Richard Bartel v. Bank of America Corp. , 193 A.3d 767 ( 2018 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 17-CV-249
09/13/2018
RICHARD C. BARTEL, APPELLANT,
V.
BANK OF AMERICA CORPORATION, APPELLEE.
Appeal from the Superior Court
of the District of Columbia
(CAB-5798-13)
(Hon. John M. Campbell, Motion Judge)
(Argued February 27, 2018 Decided September 13, 2018)
Matthew August LeFande for appellant.
David M. Ross for appellee.
Before BLACKBURNE-RIGSBY, Chief Judge, and GLICKMAN and BECKWITH,
Associate Judges.
BECKWITH, Associate Judge: More than twenty years ago, appellant Richard
Bartel purchased a cashier’s check for $30,761.00, made payable to “Dana
McKinley or Edna McKinley or Richard Bartel,” and left the check in the
McKinleys’ safe with the hope that it would serve as consideration for a business
2
transaction that never came to fruition. When Mr. Bartel sought to recover the
check over a decade later, it had vanished from the safe, both of the McKinleys had
died, and neither Mr. Bartel nor the issuing bank had any record of where the
check might have gone. Mr. Bartel filed suit against appellee Bank of America
Corporation to enforce his claim for the value of the missing check.
This is Mr. Bartel’s second appeal from the trial court’s grant of summary
judgment to Bank of America. On remand after the first appeal, the trial court
granted summary judgment again, finding that Mr. Bartel’s claims were barred by
laches, that he failed to satisfy two separate statutes governing the enforcement of
a lost or stolen cashier’s check, and that his sworn declaration of loss was
insufficient. Mr. Bartel challenges each of the trial court’s findings. We conclude
that because Mr. Bartel “transferred” the cashier’s check when he made it payable
to the McKinleys and then left it in their possession, he is now precluded from
enforcing his statutory claim for the missing instrument.
I.
In the trial court, the parties alleged the following during discovery and in
support of their summary judgment filings. In 1994, Richard Bartel purchased a
cashier’s check in the amount of $30,761.00 from Bank of America’s predecessor
in interest, NationsBank of Maryland, N.A. The check was payable to “Dana
3
McKinley or Edna McKinley or Richard Bartel.” The bank issued the check to
Mr. Bartel and shortly after, according to Mr. Bartel, he and Dana McKinley
placed the check in the McKinleys’ safe. Mr. Bartel intended the check to serve as
consideration for a contemplated business transaction with the McKinleys.
Specifically, Mr. Bartel hoped that the McKinleys would sell their shares of a
company of which Mr. Bartel was a majority shareholder—though he had “no
specific reason to believe they would do so.” After the McKinleys declined to
consummate the hoped-for business transaction, Mr. Bartel left the check with
Dana McKinley anyway on the chance that they would come to an agreement later.
Mr. Bartel has not seen the check since he left it with the McKinleys in
1994. At some point, he reached out to the McKinleys to inquire about the check.
According to Mr. Bartel, Dana McKinley informed him that he had not “touched or
moved the check” but that he had “seen it on multiple occasions.” Mr. McKinley
added, however, that “he could not open the safe because he had fumbled a change
in the safe combination, or alternatively, that his [g]uardian had changed the
combination.” Mr. McKinley’s guardian was appointed in 2008 because Mr.
McKinley was suffering from a deteriorating mental illness. Mr. McKinley’s
mother Edna McKinley died that same year, at which point she was “blind, over
eighty years of age[,] and immobile.” Although Mr. Bartel alleges that Mr.
McKinley told him that he never moved the check, there is no indication in the
4
record that Edna McKinley made any equivalent representation. Mr. Bartel stated
in a 2008 email that Rene McKinley, who was Dana McKinley’s sister and Edna’s
daughter, had access to the safe at one point after receiving the combination from a
family friend.
In 2009, Mr. Bartel filed an action in Florida, where the McKinleys had
lived, to obtain possession of the check. When the safe was eventually drilled
open, the check was not found inside. Mr. Bartel later learned, from an inventory
of Dana’s and Edna’s estates, that there was no record of a deposit into either of
their accounts other than ordinary pension deposits. Mr. Bartel asked Bank of
America to run a search for records relating to the check. A representative of the
bank responded that there was no record of escheatment to the State of Maryland
(where the check was issued) and no record of the check as unclaimed property in
Maryland.
