Starview Ventures v. Acadia Insurance Co. (2011)

Ruling on Third–Party Plaintiff and Third–Party Defendant's Motions for Summary Judgment

At issue is whether the court should grant the third-party plaintiff's motion for summary judgment or the third-party defendant's cross motion for summary judgment, both of which pertain to the first count of the third-party complaint.   The court denies both motions.

FACTS

The plaintiff, Starview Ventures, commenced the present action by service of process against defendants Acadia Insurance Company (Acadia), Underwriters at Lloyd's London (Lloyd's), Matthew Humphrey (Humphrey) and Geoffrey Lyn (Lyn) on April 5, 2006;  defendant Joseph Krar and Associates (Krar) on April 6, 2006;  defendant DNM Autocare, LLC (DNM) on April 11, 2006;  and defendant Dwight Fowlin (Fowlin) on April 12, 2006.   There have been changes in the identities of the defendants since the initiation of the action.   First, the plaintiff moved to cite Wachovia Bank, N.A. (Wachovia), into the action on March 28, 2007 and amended its complaint to include two counts against Wachovia sounding in common-law and statutory conversion.   Second, the plaintiff withdrew the action with respect to Acadia on April 8, 2009, in exchange for the sum of $15,000.   Finally, the plaintiff withdrew the action with respect to Lloyd's and Krar on May 7, 2009, in exchange for an assignment of Lloyd's and Krar's third-party causes of action against United Adjusters, LLC (United) and the third-party defendant involved in the present motion, Webster Bank, N.A.¹ The court, Blue, J., granted the plaintiff's motion to substitute itself as the third-party plaintiff in Lloyd's and Krar's third-party causes of action on February 9, 2009.

The operative version of the plaintiff's complaint is the third amended version filed on March 28, 2007.   It alleges the following relevant facts.   On April 13, 2004, a fire damaged property located at 30 Orange Avenue in New Haven.   The property was owned by the plaintiff and leased to DNM. Humphrey, Lyn and Fowlin were DNM's principals at the time of the fire.   At the time of the fire, the plaintiff had a commercial property insurance policy with Acadia.   DNM also had an insurance policy for the property, with Lloyd's.   Krar acted as Lloyd's agent or representative.   Acadia refused to pay the plaintiff for its loss.   Lloyd's, however, accepted DNM's claim of loss.   Therefore, both the plaintiff and DNM hired public adjusting firms to assess the cost and extent of the damage.   Biller Associates TA–State, LLC was the plaintiff's public adjuster.   The defendant's adjuster was United.

After both firms' assessments, on or about November 22, 2004, Lloyd's issued a settlement check (check) payable to the plaintiff, DNM and United through Krar to United in the amount of $86,966.72.   The check was drawn from Krar's account with Webster.   On or about November 29, 2004, Humphrey endorsed the check on behalf of DNM, and a representative did likewise on behalf of United.   They presented the check to Wachovia on or about November 30, 2004.   Wachovia paid the check without the plaintiff's endorsement.   The plaintiff has yet to receive any amounts from the check, either directly or by virtue of repairs done to the subject property and funded by the check's proceeds.

On January 18, 2007, Lloyd's and Krar filed a motion to implead, inter alia, the third-party defendant and United as third-party defendants.   The operative version of the third-party complaint is the third revised version filed on December 18, 2008.   It is the operative pleading with respect to the present motion.   Count one is against the third-party defendant and sounds in breach of General Statutes § 42a–4–401, which provides in relevant part:  “(a) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft.   An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.”   The count specifically alleges that the check was not “properly payable” under the statute because it lacked the plaintiff's endorsement.

Lloyd's and Krar filed the present motion for summary judgment, a memorandum of law in support thereof and exhibits on October 20, 2008.   The third-party defendant in turn filed an opposition to the motion and a cross motion for summary judgment, accompanied by a memorandum of law in support thereof and exhibits, on December 15, 2008.   The plaintiff, as the substituted third-party plaintiff, then filed a reply memorandum on June 16, 2009.   The third-party defendant subsequently filed a memorandum in reply to the plaintiff's opposition to its cross motion for summary judgment on September 10, 2010.   The court heard the matter at short calendar on January 31, 2011.

