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Robert J. Triffin v. H&R Block

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


March 28, 2012

ROBERT J. TRIFFIN, PLAINTIFF-APPELLANT,
v.
H&R BLOCK, INC. (D/B/A) H&R BLOCK, DEFENDANT-RESPONDENT, AND ROCHMEEN F. FAPREAD AND MARC PIERRE, DEFENDANTS.

On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Essex County, Docket No. DC-0886-11.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 7, 2012

Before Judges Messano and Yannotti.

Plaintiff Robert J. Triffin appeals from an order entered by the Law Division on April 29, 2011, dismissing his claims against defendant H&R Block, Inc. (H&R Block) pursuant to Rule 4:6-2(e) for failure to state a claim upon which relief could be granted. We affirm the order, as modified to reflect that the dismissal is without prejudice.

On December 14, 2010, plaintiff filed a complaint against H&R Block, Rochmeen F. Fapread (Fapread) and Marc Pierre (Pierre) in the Law Division asserting claims pertaining to certain dishonored checks drawn on H&R Block's account in U.S. Bank. These are: check # 6181926, payable to Fapread, in the amount of $563.44; and check # 6181881, payable to Pierre, in the amount of $559.12. Copies of the checks were appended to plaintiff's complaint.*fn1 The checks indicate that they had been dishonored as "altered/fictitious."

Plaintiff alleged that Check Cashing Services, Inc. (CCS) cashed the check payable to Pierre, and Atlantic City Check Cashing (ACCC) cashed the check payable to Fapread. Plaintiff claimed that, at the time CSS and ACCC cashed the respective checks, they did not have knowledge of any defenses or claims on the part of any person with regard to the checks. According to plaintiff, CCS and ACCC therefore became the holders in due course of the checks they cashed, pursuant to N.J.S.A. 12A:3-302.

Plaintiff further alleged that CCS and ACCC had assigned the checks to him. Plaintiff claimed that, as a result of the assignments, he had the legal status of holder in due course of the checks. Plaintiff sought judgment for the amount of the checks, the returned check fees, fees incurred for consolidated credit reporting and access maintenance, as well as prejudgment interest.

On February 22, 2011, H&R Block filed an answer disclaiming liability. In its separate defenses, H&R Block asserted that it was not liable on the subject instruments because it did not sign them and they were not signed by another person authorized to sign the checks on its behalf. H&R Block also asserted that plaintiff was not a holder in due course of the checks. It appears that the complaint was not served upon Fapread or Pierre, and the trial court dismissed the claims against them.

On April 6, 2011, H&R Block filed a motion to dismiss pursuant to Rule 4:6-2(e), which plaintiff opposed. The trial court decided the motion on the papers. The court entered an order dated April 29, 2011, granting the motion and later filed a letter opinion setting forth its reasons for doing so.

In its opinion, the court stated that only the party who forged or counterfeited a check may be liable on that instrument. The court noted that the checks at issue had not been signed by anyone authorized by H&R Block to do so, as shown by the fact that the checks were returned by the bank "altered/fictitious." The court therefore concluded that, based on these alleged facts, plaintiff did not have a right to recover against H&R Block.

The court additionally stated that a party could not recover on a forged or counterfeit instrument unless it was a holder in due course. The court said that, to establish holder in due course status, a holder must have taken the check in good faith and without notice of the check's invalidity. Here, plaintiff alleged that CCC and ACCC were holders in due course, and he was a holder in due course as a result of CCC's and ACCC's assignments of the checks to him.

The court said that in order to establish that CCC and ACCC were holders in due course, plaintiff had to show they took reasonable measures to ensure that the checks these entities cashed were not forged or counterfeit. The court noted that the checks each bore a statement indicating that their validity could "be determined by holding them at an angle to view a watermark as authentication." The court determined that because plaintiff had not alleged facts indicating that the check cashers took reasonable steps to ensure the checks were legitimate, the complaint failed to state a claim upon which relief could be obtained against H&R Block.

