DR. DOMINICK A. LEMBO VS. ARLENE MARCHESE (L-0453-15, PASSAIC COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4048-17T2
DR. DOMINICK A. LEMBO and
BELMONT DENTAL ASSOCIATES,
Plaintiffs-Appellants,
v.
ARLENE MARCHESE, KAREN
WRIGHT, KREINCES, ROLLINS &
SHANKER, LLC and MARIA T.
ROLLINS, CPA,
Defendants,
and
TD Bank, NA,
Defendant-Respondent.
_______________________________
Submitted March 27, 2019 – Decided April 16, 2019
Before Judges Fuentes and Vernoia.
On appeal from Superior Court of New Jersey, Law
Division, Passaic County, Docket No. L-0453-15.
De Marco & De Marco, attorneys for appellants
(Michael P. De Marco, on the briefs).
Sherman Wells Sylvester & Stamelman, LLP, attorneys
for respondent (Anthony J. Sylvester and Caitlin T.
Shadek, on the brief).
PER CURIAM
Plaintiffs Dr. Dominick A. Lembo and Belmont Dental Associates appeal
from a Law Division order dismissing with prejudice the single cause of action
asserted in their complaint against defendant TD Bank, N.A. (TD Bank), for
failure to state a claim. R. 4:6-2(e). We affirm in part, vacate in part and remand
for further proceedings.
We accept the facts alleged in the complaint as "true and give [plaintiffs]
the benefit of all inferences that may be drawn in [their] favor" because they
appeal from an order granting TD Bank's motion to dismiss for failure to state a
claim. Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988); accord
Banco Popular N. Am. v. Gandi, 184 N.J. 161, 165-66 (2005). Dr. Lembo is a
dentist and owner of Belmont Dental Associates, a dental practice. Plaintiffs
employed Karen Wright as a dental hygienist and Arlene Marchese as an office
manager. Plaintiffs also retained a certified public accountant and her
accounting firm to provide accounting services for the dental practice.
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According to the complaint, during a period prior to December 21, 2011,
Wright and Marchese took checks issued to plaintiffs that totaled several
hundred thousand dollars, forged Dr. Lembo's endorsement on the checks and
deposited the checks in their personal accounts at TD Bank. The complaint
alleged causes of action against Wright and Marchese for fraud (first count),
unjust enrichment (second count), conversion (third count), and breach of their
duty of honesty and fair dealing (fourth count). The complaint further asserted
a cause of action against the certified public accountant and her accounting firm
for negligently failing to detect the fraud and conversion of plaintiffs' property
(fifth count).
The complaint asserted a single cause of action against TD Bank.
Plaintiffs alleged TD Bank knew or should have known that Wright and
Marchese were not permitted to negotiate checks made payable to plaintiffs and
"aided and abetted Marchese and Wright in their fraudulent scheme and
conduct." TD Bank moved to dismiss the complaint, arguing it failed to state a
claim upon which relief could be granted. See R. 4:6-2(e).
The court granted the motion, finding the complaint asserted a common
law negligence claim against TD Bank that could not be sustained as a matter of
law because the "Uniform Commercial Code" bars "claims of non-customers
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against banks" absent a showing of a "special relationship." The court found
plaintiffs failed to allege a special relationship between themselves and TD Bank
or allege any facts demonstrating such a relationship. The court also rejected
plaintiffs' argument that the complaint alleged a violation of the Uniform
Fiduciaries Law (UFL), N.J.S.A. 3B:14-52 to -61, because neither Wright nor
Marchese qualified as fiduciaries under the statute. The court entered an order
dismissing the complaint as to TD Bank with prejudice. 1 This appeal followed.
