In re CLEAR ADVANTAGE TITLE Inc.
| Decision Date | 15 October 2010 |
| Docket Number | Adversary No. 08-2473 (MBK).,Bankruptcy No. 07-28673 (MBK). |
| Citation | 438 B.R. 58 |
| Parties | In re CLEAR ADVANTAGE TITLE, INC., Debtor. Clear Advantage Title, Inc. and Edward Furfey, Plaintiffs, v. Jeffrey Gibb and Holly Paxman, 1st Constitution Bank, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
OPINION TEXT STARTS HERE
COPYRIGHT MATERIAL OMITTED.
COPYRIGHT MATERIAL OMITTED.
Bunce D. Atkinson, Esq., Atkinson & DeBartolo, P.C., Red Bank, NJ, for Plaintiff, Clear Advantage Title, Inc.
Gregg S. Sodini, Esq., Law Offices of Gregg S. Sodini, LLC, Freehold, NJ, for Defendant, 1st Constitution Bank.
Herrick, Feinstein LLP, Newark, NJ, for Creditor, First American Title Insurance Company.
This matter comes before the Court by way of a Motion for Summary Judgment Dismissing the Complaint filed by Defendant, 1st Constitution Bank (“1st Constitution”), and a Cross Motion for Partial Summary Judgment On Counts Eight Through Eleven of the Complaint filed by Plaintiff, Bunce Atkinson, Chapter 7 Trustee (“Trustee”) for Clear Advantage Title, Inc. (“Clear Advantage”) (collectively, “the Parties”). The Trustee filed additional pleadings in response to the Cross Motion. 1 The Defendant requests this Court dismiss Plaintiff's breach of contract, negligence, recklessness, and New Jersey Consumer Fraud Act claims. The principal issues before the Court are: (1) whether 1st Constitution exercised good faith in executing its obligations owing to Clear Advantage; (2) whether the Uniform Commercial Code preempts Plaintiff's common law claims; (3) whether 1st Constitution violated the New Jersey Consumer Fraud Act; and, (4) whether Plaintiff's recovery on the checks is barred under N.J.S.A. 12A:4-406.
For the reasons set forth below, the Court finds Plaintiff's breach of contract, negligence, and recklessness claims implicate issues of good faith and fair dealing and are not displaced by the Uniform Commercial Code. However, these claims cannot be decided without resolving disputed material facts. Thus, the Parties failed to meet their respective burdens of showing no genuine issues of material fact exist, and summary judgment is denied. However, the Court finds that Defendant did not violate the New Jersey Consumer Fraud Act (“CFA”) because it did not engage in “sharp practices,” or such other conduct violative of the CFA. Accordingly, Defendant's motion for summary judgment is granted on Count Eleven. Lastly, unless Plaintiff can prove that the bank did not honor any of the checks paid to Gibb in good faith, relief under N.J.S.A. 12A:4-406 will be limited to recovery on checks, bearing an unauthorized or forged signature, which were included in bank statements sent to Clear Advantage within one year of proper notice to 1st Constitution.
On November 14, 2006, Clear Advantage instituted this action against Defendants Gibb and Paxman in the Superior Court of New Jersey, Mercer County, Dkt. No. MER-L-069007. Clear Advantage is a title agency licensed by the State of New Jersey, which necessitated maintenance of a trust account. Mr. Jeffrey Gibb was a staff attorney and title examiner for Clear Advantage, beginning, on or about, February 28, 2003. At all times relevant hereto, Clear Advantage maintained the accounts in issue with 1st Constitution and Clear Advantage's principal officer and sole shareholder was Edward Furfey.
On January 10, 2007, Clear Advantage filed the Complaint and First Amended Complaint, alleging that, beginning around April 2003, Gibb embezzled a significant amount of money from Clear Advantage. Specifically, Gibb is alleged to have presented to 1st Constitution a series of Clear Advantage Trust Account Checks payable to 1st Constitution and requested that the bank provide him with treasurer checks payable to various persons or entities. Gibb is alleged to have had such treasurer checks made payable to himself, cash, Clear Advantage, and personal creditors-i.e. a jewelry store and his children's private school. The total amount paid from the unauthorized withdrawal of funds by treasurer checks, based upon the checks the Trustee has obtained as of August 16, 2010, total $427,743.81. 2 According to Clear Advantage, none of the checks were authorized by Clear Advantage or Edward Furfey, and all bear forged maker signatures. Gibb's wife, Paxman, is listed in the complaint as being a beneficiary of funds allegedly embezzled by Gibb. See Atkinson Cert., Ex. A, B.
