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Cumis Mutual Insurance v. Mirek Rosol


February 22, 2011


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1450-07.

Per curiam.


Argued December 7, 2010 - Decided Before Judges Messano and Waugh.

Defendant Mirek Rosol appeals from a judgment in favor of plaintiff Cumis Mutual Insurance Society, Inc. (Cumis). Cumis sued Rosol as assignee of the rights of its insured, the Polish & Slavic Federal Credit Union (PSFCU), of which Rosol was a member. Cumis sought to recover funds Rosol had transferred from one of his PSFCU accounts based upon a provisional credit from a Canadian check that was subsequently returned as fraudulent. On cross-motions for summary judgment, the Law Division denied Rosol's motion and granted Cumis's motion. Because we conclude that there were genuine issues of material fact precluding summary judgment, we reverse.


We discern the following facts from the record on appeal. PSFCU is a federal credit union authorized pursuant to the provisions of the Federal Credit Union Act, 12 U.S.C.A. §§1751 to 1795(k). During his approximately fifteen year membership in the credit union, Rosol maintained a "share" account, a mortgage loan, and other credit accounts.

In fall 2005, Rosol received an email from someone he did not know, offering to pay him a ten percent fee if he would receive checks, deposit them, and then transfer the funds to others. The person sending the email purported to be in China.

On November 19, 2005, Rosol received a cashier's check for $9800 and deposited it in a new account he had opened at PSFCU. The check was made payable to Rosol and was issued in the name of Priority One Credit Union in Florida. The check made reference to a "Certportal Investment."

Rosol then received another check, which was drawn on a Canadian bank. The second check was for $45,000, and was also payable to Rosol. The payor was an entity called Danka Canada, Inc. Rosol deposited the second check in his new account on November 22, 2005.

PSFCU was notified that the first check had been dishonored on November 25, 2005. Although the credit union notified Rosol that the check had been returned as dishonored, PSFCU did not disclose that the check was fraudulent.*fn1 According to Rosol, he met with the manager of PSFCU's Clifton branch and was told that "the check was not fraudulent but ha[d] merely been 'stopped.'" Rosol further maintains that he paid a $50 fee for "a search or check" on the $45,000 Canadian check. The credit union, however, maintains in its brief that the $50 was only a fee for collecting a foreign check.*fn2

Although the Canadian check had not finally cleared, PSFCU provisionally credited the $45,000 to Rosol's account on

December 6, 2005. Rosol went to the branch on the same day and inquired about the status of the check. According to Rosol's certification, a bank employee "confirmed that the funds were [in his account]" and gave him a verification number. Rosol also certified that he was "told these monies were collected and in [his] account."

During his visit to the branch on December 6, 2005, Rosol arranged for an international wire transfer to Japan in the amount of $36,240. He also obtained a money order for $4500, which was sent to someone in London. The funds for both transfers came from the account that had received the provisional credit of $45,000.

On December 16, 2005, PSFCU was notified that the Canadian check had been dishonored and would be returned as a fraudulent instrument. It made a demand on Rosol for the return of the $43,624.53 he had removed from the new account based upon the provisional credit. When Rosol refused, PSFCU made a claim against Cumis, which paid it $38,609.53, after applying the credit union's deductible. PSFCU assigned its rights against Rosol to Cumis.

Cumis filed its complaint against Rosol in May 2007. Following the resolution of procedural issues not relevant to this appeal, the parties filed cross-motions for summary judgment. The motions were heard on September 25, 2009. The motion judge granted Cumis's motion, awarding damages in the amount of $38,609.53. Rosol's motion was denied. Implementing orders were entered on September 25, 2009.

This appeal followed.


On appeal, Rosol argues that summary judgment for Cumis was not appropriate because the bank employees failed to exercise due care and also failed to follow commercially reasonable standards of fair dealing in processing the Canadian check. He also argues that the judge misapplied the applicable provisions of Chapter Three of the Uniform Commercial Code, N.J.S.A. 12A:3-101 to 3-805, particularly N.J.S.A. 12A:3-406.

"An appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46." Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007)). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) (citing State v. Brown, 118 N.J. 595, 604 (1990)). Because the motion judge granted summary judgment to Cumis, the facts supported in the record must be construed in the light most favorable to Rosol. Liberty Surplus, supra, 189 N.J. at 445.

