HALA MORCOS VS. OTTO SCERBO (L-1229-16, HUDSON COUNTY AND STAEWIDE) ( 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NOT FOR PUBLICATION WITHOUT THE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-4600-17T2
HALA MORCOS and MARY
MORCOS,
Plaintiffs,
v.
OTTO SCERBO, SCHWARTZ
and SCERBO, HOOGSTRA,
SCHWARTZ and SCERBO,
Defendants.
_______________________________
PATRICIA A. IBRAIMI,
Plaintiff,
v.
OTTO J. SCERBO, ESQ.,
Defendant.
_______________________________
TRUSTEES OF THE NEW JERSEY
LAWYERS' FUND FOR CLIENT
PROTECTION,
Plaintiff-Appellant,
v.
OTTO J. SCERBO, JOHN SCHWARTZ,
and SCHWARTZ & SCERBO, PC,
Defendants,
and
PNC BANK, N.A.,
Defendant-Respondent.
_________________________________
JOHN R. SCHWARTZ, and
SCHWARTZ & SCERBO, PC,
Plaintiffs,
v.
IRONSHORE INDEMNITY, INC.,
JLT FACILITIES INC., and
UNDERWRITERS AT LLOYDS,
LONDON,
Defendants.
_________________________________
Submitted February 26, 2019 – Decided April 4, 2019
Before Judges Yannotti and Natali.
On appeal from Superior Court of New Jersey, Law
Division, Hudson County, Docket No. L-1229-16.
A-4600-17T2
2
Michael T. McCormick, attorney for appellant New
Jersey Lawyers' Fund for Client Protection.
Brown & Connery, LLP, attorneys for respondent PNC
Bank, NA (Jeffrey R. Johnson, on the brief).
PER CURIAM
The Trustees of the New Jersey Lawyers' Fund for Client Protection
(Fund) appeal from an April 13, 2018 order denying its motion for summary
judgment, granting summary judgment to defendant PNC Bank, N.A., (PNC),
and dismissing with prejudice the Fund's claims that PNC was strictly liable
under section 3-420 of New Jersey's Uniform Commercial Code (UCC) for
depositing checks bearing forged endorsements. After thoroughly reviewing the
record in light of the arguments raised on appeal, we affirm in part, vacate in
part, and remand for proceedings consistent with our opinion.
I.
The Fund is a Committee of the Supreme Court of New Jersey established
pursuant to Rule 1:28-1(a) to reimburse "losses caused by the dishonest conduct
of members of the bar of this State." The Fund paid five claims, totaling
$298,263.23, related to the dishonest conduct of disbarred lawyer, Otto J.
Scerbo. The three claims at issue in this appeal relate to Scerbo's alleged forgery
of his clients', Jonathan Vazquez, Joseph and Carmella Ricci, and Patricia A.
A-4600-17T2
3
Ibraimi, endorsements on checks that PNC received and deposited as a
depositary bank.
After the Fund paid Vazquez, the Riccis, and Ibraimi $178,228.29 and
they assigned and subrogated their claims to it, the Fund filed a complaint
against Scerbo, John Schwartz, their law firm (Schwartz & Scerbo), and PNC.
Counts fifteen, twenty-four, and thirty-three of the complaint alleged that PNC
unlawfully converted checks payable to Vazquez in the amount of $42,318.29
(Vazquez claim), Ibraimi in the amount of $15,000 (Ibraimi claim), and the
Riccis in the amount of $133,515 (Ricci claim). 1 We address the Ibraimi, Ricci,
and Vazquez claims separately.
II.
A. Ibraimi Claim
Ibraimi retained Schwartz & Scerbo in a personal injury action related to
a slip-and-fall at a Costco store. An arbitrator recommended a $30,000
settlement. Costco would not agree to resolve the case for that amount, so
Scerbo filed a notice of demand for trial de novo.
According to Scerbo, during a phone call between him and Ibraimi,
Ibraimi "very reluctantly" agreed to settle the case for $15,000. Scerbo
1
The court consolidated the Fund's complaint with matters not on appeal.
