Gossels v. Fleet Nat. Bank

• Decision Date: 12 March 2009
• Docket Number: SJC-10186
• Citation: 902 N.E.2d 370,453 Mass. 366
• Parties: C. Peter R. GOSSELS v. FLEET NATIONAL BANK.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

902 N.E.2d 370

453 Mass. 366

C. Peter R. GOSSELS v. FLEET NATIONAL BANK.

SJC-10186

Supreme Judicial Court of Massachusetts, Suffolk.

Argued November 3, 2008.

Decided March 12, 2009.

S. Elaine McChesney, Boston (Jason L. Watkins with her) for the defendant.

C. Peter R. Gossels, pro se.

Brenda R. Sharton, Dahlia S. Fetouh, & Dennis N. D'Angelo, Boston, for Massachusetts

Bankers Association, Inc., amicus curiae, submitted a brief.

Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.

CORDY, J.

This is a check collection case in which we must decide whether Fleet National Bank (Fleet) is liable for the handling of a check presented to it for collection by C. Peter R. Gossels under theories of negligent misrepresentation (Count I)¹; conversion (Count II); violation of the consumer protection laws, G.L. c. 93A, §§ 2 and 9 (Count III); and violation of the exchange rate requirement of the Uniform Commercial Code (UCC), G.L. c. 106, § 3-107 (Count IV).² After a bench trial in the Boston Municipal Court, the trial judge entered judgment for Fleet on Counts II-IV, but found it liable for negligent misrepresentation and awarded Gossels $6,861.68 in damages and $2,021.29 in interest. On Gossels's appeal, the Appellate Division affirmed. On Gossels's further appeal, the Appeals Court affirmed the judgment on the negligent misrepresentation count (increasing the damages to $10,269.03 plus interest), and reversed the judgments for Fleet on Counts II (conversion) and III (G.L. c. 93A), entering judgments for Gossels on those claims.³ Gossels v. Fleet Nat'l Bank, 69 Mass.App.Ct. 797, 812b-812c, 876 N.E.2d 872 (2007). We granted Fleet's application for further appellate review. We affirm the judgments for Fleet on Counts II, III, and IV. We affirm the judgment for Gossels on the negligent misrepresentation claim (in the amount awarded by the judge) only because Fleet waived any claim of error when it failed to appeal from that judgment to the Appellate Division.⁴

1. Background. The trial judge made the following findings of fact. As a reparations payment for a theft committed by the Nazis against Gossels's family, the German government sent Gossels a check for 85,071.19 euros, drawn on Dresdner Bank in Germany.⁵ On October 15, 1999, Gossels went to a Fleet branch in Boston to present the check for collection.⁶ The teller he spoke to at the bank did not tell Gossels that the proceeds of the check would be converted from euros to dollars for deposit in his Fleet account, and the judge credited Gossels's testimony that he would have gone to another bank had he known that Fleet would convert the euros to dollars.⁷ The teller accepted the check and told Gossels that he was not required to indorse the check because it was drawn on a foreign bank. She then handed Gossels a preprinted receipt that showed two possible payment options: "provisional credit" or "collection only." Neither box was checked.

Fleet kept a foreign check collection procedures manual, which instructed tellers to tell customers the length of the collection process (four to six weeks), the relevant date for determining the exchange rate, and how the rate would be determined. The Fleet teller did not provide Gossels with any of this information.

On November 11, 1999, Fleet contacted Gossels and told him that there had been a problem with the check collection process. He returned to the bank and met with a manager who asked Gossels to indorse the check, which was then sent a second time for collection.⁸

In resolving the case on appeal, the Appeals Court made note of additional facts that it concluded were supported by the record but not specifically referenced or found by the judge.⁹ In particular, the Appeals Court noted that the printed receipt stated that Fleet was "acting as an agent for collection on [Gossels's] behalf." Gossels v. Fleet Nat'l Bank, supra at 800, 876 N.E.2d 872. It also noted that Fleet sent the check to Deutsche Bank in Germany, which acted as Fleet's corresponding bank for the collection of checks drawn on German banks, and that Deutsche Bank had returned the check to Fleet purportedly because it lacked an indorsement and Deutsche Bank had not received a guaranty by Fleet in lieu of Gossels's indorsement.¹⁰ Id. at 800 & n. 8, 876 N.E.2d 872.

