General Acc. Ins. Co. v. Fidelity & Deposit Co.

• Decision Date: 25 October 1984
• Docket Number: Civ. A. No. 83-3223.
• Citation: 598 F. Supp. 1223
• Parties: GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND v. FIRST JERSEY NATIONAL BANK, et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

598 F. Supp. 1223

GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND v. FIRST JERSEY NATIONAL BANK, et al.

Civ. A. No. 83-3223.

United States District Court, E.D. Pennsylvania.

October 25, 1984.

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Kean K. McDonald, LaBrum & Doak, Philadelphia, Pa., for plaintiff.

Ian A.L. Strogatz, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for defendant.

Miles H. Shore, Saul, Ewing, Remick & Saul, Philadelphia, Pa., for First Pennsylvania Bank, N.A.

John T. Curtin, Philips, Curtin & DiGiacomo, Philadelphia, Pa., for Hudson United Bank.

John P. Kopesky, Philadelphia, Pa., for First Jersey Nat. Bank.

Gordon Gelfond, Philadelphia, Pa., for Ramapo Bank.

Hiliary H. Holloway, Philadelphia, Pa., for Federal Reserve Bank of Philadelphia.

Thomas J. Feeney, III, Kania, Lindner, Lasak & Feeney, Bala Cynwyd, Pa., for First Nat. Bank of Palm Beach Gardens.

Michael M. Mustokoff, Duane, Morris & Heckscher, Philadelphia, Pa., for Trust Co. of New Jersey.

Shaw, Goldman, Licitra, Levine & Weinberg, P.C., Garden City, N.Y. and Samuel Dennis, Philadelphia, Pa., for Community Nat. Bank and Trust Co. of New York.

Richard Z. Freeman, Jr., Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., for Manufacturers Hanover Trust Co.

Morris R. Brooke, Drinker, Biddle & Reath, Philadelphia, Pa., for New Jersey Bank, N.A., Manufacturers Hanover Trust Co., Chase Manhattan Bank, Nat. State Bank of Elizabeth, Fidelity Union Bank, Valley Nat. Bank, Howard Sav. Bank, Meadowlands Nat. Bank, Citibank, N.A., Hudson City Sav. Bank, Midlantic Nat. Bank, Commercial Trust Co. of New Jersey, Washington Sav. Bank, First Nat. Bank of New Jersey, Edgewater Nat. Bank and Nat. Bank of North America.

OPINION

LOUIS H. POLLAK, District Judge.

General Accident Insurance Company of America ("General Accident") brought this action against Fidelity and Deposit Company of Maryland ("Fidelity") seeking reimbursement under a blanket bond Fidelity had issued to General Accident. General Accident alleges that it lost over $2,000,000 as a result of a fraud perpetrated on it, in part, by some of its employees. The fraud alleged involved the issuance of drafts by General Accident without a proper basis?€” for example, for nonexistent claims, to nonexistent policyholders, or for excessive amounts. The drafts were negotiated at a number of different banks, passed through the chain of collection and reached First Pennsylvania Bank. Although the drafts were not drawn directly on an account at First Pennsylvania Bank, they were "payable through" that bank. First Pennsylvania Bank then obtained payment on those drafts from the drawee, General Accident.

Fidelity filed a third-party complaint against the banks allegedly involved in the collection process. The third-party complaint alleges that if Fidelity is liable to General Accident, Fidelity will be subrogated to General Accident's rights against these banks. Thus, the third-party complaint purports to assert, against the banks, those claims which General Accident could, itself, pursue against the banks in a direct action.

The banks have also filed cross-claims among themselves. In particular, First Pennsylvania Bank has filed cross-claims against the banks below it on the collection ladder.

As commonly occurs when a case reaches such substantial proportions?€”both in terms of number of parties and in terms of amount in dispute?€”a flurry of motions has been submitted seeking dismissal of these third-party claims. At the present time, the following motions have been fully briefed and await resolution.¹

(1) The motion to dismiss Fidelity's third-party claims against New Jersey Bank, N.A., Manufacturers Hanover Trust Company, Chase Manhattan Bank, National State Bank of Elizabeth, Fidelity Union Bank, Valley National Bank, Howard Savings Bank, Meadowlands National Bank, Citibank, N.A., First National Bank of New Jersey, Hudson City Savings Bank, Midlantic National Bank, Edgewater National Bank, Commercial Trust Company of New Jersey, The National Bank of North America, and Washington Savings Bank. This motion has since been joined by First Pennsylvania Bank, N.A., First Jersey National Bank, Ramapo Bank, and the Federal Reserve Bank of Philadelphia.