We review de novo a trial court's dismissal of a complaint under Rule 4:6-
2(e), Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210
N.J. 597, 604 (2012), owing "no deference to the trial court's conclusions,"
Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 114
(App. Div. 2011). "We approach our review of the judgment below mindful of
the test for determining the adequacy of a pleading: whether a cause of action is
'suggested' by the facts." Printing Mart-Morristown v. Sharp Elecs. Corp., 116
N.J. 739, 746 (1989) (quoting Velantzas, 109 N.J. at 192). "[A] reviewing court
'searches the complaint in depth and with liberality to ascertain whether the
fundament of a cause of action may be gleaned even from an obscure statement
1
Plaintiffs obtained judgments against Wright and Marchese and dismissed the
complaint against the certified public accountant and her accounting firm.
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of claim, opportunity being given to amend if necessary.'" Ibid. (quoting Di
Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div.
1957)). Plaintiffs are "entitled to every reasonable inference of fact," ibid., but
a "dismissal is mandated where the factual allegations are palpably insufficient
to support a claim upon which relief can be granted," Rieder v. State, 221 N.J.
Super. 547, 552 (App. Div. 1987).
On its face, the complaint alleges only common law claims against TD
Bank. The complaint does not expressly assert any statutory bases for plaintiffs'
claims against the bank. A liberal reading of the complaint suggests it alleges
that TD Bank either negligently allowed Wright and Marchese to deposit checks
with forged endorsements into their accounts or aided and abetted in the
conversion of plaintiffs' property.
The Uniform Commercial Code (UCC), N.J.S.A. 12A:1-101 to 12-26,
"provides a comprehensive framework for allocating and apportioning the risks
of handling checks." City Check Cashing, Inc. v. Mfrs. Hanover Tr. Co., 166
N.J. 49, 57 (2001). However, "[u]nless displaced by the particular provisions of
the [UCC], the principles of law and equity, including the law merchant and the
law relative to capacity to contract, principal and agent, estoppel, fraud,
misrepresentation, duress, coercion, mistake, bankruptcy, and other validating
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or invalidating cause supplement its provisions." N.J.S.A. 12A:1-103(b). Thus,
"[a]s a general rule, courts have read" section 103(b) of the UCC "to mean that
the [UCC] does not displace the common law of tort as it affects parties in their
commercial dealings except insofar as reliance on the common law would thwart
the purposes of the UCC." ADS Assocs. Grp. v. Oritani Sav. Bank, 219 N.J.
496, 516 (2014) (quoting N.J. Bank NA v. Bradford Sec. Operations, Inc., 690
F.2d 339, 345-46 (3d Cir. 1982)).
"It is against that backdrop, and mindful of the balance of interests
reflected in the Legislature['s] enactment of the [UCC's] provisions, that most
courts have been reluctant to sanction common law negligence claims [against
banks]." City Check Cashing, Inc., 166 N.J. at 58. "[I]n the check collection
arena, unless the facts establish a special relationship between the parties created
by agreement, undertaking or contact, that gives rise to a duty, the sole remedies
available are those provided in the [UCC]." Id. at 62. It is "[o]nly in very rare
instances," such as where claimant and the bank have a special relationship, that
a court should "permit a common law cause of action." Id. at 58 (quoting Bank
Polska Kasa Opieki v. Pamrapo Sav. Bank, 909 F. Supp. 948, 956 (D.N.J.
1995)).
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Plaintiffs' asserted common law claim of negligence fails as a matter of
law because it is untethered to any factual allegation that plaintiffs and TD Bank
had a special relationship. See Brunson v. Affinity Fed. Credit Union, 199 N.J.
381, 400 (2009). The complaint does not allege plaintiffs had any relationship,
contract or undertaking with TD Bank or assert plaintiffs had any contacts with
TD Bank establishing the special relationship required to support a legally viable
common law cause of action. See City Check Cashing, Inc., 166 N.J. at 62;
Brunson, 199 N.J. at 400; see also Psak, Graziano, Piasecki & Whitelaw v. Fleet
Nat'l Bank, 390 N.J. Super. 199, 205-06 (App. Div. 2007) (finding that where
plaintiff did not establish a special relationship between plaintiff and defendant
mortgage servicer, plaintiff's claim of common law negligence was displaced by
the UCC).