DISCUSSION

“Summary judgment is a method of resolving litigation when pleadings, affidavits, and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law ․ The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried.”  (Citations omitted.)  Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).  “However, since litigants ordinarily have a constitutional right to have issues of fact decided by a jury ․ the moving party for summary judgment is held to a strict standard ․ of demonstrating his entitlement to summary judgment.”  (Citation omitted;  internal quotations marks omitted.)   Kakadelis v. DeFabritis, 191 Conn. 276, 282, 464 A.2d 57 (1983).

“[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way ․ [A] summary disposition ․ should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party ․ [A] directed verdict may be rendered only where, on the evidence viewed in the light most favorable to the nonmovant, the trier of fact could not reasonably reach any other conclusion than that embodied in the verdict as directed.”  (Citations omitted;  emphasis in original;  internal quotation marks omitted.)  Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).

“In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact.   The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.   The courts hold the movant to a strict standard.   To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ․ As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ․ When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue ․ It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court ․” (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10–11, 938 A.2d 576 (2008).

Copies of the check are attached to both parties' memoranda as exhibits.   The words “pay to the order of” are followed by “DNM AUTO CARE, LLC;  UNITED A.” Below the payee line of the check is the amount of the check written out in words.   Below the amount of the check written out in words is “DNM AUTO CARE, LLC, UNITED ADJUSTERS, LLC & STARVIEW VENTURES, LLC,” written out over three lines with breaks occurring between the “a” and “d” in “adjusters” and the “n” and “t” in “ventures.”   Below the names of the three payees is an illegible symbol followed by “UNITED ADJUSTERS.”   Finally, below the illegible symbol and “UNITED ADJUSTERS” is the address for United.

Lloyd's and Krar moved for summary judgment on the ground that they were entitled to a judgment as a matter of law because there was no genuine issue of material fact about whether the check was “properly payable” under § 42a–4–401, since the check was jointly payable and therefore required the endorsements of all the designated payees.   The third-party defendant opposes the present motion and moves for summary judgment in turn on the ground that it is entitled to a judgment as a matter of law because there is no genuine issue of material fact about whether the plaintiff's endorsement was required in order for the defendant to accept the check, since the check was payable in the alternative and therefore did not require the endorsements of all the designated payees.   The third-party defendant also argues that the court must treat the check as payable in the alternative if it concludes that the check is ambiguous with respect to whether it is payable jointly or in the alternative.   The third-party defendant further argues that the plaintiff's endorsement was not required because it was not designated as a payee on the check, since the entry in the “pay to the order of” section of the check reads “DNM AUTO CARE, LLC;  UNITED A.” Both parties' reply memoranda reject each other's arguments and expand upon their own respective arguments.

According to the third-party defendant, the court must look only to the entry in the “pay to the order of” section of the check to determine the check's designated payees because “the drafter [of a check] is clothed with various responsibilities.   Among those responsibilities is the obligation to include the necessary elements of the check in their proper location on the check itself ․ [T]he named payee cannot appear just anywhere on a check, nor can it appear in more than one location.   For obvious reasons, this would thwart uniform and automated check processing systems, rendering them useless and creating a tremendous amount of ambiguity and uncertainty in daily transactions.”

While the court is mindful of the third-party defendant's public policy arguments, it nonetheless rejects the proposition that the court must interpret the check to state that the designated payees are “DNM AUTO CARE, LLC;  UNITED A.” “In order to constitute a negotiable instrument a check must ‘be payable to the order or to bearer.’   An ‘order’ is a direction to pay and ‘must identify the person to pay with reasonable certainty.’  “ Fred Brunoli & Sons, Inc. v. United Bank & Trust Co., Superior Court, judicial district of Hartford, Docket No. CV 89 0368494 (August 15, 1991, Aurigemma, J.) (4 Conn. L. Rptr. 404, 405).   Since the third-party defendant insists that the court take a formalistic approach to identifying the check's designated payees, the court will take an equally formalistic approach to interpreting the specified payee designations.   Any entity bearing the name “United A” would have been able to negotiate, discharge and/or endorse the check, according to the third-party defendant's approach to identifying the check's designated payees.   The court has found no reference to a “United A” in the file for the present action, and the third-party defendant conceded at oral argument that none of the involved parties can be properly identified as “United A.” The defendant's approach to identifying the check's designated payees thus yields nonsensical results, and the court declines to adopt it in deciding the present motion.

