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2 Tonjac, LLC v. Skylands Community Bank


September 29, 2010


On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-33-09.

Per curiam.


Argued September 14, 2010

Before Judges Parrillo, Yannotti and Espinosa.

Plaintiff 2 Tonjac, L.L.C. (Tonjac) appeals from an order entered by the Law Division on February 19, 2010, which granted summary judgment in favor of defendant Skylands Community Bank (Skylands) and denied plaintiff's cross-motion for summary judgment. We affirm.

This appeal arises from the following facts. Anthony Caputo (Caputo) and his wife owned a restaurant in Byram Township, which they operated under its corporate name, Porky's, A Place for Ribs, Inc. (Porky's). In January 1997, the Caputos sold the business to defendant Lefkas, Inc. (Lefkas), and in June 2005, the Caputos sold Lefkas the property on which the restaurant was located. The property consisted of a restaurant and a two-bedroom house. Lefkas financed the purchase of the property with a $249,000 mortgage loan from Skylands and a $451,000 mortgage loan from Porky's.

In August 2005, the house was damaged by fire. Lefkas had insured the property through Franklin Mutual Insurance Company (Franklin). Franklin issued a check dated November 22, 2005, in the amount of $72,000, in settlement of the fire damage claim. The check was made payable to Lefkas and Porky's. Skylands negotiated the check on November 25, 2005.

Tonjac filed a complaint in the trial court on January 5, 2009, in which it named Skylands as defendant.*fn1 Tonjac asserted that it was the successor in interest to Porky's. It alleged that Porky's had never endorsed or authorized anyone to endorse the check on its behalf. According to Tonjac, Lefkas presented the check to Skylands bearing Lefkas' endorsement along with a forged endorsement for Porky's. Defendant paid Lefkas the full amount of the check.

Tonjac further alleged that Skylands cashed and deposited the check "without making a reasonable attempt to verify the endorsements" or Lefkas' authority to cash or deposit the check. Tonjac claimed that Skylands breached its duty of care by failing to take reasonable steps to ascertain the genuineness of the endorsements, and Skylands was grossly negligent by cashing or depositing the check "without following reasonable commercial banking procedures and standards."

On February 2, 2009, Skylands filed an answer, in which it asserted eleven separate defenses. Skylands's third separate defense stated that Tonjac's action was barred by the statute of limitations, laches, waiver and abandonment of the claim. Skylands additionally asserted various cross-claims against Lefkas. In March 2009, Tonjac served initial interrogatories upon Skylands, in which it asked Skylands to set forth the facts upon which it based its third separate defense. Tonjac believed that Skylands's response to this and other interrogatories was deficient and, therefore, obtained an order by the court dated August 31, 2009, which required Skylands to provide more specific answers.

On September 8, 2009, Skylands provided a further response to Tonjac's interrogatories. Tonjac maintained that Skylands's supplemental answers did not comply with the court's order. In particular, Tonjac asserted that Skylands had not provided the factual basis for the third separate defense. Skylands insisted, however, that its answer was fully responsive to the question.

On June 18, 2009, counsel for Skylands wrote to Tonjac's attorney and stated that he had recently scheduled depositions for the Caputos. Skylands's counsel stated that, based on his review of the matter, liability in the matter rests with the other defendants and Tonjac would have difficulty attempting to collect any judgment from them. Skylands's counsel additionally stated that, in an attempt to avoid further costs of litigation, he had been authorized to offer to settle the matter for $15,000. The offer was apparently rejected and the Caputos were deposed on August 3, 2009.

On December 23, 2009, Skylands filed a motion for summary judgment, in which it argued that Tonjac's claim was barred by the statute of limitations. Tonjac thereafter filed a cross-motion seeking to strike Skylands's statute of limitations defense on the basis of waiver, estoppel and laches. Tonjac argued that Skylands should be barred from asserting the statute of limitations defense because it had engaged in discovery, provided insufficient answers to interrogatories and inexcusably delayed in seeking dismissal of the complaint.

The trial court considered the motion on February 19, 2010, and placed its decision on the record on that date. The court noted that that N.J.S.A. 12A:4-111 required that Tonjac's claim on the check be brought within three years of its accrual. The court found that Tonjac's cause of action accrued on November 25, 2005, when Skylands negotiated the check, and Tonjac had not filed its complaint within three years of that date.

The trial court rejected Tonjac's assertion that Skylands should be precluded from asserting the statute of limitations defense. The court found that Skylands had reasonably sought discovery to determine whether there was any factual basis upon which Tonjac could avoid the statute of limitations defense. The court also found it would not be appropriate to bar Skylands from asserting the statute of limitations defense based on Tonjac's claim that Skylands purportedly had not provided complete answers to the interrogatories.

The court observed that, having filed an action under the Uniform Commercial Code (UCC), plaintiff's counsel should have expected that Skylands's third separate defense was based upon the UCC's statute of limitations. The court also observed that case law did not require a party to identify for another attorney "the statute of limitations that applies to the claims being brought by that attorney's client."

The court therefore concluded that Skylands's motion for summary judgment should be granted, and Tonjac's cross-motion denied. The court entered an order dated February 19, 2010, which memorialized its decision. This appeal followed.

We note initially that Tonjac concedes that its complaint was filed beyond the time prescribed by N.J.S.A. 12A:4-111, which requires that a claim to enforce obligations under article four of the UCC be brought within three years of its accrual. Tonjac also concedes that its claim accrued on November 25, 2003, when Lefkas deposited the check in Skylands. Tonjac nevertheless argues that the trial court erred by failing to bar Skylands from asserting the statute of limitations defense. We disagree.

