ROBERT J. TRIFFIN VS. SHS GROUP, LLC (DC-013226-18, MIDDLESEX COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5497-18
ROBERT J. TRIFFIN,
Plaintiff-Appellant,
APPROVED FOR PUBLICATION
v. March 3, 2021
APPELLATE DIVISION
SHS GROUP, LLC (d/b/a) THE
SALON PROFESSIONAL
ACADEMY (d/b/a) INNOVATE
SALON ACADEMY and
JOHN W. SICKLES,
Defendants-Respondents,
and
AMANDA R. GRZYB-KELLY,
Defendant.
___________________________
Argued December 2, 2020 – Decided March 3, 2021
Before Judges Alvarez, Geiger and Mitterhoff.
On appeal from the Superior Court of New Jersey,
Law Division, Middlesex County, Docket No. DC-
013226-18.
Robert J. Triffin, appellant, argued the cause pro se.
Respondents have not filed a brief.
The opinion of the court was delivered by
MITTERHOFF, J.A.D.
Plaintiff Robert J. Triffin appeals from a May 23, 2019 order denying his
motion for reconsideration of the trial court's January 24, 2019 order, issued
after a Special Civil Part trial, that dismissed his complaint for enforcement
pursuant to N.J.S.A. 12A:3-414(b), alleging non-payment of a dishonored
check against defendant SHS Group, LLC (SHS) and its owner John W.
Sickles. At trial, plaintiff argued N.J.S.A. 12A:3-308(b)1 required defendant to
establish a defense to his right of enforcement, by proving the check was paid
by defendant's bank before plaintiff's predecessor in interest presented it for
payment. Plaintiff further argued a missing indorsement made it impossible
for defendant to prove the check had already been paid.
The judge found the check was electronically deposited and paid by
defendant's bank before the physical copy was presented for payment.
Therefore the judge held defendant was not liable. See N.J.S.A. 12A:3-
305(a)(2). In his motion for reconsideration, plaintiff argued the previously
1
"[A] plaintiff producing the instrument is entitled to payment if the plaintiff
proves entitlement to enforce the instrument under N.J.S.12A:3-301, unless the
defendant proves a defense or claim in recoupment." N.J.S.A. 12A:3-308(b).
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paid defense was not satisfied because the subject check was not indorsed
when electronically deposited into codefendant Grzyb-Kelly's account. 2
In denying the reconsideration motion, the trial judge relied on N.J.S.A.
12A:3-414(c), which discharges a drawer's obligation to pay if the check was
accepted by a bank. On appeal, defendant renews his argument regarding the
missing indorsement. Having reviewed the record and applicable law, we
affirm the trial judge's conclusion that defendant was entitled to dismissal on
its previously paid defense, albeit for slightly different reasons. See Do-Wop
Corp. v. City of Rahway, 168 N.J. 191, 199 (2001) (appeals are taken from
orders and judgments, not opinions or oral decisions).
We discern the facts from the record of the May 23, 2019 Special Civil
Part trial. Defendant is a hair styling school and participant in a government
program providing financial assistance to its students. Defendant receives
money from the federal government, and then distributes the funds to
qualifying students for educational and living expenses. Id. On December 2,
2015, defendant issued check number 1483 to one of its students, codefendant
Amanda R. Grzyb-Kelly, in the amount of $1,431. That same day, the check
was redeemed twice, once via electronic deposit into Grzyb-Kelly's Wells
2
At trial and on reconsideration, plaintiff also argued against the admissibility
of defendant's bank records on hearsay grounds. On appeal, however, plaintiff
has abandoned this argument. Therefore, we will not address it.
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Fargo bank account, and once at United Check Cashing, a check-cashing
business.
Notably, plaintiff did not dispute that Grzyb-Kelly electronically
deposited the check, or that defendant's bank paid the check. Rather, plaintiff's
arguments attacked the legitimacy of the payment made by Bank of America,
SHS' bank, to Grzyb-Kelly's Wells Fargo account. Plaintiff conceded that the
check was cashed twice on December 2, 2015, but argued the lack of
indorsement rendered defendant's payment a legal nullity.
Grzyb-Kelly completed the electronic deposit by taking pictures of the
front and back of the check through an application on her phone. The check
was not indorsed at the time it was electronically deposited. When cashed at
United Check Cashing, the check was indorsed, stamped, and relinquished.
The check was subsequently dishonored when presented to Bank of America
for payment and returned on December 7, 2019, to United Check Cashing with
the return reason listed as "Duplicate Presentment." United Check Cashing
then sold several dishonored checks, including SHS check number 1483, to
plaintiff through an assignment agreement.
Plaintiff as assignee brought an enforcement action against defendant
and Grzyb-Kelly pursuant to N.J.S.A. 12A:3-414(b). At trial, plaintiff argued
that under N.J.S.A. 12A:3-308(b), defendant had the burden of establishing a
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defense to plaintiff's right to payment, by proving that the check was paid by
defendant's bank (Bank of America) before United Check Cashing presented it
for payment. In that regard, both parties produced copies of the check. The
first, offered by plaintiff, was marked as a duplicate, stamped "RETURN
REASON – Y DUPLICATE PRESENTMENT", and was indorsed by Grzyb-
Kelly. The copy also showed a dated stamp on the back, indicating the check
was received by United Check Cashing on December 2, 2015. The second
copy, offered by defendant, did not display Grzyb-Kelly's signature on the
back of the check, was not marked with United Check Cashing's dated stamp,
and indicated the check had been electronically indorsed by Wells Fargo and
Bank of America on December 2, 2015.