Mr. Bartel submitted what he titled a “declaration of loss” of the check to
Bank of America in 2013, requesting payment. In that declaration, he asserted that
no payment of the check had ever occurred and that the original instrument had
been lost. He attached a photocopy of the original check, emblazoned with the
words “copy—not negotiable.” The bank replied that it could not honor his
demand for payment. The bank explained that, in conformance with federal law, it
5
maintained records for seven years and was at that point—nineteen years from the
date of issuance—unable to locate any information related to the check.
Shortly after, Mr. Bartel filed a complaint against Bank of America for relief
under D.C. Code §§ 28:3-309 and -312 (2015 Supp.)—two statutes that establish
the procedures by which a party can obtain payment of a lost cashier’s check or
other negotiable instrument.1 The trial court granted summary judgment to Bank
of America.
On appeal, this court held that the trial court had erred by assigning Mr.
Bartel the burden to establish that the check had not already been paid to someone
entitled to enforce it. Bartel v. Bank of America, 128 A.3d 1043, 1047 (D.C.
2015). We specifically declined to address, however, “whether Mr. Bartel bore the
burden of proving that the McKinleys had not negotiated the check, i.e., transferred
possession of the check to a holder.” Id. at 1045 n.1. We also left open “whether
dismissal or summary judgment would be appropriate on other grounds not
reached by the trial court, including laches as well as other statutory requirements
under sections 28:3-309 and 28:3-312.” Id. Finally, we clarified that we did not
decide “whether, given that the Bank bears the burden on the issue of prior
1
Mr. Bartel also alleged unjust enrichment but the trial court dismissed that
ground for failure to state a claim and Mr. Bartel has not challenged that ruling on
appeal.
6
payment, the Bank [could] nevertheless [] demonstrate an entitlement to summary
judgment on that issue.” Id.
On remand, the parties again filed motions for summary judgment. The trial
court once again granted summary judgment for Bank of America, this time on
three independent grounds. The court first found that Bank of America’s equitable
defense of laches applied because Mr. Bartel had “failed to exercise reasonable
diligence in protecting his rights” by waiting nineteen years to seek payment from
the bank. The court also granted summary judgment because Mr. Bartel had failed
to satisfy the statutory requirements for enforcement of a lost, destroyed, or stolen
instrument (D.C. Code § 28:3-309) or cashier’s check (D.C. Code § 28:3-312).
Finally, the court found that Mr. Bartel had failed to comply with the statute setting
forth the requirements for filing a declaration of a lost check (D.C. Code § 28:3-
312 (a)(3)). Mr. Bartel challenges each of these findings.2
II.
“To prevail on a motion for summary judgment, a party ‘must demonstrate
that there is no genuine issue of material fact and that [it] is entitled to judgment as
2
Given our resolution of Mr. Bartel’s challenge to the trial court’s
conclusion that he failed to satisfy the requirements set forth in D.C. Code § 28:3-
309 and § 28:3-312, we need not reach the remaining issues.
7
a matter of law.’” Boyrie v. E & G Prop. Servs., 58 A.3d 475, 477 (D.C. 2013)
(quoting Murphy v. Schwankhaus, 924 A.2d 988, 991 (D.C. 2007)). We review
orders granting summary judgment de novo, “applying the same standard as the
trial court did in ruling on the motion.” Washington v. District of Columbia, 137
A.3d 170, 173 (D.C. 2016). In doing so, we construe the record in the light most
favorable to the party opposing summary judgment. Perkins v. District of
Columbia, 146 A.3d 80, 84 (D.C. 2016).
Two provisions in Article 3 of the Uniform Commercial Code (UCC)—
which has been adopted in the District of Columbia3—set forth requirements for
enforcing a cashier’s check that has been lost: D.C. Code § 28:3-312 (Repl. 2012)4
(entitled “Lost, destroyed, or stolen cashier’s check, teller’s check, or certified
check”) and § 28:3-309 (entitled “Enforcement of a lost, destroyed, or stolen
instrument”). Section 28:3-312 (a)(3) imposes an obligation on a bank that issues
a cashier’s check to refund a lost check to a claimant who files, under penalty of
perjury, a declaration that says that the declarer lost possession of the check and
that the loss of possession was not the result of a transfer. Section 28:3-309
3
See Dennis Joplin Co., LLC v. Robinson Broadcasting Corp., 977 F. Supp.
491, 494 (D.D.C. 1997).
