Pelican National Bank v. Provident Bank

• Decision Date: 14 May 2004
• Docket Number: No. 48,48
• Citation: 849 A.2d 475,381 Md. 327
• Parties: PELICAN NATIONAL BANK v. PROVIDENT BANK OF MARYLAND.
• Court: Maryland Court of Appeals

849 A.2d 475

381 Md. 327

PELICAN NATIONAL BANK v. PROVIDENT BANK OF MARYLAND.

No. 48, Sept. Term, 2002.

Court of Appeals of Maryland.

May 14, 2004.

C. Kevin Kobbe (Richard M. Kremen, Jodie E. Bekman, Piper, Rudnick, LLP, on brief), Baltimore, for petitioner.

James T. Heidelbach (Gebhardt & Smith, LLP, on brief), Baltimore, for respondent.

Marjorie A. Corwin, Brian L. Moffet, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, Baltimore, amicus curiae in support of appellee.

Argued before BELL, C.J., ELDRIDGE¹, RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA, JJ.

BELL, C.J.

The issue in this case is whether a check made payable to multiple payees, listed in stacked formation on its face, without any grammatical connector or punctuation, is ambiguous as to whether it is negotiable only jointly, thus, requiring the indorsement of all of the named payees, or alternatively, requiring the indorsement of any one of the named payees. The Circuit Court for Baltimore City held that a check so drawn is ambiguous and, accordingly, entered summary judgment in favor of Provident Bank of Maryland, the appellee, and against Pelican National Bank, the appellant. We shall affirm the judgment of the Circuit Court.

I.

Harford Mutual Insurance Company issued a check, drawn on Allfirst Bank, in the amount of $60,150.00, to payees as follows:

"Andrew Michael Bogdan, Jr., Crystal Bogdan

Oceanmark Bank FSB

Goodman-Gable-Gould Company".

The check was in payment of a casualty claim made by Bogdan on an insurance policy, issued by Harford Mutual, on commercial property owned by Bogdan and his wife and on which Oceanmark, the appellant's predecessor in interest,² held a mortgage. Thus, the payees of the check were the property owners, the mortgage holder and the insurance agent who adjusted the casualty claim. In addition to the payees, the face of the check listed, in small print, the insurance policy number, claim identification number and the "loss date" and a small notation that read "MEMO Fire— building."

The check, indorsed only by the Bogdans and the insurance adjuster, was presented to the appellee, which cashed it. Michael Bogdan deposited the proceeds in a commercial account he held at the appellee bank. When the appellant filed its Complaint for Money Judgment, Bogdan had not distributed any of the proceeds of the check to the appellant.

Having failed in its attempt to obtain reimbursement from the appellee for negotiating the check without Oceanmark's endorsement, the appellant filed against the appellee, in the Circuit Court for Baltimore City, a Complaint for Money Judgment. Alleging conversion,³ it argued that the subject check was negotiable only if each of the listed payees indorsed it and, since the check was not indorsed by Oceanmark, the appellee improperly negotiated the check. After it filed its answer to the complaint,⁴ arguing as an affirmative defense, that the check was payable in the alternative pursuant to Maryland Code, (1975, 2002 Replacement Volume) § 3-110(b) of the Commercial Law Article,⁵ the appellee moved for summary judgment on that basis. The appellant responded with its Cross-Motion for Summary Judgment.⁶

The Circuit Court granted the appellee's motion for summary judgment. Interpreting § 3-110(b) as resolving any ambiguity with respect to whether a check payable to two or more persons is payable jointly or in the alternative in favor of the latter, i.e., that such checks are payable in the alternative, and noting the parties' arguments acknowledging that the issue was whether the check was ambiguous, the court held:

"[o]n its face, the check is payable to two or more persons and has no intervening connectors, marks or punctuation, such as `and', `or,' or `and/or'. Therefore, this court finds as a matter of law that the check is ambiguous as to whether or not it is payable to the persons jointly or alternatively."

It relied on City First Mortgage Corp. v. Florida Residential Property & Casualty, 37 U.C.C. Rep. Serv.2d 126 (Miami-Dade County Ct.1998)⁷ and Bijlani v. Nationsbank of Florida, N.A., 25 U.C.C. Rep. Serv.2d 1165 (Fla.Cir.Ct.1995),⁸ but neither addressed, nor cited, Peoples National Bank v. American Fid. Fire Ins. Co., 39 Md.App. 614, 386 A.2d 1254 (1978). The court also rejected Bank of America National Trust and Savings Assoc. v. Allstate Insurance Co., 29 F.Supp.2d 1129 (C.D.Cal.1998) as supporting the appellant's argument. The court explained that the court in Allstate Insurance Company, 29 F.Supp.2d at 1139, "required extrinsic evidence and determined that the check was unambiguous based [on] the custom and usage developed under the prior UCC provision, § 3-116;" however, it pointed out, "`[n]egotiability [should be] determined from the face, the four-corners, of the instrument without reference to extrinsic facts.'" (quoting Participating Parts Associates v. Pylant, 460 So.2d 1299, 1301, 40 U.C.C. Rep. Serv. 498 (Ala.Civ.App. 1984) and Holsonback v. First State Bank of Albertville, 394 So.2d 381, 383, 30 U.C.C. Rep. Serv. 222 (Ala.Civ.App.1980)).

