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Kuhn v. Tumminelli

February 11, 2004

CLIFFORD N. KUHN, JR., AND TOUCH OF CLASS LIMOUSINE SERVICE, L.L.C., D/B/A TOUCH OF ELEGANCE LIMOUSINE SERVICE, PLAINTIFFS-APPELLANTS,
v.
JOSEPH M. TUMMINELLI, JOANNE TUMMINELLI, QUICK CASH, INC., CHASE MANHATTAN BANK, N.A., FIRST UNION NATIONAL BANK, N.A. (SUCCEEDED BY WACHOVIA BANK), AND BANK OF AMERICA CORPORATION, DEFENDANTS-RESPONDENTS, AND QUICK CASH, INC., THIRD-PARTY PLAINTIFF-RESPONDENT,
v.
JOSEPH TUMMINELLI, JOANNE TUMMINELLI, CHASE MANHATTAN BANK, N.A., FIRST UNION NATIONAL BANK, N.A. (SUCCEEDED BY WACHOVIA BANK), AND BANK OF AMERICA CORPORATION, THIRD-PARTY DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, MiddleseX County, Docket No. L-9287-01.

Before Judges Stern, A.A. Rodríguez and Lefelt.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 6, 2004

Plaintiff Clifford Kuhn, Jr., a practicing attorney, and defendant Joseph Tumminelli formed Touch of Class Limousine Service under the New Jersey Limited Liability Company Act, N.J.S.A. 42:2B-1 to -70, doing business as Touch of Elegance Limousine Service. The parties orally agreed that Kuhn would provide the financial backing and procure customers, and Tumminelli would generally manage the business and operate the company day-to-day. Unfortunately, however, Tuminelli embezzled*fn1 funds from the company after cashing customers' checks at defendant Quick Cash, Inc, a local check cashing service operating under The Check Cashers Regulatory Act of 1993, N.J.S.A. 17:15A-30 to -52.

After cashing the checks for Tumminelli, Quick Cash deposited the checks in its bank account with defendant First Union National Bank, N.A. [now Wachovia Bank] and First Union collected on the checks from the drawee banks, defendants Bank of America Corp. and Chase Manhattan Bank, N.A. [now J.P. Morgan Chase Bank].

Kuhn obtained a judgment against Tumminelli for the embezzled funds, but now appeals from Judge Ann McCormick's summary judgment in favor of all remaining defendants, which concluded that because Tumminelli was authorized to endorse the checks, none of the remaining defendants were liable to Kuhn. Kuhn claims that because Tumminelli did not have authority to convert the company's cash to his own use, summary judgment was granted erroneously as there were genuine issues of material fact regarding the scope of Tumminelli's check cashing authority under common law agency principles. We conclude that Judge McCormick correctly awarded defendants summary judgment and affirm.

I.

Here are the facts followed by the relevant procedural history. Kuhn and Tumminelli each owned a half-interest in the limousine service company, which began as a partnership in 1999 and soon became a Limited Liability Company (LLC), with Kuhn and Tumminelli as members. Kuhn and Tumminelli never entered into a written operating agreement, but they orally agreed to various operating procedures, including an understanding that while Tumminelli could receive customer payments all such monies should pass through the appropriate company bank accounts and be accounted for properly.

The LLC leased several limousines, hired two full-time drivers, and served corporate customers in the area, such as Merck & Co. in Rahway. Kuhn and Tumminelli were authorized signatories on the LLC's only checking account. Beginning in late 1999, Kuhn became aware of shortages in the checking account along with returned checks and other irregularities in the operation of the LLC. Kuhn discovered as early as January 2000 that"Tumminelli had written several checks to'cash,' signed the checks personally, and cashed them at Quick Cash."

Kuhn confronted Tumminelli who tried to explain the irregularities, but by February 2001, Kuhn had concluded that Tumminelli had been embezzling LLC money by cashing customers' checks payable to the LLC at Quick Cash based on Tumminelli's personal endorsement and converting the proceeds to his personal use.

Nevertheless, Kuhn allowed Tumminelli to continue receiving company payments and to manage company funds after Kuhn's suspicions were aroused in January 2000 until June 2001, when Kuhn brought suit against Tumminelli. The record discloses that Kuhn did nothing to take control of the finances or otherwise protect the company assets during this period and merely instructed Tumminelli to not expend company money without discussing it with him. Kuhn never, during this period, attempted to enforce the instruction. Significantly, Kuhn also did not notify Quick Cash of his concerns regarding Tumminelli at any time during this period.

Before Tumminelli cashed any checks at Quick Cash, Tumminelli presented Quick Cash with a form corporate resolution provided by Quick Cash, signed by Tumminelli as Secretary and President, purporting to authorize him to cash checks on the company's behalf under his personal signature. The resolution, however, was not notarized and contained neither the date it was executed nor a corporate seal. In addition, Tumminelli had presented Quick Cash with two letters on LLC letterhead to the same effect, which Tumminelli had signed as General Partner. After receiving the two letters and resolution, an owner and officer of Quick Cash called the LLC offices and spoke with Mrs. Tumminelli, who helped in the day-to-day management of the business and maintained the company books and records. Mrs. Tumminelli informed Quick Cash that Tumminelli was an owner of the company.*fn2 And, before cashing each check presented by Tumminelli, Quick Check also verified Tumminelli's identity by"taking [his] driver's license and photocopying [it] against the check presented."

Kuhn sued Tumminelli, Tumminelli's wife, and Quick Cash in the Chancery Division, accusing the Tumminellis of embezzlement and conversion and charging Quick Cash with negligence for failing to comply with statutory check-cashing procedures. The Chancery judge restrained the Tumminellis from any further involvement with the LLC, entered a $280,000 judgment against Tumminelli, and ordered the transfer of Tumminelli's ownership interest to ...


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