Tonjac argues that Skylands led it to believe that it would not invoke the statute of limitations defense because Skylands actively engaged in pre-trial discovery rather than seeking dismissal of the complaint pursuant to Rule 4:6-2(e). However, the fact that Skylands engaged in discovery was not an indication that it would not pursue the statute of limitations defense.

Indeed, as we pointed out previously, in its interrogatories, Tonjac requested that Skylands provide a factual basis for its statute of limitations defense. In responding to this question, Skylands never indicated that it was waiving this defense. Although Tonjac insists that Skylands's initial and subsequent responses to this question were inadequate, Skylands's responses cannot be interpreted as a waiver of the statute of limitations defense.

Moreover, we cannot say that Skylands acted unreasonably in seeking pre-trial discovery in order to determine whether Tonjac had an equitable basis for avoiding the application of the relevant statute of limitations. We recognize that case law indicates that the so-called "discovery rule" would not apply here. See Psak, Graziano, Piasecki & Whitelaw v. Fleet Nat'l Bank, 390 N.J. Super. 199, 206-07 (App. Div. 2007) (holding that discovery rule does not apply to actions governed by the three- year statute of limitations in N.J.S.A. 12A:4-111); N.J. Lawyers' Fund for Client Protection v. Pace, 374 N.J. Super. 57 (App. Div. 2005), aff'd, 186 N.J. 123 (2006) (finding that discovery rule is inapplicable in action governed by three-year statute of limitations in N.J.S.A. 12A:3-118(g)).

We note that in Pace, the Supreme Court stated that it agreed with the general principle that the "discovery rule" does not apply to UCC actions. Pace, supra, 186 N.J. at 125. The Court added, however, that its adherence to that general rule was based upon the "equitable considerations" in that case. Id. at 126. Thus, the Pace decision indicates that there may be circumstances in which a court might apply the "discovery rule." Accordingly, it was not unreasonable for Skylands to seek pre-trial discovery to determine whether there was any factual basis for such an argument in this case.

Tonjac additionally argues that Skylands should be barred from invoking the statute of limitations defense because it waited until the close of discovery to seek dismissal of the complaint. This contention also is unavailing. As we have explained, Skylands acted reasonably in seeking pre-trial discovery to ascertain whether there was any factual basis to support an argument for application of the "discovery rule" in this case. That being so, Skylands cannot be faulted for waiting until discovery was complete before seeking dismissal of the complaint. See Parete v. Mully, 316 N.J. Super. 100, 103 (App. Div. 1998) (holding that when the discovery rule is invoked, the issue of whether statute of limitations bars a claim cannot be decided until discovery is complete).

In support of its argument that the trial court erred by failing to bar Skylands from asserting the statute of limitations defense, Tonjac relies upon Knorr v. Smeal, 178 N.J. 169 (2003). That case involved the plaintiffs' failure to comply with the requirements of the Affidavit of Merit statute, N.J.S.A. 2A:53A-26 to -29. Knorr, supra, 178 N.J. at 173. The statute provides that in a malpractice action, a plaintiff must serve upon a defendant an affidavit of merit within a specified period of time. Ibid. (citing N.J.S.A. 2A:53A-27).

In Knorr, the defendant did not seek dismissal of the complaint after the statutory deadline passed. Id. at 173-74. Rather, the defendant exchanged interrogatories with the plaintiffs, deposed the plaintiffs and submitted to a deposition, obtained plaintiff's expert report and had the plaintiff undertake a physical exam. Id. at 174. The Court held that the defendant did not waive his right to enforce the Affidavit of Merit statute by delaying the filing of the dismissal motion because the defendant did not "intentionally elect[] to forgo his right to seek the remedy of dismissal by his tardy filing of the motion." Id. at 178.

The Knorr Court held, however, the defendant was estopped from seeking dismissal of the complaint. Id. at 178-80. The Court stated that the defendant waited fourteen months after the statutory deadline to file its motion to dismiss, even though another defendant had filed a timely motion and had been granted relief. Id. at 179. In addition, the plaintiffs had incurred significant expert and deposition costs, as well as emotional stress, based on their belief that the case "was still viable." Id. at 180. The Court also pointed out that dismissal of the claim would be unjust because the claim was meritorious. Ibid.

The Knorr Court additionally held that defendant's motion to dismiss was barred by the doctrine of laches. Id. at 180-81. The Court stated that the defendant "slept on his rights and [the] plaintiffs were harmed by the delay." Id. at 181. The Court noted that the defendant had not offered a plausible reason for "the unreasonable delay in filing his motion." Ibid. Because of his "inexcusable delay," the defendant caused the plaintiffs to believe that he had abandoned his dismissal motion. Ibid.

In our view, Tonjac's reliance upon Knorr is misplaced. Here, Skylands did not unreasonably delay in filing its motion to dismiss. Furthermore, Skylands provided a plausible explanation for waiting until the completion of discovery before filing its motion to dismiss. Moreover, Skylands never conveyed that it had abandoned its dismissal motion. Indeed, Skylands's answers to interrogatories made plain that it intended to pursue its statute of limitations defense.

We are therefore satisfied that the trial court correctly determined that Tonjac's claim against Skylands was filed beyond the time prescribed by N.J.S.A. 12A:4-111 and the doctrines of waiver, estoppel and laches did not preclude Skylands from asserting the statute of limitations defense in this case.


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