The appellant timely filed a Notice of Appeal to the Maryland Court of Special Appeals. This court issued a writ of certiorari before the intermediate appellate court considered the case. Pelican National Bank v. Provident Bank of Maryland, 369 Md. 659, 802 A.2d 438 (2002).

In this Court, the appellant argues that the Circuit Court erred when it granted the appellee's motion for summary judgment and denied its motion. In so arguing, it acknowledges the applicability to the case sub judice of § 3-110(d) and that, pursuant to that provision, the default rule with regard to the payment of checks with ambiguous multiple payee designations is that they are payable alternatively, rather than jointly. Nor does the appellant dispute that the default rule was changed from the prior law. Nevertheless, the appellant asserts, as it did in the Circuit Court, that the listing of multiple payees in stacked format on a check, without any terms or connectors, is not ambiguous. To the contrary, again as it did in the Circuit Court, the appellant maintains that the Court of Special Appeals resolved the matter in Peoples National Bank, where the court "held the bank liable [in that case] because the check was payable jointly, not payable in the alternative." (appellant's Brief at 7). According to the appellant, the rule enunciated by that case is that checks containing multiple payees in "stacked" format are per se unambiguous and jointly payable.

The appellant also relies on Allstate Insurance Co., supra for the proposition that, notwithstanding the change in the language of the relevant U.C.C. provision, "the case law that existed under § 3-116 with respect to stacked payee designations on the checks (specifically including Peoples Nat. Bank) remains firmly in place under § 3-110(d)." Rejecting the argument that the sentence in § 3-110(d) prescribing the default rule for ambiguity is dispositive of this case, the appellant submits:

"The last sentence to § 3-110(d) only applies if the check is ambiguous. The second sentence to § 3-110(d) (which was applied in both the Peoples Nat. Bank and Allstate Ins. Co. decisions) remains firmly in place. The second sentence of § 3-110(d) provides that `[i]f an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them.' (emphasis added). Because the Check in the present case was in the stacked payee designation format and `payable to two or more persons not alternatively,' the Court need not reach the last sentence of § 3-110(d) which would only apply if the Check was ambiguous."

The appellee acknowledges that, prior to 1996, pursuant to § 3-116 and People's National Bank, checks with stacked payees, as is the case with the check sub judice, were deemed payable only jointly. Noting that "Maryland law regarding checks payable to multiple payees was changed with the adoption of the 1990 version of the UCC in 1996," in particular, the addition of a sentence, which provides that checks with an ambiguous multiple payee designation are payable in the alternative, it argues that, under that provision, checks listing multiple payees in stacked format without terms or connectors are ambiguous and thus, payable in the alternative. Consequently, the appellee contends that People's National Bank, having been decided under § 3-116, is inapposite to the case sub judice. Because § 3-110 expressly resolves the situation in which a check with multiple payees is ambiguous as to whether it is alternatively or jointly payable, it asserts that the default rule enunciated in People's National Bank is abrogated.

II.

The only issue that we must resolve is one of law, whether a check with stacked payees, unseparated by a term, punctuation, connector or symbol indicating joint or alternative payment, is ambiguous. Where a statutory provision of the U.C.C. purports to cover an area of the law, it is the language and the intent of the statute that will govern a conflict that arises within that particular area of law. Hartford Fire Ins. Co. v. Maryland Nat'l Bank, N.A., 341 Md. 408, 413, 671 A.2d 22, 24 (1996) ("The rights and duties of drawers and depositary banks are governed by ... Titles 3 and 4 of the Commercial Law Article, which are essentially the same as Articles 3 and 4 of the Uniform Commercial Code (U.C.C.)"); see § 1-301 of the Commercial Law Article.⁹ This is, in other words, a matter of statutory interpretation,¹⁰ the canons of which are well settled.

This Court has often stated the paramount goal of statutory interpretation, to "ascertain and effectuate the intention of the legislature." Oaks v. Connors, 339 Md. 24, 35, 660 A.2d 423, 429 (1995); Nationsbank v. Stine, 379 Md. 76, 85, 839 A.2d 727, 732-33 (2003). The quest to ascertain legislative intent requires examination of the language of the statute as...