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Dave's Heavy Towing, Inc. v. PNC Bank


June 3, 2010


On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-559-08.

Per curiam.


Argued April 26, 2010

Before Judges Baxter and Alvarez.

Plaintiff Dave's Heavy Towing, Inc. appeals from a July 17, 2009 grant of summary judgment in favor of defendant PNC Bank, and the September 11, 2009 denial of a subsequent motion for reconsideration. For the reasons that follow, we affirm.

Plaintiff's bookkeeper, defendant Deborah Dynak, embezzled approximately $673,006.88 from her employer, over the course of nearly seven years. Plaintiff maintained its business checking account at PNC and David Bender, plaintiff's president, was the authorized signatory. Dynak accomplished the thefts by forging Bender's signature on business checks made payable to "D D Buenhora" and "Murray Rude," fictitious persons. Additionally, Dynak directly paid her credit card bills at Merrick Bank and Providian Bank from plaintiff's account.

It is undisputed that during the course of the seven years, monthly statements and cancelled checks were issued to plaintiff. Bender did not learn until October 18, 2007, when he examined his bank statements, that Dynak was forging his signature. Ultimately, Dynak was convicted of second-degree theft. A default judgment has been entered against her in these proceedings.

Plaintiff's complaint asserts: (1) that PNC was strictly liable for the issued checks; (2) that PNC breached its contract with plaintiff; and (3) ordinary negligence on PNC's part. Plaintiff sought punitive damages, compensatory damages, attorney's fees, costs of suit, and prejudgment interest.

The standard of review on a motion for summary judgment is the same as that applied by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). "Bare conclusions in the pleadings, without factual support in tendered affidavits, will not defeat a meritorious application for summary judgment." U.S. Pipe & Foundry Co. v. Am. Arbitration Ass'n, 67 N.J. Super. 384, 399-400 (1961). A movant must establish that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). See also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 535 (1995).

Plaintiff contends that the trial court erred in dismissing its complaint. We do not agree. N.J.S.A. 12A:4-406c states:

If a bank sends or makes available a statement of account or items pursuant to subsection a. of this section, the customer must exercise reasonable promptness in examining the statement or items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.

The motion court read this statutory language to mean that the burden is upon the account holder to establish that he or she exercised "reasonable promptness" in examining the statements and cancelled checks. We agree.

Here, plaintiff did not detect the fraud until October 2007, despite having received statements and cancelled checks for seven years. In answers to interrogatories, plaintiff claimed both that Dynak discarded "bank documentation" that would have resulted in prompt discovery of her wrongdoing, and that Dynak's forgeries appeared to be payments for legitimate business expenses and therefore were, in some unspecified manner, thereby undetectable. In either event, the burden remains with the account holder. He is not relieved from the obligation to discover the forgery merely because it is committed by the very person charged with the responsibility of balancing the account. Traveler's Indem. Co. v. Good, 325 N.J. Super. 16, 24 (App. Div. 1999).

As plaintiff points out, a bank's duty is to charge its customer's accounts only for those items that are "'properly payable.'" Lor-Mar/Toto, Inc. v. 1st Constitution Bank, 376 N.J. Super. 520, 528 (App. Div. 2005) (quoting N.J.S.A. 12A:4-401a). But the analysis, unfortunately for plaintiff, does not end there. The bank's fiduciary responsibility does not eliminate the customer's obligation to "exercise reasonable promptness in" reviewing his account records. See N.J.S.A. 12A:4-406c. Where a customer does not fulfill that obligation, the customer is precluded from asserting claims against the bank. See N.J.S.A. 12A:4-406d(2). In this case, it is undisputed that Bender only discovered the embezzlement when he finally reviewed the bank statements. Had he done so earlier, the fraud would have been earlier discovered. Plaintiff did not exercise the requisite "reasonable promptness" in reviewing his account records.

Plaintiff contends that where a bank fails to discern endorsements that are forged, and the customer reasonably fails to have discovered them, the loss is allocated between the two pursuant to N.J.S.A. 12A:4-406e. Such allocation is available, however, only if "the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure substantially contributed to [the] loss." N.J.S.A. 12A:4-406e. In this case, plaintiff has made no showing that the bank failed to exercise ordinary care. Plaintiff has no expert report to that effect, nor does it proffer any fact which would support the conclusion, even interpreting the facts in the most favorable light as we must on a motion for summary judgment. See Distrib. Label v. Fleet Nat'l Bank, 401 N.J. Super. 345, 351 (App. Div. 2008). In other words, in addition to plaintiff's undisputed failure to examine his bank statements and checks in the exercise of ordinary care, plaintiff has absolutely no proof that the bank failed to exercise ordinary care.

Thus, pursuant to the statutory scheme, the customer bears the loss. Bender's failure to exercise ordinary care by failing to examine his bank records over seven years "substantially contribute[d]" to the loss. The claim against defendant is therefore barred by N.J.S.A. 12A:3-406a.

Furthermore, in the absence of any proof that PNC did not exercise ordinary care, plaintiff is not entitled to allocate any portion of the loss to the bank. See N.J.S.A. 12A:3-406b. Hence, summary judgment was properly granted. In light of our conclusions that plaintiff alone must suffer these losses, we will not reach the arguments with reference to the N.J.S.A. 12A:4-111 timelines because the issues are moot.



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