Plaintiffs' putative common law claim for conversion similarly fails
because the UCC provides a remedy for conversion of a check by paying on a
forged endorsement. N.J.S.A. 12A:3-420(a); see also N.J. Lawyers' Fund for
Client Prot. v. Pace, 374 N.J. Super. 57, 62 (App. Div. 2005) (noting that
"[c]onversion occurs" under N.J.S.A. 12A:3-420(a) "when [a] bank pays on [a]
forged endorsement"); Leeds v. Chase Manhattan Bank, NA, 331 N.J. Super.
416, 422 (App. Div. 2000) (finding "a depository bank" is "strictly liable [under
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the UCC] for conversion on a forged or stolen instrument"). Thus, allowing
plaintiffs to pursue a common law conversion claim against TD Bank for its
alleged aiding and abetting of Wright's and Marchese's conversion of the checks
by paying on the alleged forged endorsements would "thwart the purposes of the
UCC." ADS Assocs., 219 N.J. at 516 (quoting N.J. Bank, 690 F.2d at 345-46).
The complaint does not expressly assert a claim founded on the UCC.
But even if the requisite liberal reading of the complaint, Printing Mart, 116 N.J.
at 746, permitted an extrapolation of a cause of action based on the UCC, the
claim must be dismissed because it is time-barred. N.J.S.A. 12A:3-118(g)
provides that "an action for conversion of an instrument . . . or like action based
on conversion . . . arising under this chapter . . . must be commenced within
three years after the cause of action accrues." An action for conversion accrues
"with respect to negotiable instruments . . . at the time of conversion, and . . . the
time of discovery rule does not apply." N.J. Lawyers' Fund for Client Prot. v.
Pace, 186 N.J. 123, 125 (2006) (quoting Pace, 374 N.J. Super. at 67).
Plaintiffs' complaint alleges they learned of Wright's and Marchese's
actions in "late December of 2011," but did not file their complaint until
February 2015, more than three years after TD Bank's putative conversion of the
funds by paying on the allegedly forged endorsements. Thus, to the extent the
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complaint might be liberally read to assert a claim for conversion under the
UCC, it is time-barred under N.J.S.A. 12A:3-118(g). Plaintiffs do not argue to
the contrary.
Although the complaint makes no reference to the UFL, plaintiffs also
argued before the motion court, and reprise the argument on appeal, that the
complaint asserts a cause of action under the UFL against TD Bank. The court
rejected the argument finding that, based on the facts alleged in the complaint,
the statute did not apply because Wright and Marchese were not fiduciaries
under the UFL. We therefore consider whether the complaint's allegations
suggest the fundament of a cause of action against TD Bank under the UFL.
Printing Mart, 116 N.J. at 746. We find that it does.
The UFL provides that a bank is liable where it takes a check from a
fiduciary under certain circumstances, the fiduciary breaches his or her fiduciary
obligations to the principal and the bank "takes the instrument with actual
knowledge of the breach or with knowledge of facts that [its] action in taking
the instrument amounts to bad faith." N.J.S.A. 3B:14-55; see also N.J. Title Ins.
Co. v. Caputo, 163 N.J. 143, 149-57 (2000) (explaining standard for establishing
bad faith under N.J.S.A. 3B:14-55). Similarly, N.J.S.A. 3B:14-58(a) provides
that a bank is liable under certain defined circumstances where a fiduciary
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deposits a check in his or her personal account and the bank "receives the deposit
or pays the check with actual knowledge that the fiduciary is committing a
breach of [her] obligation as fiduciary in making the deposit o r drawing the
check, or with knowledge . . . that . . . receiving the deposit of paying the check
amounts to bad faith." N.J.S.A. 3B:14-58(b) provides that where an instrument
is "payable to the principal . . . the bank has notice of the breach of fiduciary
duty if the instrument is deposited to an account other than an account of the
fiduciary, as fiduciary, or an account of the principal."
Here, the complaint in part alleges TD Bank had actual knowledge Wright
and Marchese forged checks made payable to plaintiffs and, with that
knowledge, accepted the checks with forged endorsements and deposited them
in Wright's and Marchese's personal accounts. In our view, those assertions
sufficiently allege the bad faith elements of causes of action under N.J.S.A.
