Dalessio v. Kressler

• Decision Date: 08 March 2004
• Docket Number: 2003-00749.
• Parties: BENITO DALESSIO, Appellant, v. LINDA KRESSLER, Doing Business as MADAM LINDA, Defendant, and REPUBLIC NATIONAL BANK OF NEW YORK, Respondent.
• Court: New York Supreme Court — Appellate Division

6 A.D.3d 57

773 N.Y.S.2d 434

2004 NY Slip Op 01533

BENITO DALESSIO, Appellant, v. LINDA KRESSLER, Doing Business as MADAM LINDA, Defendant, and REPUBLIC NATIONAL BANK OF NEW YORK, Respondent.

2003-00749.

Appellate Division of the Supreme Court of the State of New York, Second Department.

March 8, 2004.

Richard S. Bonfiglio, Brooklyn, for appellant.

Conrad D. Singer, Great Neck (Paula Schwartz Frome of counsel), for respondent.

OPINION OF THE COURT

GOLDSTEIN, J.P.

The two issues presented in this case are whether the plaintiff is entitled to any relief against Republic National Bank of New York (hereinafter Republic) based upon the undisputed facts of this case and whether UCC 4-303 authorizes a payor bank to defy a court order with impunity. We find that the plaintiff is not entitled to relief against Republic. However, we reject Republic's contention that a restraining order dated November 12, 1998, of the Supreme Court, Kings County, in this action was not effective and could be ignored.

The plaintiff's contentions are, for the most part, undisputed by Republic. In May 1998, the plaintiff's girlfriend Jennifer Lopez introduced the plaintiff to the defendant Linda Kressler, doing business as Madam Linda, a spiritual advisor. Kressler allegedly told the plaintiff that his girlfriend had certain debts which had to be paid before he could marry her.

On Monday, November 9, 1998, the plaintiff drew a check payable to Kressler for $107,000, had the check certified by Republic, and gave the certified check to Kressler.

On Tuesday, November 10, 1998, the plaintiff himself appeared at Republic to cash a $15,000 check. Since the plaintiff appeared nervous when he approached the teller, she referred the matter to the branch manager. The plaintiff revealed to the branch manager that Kressler and his girlfriend had both visited him in his home, knew his entire financial situation and represented to him that the girlfriend would only be free to marry him if he paid her the funds requested. The branch manager notified the plaintiff's sister and co-owner of the account and after consulting with senior management, advised her to retain an attorney to obtain a court order to stop payment on the certified check for $107,000.

Wednesday, November 11, 1998, was Veteran's Day. Both Republic and the courts were closed. On that day, the plaintiff retained an attorney who drafted a summons and complaint naming both Kressler and Republic as defendants. The complaint was verified on November 11, 1998. It charged Kressler with fraud and stated that Republic was named as a defendant "for the purpose of making said Defendant subject to the Order of this Court directing the disposition of the funds hereinbefore described as having been certified by said Defendant on or about November 9, 1998."

On Thursday, November 12, 1998, the summons and complaint were filed and Justice Irving S. Aronin signed a temporary restraining order directing that "Defendant, REPUBLIC NATIONAL BANK OF NEW YORK be and hereby is restrained and enjoined from transferring paying or otherwise disposing of funds in the sum of $107,000.00 heretofore certified from" the plaintiff's account pending hearing and determination of the plaintiff's application for further injunctive relief.

The temporary restraining order provided that "personal service" upon Republic shall "be deemed good and sufficient notice of the restraints imposed herein." Republic's Assistant Treasurer was personally served on November 13, 1998, at 11:30 A.M. The certified check was presented for payment at some time on November 13, 1998, and paid. However, there is no evidence as to when on November 13, 1998, the check was paid. Nor is there any evidence in the record as to whether payment was made directly to Kressler or to another bank as holder in due course.

On November 16, 1998, the return date of the motion for a preliminary injunction, neither Kressler nor Republic appeared. By order dated November 16, 1998, the temporary restraining order was continued until further order of the court.

Both Kressler and Republic defaulted in appearing in the action and the plaintiff moved for an inquest. In response, both defendants cross-moved to vacate their default. By order dated February 2, 2000, the Supreme Court (G. Aronin, J.), granted the cross motion, deemed the defendants' answers served, and directed the defendants to pay costs.

Thereafter, Republic moved to dismiss the complaint insofar as asserted against it for failure to state a cause of action or, in the alternative, for summary judgment. Republic argued that "[u]nder UCC 4-303, a bank must honor payment on a certified check regardless of a subsequently received stop payment order."