A-4600-17T2
4
thereafter received a letter from Costco's counsel, which enclosed a copy of a
stipulation of dismissal and a release form.
Scerbo testified that after he confirmed Costco's settlement offer, Ibraimi
refused to accept the settlement funds. Scerbo acknowledged that despite
Ibraimi's position, either he or his secretary, who was a notary public, "forged"
Ibraimi's signature on the claim release, endorsed Ibraimi's name on the
settlement check, and then presented the check to PNC for deposit in his trust
account. PNC accepted and deposited the check in Scerbo's account.
Ibraimi filed an initial and supplemental statement of claim with the Fund
in which she claimed Scerbo "forged" her signature on the $15,000 settlement
check "and stole [her] money." Ibraimi signed a release, assignment, and
subrogation agreement with the Fund on February 27, 2015. According to the
Fund, on March 11, 2016, it employed a messenger to file its complaint with the
court, "a distance of two city blocks" away from the Fund's office, "with the
reasonable expectation" that it be delivered that day or the next business day.
However, the complaint was not filed until March 15, 2016.
B. Vazquez Claim
Vazquez also retained Scerbo to represent him in a personal injury case,
which Scerbo settled in December 2013. Scerbo testified that he settled the case
A-4600-17T2
5
"with [Vazquez's] consent" for $75,000. According to the Fund, "Scerbo forged
Vazquez's endorsement to the $42,318.29 check, one of three checks issued by
the tortfeasor's insurer to settle the matter." The record contains a check dated
December 9, 2013, in the amount of $42,318.29, payable to the order of Jonathan
"Vasquez,"2 with a payee address of Otto J. Scerbo at Schwartz & Scerbo's office
in Jersey City, New Jersey. Scerbo testified at deposition that although he had
authority to receive, endorse, and negotiate the check, he did not remember
whether he, in fact, endorsed the check. Nonetheless, Scerbo conceded that he
deposited the check in his trust account at PNC, but "did not disburse
[Vazquez's] portion of the funds to him" and "did not pay him back."
Vazquez filed a statement of claim with the Fund on October 15, 2014. In
a supplemental statement, he denied that he or "anyone on [his] behalf
authorized [Scerbo] to write checks to himself or sign [his] name on checks on
[his] behalf." Similarly, Vazquez certified in an October 31, 2014 forged
endorsement affidavit that "[t]o the best of [his] knowledge and belief, [he]
never authorized anyone to sign [his] name on [the settlement] check." Vazquez
signed a release, assignment, and subrogation agreement with the Fund on May
29, 2015, and the Fund paid Vazquez $42,318.29.
2
Above the payee line, the check states that the claimant is Jonathan Vazquez.
A-4600-17T2
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C. Ricci Claim
Joseph and Carmella Ricci retained Scerbo's firm to represent them in two
real estate transactions, a June 2007 sale and a sale that closed in September
2013, though certain payments were made months after the closing. Only the
September 2013 sale is relevant to this appeal. The Fund maintains that Scerbo
ultimately received three checks totaling $135,308 as proceeds from the sale,
forged the Riccis' endorsements, and presented them to PNC, which took and
deposited the checks into Scerbo's trust account. Scerbo later reimbursed the
Riccis for approximately $15,000, and the Fund paid the Riccis $120,910 as a
result of Scerbo's actions.
During discovery, PNC produced a Power of Attorney dated September
24, 2013, signed by the Riccis, notarized by Scerbo's secretary, and which
granted Scerbo the authority to "endorse . . . in my name . . . all checks . . . as
my attorney-in-fact may deem necessary or appropriate . . . ." In addition, the
Power of Attorney grants Scerbo the power to conduct "banking transactions"
on behalf of the Riccis, as set forth in N.J.S.A. 46:2B-10 to -19.
