Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Hudson Neurological Clinic, Inc. v. PNC Bank

November 20, 2000

HUDSON NEUROLOGICAL CLINIC, INC.,
FIRST MEDICAL SUPPLY, INC., WEST
NEW YORK CHIROPRACTIC, INC.,
NORTH HUDSON CHIROPRACTIC, INC.,
FLORIDA MEDICAL SUPPLY INC., AND
THE HEALING CLINIC, INC.,
PLAINTIFFS-RESPONDENTS,
V.
PNC BANK, N.A., NEW JERSEY,
SUCCESSOR-IN-INTEREST TO MIDLANTIC
NATIONAL BANK,
DEFENDANTS-APPELLANTS,
AND
W & T, INC. TRADING AS FIRST
BILLING SERVICE, THOMAS
LAMAS AND EMILIO ROBAINA,
DEFENDANTS.



Before Judges Kestin, Ciancia and Alley

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 24, 2000

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

Defendant PNC Bank appeals from the motion court's grant of judgment against it, which also brings before us the motion court's earlier grant of plaintiffs' motion for partial summary judgment and the court's denial of PNC's cross-motion for summary judgment, as well as the motion court's award against PNC of prejudgment interest.

This action arises from a fraudulent scheme that occurred in connection with plaintiffs' billing and collection activities for medical services and supplies. Plaintiffs would send bills to insurers for payment. Plaintiffs contend that they hired two individuals, Lamas and Robaina, to assist in the billing activities, and that instead those individuals perpetrated a fraud by convincing the insurers to send checks that the insurers issued in payment of plaintiffs' services to a fraudulent operation controlled by Lamas and Robaina instead of to plaintiffs. All these checks were made payable to plaintiffs, but after obtaining possession of the checks Lamas and Robaina allegedly caused them to be improperly endorsed and then deposited in accounts with PNC that Lamas and Robaina controlled. The parties stipulated that the total face amount of the checks was $216,289.71. It was undisputed that the insurers never actually delivered the checks to plaintiffs. There was no evidence before the motion court that plaintiffs actually authorized Lamas or Robaina to receive delivery of the checks payable to plaintiffs that they converted.

This appeal poses two main issues: (1) whether plaintiffs, to have standing to sue PNC for conversion of the checks under N.J.S.A. 12A:3-419 as in effect at the time of the alleged fraud, must have received delivery of the checks, actually or constructively, and (2) whether they received such delivery of the checks. The motion judge did not specifically decide the first issue but ruled in any event that plaintiffs had received constructive though not actual delivery. He found that while the only evidence as to intent was that the insurers presumably intended that the checks would be delivered to plaintiffs when they placed them in the mail, plaintiffs, through that mailing to the defrauding parties, nevertheless had acquired a "sufficiently vested ownership right" in the checks to have standing to sue.

Plaintiffs' amended complaint alleges that the checks were deposited in the PNC accounts by or on behalf of Lamas and Robaina from about March 1, 1993 until December 1994. As we have noted, the applicable Uniform Commercial Code provision that was in effect in New Jersey regarding the conversion of checks was N.J.S.A. 12A:3-419. That section does not specify that delivery is a prerequisite to standing to sue thereunder for conversion. It was replaced, effective June 1, 1995, by N.J.S.A. 12A:3-420 of the revised Article 3, which in contrast provides in paragraph (a), "[a]n action for conversion of an instrument may not be brought by the issuer or acceptor of the instrument or a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee."

We do not apply this new provision because it had not been adopted at the time of the events complained of by plaintiffs and is inapplicable. Interchange State Bank v. Veglia, 286 N.J. Super. 164 (App. Div. 1995) certif. denied, 144 N.J. 377 (1996). It is instructive, however, to note that Comment 1 of the Uniform Commercial Code Comments to N.J.S.A. 12A:3-420, effective June 1, 1995, states, "There was ... a split of authority under former Article 3 on the issue of whether a payee who never received the instrument is a proper plaintiff in a conversion action."

New Jersey, under the version of the Uniform Commercial Code set forth in the old N.J.S.A. 12A:3-419, was one jurisdiction that required delivery of a check to the payee as a prerequisite to the payee's standing to sue for the check's conversion, although the requirement was only one of constructive delivery, not actual delivery.

This court applied the concept of constructive delivery in Interchange State Bank, supra, which affirmed the trial court's finding that constructive delivery occurred when the drawer transferred the check to an authorized agent of the payee. Moreover, in Humberto Decorators, Inc. v. Plaza National Bank, 180 N.J. Super. 170 (App. Div. 1981), the check was constructively delivered to the payee through the debtor, thereby vesting ownership rights in the check in the payee, and the payee therefore had standing to sue. Id. at 175.

We are satisfied that constructive delivery is a prerequisite to a payee's standing to sue under the former N.J.S.A. 12A:3-419 if actual delivery has not occurred.

PNC contends that the motion court's finding of constructive delivery was in error, because the insurers' depositing of the checks into the mail did not prove their intent to pay plaintiffs, and because plaintiffs did not adopt the postal authorities as their agents.

We agree that it was error, on the basis of the present record, to grant judgment against PNC in favor of plaintiffs for conversion under the former N.J.S.A. 12A:3-419, but our decision is not entirely based on the reasons advanced by PNC. As we have shown, standing exists in favor of a payee to whom the payor has made constructive delivery, if not actual delivery. It is undisputed that the checks were not actually received by plaintiffs, at least in the sense of being received by employees acting in the scope of their duties, because plaintiffs themselves assert that Lamas and Robaina had no authority to do what they did. The difficulty with the ruling appealed from is that the proofs ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.