Bank, 160 A.D.2d 113, 124, 559 N.Y.S.2d 704, 712 (1st Dep't 1990); Payne v. White, 101 A.D.2d 975, 976, 477 N.Y.S.2d 456, 458 (3d Dep't 1984); Meese v. Miller, 79 A.D.2d 237, 242, 436 N.Y.S.2d 496, 500 (4th Dep't 1981).
Cumis alleges that Citibank itself segregated the disputed funds after being informed that Benchmark had sent them by mistake and wished to cancel the transfer. (See Compl. P 16.) Therefore, while funds commingled in an account are ordinarily not specifically identifiable for the purposes of a conversion claim, see, e.g., Geler v. National Westminster Bank USA, 770 F. Supp. 210, 215 (S.D.N.Y. 1991); Massive Paper Mills v. Two-Ten Corp., 669 F. Supp. 94, 95-96 (S.D.N.Y. 1987); Peters Griffin, 88 A.D.2d at 883, 452 N.Y.S.2d at 600, there is a factual dispute in this case with respect to whether the funds were segregated in a manner that permitted them to be specifically identifiable. See Swan Brewery Co. Ltd. v. United States Trust Co. of New York, 832 F. Supp. 714, 718-20 (S.D.N.Y. 1993) (describing difference between general and special accounts, an inquiry depending largely on "the mutual intent of the parties"). Cumis alleges that they were and that they were segregated by Citibank itself. On a motion to dismiss, the plaintiff's allegations are presumed true, and therefore, dismissal of the conversion claim on this basis is not warranted.
Nevertheless, Cumis's conversion claim does not state a claim under New York law because there is no allegation of any wrongful or improper act of dominion by Citibank in contravention of Cumis's or Benchmark's rights. The alleged acts constituting a conversion are specifically permitted under U.C.C. Article 4-A. There is no dispute that once the funds were credited to Covacentro's account they were accepted within the meaning of U.C.C. § 4-A-209. As explained above, Citibank was under no obligation to agree to return the funds once accepted pursuant to § 4-A-211(3). Cumis does not allege that there was any agreement to return the funds--only that Citibank had offered to do so upon receipt of suitable telex. Before any such telex was received, Citibank permitted the funds to be withdrawn, action specifically authorized by § 4-A-502(3)(b), which provides that "the bank may credit the beneficiary's account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal." There is no allegation that Citibank was served with any creditor process, and therefore Citibank was entitled to make the funds available to Covacentro. Accordingly, Cumis does not state a claim because all of the acts alleged to constitute a conversion were specifically authorized under applicable provisions of the U.C.C. and were not wrongful, improper, or in contravention of Benchmark's rights. Therefore, Citibank's motion to dismiss the conversion claim is granted.
CoreStates moves to dismiss Cumis's negligence claim as time-barred under the statute of limitations. Cumis alleges that CoreStates was negligent in not sending a tested telex to Citibank in the period December 6-12, 1991. (Compl. PP 54-60.) CoreStates argues that Benchmark, and therefore Cumis, knew of its injury at that time and had two years during which it could assert a negligence claim against CoreStates. CoreStates contends that Cumis's negligence action, asserted for the first time in the second amended complaint filed in March 1995, is therefore time-barred.
Pennsylvania law provides a two year statute of limitations for negligence.
42 Pa. Cons. Stat. § 5524(7). CoreStates was joined as a defendant in this action on March 31, 1995. The question is whether the cause of action for negligence accrued before or after March 31, 1993, two years earlier. On this the parties agree. The parties disagree, however, on when the cause of action accrued. Cumis alleges that it "did not learn about [the] shortcomings of the December 11 Telex until the course of discovery in this action." (Compl P 21.) CoreStates argues that the bare allegation that the plaintiff did not actually discover the defendant's alleged negligence does not avoid the limitations bar if, in the exercise of reasonable diligence, the plaintiff should have learned of the facts and circumstances of its claim more than two years before bringing the suit. Cumis responds by arguing that it may have known of its injury earlier--in fact Cumis paid Benchmark's insurance claim in February 1992--but CoreStates's role in that injury was not discovered until Citibank produced the actual telex during discovery after March 31, 1993.