The plaintiff, in opposition, argued that he had complied with Republic's internal rules with respect to stop orders on certified checks. He cited UCC 3-603 which states in pertinent part the bank's liability is discharged once payment is made "even though it is made with knowledge of a claim of another person to the instrument unless prior to such payment or satisfaction the person making the claim either supplies indemnity deemed adequate by the party seeking the discharge or enjoins payment or satisfaction by order of a court of competent jurisdiction" (emphasis supplied).

The Supreme Court, by order dated July 16, 2002, denied Republic's motion. Relying upon UCC 3-603, the Supreme Court found presentment of a stop-payment order was not sufficient to stop payment of a certified check, but presentment of a court order was sufficient. Since Republic did not reveal the time when the check was presented for payment on November 13, 1998, the Supreme Court found that "there exists a triable issue of fact as to whether Republic was personally served with the temporary restraining order prior to the payment of the check."

Thereafter, Republic moved for leave to reargue, contending that, assuming arguendo, that the court order restraining payment of the certified check was "properly and timely served upon Republic," Republic was still entitled to judgment as a matter of law on the ground that, pursuant to UCC 4-303, payment on a certified check cannot be stopped even by order of a court of competent jurisdiction.

In the order appealed from the Supreme Court granted leave to reargue and upon reargument granted Republic's motion to dismiss the complaint insofar as asserted against it on the ground that UCC 4-102 provides that in the event of a conflict between provisions of UCC article 3 and UCC article 4, the provisions of UCC article 4 take precedence (see First Commercial Bank v Gotham Originals, 64 NY2d 287 [1985]).

The plaintiff does not dispute that he knowingly executed a certified check payable to Kressler. Accordingly, the nature of Kressler's alleged fraud is fraud in the inducement, not fraud in the factum (see First Natl. Bank of Odessa v Fazzari, 10 NY2d 394, 397 [1961]; Mechwart v Mechwart, 292 AD2d 354 [2002]; Mix v Neff, 99 AD2d 180, 182-183 [1984]; Federal Deposit Ins. Corp. v Kassel, 72 AD2d 787, 788 [1979]).

In the case of fraud in the factum, the maker is induced to sign something entirely different than what he thought he was signing (see First Natl. Bank of Odessa v Fazzari, supra at 397). The instrument is "void ab initio" (Mix v Neff, supra at 182). However, fraud in the inducement renders the obligation voidable based upon facts occurring prior or subsequent to its execution (see Mix v Neff, supra at 183).

The elements of a cause of action sounding in fraudulent inducement are "representation of a material existing fact, falsity, scienter, deception and injury" (Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403, 407 [1958]). The plaintiff's entitlement to a preliminary injunction was dependent upon his establishing a likelihood of success on the merits (see Chrys v D.C.G. Dev. Co., 187 AD2d 923, 924 [1992]).

The plaintiff claims that he executed the certified check and gave it to Kressler based upon a promise that if he made those payments his girlfriend Jennifer Lopez would marry him. There are a number of difficulties with the plaintiff's cause of action. It is unclear as to whether the plaintiff is claiming that Kressler falsely represented that she was acting on behalf of Jennifer Lopez or whether Kressler, acting in concert with Lopez, falsely represented that Lopez would marry the plaintiff if he paid $107,000.

If the alleged misrepresentation was a promise to marry there are additional difficulties. Essential to a cause of action sounding in fraudulent inducement based upon a false promise is that the defendant had no intention to perform the promise at the time it was made (see Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986]; Channel Master Corp. v Aluminium Ltd. Sales, supra; Nastro Contr. v Agusta, 217 AD2d 874 [1995]). Assuming arguendo that there was an intent to perform, any promise to marry would be legally unenforceable (see Civil Rights Law § 80-a).

The plaintiff's assertions in support of his cause of action were insufficient to establish his likelihood of success on the merits (see Chrys v D.C.G. Dev. Co., supra). Accordingly, it is apparent that he never should have been afforded injunctive relief against Republic. If Republic had sought vacatur of the injunction against it, its application should have been granted.

However, Republic never sought vacatur of the injunction against it, defaulted in appearing in the action, and only sought to vacate its default after the plaintiff moved for an inquest with respect to damages. Republic now contends that the court order was "ineffective" since "the check in question could not be stopped once it was certified." However, Republic also acknowledges that its rules allow "a stop payment on the certified" check under certain circumstances which Republic contends are not present here. The inference to be drawn from...