(2) The motion to dismiss Fidelity's third-party claims against First Jersey National Bank. This motion has been joined by The Trust Company of New Jersey, First Pennsylvania Bank, and the Federal Reserve Bank of Philadelphia.

(3) The motion to dismiss Fidelity's third-party claims against Community National Bank and Trust Company which has been joined by The Trust Company of New Jersey and First Jersey National Bank.

(4) The motion to dismiss First Pennsylvania Bank's cross-claims against New Jersey Bank, N.A., Manufacturers Hanover Trust Company, Chase Manhattan Bank, National State Bank of Elizabeth, Fidelity Union Bank, Valley National Bank, and Howard Savings Bank. That motion has been joined by First Jersey National Bank, Ramapo Bank, and The Trust Company of New Jersey.

(5) The motion to dismiss First Pennsylvania Bank's cross-claims against First Jersey National Bank which has been joined by Community National Bank and Trust Company.

(6) The motion to dismiss First Pennsylvania Bank's cross-claims against The Trust Company of New Jersey.

(7) The motion to dismiss First Pennsylvania Bank's cross-claims against Community National Bank and Trust Company.

(8) The motion for summary judgment on Fidelity's claims filed by New Jersey Bank, N.A., Manufacturers Hanover Trust Company, Chase Manhattan Bank, National State Bank of Elizabeth, Fidelity Union Bank, Valley National Bank, Howard Savings Bank, Meadowlands National Bank, Citibank, N.A., First National Bank of New Jersey, Hudson City Savings Bank, Midlantic National Bank, Edgewater National Bank, Commercial Trust Company of New Jersey, The National Bank of North America, and Washington Savings Bank. That motion has been joined by Ramapo Bank.²

This list of parties and motions is deceptive in its length. The first three motions, although supported by ostensibly distinct briefs, raise identical legal arguments. In fact, the briefs submitted by First Jersey National Bank and Community National Bank and Trust Company are, for the most part, reproductions of the brief submitted by New Jersey Bank, N.A.³ Furthermore, the motions to dismiss the cross-claims of First Pennsylvania Bank rely wholly upon the arguments presented in support of the motion to dismiss the third-party claims of Fidelity. Consequently, I will address the issues raised by all of these motions only once. Following the resolution of those issues, I will consider the arguments asserted in the motion for summary judgment filed by New Jersey Bank, N.A.

I. MOTIONS TO DISMISS

Unfortunately, in their rush to move this litigation to prompt resolution, the parties have overlooked the substantial restrictions upon the court's authority to dismiss claims solely on the basis of the pleadings. As a result, most of the arguments raised in these motions suffer from the same defect ?€”they seek a legal determination that Fidelity's claims are groundless although such a legal determination is impossible without further factual development.

A. Standard for Determination of a Motion to Dismiss

Before I address the theories upon which these motions are based, it is appropriate to note the legal standard applicable to a motion to dismiss pursuant to Rule 12(b)(6).

A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Professors Wright and Miller, in their treatise on federal civil procedure, describe the analysis in similar terms.

The question therefore is whether in the light most favorable to plaintiff, and with every doubt resolved in his behalf, the complaint states any valid claim for relief.

5 C. Wright and A. Miller, Federal Practice and Procedure ? 1357 at 601 (1969) (footnotes omitted).

Thus, the question before me is not whether Fidelity will prevail against the third-party defendants. That is a matter which is properly resolved upon the basis of proof, not merely upon the pleadings.

As a practical matter, a dismissal under Rule 12(b)(6) is likely to be granted in the unusual case in which plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief. In other words, dismissal is justified only when the allegations of the complaint itself clearly demonstrate that plaintiff does not have a claim....

The complaint also is subject to dismissal under Rule 12(b)(6) when its allegations indicate the existence of an affirmative defense, but the defense must clearly appear on the face of the pleading.

5 C. Wright & A. Miller, Federal Practice and Procedure ? 1357 at 604-06 (1969).

B. Items Considered on Motion to Dismiss

The motions to dismiss assume that the allegations in both the complaint filed by General Accident against Fidelity and the third-party complaint filed by Fidelity against the banks should be considered in determining whether Fidelity's claims are viable. As a result, many of the arguments presented for dismissal of the third-party complaint rely upon "facts" presented in General Accident's complaint which, according to the third-party defendants, show that Fidelity's claims are legally unsupportable or are barred by certain affirmative defenses.

General Accident's complaint against Fidelity is appended to the third-party complaint. But that fact alone is not sufficient to tie Fidelity to the specific allegations made by General Accident. Nor does the fact that Fidelity's third-party claims are based upon its right to subrogation to General Accident's claims against ...