Defendant also presented bank records, including defendant's December
2015 Bank of America statement, which indicated that check 1483 was paid
and that $1,431 was deducted from the account. Based on a comparison of the
checks presented by each party, and defendant's December 2015 bank
statement, the trial judge concluded the check was deposited into Grzyb-
Kelly's Wells Fargo account and paid by Bank of America on December 2,
2015, before it was presented to United Check Cashing for payment.
Accordingly, the trial judge found defendant had successfully proved its
previously paid defense and dismissed plaintiff's claim against defendant.
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Default judgment was entered in favor of plaintiff against codefendant Grzyb -
Kelly.
The judge denied plaintiff's motion for reconsideration. In addition to
the reasons set forth at trial, the judge also found that N.J.S.A. 12A:3-414(c)
provided a defense to plaintiff's claim against defendant. That statute states,
"[i]f a draft is accepted by a bank, the drawer is discharged, regardless of when
or by whom acceptance was obtained." 3 N.J.S.A. 12A:3-414(c).
On appeal, plaintiff raises the following argument for our consideration:
POINT I
THE TRIAL JUDGE COMMITTED PREJUDICIAL
ERROR WHEN HE DISREGARDED N.J.S.A. 12A:3-
201(b) [AND] 12A:3-203(c)'[S] REQUIREMENTS
FOR NEG[OTIA]TION, TRANSFER, AND
INDORSEMENT OF CHECKS
Essentially, plaintiff argues that because SHS check number 1483 was
not indorsed when codefendant Grzyb-Kelly electronically deposited it into her
account, transfer, as defined by the Uniform Commercial Code 4 (the Code) and
New Jersey's statutory corollaries, could not have occurred. Accordingly,
3
Acceptance in this context refers to a process by which a bank, as opposed to
an account holder, guarantees payment of a draft. Similar to a certified check,
accepted checks provide a greater level of security to the payee that the draft
will be paid. See N.J.S.A. 12A:3-409.
4
U.C.C. § 1-101 to 9-709 (AM. LAW INST. & U NIF. L AW COMM'N 2012).
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defendant's bank made an unauthorized payment to codefendant Grzyb -Kelly
that did not satisfy defendant's promise to paycheck number 1483.
We review the denial of a motion for reconsideration to determine
whether the trial court abused its discretion. Cummings v. Bahr, 295 N.J.
Super. 374, 389 (App. Div. 1996). A motion for reconsideration is meant to
"seek review of an order based on the evidence before the court on the initial
motion . . . not to serve as a vehicle to introduce new evidence in order to cure
an inadequacy in the motion record." Cap. Fin. Co. of Del. Valley, Inc. v.
Asterbadi, 398 N.J. Super. 299, 310 (App. Div. 2008).
For these reasons, reconsideration should only be granted in "those cases
which fall into that narrow corridor in which either 1) the [c]ourt has expressed
its decision based upon a palpably incorrect or irrational basis, or 2) it is
obvious that the [c]ourt either did not consider, or failed to appreciate the
significance of probative, competent evidence . . . . " Cummings, 295 N.J.
Super. at 384 (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401-02 (Ch.
Div. 1990)). Therefore, we have held that "the magnitude of the error cited
must be a game-changer for reconsideration to be appropriate." Palombi v.
Palombi, 414 N.J. Super. 274, 289 (App. Div. 2010).
This matter is governed by Article 3, which covers negotiable
instruments, N.J.S.A. 12A:3-101 to -605, and Article 4, which covers bank
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deposits and collections, N.J.S.A. 12A:4-101 to -504, of New Jersey's version
of the Code. Under the Code, a "check" is a draft, N.J.S.A. 12A:3-104(f); a
"drawer" is the person who signs a draft ordering payment from their account
(i.e. the person who wrote the check), N.J.S.A. 12A:3-103(a)(3); and a
"depository bank" is "the first bank to take an item," such as a draft. N.J.S.A.
12A:4-105.
Plaintiff's claim arises out of N.J.S.A. 12A:3-414(b), which provides
"[i]f an unaccepted draft is dishonored, the drawer is obliged to pay the draft
according to its terms at the time it was issued . . . The obligation is owed to a
person entitled to enforce the draft . . . ." As the assignee of the dishonored
check, plaintiff argues he is a person entitled to enforce the draft. See N.J.S.A.
12A:3-201(a). N.J.S.A. 12A:3-308(b) entitles a plaintiff producing a
dishonored draft to payment, "unless the defendant proves a defense or claim
in recoupment." Previous payment of a draft is a defense to enforcement. See
N.J.S.A. 12A:3-305(a)(2).