The Riccis filed a statement of claim and a supplemental statement of
claim with the Fund on November 20, 2014. In their supplemental statement,
the Riccis denied that they "authorize[d] [Scerbo] to write checks to himself or
A-4600-17T2
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sign [their] name on checks." In addition, they stated that on September 26,
2014, Scerbo called and asked them "to sign an Affidavit to the effect that we
gave our authorization to him to represent us in matters. We refused to do this
and did not give him authorization for anything." Further in an April 6, 2015
forged endorsement affidavit, Mrs. Ricci certified that "[t]o the best of [her]
knowledge and belief, [she] never authorized anyone to sign [her] name on" any
of the checks that Scerbo endorsed in her name, and that she never saw or had
them in her possession. Mr. Ricci provided an identical statement in his forged
endorsement affidavit.
III.
The Fund filed its complaint on March 15, 2016. Following discovery,
the parties filed cross-motions for summary judgment with respect to the
Vazquez, Ibraimi, and Ricci claims. PNC maintained the Ibraimi claim was
barred as a matter of law under the UCC's three-year statutes of limitation. With
respect to the Vazquez and Ricci claims, PNC argued it was undisputed that
Scerbo had "authority to endorse" the checks and therefore it was not liable
under N.J.S.A. 12A:3-420(a). Conversely, the Fund maintained PNC was
strictly liable under that provision on all three claims for taking and depositing
checks bearing forged endorsements.
A-4600-17T2
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On April 20, 2018, after the parties waived oral arguments, the court
granted PNC's motion and denied the Fund's cross-motion. In an oral opinion,
the court held:
Now, as to the Ibra[]imi matter, there is no credible
argument made by the Fund as to why, other than its
perceived lack of prejudice, . . . the claim was not filed
within the strict three-year statute of limitations.
As noted by PNC, the Fund's argument to salvage this
claim was that it unquestionably filed its complaint
outside of the statute of limitations, is only based on a
single unpublished opinion.
It is not based on any of the UCC provisions or on any
interpretive case law. Similarly, under a UCC there is
a strict three-year statute of limitations, and therefore
filing outside of that time period, the claim would be
time barred. That is N.J.S.A. 12A:3-118(g).
....
As to the Va[z]quez matter, according to Mr. Scerbo's
own testimony, he had the authority to endorse the
Va[z]quez settlement check into his attorney trust
account. This would have been customary since it was
handled properly at its inception.
....
[A]s to the power of attorney that was endorsed and
negotiated with the specific authorization, the Fund
does not counter the allegations nor the representations
of fact surrounding the existence of a power of attorney
that was given to Otto Scerbo from Mr. and Mrs. Ricci
and appropriately notarized. Only unsubstantiated
A-4600-17T2
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arguments are made in favor or in support of the
allegations, therefore summary judgment sought by the
Fund as against PNC in this issue is denied, and
summary judgment sought by PNC Bank as to this issue
will be granted.
This appeal followed.
IV.
On appeal, the Fund maintains: 1) it was entitled to summary judgment
with respect to the Vazquez claim; 2) a material issue of fact precluded summary
judgment in PNC's favor as to the Ricci claim; and 3) the motion judge
incorrectly interpreted the law in barring recovery on the Ibraimi claim. In
addition, PNC contends the Fund would impermissibly obtain "double recovery"
if PNC were required to reimburse the Fund for conversion of the checks.
We review summary judgment rulings de novo, under the same standard
governing the motion judge's initial decision. Globe Motor Co. v. Igdalev, 225
N.J. 469, 479 (2016). Summary judgment is appropriate when "the pleadings,
depositions, answers to interrogatories and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
challenged and that the moving party is entitled to a judgment or order as a
matter of law." R. 4:46-2(c). If there are no genuine and material factual
A-4600-17T2
10
questions, we determine whether the court correctly interpreted the law. Walker
v. Alt. Chrysler Plymouth, 216 N.J. Super. 255, 258 (App. Div. 1987).