The relationship between a collecting bank, such as PSFCU, and the owner of a negotiable instrument, such as Rosol, is governed by the provisions of N.J.S.A. 12A:4-201(a). That statute provides, in applicable part, as follows:

a. Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or sub-agent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of endorsement or lack of endorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank, such as those resulting from outstanding advances on the item and rights of recoupment or setoff.

See DNI Nevada, Inc. v. Medi-Path Medical Lab, Inc., 337 N.J. Super. 313, 316-18 (App. Div. 2001) (explaining the operation of the statute and its relationship to federal law with respect to prompt crediting of deposited checks).

A straightforward application of the language of the governing statute to the facts of this case supports the result reached by the motion judge. Rosol deposited a check, drawn on a foreign bank, for collection. PSFCU credited the amount of the check to his account prior to final settlement. Rosol drew on those funds. The check was subsequently dishonored, also prior to final settlement. Consequently, pursuant to the statute, the credit to Rosol's account was "provisional" and PSFCU had a "right[] of recoupment."

Rosol points to language in his membership agreement and argues that it satisfies the statutory proviso regarding provisional credits: "[u]nless a contrary intent clearly appears." (Emphasis added). The language upon which Rosol relies is: "Generally the availability of funds for deposit of foreign checks will be delayed for the time it takes to collect the funds from the financial institution upon which it is drawn." (Emphasis added). We cannot agree that, standing alone, the credit union's reference to a practice that is "generally" applicable satisfies the "clearly appears" requirement of N.J.S.A. 12A:4-201(a).

Rosol further argues that, when he went to his PSFCU branch on December 6, the credit union's employees made representations that reasonably led him to believe the second check had actually cleared. He also points to the fact that, even though he had asked to verify that the funds were in the account at the same time he was making the transfers out of the account, he was never advised that there was only a "provisional" credit.

As previously noted, we must take Rosol's factual assertions as true and give him the benefit of all reasonable inferences. If, in fact, PSFCU represented that the check had actually cleared or led Rosol to a reasonable belief that it had, the credit union would be equitably estopped from relying on the provisions of N.J.S.A. 12A:4-201(a). See Miller v. Miller, 97 N.J. 154, 163 (1984), stating:

To establish a claim of equitable estoppel, the claiming party must show that the alleged conduct was done, or representation was made, intentionally or under such circumstances that it was both natural and probable that it would induce action. Further, the conduct must be relied on, and the relying party must act so as to change his or her position to his or her detriment.

See also Fairken Assocs. v. Hutchin, 223 N.J. Super. 274, 280 (Law Div. 1987) (stating equitable estoppel is essentially the same as promissory estoppel, as "it also requires a detrimental change in position based on reasonable reliance," but "the difference is that the party asserting it need not prove a promise, but may rely on conduct, inaction, representations of the actor, misrepresentation, silence or omission") (citations omitted). Rosol would bear the burden of proof on the issue of equitable estoppel.

Rosol also contends that, had he been advised that the first check was "fraudulent," as opposed to just "stopped," he would not have transferred funds from the account. Given the nature of the transactions Rosol was engaged in, we question whether Rosol's position is reasonable. We also observe that the assertion is inconsistent with his position that he was told the second check had actually cleared. In any event, while we do not find that argument sufficient in itself to preclude his liability under N.J.S.A. 12A:4-201(a), the state of his knowledge about the first check may inform the factfinder's view, one way or another, on the issue of whether he acted reasonably in relying on any representations that may have been made by PSFCU's employees.

Finally, we conclude that Rosol's reliance on N.J.S.A. 12A:3-406 and related provisions of Chapter Three of the UCC, as well as cases interpreting them, is misplaced.*fn3 Although N.J.S.A. 12A:3-406 does speak of comparative negligence, it does so only in the context of a forged signature or altered instrument. Neither is involved in this case. The second check was returned as fraudulent, not because of a forged signature or alteration to the check. While it appears that someone printed Rosol's name on the back of the check, that fact had nothing to do with the check being dishonored. The UCC provision that governs this case is N.J.S.A. 12A:4-201(a).

Because we have concluded that summary judgment should not have been granted to Cumis on the record before us, we reverse and remand for further proceedings consistent with this opinion.


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