N.J.S.A. 12A:1-201(21) defines "[h]older" as:
(a) the person in possession of a negotiable instrument
that is payable either to the bearer or to an identified
person that is the person in possession[.]
N.J.S.A. 12A:3-201 provides:
a. "Negotiation" means a transfer of possession,
whether voluntary or involuntary, of an instrument by
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a person other than the issuer to a person who thereby
becomes its holder.
b. Except for negotiation by a remitter, if an
instrument is payable to an identified person,
negotiation requires transfer of possession of the
instrument and its indorsement by the holder. If an
instrument is payable to bearer, it may be negotiated
by transfer of possession alone.
[emphasis added.]
Commentary to N.J.S.A. 12A:3-201 explains a person cannot become a
holder without negotiation:
A person can become holder of an instrument when
the instrument is issued to that person, or the status of
holder can arise as the result of an event that occurs
after issuance. "Negotiation" is the term used in article
3 to describe this post-issuance event. Normally,
negotiation occurs as the result of a voluntary transfer
of possession of an instrument by a holder to another
person who becomes the holder as a result of the
transfer.
[N.J.S.A. 12A:3-201 cmt. 1.]
In most instances, as plaintiff correctly points out, N.J.S.A. 12A:3-
203(c) identifies indorsement as a prerequisite to negotiation of an instrument:
Unless otherwise agreed, if an instrument is
transferred for value and the transferee does not
become a holder because of lack of indorsement by
the transferor, the transferee has a specifically
enforceable right to the unqualified indorsement of the
transferor, but negotiation of the instrument does not
occur until the indorsement is made.
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[emphasis added.]
Read together, plaintiff argues these statutes dictate that before a person
or bank can become a "holder," i.e. a person entitled to enforce the instrument,
"negotiation" must occur between the person the instrument is made payable to
and the assignee. A prerequisite of negotiation is indorsement. Because Wells
Fargo accepted the unindorsed draft, plaintiff argues that negotiation, first
between Grzyb-Kelly and Wells Fargo, then between Wells Fargo and Bank of
America, never took place. Plaintiff argues that the only negotiation of the
check that occurred on December 2, 2015, was between Grzyb-Kelly and
United Check Cashing. Therefore, plaintiff argues, the unauthorized payment
made by Bank of America cannot be the basis of defendant's previously paid
defense, because the instrument could not have been transferred without
negotiation.
N.J.S.A. 12A:4-205, however, allows the customer of a depository bank
to transfer a draft without prior indorsement:
If a customer delivers an item to a depository bank for
collection:
a. the depository bank becomes a holder
of the item at the time it receives the item
for collection if the customer at the time
of delivery was holder of the item,
whether or not the customer indorses the
item . . . ; and
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b. the depository bank warrants to
collecting banks, the payor bank or other
payor, and the drawer that the amount of
the item was paid to the customer or
deposited to the customer's account.
Commentary to N.J.S.A. 12A:4-205 explains the former rule of N.J.S.A.
12A:4-205(1) allowed depository banks to supply the missing indorsement of
its customers to "afford the drawer and the subsequent banks evidence that the
proceeds of the item reached the customer's account." N.J.S.A. 12A:4-205
cmt. 1. Because subsection (b) of the statute now serves the same purpose,
"[w]hether [a depository bank] supplies the customer's indorsement is
immaterial." Ibid.Thus, N.J.S.A. 12A:4-205 is fatal to plaintiff's argument. When Grzyb-
Kelly electronically deposited the unindorsed SHS check number 1483 into her
Wells Fargo account, valid transfer and negotiation of the instrument occurred
because she was a customer of the depository bank. The customer's
indorsement was immaterial. See ibid.As the trial judge found, a comparison of the copies of SHS check
number 1483 provided by each party conclusively demonstrate that defendant
successfully proved its previously paid defense. Defendant's copy shows the
check was deposited into Grzyb-Kelly's Wells Fargo account on December 2,
2015. It also shows that on the same day, the check was electronically
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indorsed twice, first by Wells Fargo as the bank of first deposit, then by Bank
of America as the payor bank. Defendant's Bank of America account
statement for the relevant period indicates $1,431 was deducted in January of
2015. The check is not indorsed by Grzyb-Kelly.
Plaintiff's copy, on the other hand, is marked duplicate, lists
"DUPLICATE PRESENTMENT" as the reason for return, and is indorsed by
Grzyb-Kelly. It is also marked with United Check Cashing's dated stamp
indicating the check was received on December 2, 2015.
The presence of Grzyb-Kelly's indorsement, as well as United Check
Cashing's dated stamp on plaintiff's copy, prove the check was electronically
deposited before it was cashed at the check-cashing business. Grzyb-Kelly
could not have indorsed, stamped, and relinquished the check, before she
electronically deposited an unindorsed and unstamped version. The absence of
the additional markings indicate the check must have been electronically
deposited first. Further, the markings on plaintiff's copy identifying it as
duplicate, compared to defendant's copy referencing the electronic
indorsements and transfers by both banks, and defendant's bank statement
showing $1,431 deducted from his account, clearly demonstrate the check was
processed and paid as result of the electronic deposit.
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Affirmed.
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