Reviewing a summary judgment record involves an "evaluation, analysis
and sifting of evidential materials," but "not the same kind of weighing that a
factfinder (judge or jury) engages in when assessing the preponderance or
credibility of evidence." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,
536 (1995). "On a motion for summary judgment the court must grant all the
favorable inferences to the non-movant." Ibid.A. Ibraimi Claim
With respect to the Ibraimi claim, the Fund maintains the court committed
reversible error in requiring strict compliance with the UCC's applicable three -
year statute of limitations, and argues the statute should have been relaxed under
Negron v. Llarena, 156 N.J. 296 (1998). We disagree.
"[A]n action for conversion of an instrument . . . must be commenced
within three years after the cause of action accrues." N.J.S.A. 12A:3-118(g).
"An action involving a negotiable instrument accrues at the time the check is
negotiated; that is, the statute of limitations begins to run at the time the check
amount is debited from the maker's account." Psak, Graziano, Piasecki &
Whitelaw v. Fleet Nat. Bank, 390 N.J. Super. 199, 204 (App. Div. 2007)
A-4600-17T2
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(citations omitted); see also N.J.S.A. 12A:3-104(b), (e), and (f) (defining checks
as negotiable instruments). Thus, the cause of action for the Ibraimi claim
accrued on March 12, 2013, when Scerbo presented, and PNC deposited, the
$15,000 settlement check. As March 12, 2016, was a Saturday, the three-year
statute of limitations expired on Monday, March 14, 2016. See Mercer Cty.
Park Comm'n v, DiTullio, 139 N.J. Super. 36 (App. Div. 1976); R. 1:3-1; see
also N.J.S.A. 36:1-1 (designating Saturdays as public holidays). It is undisputed
that the Fund filed its complaint on Tuesday, March 15, 2016, one day after the
statute of limitations had run.
The Fund maintains that we should apply the substantial compliance
doctrine to relax the UCC's statute of limitation. The substantial compliance
doctrine requires a party seeking to invoke that equitable doctrine to establish:
(1) the lack of prejudice to the defending party;
(2) a series of steps taken to comply with the statute
involved;
(3) a general compliance with the purpose of the
statute;
(4) a reasonable notice of petitioner's claim[;] and
(5) a reasonable explanation why there was not a
strict compliance with the statute.
A-4600-17T2
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[Negron, 156 N.J. at 305 (quoting Bernstein v. Bd. of
Trustees of Teachers' Pension & Annuity Fund, 151
N.J. Super. 71, 76-77 (App. Div. 1977)).]
In Negron, a wrongful death suit, the Court distinguished "[p]rocedural
statute of limitations," which "govern general causes of action, such as torts and
contracts," from "substantive statutes of limitations," which "restrict statutory
causes of action that did not exist at common law." Id. at 300 (citations omitted).
After noting that "substantive statutes of limitations are traditionally strictly
applied," id. at 300-01, the Court recognized its "approach to substantive statutes
of limitations has evolved to one that recognizes that their application depends
on statutory interpretation focusing on legislative intent and purpose." Id. at
304.
Here, as explained in N.J.S.A. 12A:1-103(a), the legislative intent and
policies underlying the UCC are:
(1) to simplify, clarify, and modernize the law
governing commercial transactions;
(2) to permit the continued expansion of commercial
practices through custom, usage, and agreement
of the parties; and
(3) to make uniform the law among the various
jurisdictions.
A-4600-17T2
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Requiring strict compliance with N.J.S.A. 12A:3-118(g)'s three-year
statute of limitation would promote simplicity, uniformity, and certainty in
commercial transactions. Further, although there are no reported cases in New
Jersey addressing whether the substantial compliance doctrine should be applied
to relax N.J.S.A. 12A:3-118(g), we have declined to apply a related equitable
doctrine, the discovery rule, to toll the statute. See Psak, 390 N.J. Super. at 207
(explaining "an unsuspecting victim of forgery is bound by the strict application
of the UCC's three-year limitations period"); N.J. Lawyers' Fund for Client Prot.