4
Unless otherwise noted, all subsequent citations to the D.C. Code are from
the 2012 replacement volume.
8
similarly states that the loss of possession cannot be the result of a “transfer.”5 “An
instrument is transferred when it is delivered by a person other than its issuer for
the purpose of giving to the person receiving delivery the right to enforce the
instrument.” D.C. Code § 28:3-203 (a).
In this case, Mr. Bartel purchased a cashier’s check and chose to have it
made payable to Dana McKinley, Edna McKinley, or himself. He then placed the
check in the McKinleys’ safe and left it there. The trial court found, and Bank of
America emphasizes on appeal, that the moment that Mr. Bartel voluntarily left the
check made out to both McKinleys in their possession, he transferred the
instrument to them. Mr. Bartel’s primary response is that although he did give the
McKinleys the check, he did not do so “for the purpose” of giving them the right to
enforce the instrument. Rather, he gave them the check for safekeeping. For him
to have “transferred” the check, Mr. Bartel argues, the McKinleys would have
needed the lawful right to enforce the check—which he says they never had
5
Each section serves a slightly different purpose. Section 28:3-309 applies
only to a person entitled to enforce a check, but “does not apply to a remitter of a
cashier’s check or teller’s check or to the drawer of a certified check.” D.C. Code
§ 28:3-312 UCC comment 1. Section 28:3-312 applies to both the person entitled
to enforce a check and to those excluded under § 28:3-309, id., and is designed to
provide a person who loses a check the means of getting a refund without posting a
bond. Id. Depending on the circumstances, a person might be able to enforce a
claim for a missing instrument under either section.
9
because he gave them the check only in contemplation of a future negotiation.
As named payees on the cashier’s check, both of the McKinleys were
entitled to enforce the instrument once they had possession. D.C. Code § 28:3-110
(d) (“If an instrument is payable to 2 or more persons alternatively, it is payable to
any of them and may be negotiated, discharged, or enforced by any or all of them
in possession of the instrument.”).6 Mr. Bartel made the check payable to the
McKinleys and placed it in their safe—and took these steps so that the McKinleys
could, upon selling their shares, enforce the check with the issuing bank. The UCC
draws a distinction between the right to enforce an instrument and the ownership of
an instrument. As stated in D.C. Code § 28:3-301, “[a] person may be a person
entitled to enforce the instrument even though the person is not the owner of the
instrument or is in wrongful possession of the instrument,” and not all owners will
qualify as persons entitled to enforce. The two are different concepts. D.C. Code
§ 28:3-203 UCC comment 1. “Although transfer of an instrument might mean in a
particular case that title to the instrument passes to the transferee, that result does
6
Cf. In re Mora, 218 B.R. 71, 76 (9th Cir. 1998) (explaining why a transfer
of a cashier’s check, as opposed to a regular check, occurs when the check is in the
physical possession or control of the intended payee, under a different provision of
the federal bankruptcy code); In re Essex Constr., LLC, 575 B.R. 648, 657 (D. Md.
2017) (“a cashier’s check is transferred upon delivery, because the obligation to
pay a cashier’s check becomes fixed at that point”) (citation omitted).
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not follow in all cases.” Id.; see also Brown v. Wash. State Dep’t of Commerce,
359 P.3d 771, 777–78 (Wash. 2015) (discussing the two sets of rights embraced by
promissory notes under the UCC); David Frisch, 6B Lawrence’s Anderson on the
Uniform Commercial Code § 3-203:4 (3d ed. rev.) (“A transfer does not require
that the transferor intend to vest ownership in the instrument of the transferee.”).
So even if Mr. Bartel intended that the McKinleys’ permanent possession of the
funds be contingent upon their sale of stock, when he delivered the check to the
McKinleys, he did so for the purpose of conferring the right to enforce the
instrument.7 See Anderson v. Burson, 35 A.3d 452, 461 (Md. Ct. App. 2011)
(“[T]he transferor . . . must intend to vest in the transferee the right to enforce the
instrument (thieves and accidental transferees are excluded) and must deliver the
instrument so the transferee receives actual or constructive possession.”); see also
D.C. Code § 28:3-203 UCC comment 1 (providing as an example that a transferee
may have a purpose “other than transfer of the right to enforce” where a “check is
presented for payment by delivering the check to the drawee . . . because there is
no intent to give the drawee the right to enforce the check”).
