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County Concrete Corp. v. Smith

December 16, 1998


Before Judges Baime, Conley and A.a. Rodr¡guez.

The opinion of the court was delivered by: Conley, J.A.D.

[9]    Submitted December 2, 1998

On appeal from Superior Court of New Jersey, Law Division, Morris County.

This appeal requires us to address the issue of "absolute liability" of a drawee bank under N.J.S.A. 12A:3-419(2) where the payee of a converted check has received the monies intended by way of a replacement check. In our prior opinion which reversed summary judgments in favor of the defendant banks and remanded for trial, we raised, but did not decide, this issue. County Concrete Corp. v. National State Bank and Chemical Bank, No. A-1136-94 at 5-7 (App. Div. June 12, 1995). We now conclude that N.J.S.A. 12A:3-419(2) does not preclude a drawee bank from obtaining a setoff for the amount of the replacement check received by the payee against the amount of the converted check. Since the plaintiff payee here received the full amount of the monies the first check was intended to transfer to it, it sustained no loss from the conversion of the first check and, therefore, is entitled to no further relief, as properly determined by the trial Judge.


The critical facts are not complex. Plaintiff was a supplier of concrete to a subcontractor, Gene Smith Contractors, Inc. (Smith), on a job site owned by Roxville Associates (Roxville). The general contractor was Modular Structures, Inc. (Modular). During the course of the job, Modular failed to timely pay its subcontractors, including Smith. As a result, by June 1990, plaintiff supplier was owed money by Smith for its supplies and had threatened to make no further deliveries. At that point, in order to ensure further deliveries of concrete to keep the job going, Roxville intervened. Salvatore Davino, president of Roxville, testified to the following oral agreement with John Crimi, the president of County Concrete.

1. Roxville Associates would pay $81,732 on account of the amounts past due to plaintiff; and

2. Roxville Associates would pay for all future deliveries of concrete to the project on a current basis.

Davino specifically testified that he never intended to pay more than $81,732 towards Smith's then arrears with County Concrete. *fn1 In accordance with Davino's agreement with Crimi, on June 28, 1990, Roxville issued check #1203, drawn on its account with Chemical Bank, in the amount of $81,732 payable to Modular, Smith and County Concrete. The check was intended to be paid to County Concrete for monies owed it by Smith. In reliance on the expected arrival of the check, plaintiff resumed delivering concrete to Smith. However, this particular check never reached plaintiff. After being endorsed by Modular and then sent to Smith, someone then forged County Concrete's endorsement and deposited the check in the Smith account at National. Chemical paid the full amount of the check to National. At that time, Smith's account at National was overdrawn by $55,797.43. As a result, National retained that amount and deposited the remainder in the Smith account.

Upon discovery of the forgery, County Concrete demanded a replacement check from Roxville. Davino knew County Concrete had not received the intended money, although he did not then know that the check had been converted. So as to keep his promise to County Concrete, he issued a replacement check to County Concrete in the same amount, $81,732. Davino testified that he sent the second check with the understanding that it was a replacement for the first and if the first check eventually made its way to County Concrete, it would be used as a credit against future concrete deliveries purchased by Roxville, not against past due amounts. Thus, when asked during trial "[a]nd so, when you issued this second check, it wasn't your intention to pay a total of $160,000 toward the past due amounts, was it?," he answered "[n]o. I think that you got things out of context, but no, it was not my intent." It is undisputed that County Concrete received the second check.


The prior summary judgments had been granted by the motion Judge as a result of her Conclusions, from the discovery material submitted to her, that the second check was, indeed, intended to be a replacement check and that, since plaintiff received the promised $81,732 by way of the second check, it sustained no damages arising from the conversion of the first check. We did not necessarily disagree with this legal analysis, but concluded there were factual disputes as to the intended nature of the second check which should, in the first instance, be resolved by the jury.

And so, following four days of the trial on remand, the trial Judge gave the following interrogatory:

Did Roxville Associates and County Concrete verbally agree that Roxville Associates would make one payment of $81,732 on account of the amounts past due from Gene Smith Contracting to County Concrete, ...

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