3B:14-55 and -58(b). Moreover, the allegations concerning their possession of
the checks, fraudulent endorsement of the checks and deposits of the checks
sufficiently suggest that they engaged in conduct encompassed by the statutes
supporting a claim against TD Bank under the UFL. For example, and not by
way of limitation, the complaint alleges Wright and Marchese deposited the
checks into their personal accounts which, giving plaintiffs the benefit of all
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reasonable inferences, supports a claim TD Bank had notice of their alleged
breach of fiduciary duty. See N.J.S.A. 3B:14-58(b).
TD Bank correctly argues the complaint does not expressly allege that
either Wright or Marchese was a fiduciary within the meaning of the UFL.
N.J.S.A. 3B:14-53(b) defines "fiduciary" under the UFL as follows:
[A] trustee under any trust, expressed, implied,
resulting or constructive, executor, administrator,
guardian, conservator, curator, receiver, trustee in
bankruptcy, assignee for the benefit of creditors,
partner, agent, officer of a corporation, public or
private, public officer, or any other person acting in a
fiduciary capacity for any person, trust or estate.
[N.J.S.A. 3B:14-53(b).]
Here, the complaint describes Marchese as the dental practice's office
manager and Wright and Marchese as plaintiffs' employees. It also suggests that
in their respective capacities they had access to the checks at issue. Plaintiffs
further argue that by virtue of Wright's and Marchese's taking of the checks,
they should be considered "constructive trustees" of the checks and, as such, are
fiduciaries under N.J.S.A. 3B:14-53(b).2
2
We acknowledge plaintiffs did not argue before the motion court that Wright
and Marchese are "constructive trustees" of the checks and are therefore
fiduciaries under N.J.S.A. 3B:4-53(b). While we generally do not consider
arguments raised for the first time on appeal unless they go to our jurisdiction
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It is not our role to determine whether plaintiffs are correct in their
assertions, or whether evidence will ultimately support their UFL claim.
Printing Mart, 116 N.J. at 746. We determine only whether a cause of action is
suggested by the facts, ibid., and if "a cause of action may be gleaned even from
an obscure statement of claim, opportunity being given to amend if necessary,"
ibid. (quoting Di Cristofaro, 43 N.J. Super. at 252). For the reasons noted, we
are convinced the complaint suggests a cause of action against TD Bank under
the UFL and the court erred by dismissing the complaint as to that claim with
prejudice.3 See id. at 772 (noting that dismissals granted pursuant to Rule 4:6-
2(e) should ordinarily be without prejudice so as to allow plaintiffs to better
articulate their claims in an amended complaint). We therefore vacate the court's
order dismissing the complaint with prejudice as to plaintiffs' UFL claim against
or involve matters of public concern, Nieder v. Royal Indem. Ins. Co., 62 N.J.
229, 234 (1973), we consider plaintiffs' belated argument here because our
analysis under Rule 4:6-2(e) requires that we conduct a "painstaking" review of
the complaint "with a generous and hospitable approach" to discern whether it
suggests a fundament of a cause of action, Printing Mart, 116 N.J. at 746.
3
We offer no opinion as to the merits of any UFL claim plaintiffs may assert in
an amended complaint. For example, we do not suggest or decide that either
Wright or Marchese is a fiduciary under N.J.S.A. 3B:14-53(b), that they engaged
in conduct which would otherwise make TD Bank liable under the UFL or that
TD Bank acted in bad faith or in any other manner making it liable under the
UFL. We decide only that plaintiffs may file an amended complaint alleging
facts supporting their UFL claims.
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TD Bank and remand to allow plaintiffs to amend their complaint to allege a
claim under the UFL.
We affirm the court's dismissal with prejudice of plaintiffs' common law
claims for negligence and conversion and claims under the UCC against TD
Bank.
Affirmed in part, vacated in part and remanded for further proceedings in
accordance with this opinion. We do not retain jurisdiction.
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