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300 Broadway Healthcare Center v. Wachovia Bank

March 27, 2012

300 BROADWAY HEALTHCARE CENTER, L.L.C., D/B/A NEW VISTA NURSING AND REHABILITATION CENTER, PLAINTIFF-RESPONDENT,
v.
WACHOVIA BANK, N.A., COMMERCE BANK, N.A., GARDEN STATE CHECK CASHING SERVICE, INC., PETER JOSEPH LEUS, A/K/A JOSEPH Q. LEUS, COMIC WORLD ENTERPRISES, INC, JENNY M. MIQUI, MARTIN FRIEDMAN ASSOCIATES, P.C., AND ZESHA AUERBACH, DEFENDANTS-RESPONDENTS,
AND
PNC BANK, N.A., DEFENDANT-APPELLANT. 300 BROADWAY HEALTHCARE CENTER, L.L.C., D/B/A NEW VISTA NURSING AND REHABILITATION CENTER, PLAINTIFF-RESPONDENT,
v.
WACHOVIA BANK, N.A., PNC BANK, N.A., GARDEN STATE CHECK CASHING SERVICE, INC., PETER JOSEPH LEUS, A/K/A JOSEPH Q. LEUS, COMIC WORLD ENTERPRISES, INC., JENNY M. MIQUI, MARTIN FRIEDMAN ASSOCIATES, P.C., AND ZESHA AUERBACH, DEFENDANTS-RESPONDENTS, AND COMMERCE BANK, N.A., N/K/A TD BANK, N.A., DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6075-05.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Telephonically argued February 24, 2012

Before Judges Yannotti, Espinosa and Kennedy.

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

We granted defendants TD Bank (TDB), formerly Commerce Bank (Commerce), and PNC Bank, N.A. (PNC) leave to appeal from orders entered by the trial court denying their motions for summary judgment on conversion claims asserted against them by plaintiff 300 Broadway Healthcare Center, L.L.C., an entity doing business as New Vista Nursing and Rehabilitation Center (New Vista). We consolidate the appeals for purpose of decision and reverse.

The relevant facts are essentially undisputed. New Vista is a nursing home and employed Peter Joseph Leus (Leus) as controller and later as its Chief Financial Officer. Leus reported to Steven and Brian Kleiman (the Kleimans), the administrators of the nursing home. New Vista maintained checking accounts at Wachovia Bank, N.A. (Wachovia) and its predecessor, First National Bank.

New Vista alleges that Wachovia arranged for and paid Garden State Check Cashing (GSCC) to provide check cashing services to its employees. It also alleges that Leus maintained a personal checking account at TDB, and a checking account at PNC in the name of Comic World.

According to New Vista, Leus issued illegitimate checks drawn upon New Vista's accounts at Wachovia, by forging the name of an authorized signatory on the checks, and cashing or depositing those checks into his account at TDB and the Comic World account at PNC. New Vista claims that some of the checks also had forged endorsements. It appears that TDB and PNC presented the checks to Wachovia, which paid TDB and PNC with monies drawn from New Vista's account.

On July 29, 2005, New Vista filed a complaint in the Law Division in which it asserted claims against Wachovia, TDB, PNC, Leus and others. New Vista alleged that TDB and PNC violated the Uniform Commercial Code (UCC), specifically N.J.S.A. 12A:3-401, by receiving payment on checks with unauthorized signatures (count one); negligently failed to adhere to reasonable, usual and customary banking practices (count two); converted its funds (count three); and were negligent in the supervision of their respective employees (count five).

In December 2007, TDB and PNC filed motions for summary judgment, seeking dismissal of all of the claims asserted against them. The motion judge granted the motions for summary judgment on the claims in counts one, two and five, but denied the motions as to the conversion claims in count three. The court rejected TDB's and PNC's argument that New Vista's claims for conversion were barred by N.J.S.A. 12A:3-420(a), which provides that:

The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by the issuer or acceptor of the instrument or a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.

The motion judge concluded that the statute precludes an action for conversion for checks that the Kleinmans signed, regardless of the circumstances under which the checks were obtained, because New Vista was the "issuer" of those checks for purposes of N.J.S.A. 12A:3-420(a). The motion judge determined, however, that the statute does not preclude New Vista from asserting a claim for conversion for checks on which Leus ...


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