v. Pace, 374 N.J. Super. 57, 66-67 (App. Div. 2005). In addition, other states
similarly require strict compliance with the UCC's statutes of limitations. See
Pace, 374 N.J. Super. at 65 n.7 (listing cases from other jurisdictions in which
the discovery rule was held inapplicable to the UCC's statutes of limitations);
accord Jorgensen Farms, Inc. v. Country Pride Corp., Inc., 824 N.W.2d 410, 419
(S.D. 2012); Fuscellaro v. Indus. Nat. Corp., 368 A.2d 1227, 1231 (R.I. 1977);
Estate of Hollywood v. First Nat. Bank of Palmerton, 859 A.2d 472, 481 (Pa.
Super. Ct. 2004). We therefore conclude that strict compliance, not substantial
compliance, with N.J.S.A. 12A:3-118(g) "would effectuate" the UCC's
underlying policies, see Negron, 156 N.J. at 304, and that because the Fund
A-4600-17T2
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failed to file its complaint within three years, the court correctly granted
summary judgment to PNC on the Ibraimi claim.
B. Vazquez and Ricci Claims
Turning to the Vazquez and Ricci claims, the parties agree that N.J.S.A.
12A:3-420(a) governs whether PNC improperly converted the checks. That
statute provides, in pertinent part, that an instrument is "converted if . . . a bank
makes or obtains payment with respect to the instrument for a person not entitled
to enforce the instrument or receive payment." N.J.S.A. 12A:3-420(a).
The Fund maintains it was entitled to summary judgment on the Vazquez
claim because depositary banks are "strictly liable" under the statute for
"accepting, and warranting as authentic, endorsements forged by [an] attorney-
thief," and no factual dispute exists that Scerbo endorsed the check in Vazquez's
name and that endorsement was a "deliberate, willful, forgery . . . ."
By contrast, PNC maintains "[t]he Fund cannot shift liability to PNC
Bank" under section 3-420 "unless [the Fund] demonstrates Scerbo was not
entitled to endorse the check and deposit [it] into his attorney trust account"
(emphasis added), and no material factual issue exists that "Scerbo had authority
to endorse the check and deposit it into his attorney trust account." The parties
make essentially the same arguments as to the Ricci claim.
A-4600-17T2
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Thus, both before the motion judge and on appeal, the only issues the
parties raise as to PNC's potential liability are: 1) whether Scerbo had authority
to endorse the checks in his clients' names; and, if not, 2) whether a depositary
bank is strictly liable under section 3-420 for taking for deposit a check bearing
an unauthorized or forged endorsement. 3 The motion judge found the competent
evidential materials in the record revealed no material factual issue that Scerbo
was authorized to endorse the checks in his clients' names. We disagree.
"[A] depositary bank is strictly liable for paying on forged indorsements"
in an action for conversion under N.J.S.A. 12A:3-420(a). N.J. Lawyers' Fund
For Client Prot. v. First Fid. Bank, N.A., 303 N.J. Super. 208, 223 (App. Div.
1997). In First Fidelity, the Lawyers' Fund "paid fifteen former clients of James
V. Higgins, Esquire, . . . who had settled their tort claims without the client s'
knowledge, forged the clients' signatures, and embezzled the clients' funds." Id.3
PNC has not articulated any argument that Scerbo was entitled to enforce the
instrument or receive payment other than by virtue of his alleged authority to
endorse the checks. We therefore express no views as to whether Scerbo may
have been "entitled to enforce" the checks as "the holder of the instrument, a
nonholder in possession of the instrument who has the rights of a holder, or a
person not in possession of the instrument who is entitled to enforce the
instrument pursuant to [N.J.S.A.] 12A:3-309 or subsection d. of [N.J.S.A.]
12A:3-418" in any way other than PNC's "authority to endorse" argument. See
N.J.S.A. 12A:3-301 (defining "'[p]erson entitled to enforce' an instrument").
Nothing in this opinion should be interpreted as precluding the parties from
addressing this issue, or any other matter, on remand.