On August 16, 2007, Clear Advantage filed the Second Amended Complaint, adding 1st Constitution as an additional defendant and asserted four claims against the bank: (1) breach of contract (Count Eight); (2) negligence (Count Nine); (3) recklessness (Count 10); and, (4) violations of the New Jersey Consumer Fraud Act (Count Eleven). 1st Constitution was served with the Second Amended Complaint on August 21, 2007.
There is no dispute that the checks at issue were drawn on either one of two Clear Advantage accounts at 1st Constitution, Account No. 9760022864 (the “2864 Account”) and Account No. 1501996612 (the “6612 Account”) (collectively the “Accounts”). The checks were drawn on the 6612 Account from March 2003 through April 2006 and were drawn on the 2864 Account from April 2005 through September 2006. Upon opening of the Accounts, 1st Constitution required that Clear Advantage execute Depositary Agreements. The Depositary Agreements contained a section entitled WITHDRAWALS. It provided, inter alia, that “Unless otherwise clearly indicated on the account records, anyone of you who signs this form, including authorized signers, may withdraw or transfer all or part of the account balance at any time on forms approved by us.” See Mangano Cert., Ex. B. The only parties authorized to sign on either account were Edward Furfey, David G. Pierce, Christpoher Lacroce and Joan C. Herrara. Jeff Gibb was never an authorized signature on either Trust Account. Id.
Additionally, 1st Constitution required that Clear Advantage provide Corporate Authorization Resolutions to 1st Constitution, on a form prepared by the bank, listing those persons with authority to withdraw or transfer funds on deposit with 1st Constitution. Jeff Gibb was not listed on the Corporate Authorization Resolutions as a person entitled to withdraw funds from the Accounts.
Each month, from the inception of the Accounts until the Accounts were closed, 1st Constitution sent, and Clear Advantage admittedly received, account statements for each of the Accounts. The account statements included copies of all items paid for that month such that Clear Advantage would have received these statements and items no later than the tenth of each month. Additionally, in October 2006, Mr. Robert Mangano, President of 1st Constitution, alerted Edward Furfey of Gibb's conduct after he discovered suspicious activity on the Accounts. 1st Constitution alleges that it was never notified that any of the subject transactions was unauthorized.
Oral argument on the motions was held on September 13, 2010. At the conclusion of the hearing, the Court took the matter under advisement and reserved decision. After reviewing the parties' submissions and applicable law, the Court is prepared to rule.
The Court has jurisdiction over the underlying case under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court, dated July 10, 1984, referring all bankruptcy cases to the bankruptcy court. Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a). While the claims at issue are non-core proceedings (not arising under nor in Title 11), the Court determines that said claims are related to the Chapter 7 case pending before this Court; consequently, the Court exercises jurisdiction under 28 U.S.C. § 1334(b).
Fed.R.Civ.P.56(c) provides that summary judgment is appropriate where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.” Id. As the Supreme Court has indicated, “Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather an integral part of the Federal Rules as a whole which are designed to secure the just, speedy, and inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “In deciding a motion for summary judgment, the judge's function is to ... determine if there is a genuine issue for trial.” Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir.1993).
The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir.2001) (). In determining whether a factual dispute warranting trial exists, the court must view the record evidence and the summary judgment submissions in the light most favorable to the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Issues of material fact are those “that might affect the outcome of the suit under the governing law.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505. An issue is genuine when it is “triable,” that is, when reasonable minds could disagree on the result. Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 300, 301 (3d Cir.1995).
In Count Eight, Plaintiff alleges that 1st Constitution is in breach of the Depositary Agreements the Parties executed. As will be discussed below with respect to the common law claims of negligence and recklessness, the Parties dispute whether recovery on the checks under a breach of contract cause of action is displaced by the...
To continue reading
Request your trial