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New Jersey Lawyers' Fund for Client Protection v. Pace

January 4, 2005

NEW JERSEY LAWYERS' FUND FOR CLIENT PROTECTION, PLAINTIFF-APPELLANT,
v.
JEAN A. PACE, DEFENDANT, AND SUMMIT BANK, DEFENDANT-RESPONDENT.
NEW JERSEY LAWYERS' FUND FOR CLIENT PROTECTION, PLAINTIFF-APPELLANT,
v.
JEAN A. PACE, CRAWFORD & COMPANY, AND SUN TRUST BANK, DEFENDANTS, AND SUMMIT BANK, DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket Nos. L-2378-01 and L-2337-02.

Before Judges Petrella, Parker and Yannotti.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 6, 2004

Plaintiff New Jersey Lawyers' Fund for Client Protection (the Fund), established pursuant to R. 1:28, appeals from orders entered dismissing its complaints in two matters. Summary judgment was granted in favor of the defendant Summit Bank (Summit) in each case on the ground that the applicable statute of limitations in the Uniform Commercial Code (UCC) barred the Fund's claims against Summit based on conversion.

On appeal the Fund argues that the motion judge committed error in failing to apply the time of discovery rule in determining the date its cause of action for conversion accrued.

On July 25, 2001 and July 17, 2002, the Fund filed complaints against Jean Pace and Summit (subsequently doing business as Fleet Bank).*fn1 Pace was an attorney who had misappropriated funds from her clients by forging their endorsements on settlement checks. By virtue of assignments from the various victims, the Fund sued Pace and also Summit. The Fund alleged in its complaints that Summit was liable in conversion for accepting the forged settlement checks for deposit.

Pace*fn2 did not file an answer and the Fund obtained a default judgment against her on April 17 and December 12, 2002, respectively. Neither she nor any other party has participated in this appeal.

Summary judgment was granted in the first action on March 10, 2003, on the ground that the conversion action against Summit was barred by the UCC statute of limitations for claims of conversion of negotiable instruments. In a June 17, 2003 written opinion, the motion judge held that the time of discovery rule does not apply in determining the date of accrual of a cause of action under the UCC for conversion of a negotiable instrument. A consent order resolved the second case in light of the decision in the first case.

The first appeal involves Pace's settlement of claims of five of her clients without their knowledge. She then proceeded to forge each client's signature on the respective settlement check, and deposited the checks into her own account at Summit. The clients from whom Pace stole included Stephen Pierce ($5,500 check deposited by Pace on May 12, 1997), Christopher Cocca ($5,000 check deposited on May 12, 1997), Marvin Valle ($4,500 check deposited on October 9, 1996), Eureka Reese ($4,000 check deposited September 25, 1995), and James Perry and his late wife Eola ($2,650 check deposited November 28, 1995). The clients were unaware of these events until so informed by the Office of Attorney Ethics on January 20, 2000 (Pierce and Cocca),*fn3 February 1, 2000 (Valle), April 5, 2000 (Reese), and May 9, 2000 (Perry).

The second appeal involves a situation where Pace informed her client, Daniel Hogger, that his suit had settled for $21,000, but failed to tell him about the $4,000 check she had received from another defendant. Pace forged Hogger's endorsement on the $4,000 check and deposited it into her Summit account around May 15, 1998. After being notified by the Office of Attorney Ethics, Hogger filed a claim with the Fund on or about April 11, 2001.

After being informed about Pace's actions by the Office of Attorney Ethics, her clients filed claims with the Fund. The claims were approved in amounts that we are told reflected a reduction for a sum attributable to the amount of counsel fees Pace would have been entitled to, and the clients assigned their rights to the Fund pursuant to R. 1:28-3(e). The Fund now asserts its rights as assignee against Summit for strict liability for conversion of negotiable instruments.

I.

The Fund argues that the New Jersey Legislature's choice of language in N.J.S.A. 12A:3-118(g) is significant and should lead us to conclude that conversion of negotiable instruments should not be considered as accruing until the discovery of the conversion. N.J.S.A. 12A:3-118(g), the critical subsection applicable in this ...


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