accounts and the New Providence Board of Education, Tso's previous employer, received 47% of the funds.

Plaintiff then commenced this action on July 11, 1996, almost two years later, alleging that defendant Summit Bank breached the parties' deposit contract by charging its account for the bank's payment of the forged checks.

Defendant Summit Bank contends that it is not liable to plaintiff for two reasons. First, defendant contends that plaintiff's claim is barred by the entire controversy doctrine, because plaintiff should have made defendant bank a party to plaintiff's 1994 action against Tso and Vargas. Defendant asserts that it obviously had a significant interest in the previous action and that it has been prejudiced as a result of not being made a party to said action. Thus, defendant contends that this is an instance where the entire controversy doctrine should be applied to bar plaintiff's claim.

Second, defendant contends that plaintiff failed to comply with the requirements of N.J.S.A. 12A:4-406(4), because it did not report the forged checks to the bank within one year of the date the bank statement, in which the those checks were included was made available to it.

For these reasons, defendant contends that summary judgment should be granted in its favor.

Plaintiff responds that the entire controversy doctrine does not bar the instant claim because the 1994 action was not an "adversarial proceeding." Plaintiff states that the prior action was brought merely to allow it and the New Providence Board of Education to obtain the funds from the embezzlers' bank accounts, as such accounts had been frozen. All that had to be worked out between plaintiff and the Board of Education was the proper distribution of said funds, and therefore the action was not an "adversarial proceeding." Plaintiff contends that the entire controversy doctrine does not require that all interested parties be joined in non-adversarial actions, and that its claim against Summit Bank is therefore not barred.

Further, plaintiff contends that George Villa, the director of plaintiff business, did inform defendant of the forged checks within the one year statutory period. It contends that George Villa spoke with or met with employees of defendant bank four or five times after he discovered that Tso had embezzled funds by forging company checks. On these occasions, George Villa informed the bank of the embezzlement and noted that several forged checks were drawn on plaintiff's account with defendant bank. It is plaintiff's contention that the above actions satisfied the notice requirement of N.J.S.A. 12A:4-406(4), and that summary judgment therefore should not be granted.

Entire Controversy Doctrine

The entire controversy doctrine requires that all claims against all parties with a significant interest in those claims be brought in one proceeding at one time. Circle Chevrolet v. Giordano, ...


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