Plaintiff appeals and argues that the court erred by: (1) failing to treat the motion as one for summary judgment and basing its decision on facts not in evidence; (2) stating that a party must be a holder in due course to recover upon a forged or counterfeit check; and (3) finding that prior to cashing a check, a party must take reasonable measures to ensure that the check is not forged or counterfeit.

We turn first to plaintiff's argument that, because H&R Block allegedly relied upon matters outside of the pleadings, its motion was not a motion to dismiss pursuant to Rule 4:6-2(e) and should have been treated as a motion for summary judgment pursuant to Rule 4:46-1. Rule 4:6-2 provides:

If, on a motion to dismiss based on [a failure to state a claim], matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided by R. 4:46, and all parties shall be given reasonable opportunity to present all material pertinent to such a motion.

Here, the trial court reviewed H&R Block's motion to dismiss by considering the pleadings, which included copies of checks that formed the basis for plaintiff's claims. The court's consideration of documents referred to in a complaint does not require the court to treat a Rule 4:6-2(e) motion as a motion for summary judgment. N.J. Citizen Action, Inc. v. Cnty. of Bergen, 391 N.J. Super. 596, 605 (App. Div.), certif. denied, 192 N.J. 597 (2007).

We note the trial court stated in its opinion that the checks had not been signed by anyone who H&R Block had authorized to sign its checks. The court indicated that it based that statement on the checks appended to the complaint, not on matters outside the pleadings. We therefore conclude that the trial court did not err by treating the application as a motion to dismiss pursuant to Rule 4:6-2(e), rather than a motion for summary judgment.

We turn to plaintiff's argument that the trial court erred by dismissing his complaint for failure to state a claim. In determining whether to grant such a motion, the court must search the complaint "'in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim[.]'" Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 746 (1989) (quoting Di Cristofaro v. Laurel Grove Mem. Park, 43 N.J. Super. 244, 252 (App. Div. 1957)). In making this decision, the court is required to give the plaintiff "every reasonable inference of fact." Ibid. (citing Indep. Dairy Workers Union v. Milk Drivers Local 680, 23 N.J. 85, 89 (1956)).

In this case, plaintiff sought recovery as the alleged holder of checks that were dishonored as "altered" and/or "fictitious." It is well established that under New Jersey law, only the party who forged or counterfeited a check may be liable on that instrument. Triffin v. Pomerantz Staffing Services, L.L.C., 370 N.J. Super. 301, 306 (App. Div. 2004). We are satisfied that the trial court correctly determined that plaintiff's complaint failed to state a claim against H&R Block because there was no allegation that H&R Block forged or counterfeited the checks or should otherwise be obligated to pay instruments that were dishonored as "altered/fictitious."

The trial court additionally determined that plaintiff's complaint failed to set forth sufficient facts to support his claim that he was the holder in due course of the checks. The trial court erred, however, by stating that a holder in due course could obtain recovery from the purported maker of a forged or counterfeit check.

Under the Uniform Commercial Code (Code), a holder in due course is one who takes an instrument "for value, in good faith, and without notice of dishonor or any defense against or claim to it on the part of any person." Triffin v. Quality Hous. Partners, 352 N.J. Super. 538, 540 (App. Div. 2002). The Code provides in N.J.S.A. 12A:3-305(b) that a holder in due course remains subject to the following: a defense of the obligor based on infancy of the obligor to the extent it is a defense to a simple contract, duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or discharge of the obligor in insolvency proceedings[.] [N.J.S.A. 12A:3-305(a)(1).]