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at 211. Like Vazquez and the Riccis, the "clients assigned their rights to the
Lawyers' Fund," which instituted an action for conversion "as assignee and
subrogee" of the clients against the depositary bank. Ibid. We held that "if the
claimants had pursued a legal action against" the depositary bank without
assigning and subrogating their rights to the Fund, "they would have prevailed
because there was no factual dispute that the checks were forged and [the bank]
accepted and paid under the forged indorsements." Id. at 229. We therefore
affirmed the Law Division's grant of summary judgment to the Fund because
"the Lawyers' Fund has a right to subrogate against collateral sources other than
the defrauding attorney." Ibid.
The difference between the case at bar and First Fidelity is the presence
here of a factual dispute as to whether the checks were forged or unauthorized.
See Kuhn v. Tumminelli, 366 N.J. Super. 431, 446 (App. Div. 2004) (stating the
UCC "places responsibility for forged and unauthorized endorsements on
depositary banks") (emphasis added); see also Leeds v. Chase Manhattan Bank,
N.A., 331 N.J. Super. 416, 422 (App. Div. 2000) ("There is no substantial
difference between an unauthorized endorsement and a forged endorsement, the
result being the same in so far as concerns the passing of title." (quoting Teas v.
Third Nat'l Bank & Trust Co., 125 N.J. Eq. 224, 227–28 (E. & A.1939)). Thus,
A-4600-17T2
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the critical issue raised on summary judgment was whether the competent
evidential materials created a factual issue as to whether Scerbo was authorized
to endorse the checks.
The motion judge found the only competent evidence in that regard was
Scerbo's deposition testimony that he was authorized to endorse the checks, and
concluded that PNC was entitled to judgment as a matter of law. Because the
Riccis' and Vazquez's forged endorsement affidavits created material factual
disputes regarding Scerbo's authority to endorse the checks, we disagree with
the court's conclusion that PNC was entitled to summary judgment.
Both Joseph and Carmella Ricci and Vazquez submitted affidavits and
supplemental statements disputing Scerbo's authorization. As to Vazquez, the
court stated, "according to Mr. Scerbo's own testimony, he had the authority to
endorse the Vazquez settlement check into his attorney trust account. This
would have been customary since it was handled properly at its inception." In
so concluding, the court credited Scerbo's sworn statement and failed to address
that the summary judgment motion record contained Vazquez's affidavit directly
contradicting Scerbo's deposition testimony. Accordingly, although we agree
with the court that the Fund was not entitled to summary judgment on the
A-4600-17T2
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Vazquez claim, we disagree with its conclusion that PNC was entitled to
summary judgment in light of that factual dispute.
The Riccis' claim is a bit more complicated. They too submitted affidavits
attesting that Scerbo had no authority to endorse checks on their behalf.
However, they also executed a Power of Attorney that expressly authorized
Scerbo to "endorse . . . in my name . . . all checks . . . as my attorney-in-fact may
deem necessary or appropriate," and which granted him the authority provided
in N.J.S.A. 46:2B-10 to -19.
In its merits brief, the Fund describes the Power of Attorney as only
"allegedly executed by the Riccis," maintains a "conflict" existed between "the
Riccis' sworn statements and the [P]ower of [A]ttorney," and argues that it
"should be afforded the opportunity to solicit testimony on this issue." The
Fund further disputes the validity of the Power of Attorney in that, "[e]ven if the
Riccis signed the [P]ower of [A]ttorney . . . , they may have been induced to do
so by misrepresentations made by Scerbo as part of his plan to ultimately steal
the check proceeds." The motion judge, other than stating "the Fund does not
counter the allegations nor the representations of fact surrounding the existence"
of the Power of Attorney and that the Fund offered "[o]nly unsubstantiated
arguments" in support of its allegations, did not address that conflict.