As the trial court stated, § 3-203’s definition of a transfer does not include
7
In that same vein, had the McKinleys enforced the check but maintained
the entire sum in cash in the same safe pending their sale of stock to Mr. Bartel, it
is not clear that this would have been a violation of their alleged contract with him.
11
language limiting the right to enforce a check to an “immediate right” or to a “right
not contingent on other events.” The statute’s unqualified language is consistent
with the burdens of proof allocated throughout Article 3 of the UCC, designed to
make it unnecessary for a bank to have to “delve into the contractual relationships
of named payees[.]” Am. Nat’l Ins. Co. v. Citibank, 543 F.3d 907, 909–10 (7th
Cir. 2008) (explaining that it would “bring commercial transactions to a grinding
halt” if, “instead of being able to look at the payee line and to verify that the person
presenting the check was indeed entitled to do so, banks” were required “to
conduct a full-blown investigation every time to make sure that a party with an
equitable interest in the check was not lurking in the background”); § 28:3-203
UCC comment 1 (“An instrument is a reified right to payment. The right is
represented by the instrument itself.”); see also Menichini v. Grant, 995 F.2d 1224,
1232 (3d Cir. 1993) (“Article 3 of the UCC furnishes us with the applicable loss-
allocation rules for the check payments. These rules, premised on the
responsibility to exercise ordinary care, proceed from the principle that liability
rests with the party best able to prevent the loss.”). From the standpoint of the
bank, the McKinleys had a legal right to enforce the check without providing any
notice to Mr. Bartel. D.C. Code § 28:3-110; see also D.C. Code § 28:3-412 (“The
obligation” on the part of the issuer of a cashier’s check “is owed to a person
entitled to enforce the instrument.”); Covington v. JP Morgan Chase, 62 F. Supp.
12
3d 47, 55–56 (D.D.C 2014) (citing D.C. Code § 28:3-203 (b)).
That Mr. Bartel transferred the check does not mean that a person in Mr.
Bartel’s shoes is necessarily without recourse. Where a third party breaches a
contract or improperly converts an instrument, a person in Mr. Bartel’s
circumstances may pursue an action against that third party. See § 28:3-203 UCC
comment 1 (“If [a] thief transfers [a] check to a purchaser the transferee obtains the
right to enforce the check. If the purchaser is not a holder in due course, the
owner’s claim to the check may be asserted against the purchaser.”); cf. McNulty v.
Great Am. Ins. Co., 727 F. Supp. 45, 48–49 (D. Mass. 1989) (“Although the
plaintiff in this case is a payee and was unaware of the attempted surrender of the
note, the actors who returned the old check and received a new check were payees
also. . . . A note should not be considered ‘lost’ solely because it has been
transferred improperly.”). Mr. Bartel’s private hope or even formal agreement
requiring that the McKinleys not cash the check until selling their stock shares did
not, however, immunize his delivery of a cashier’s check made out to both of them
from the repercussions of such a transfer within the meaning of § 28:3-203.8 In
8
This result may seem unusually harsh in light of the unique circumstances
of Mr. Bartel’s case, where both of the McKinleys are now deceased and the lapse
of time has resulted in a scenario in which, as the trial court put it, “[t]here are
simply no records proving anything” as to the whereabouts of the check, “except
that Mr. Bartel has a copy of a 1994 receipt for the check.” In a different case, the
(continued…)
13
short, therefore, Mr. Bartel cannot prevail in his suit because his “loss of
possession” was “the result of a transfer” precluding his recovery under D.C. Code
§ 28:3-309 (a)(2) and § 28:3-312 (a)(3)(iii).
III.
For the foregoing reasons, we affirm the judgment of the Superior Court.
So ordered.
(…continued)
McKinleys might have been able to simply describe what had come of the check or
file a declaration of loss themselves. Given the facts at hand, however, we
interpret “transfer” consistent with the primary concern associated with a missing
instrument—that the bank not be forced to pay twice, e.g. A.I. Credit Corp. v.
Gohres, 299 F. Supp. 2d 1156, 1160 (D. Nev. 2004)—and consistent with the
fundamental “principle that liability rests with the party best able to prevent the
loss.” Menichini v. Grant, 995 F.2d 1224, 1232 (3d Cir. 1993). Having
voluntarily given the McKinleys a cashier’s check that they could readily enforce
or negotiate at any time, Mr. Bartel is no longer in the best position to attest to the
fate of the missing instrument.