After Gossels indorsed the check, Fleet sent the check back to Deutsche Bank for collection; the Dresdner Bank then transferred 85,071.19 euros to Deutsche Bank. After deducting a transaction fee of one hundred euros, Deutsche Bank credited Fleet's account with 84,971.19 euros. Fleet exchanged the euros for dollars at its retail exchange rate and deposited $81,754.77 into Gossels's Fleet account on December 15, 1999. Id. at 801, 876 N.E.2d 872. The "retail" exchange rate Fleet offered customers for euros was lower (in dollars) than the "spot" or interbank exchange rate that it was entitled to receive from other banks. Id. See G.L. c. 106, § 3-107.¹¹

The judge found that the value of the euro declined in the interim between October 15, 1999, when the check was presented to Fleet, and December 15, 1999, when Fleet received the euros from the Dresdner Bank (through Deutsche Bank). The judge also found that this decline in value amounted to $6,861.68, and awarded that amount (plus interest) to Gossels as damages for the bank's "negligence" in failing to disclose all the terms of the transaction and in failing to require that Gossels indorse the check.¹²

The Appeals Court increased the award of damages on the negligent misrepresentation claim by adding another factor into its calculation: the differential between Fleet's retail and spot exchange rates. It found that on October 15, 1999, Gossels's check would have been worth $88,616.45 based on the Fleet retail exchange rate and $92,023.80 based on the spot rate. Gossels v. Fleet Nat'l Bank, supra at 801, 876 N.E.2d 872. This rate differential, the Appeals Court held, was detailed on a rate sheet that Fleet did not distribute to the public. Id. at 808, 876 N.E.2d 872. Consequently, it awarded Gossels $10,269.03, the difference between what he had received in dollars from Fleet on December 15 ($81,754.77) and what he would have received on October 15 at the spot rate ($92,023.80). Id. at 801, 812, 876 N.E.2d 872b.

2. Discussion. Check collection is governed by the UCC, a statutory framework designed to implement, among other things, a national, uniform system of check collection. G.L. c. 106, § 1-102 (2) ("Underlying purposes and policies of this chapter are ... to make uniform the law among the various jurisdictions"). Where a UCC provision specifically defines parties' rights and remedies, it displaces analogous common-law theories of liability. National Shawmut Bank v. Vera, 352 Mass. 11, 16, 223 N.E.2d 515 (1967), citing Stone & Webster Eng'g Corp. v. First Nat'l Bank & Trust Co., 345 Mass. 1, 5, 184 N.E.2d 358 (1962). Otherwise, banks would face a motley patchwork of liability standards from State to State.

There are several bedrock principles with respect to that framework (and much of the common law that preceded it), two of which bear repeating here. First, the bank customer remains the owner of the check throughout the collection process and bears the risk of collection, including the risk in foreign currency fluctuation. See Fabens v. Mercantile Bank, 40 Mass. 330, 23 Pick. 330, 332-333 (1839); G.L. c. 106, § 4-201 (a). Second, the collecting bank is held only to a standard of ordinary care in making the collection. Fabens v. Mercantile Bank, supra at 331-332; G.L. c. 106, § 4-202 (a). So long as it has fulfilled this obligation, the collecting bank is not liable for the conduct of other banks in the chain of collection. G.L. c. 106, § 4-202 (c).

a. Negligent misrepresentation. Fleet argues here that the trial judge erred in holding that the bank was liable for making negligent misrepresentations to Gossels. It claims that Fleet did not tell Gossels that the check would be paid in euros, that Gossels presented no evidence of detrimental reliance (as required to make out his claim), and that Gossels was bound by Fleet's customary check practices. All of these arguments were waived.

In a civil case, after a judgment by the District Court, an "appellant is barred from pursuing in the Appeals Court a claim of error that it failed to raise at the Appellate Division." M.G. Perlin & J.M. Connors, Civil Procedure in the Massachusetts District Court § 12.26, at 160 (3d ed. Supp.2007), citing Brossi v. Fisher, 51 Mass.App.Ct. 543, 550, 747 N.E.2d 714 (2001). When an appellant's claim of error is "not presented to or decided by the Appellate Division[,][i]t cannot be considered by us." Kelsey v. Hampton Court Hotel Co., 327 Mass. 150, 152, 97 N.E.2d 407 (1951), citing Reliable Fin. Corp. v. Baldrate, 291 Mass. 150, 196 N.E. 849 (1935). In this case, Fleet chose not to appeal from the judge's judgment of $6,861.68 (plus interest) for negligent misrepresentation. Fleet conceded this point before the Appeals Court, admitting that it "did not appeal [from] the [judge's] judgment for actual damages, seeking to pay the judgment amount." The bank had an opportunity to contest the judgment on Count I before the Appellate Division, but chose not to do so; therefore, Fleet's cross appeal on that issue was not properly before the Appeals Court, and we do not consider it. Kelsey v. Hampton Court Hotel Co., supra.

However, because there are rulings from two courts in this case that sustain Gossels's negligent misrepresentation claim and impose disclosure obligations on Fleet that we conclude are not required by the UCC, we will proceed to analyze the claim for the purpose of guidance and clarity. In order to recover for negligent misrepresentation a plaintiff must prove that the defendant (1) in the course of his business, (2) supplied false information for the guidance of others (3) in their business transactions, (4) causing and...