These defenses are referred to as "real defenses." N.J.S.A. 12A:3-305, Code Comment 1 ("Subsection (a)(1) states the 'real defenses' that may be asserted against any person entitled to enforce the instrument."). Forgery is considered to be a "real defense" in a suit on a negotiable instrument, and this defense is available "even against the claim of a holder in due course." Budelman v. White's Express & Transfer Co., 49 N.J. Super. 511, 520-21 (App. Div. 1958). See also Ingersoll-Rand Fin. Corp. v. Anderson, 921 F.2d 497, 503 (3rd Cir. 1990) (noting that under New Jersey law, the holder in due course is subject to a forgery defense). Thus, under the Code, plaintiff could not recover against H&R Block as the purported maker of the checks, even if he established that he was the holder in due course of these instruments.

In any event, the trial court correctly determined that plaintiff had not alleged sufficient facts to show that either CCC or ACCC were holders in due course of the checks they cashed. "A party who fails to make an inquiry, reasonably required by the circumstances of the transaction, so as to remain ignorant of facts that might disclose a defect cannot claim to be a holder in due course." Pomerantz Staffing, supra, 370 N.J. Super. at 309 (citing General Inv. Corp. v. Angelini, 58 N.J. 396, 403-04 (1971)). A check casher must inquire into the authenticity of checks if presented with "evidence that they were not authentic." Ibid. See also Triffin v. Travelers Express Co., 370 N.J. Super. 399, 405 (App. Div. 2004) (noting that check cashing businesses "cannot claim holder in due course status by blithely and blindly cashing such instruments").

Plaintiff's complaint did not set forth any facts indicating that CCC and ACCC took reasonable steps to ensure that the checks they cashed were not "altered" and/or "fictitious." The complaint also does not indicate whether the checks had the required colored borders and watermarks, or whether the check cashers held them at an angle for viewing. Thus, the complaint failed to allege sufficient facts that, if proven, would establish that plaintiff had the status of a holder in due course.

Plaintiff argues that, as a result of the enactment of the Check Clearing for the 21st Century Act (the Act), 12 U.S.C.A. § 5001 to 5018, he is not required to show that the entities who cashed the checks took reasonable measures to ensure that the checks were legitimate. Among other things, the Act provides that a "substitute check" is "a paper reproduction of the original check . . . ." 12 U.S.C.A. § 5002(16).

Under the Act, a substitute check is the "legal equivalent" of the original "for all purposes[.]" 12 U.S.C.A. § 5003(a) and

(b). Therefore, a "person may deposit, present, or send for collection or return a substitute check without any agreement with the recipient, so long as a bank has made the [necessary] warranties . . . with respect to such substitute check." Ibid.

In this case, however, the complaint does not reveal whether CCS or ACCC cashed the original checks or substitutes for those checks. Nevrtheless, the use of substitute checks would not relieve the check cashers of their respective obligations to take reasonable steps to ensure that the checks were legitimate. If the check cashers could not see the colored border or watermarks on the checks, they would be obliged to take other reasonable steps to ensure that the checks were not forged or counterfeit.

Plaintiff further argues that his status as a holder in due course is not a material element of his claim because H&R Block has not raised a specific defense that would implicate holder in due course principles. We agree that plaintiff's status as a holder in due course would not be material in the sense of allowing him to recover against H&R Block for checks that were properly dishonored as "altered" or "fictitious."

However, plaintiff's alleged status as a holder in due course status would be material if plaintiff were to allege sufficient facts to establish that the checks were, in fact, legitimate and H&R Block asserted one of the "real defenses" set forth in N.J.S.A. 12A:3-305(a)(1). As we have explained, plaintiff's complaint failed to allege sufficient facts to support a claim against H&R Block on these dishonored checks, or on the basis of his claimed status as a holder in due course.

We note that the court's order of April 29, 2011, does not indicate that the complaint was dismissed without prejudice. Dismissal of a complaint for failure to state a claim pursuant to Rule 4:6-2(e) is ordinarily without prejudice. Smith v. SBC Commmc'ns, 178 N.J. 265, 282 (2004). We therefore modify the court's order to reflect that the complaint has been dismissed without prejudice.

As so modified, the court's order of April 29, 2011 is affirmed.


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