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The competent evidence that we must view in the light most favorable to
the Fund on this issue consists of the Riccis' forged endorsement affidavits in
which they dispute the validity of signatures on three checks made payable to
"Joseph Ricci and Carmela Ricci." With respect to each check, the Riccis swore
to the following statements: "The endorsement on the check, which purports to
be my signature is not. In fact, the signature is a forgery. . . . To the best of my
knowledge and belief, I never authorized anyone to sign my name on said
check." In addition, Scerbo testified at his deposition that he began withdrawing
money from his attorney trust account for his own personal use as early as "2010
or 2011," years in advance of the Power of Attorney dated September 24, 2013.
Accordingly, we are satisfied on this record that the existence of two
competing statements, one authorizing Scerbo to endorse checks, and the other
expressly stating that Scerbo had no such authority, created a genuine and
material factual question sufficient to deny PNC's motion. However, on remand
the Riccis must present further evidence, by way of affidavit or deposition,
specifically addressing the authority purportedly given to Scerbo under the
Power of Attorney. Nothing in our opinion forecloses additional summary
judgment motions upon receipt of these sworn statements.
A-4600-17T2
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PNC also claims that the Fund would impermissibly receive a "double
recovery" if PNC was required to reimburse the Fund for the defrauded clients'
losses. Although we agree that double recovery is not permitted, see County
Concrete Corp. v. Smith, 317 N.J. Super. 50 (App. Div. 1998), PNC has failed
to demonstrate that the Fund, in fact, would receive double recovery if PNC
were ultimately found liable for conversion.
In County Concrete, the issue was whether a drawee bank "must reimburse
a payee or the true owner of a converted instrument the full amount of that
instrument even where the payee or true owner has otherwise received all or part
of the monies that the instrument was intended to transfer." Id. at 61. We held
that under those circumstances, the bank "is entitled to offset the amount of the
monies actually received by the payee or true owner . . . ." Ibid.However, County Concrete did not involve a payee who entered an
assignment and subrogation agreement with the Fund. Rather, the payee sued
in its own right after it already received a "replacement check" in the full amount
of the first converted check. Id. at 52-53. Accordingly, our holding that the
drawee bank against whom suit was brought was "entitled to offset the amount
of the monies actually received by the payee or true owner," id. at 61, did not
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assess a subrogee's rights to recover from a depositary bank after the subrogee
makes payment to the subrogor. That issue is governed by First Fidelity.
By virtue of the assignment and subrogation agreements and its payments
made to the defrauded clients, the Fund is an aggrieved party, and "[t]he
remedies provided by the [UCC] shall be liberally administered to the end that
the aggrieved party may be put in as good a position as if the other party had
fully performed . . . ." N.J.S.A. 12A:1-305(a).4 Therefore, although we agree
with PNC that it may be entitled to an offset under County Concrete as the Fund
may not receive a "double recovery," PNC's potential entitlement to an offset
does not depend on the amount of money that the Fund paid to the defrauded
clients. Rather, PNC's only plausible claim to an offset derives from the fact
that the Fund has settled with another party for an undisclosed amount. Because
that amount is undisclosed, we cannot determine the extent of any offset
available to PNC. On remand, the trial court can address that issue in the first
instance.
Finally, PNC contends that even if "Vazquez signed the check, it would
have been deposited into the trust account," and that under County Concrete, a
4
PNC has not disputed that the Fund is entitled to enforce the check by virtue
of the subrogation agreements with Vazquez and the Riccis.
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depositary bank is not subject to liability when the deposited funds reach their
intended destination. This argument is meritless. There is no competent
evidence in the record to conclude that, if Vazquez had endorsed the check, he
would have deposited the check into Scerbo's trust account. Further, under
County Concrete, it is not whether the funds reached their intended destination,
but rather whether they reached the "intended payee" that determines the bank's
liability, and there is no allegation that anyone other than Vazquez was the
intended payee of the check. See County Concrete, 317 N.J. Super. at 61(quoting Lund v. Chemical Bank, 797 F. Supp. 259, 272 (S.D.N.Y. 1992)).
Affirmed in part, vacated in part, and remanded. We do not retain
jurisdiction.
A-4600-17T2
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