The court similarly declines to adopt the third-party defendant's argument that the court must treat the check as payable in the alternative because the check is ambiguous on its face with respect to whether it is jointly payable or payable in the alternative.   The third-party defendant argues:  “If one accepts Underwriters and Krar's position that the appearance of Starview's name in the address field renders it a payee, the payee field of the check and the address field would be at direct odds with each other, rendering the check ambiguous per Connecticut General Statutes § 42a–3–110.”  General Statutes § 42a–3–110(d) provides:  “If an instrument is payable to two 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.   If 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.   If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.”   See also Coregis Ins. Co. v. Fleet National Bank, 68 Conn.App. 716, 793 A.2d 254 (2002).   Because the court has concluded that the entry in the “pay to the order of” section of the check cannot reasonably be read to designate the check's payees, it will not consider whether this entry creates a conflict with other entries on the check, specifically the entry specifying DNM, the plaintiff and United.   It therefore rejects the third-party defendant's argument that it is entitled to a judgment as a matter of law because there is no genuine issue of material fact about whether the plaintiff's endorsement was required, since the check was payable in the alternative due to its ambiguity in designating its payees.

This rejection, however, does not result in the court's acceptance of the plaintiff's argument that it is entitled to a judgment as a matter of law because there is no genuine issue of material fact that the check was jointly payable and therefore required the endorsements of all three designated payees.   According to the plaintiff in its memoranda regarding Webster's motion for summary judgment, the inclusion of United's name and address at the bottom of the check only vested United with temporary custody over the check, not with the authority to negotiate, discharge and endorse the check by itself.   The symbol preceding United's name and address is illegible, however, on all of the check copies provided by the parties.   The significance of United's name and address on the check is therefore unclear on the face of the check.   The court will not make legal conclusions based on the drafting of the check that will dispose of the plaintiff's cause of action against the third-party defendant on summary judgment under these circumstances.   Cf. Norwest Mortgage, Inc. v. Domack, Superior Court, judicial district of Fairfield, Docket No. CV 96 0334787 (July 23, 1997, West, J.) (denying motion for summary judgment in foreclosure action where genuine issue of material fact existed with respect to defendant's receipt of notice because documents establishing defendant's receipt of notice were illegible);  Dime Savings Bank of New York, FSB v. Zanesky, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV 90 0105513 (April 28, 1993, Lewis, J.) (deeming documentary evidence submitted in opposition to summary judgment inappropriate because it was illegible).

“The question of facial ambiguity presents an extremely fact specific inquiry.”   Brookview Rehab Funding, LLC v. Bank of America, Superior Court, judicial district of Hartford, Docket No. CV 08 5021486 (March 27, 2009, Cofield, J.) (47 Conn. L. Rptr. 437, 438).   In the present action, genuine issues of material fact exist with respect whether and how the presence of United's name and address on the check affected the requirements for negotiating, discharging and endorsing the check.   Such issues cannot be resolved on the present motion, given the court's inability to make legal conclusions based on the face of the check.   See Barco Auto Leasing Corp. v. Bourassa, Superior Court, judicial district of Hartford, Docket No. CV 96 0558681 (February 21, 1997, Sullivan, J.).

For this reason, the court rejects the third-party defendant's argument that the check was “properly payable” without the plaintiff's endorsement.   General Statutes § 42–4–401(a) provides:  “A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft.   An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and the bank.”   The check was “properly payable,” according to the third-party defendant, because there is no dispute that the check was authorized by Krar, the customer of the third-party defendant at issue, and that the issuance of the check was proper under any agreement between the third-party defendant and Krar. The third-party defendant's argument, however, ignores a line of decisions by Connecticut appellate courts concluding that a check is only “properly payable” when it bears the necessary endorsements of the designated payees.   See Perley v. Glastonbury Bank & Trust Co., 170 Conn. 691, 368 A.2d 149 (1976);  Coregis Ins. Co. v. Fleet National Bank, supra.   The issue of which endorsements were legally necessary for the third-party defendant to withdraw from Krar's account cannot be resolved on the present motion, for the reasons stated infra.

For the foregoing reasons, the court denies both parties' motions for summary judgment.

Frechette, J.

FOOTNOTES

FN1. Because Webster is the only third-party defendant involved in the present motion, the court will refer to it as the third-party defendant hereinafter..  FN1. Because Webster is the only third-party defendant involved in the present motion, the court will refer to it as the third-party defendant hereinafter.

Frechette, Matthew E., J.