Under Pennsylvania law, "[a] cause of action for negligence arises on the date of the alleged act or omission or on the date plaintiff discovers, or reasonably should have discovered, the harm he has suffered if it is not immediately apparent." Manning v. Maloney, 787 F. Supp. 433, 437 (M.D. Pa. 1992) (quoting School Dist. of the Borough of Aliquippa v. Maryland Cas. Co., 402 Pa. Super. 569, , 587 A.2d 765, 770-71 (1991)), aff'd, 980 F.2d 722 (3d Cir. 1992) (table). As the Pennsylvania Supreme Court has explained:
The "discovery rule" . . . arises from the inability of the injured, despite the exercise of due diligence, to know of the injury or its cause. . . . The salient point giving rise to the equitable application of the exception of the discovery rule is the inability, despite the exercise of diligence by the plaintiff, to know of the injury. A court presented with an assertion of applicability of the "discovery rule" must, before applying the exception of the rule, address the ability of the damaged party, exercising reasonable diligence, to ascertain the fact of a cause of action.
Pocono Int'l Raceway, Inc. v. Pocono Produce Inc., 503 Pa. 80, 85, 468 A.2d 468, 471 (1983); see also Vernau v. Vic's Market, Inc., 896 F.2d 43, 46 (3d Cir. 1990) ("Under Pennsylvania tolling principles, the statute is tolled until 'plaintiffs knew or using reasonable diligence should have known of the claim.'" (quoting Urland v. Merrell-Dow Pharmaceuticals, Inc., 822 F.2d 1268, 1272 (3d Cir. 1987)). It is the plaintiff's burden to plead facts sufficient to toll the statute of limitations by means of the discovery rule. See Resolution Trust Corp. v. Farmer, 865 F. Supp. 1143, 1148 (E.D. Pa. 1994). Furthermore, "the Third Circuit has ruled that when a motion to dismiss is advanced on the ground that it is barred by the statute of limitations, 'the question to be answered thus becomes whether the assertions of the complaint, given the required broad sweep, would permit adduction of proofs that would provide a recognized legal basis for avoiding the statutory bar.'" Atlantic Paper Box Co. v. Whitman's Chocolates, 844 F. Supp. 1038, 1044 (E.D. Pa. 1994) (quoting Leone v. Aetna Cas. & Sur. Co., 599 F.2d 566, 567 (3d Cir. 1979)). See Sanders v. Department of the Army, 981 F.2d 990, 991 (8th Cir. 1992) ("Although statutes of limitations provide an affirmative defense that ordinarily must be specifically pleaded, see Fed.R.Civ.P. 8(c), a complaint is subject to dismissal for failure to state a claim 'when the affirmative [limitations] defense clearly appears on the face of the complaint.'" (quoting White v. Padgett, 475 F.2d 79, 82 (5th Cir.), cert. denied, 414 U.S. 861, 38 L. Ed. 2d 112, 94 S. Ct. 78 (1973)) (alteration in original)). Therefore, the issue in this case is whether the allegations in the complaint establish that the plaintiff should have learned, in the exercise of reasonable diligence, the factual circumstances of its claim prior to March 31, 1993.
"There are very few facts which diligence cannot discover, but there must be some reason to awaken inquiry and direct diligence in the channel in which it would be successful." Vernau, 896 F.2d at 46 (quoting Urland, 822 F.2d at 1273). Without doubt, Benchmark had every reason to investigate why the arrangement it made with Citibank for return of the funds had miscarried. Assuming the allegations in the complaint are true, Benchmark believed the state of affairs were as follows. Benchmark had been informed by Citibank that the funds were recoverable and a tested telex with an indemnification was required before the funds would be returned. (Compl. PP 15-16.) Benchmark had asked CoreStates to send such a telex, and CoreStates had agreed. Benchmark then had learned that Citibank had not received the first telex. Benchmark had asked CoreStates to resend it, but CoreStates refused. Benchmark had called Citibank again on December 9 and had been informed that Citibank had still not received any telex. Benchmark also had been reassured that the funds were available. According to the complaint, the next thing Benchmark learned through CoreStates was that the funds were no longer available and any further telexes would be "futile." This is what Benchmark knew according to the pleadings as of December 12, 1991.
Benchmark knew of its injury in December 1991 when Tavares allegedly stated that further telexes would be futile, and Benchmark became aware at that time that Citibank had refused to return the wire transfers. It is of no significance that Benchmark may not have known the details of CoreStates's alleged failure to send a proper telex. Benchmark was aware of its injury and was under a duty under Pennsylvania law to make a diligent inquiry to determine the details of any cause of action it may have had. It is unimportant that the complaint alleges that Benchmark was actually unaware of CoreStates's actions and allegedly remained so until 1995. See Pocono Int'l Raceway, 503 Pa. at 85, 468 A.2d at 472 (discovery rule does not depend on "retrospective view of whether the facts were actually ascertained within the period"). The situation that Benchmark faced presented sufficient facts to "awaken inquiry" and raise a duty for Benchmark to investigate. Yet, there are no allegations to support even an inference that upon conducting such an investigation, Benchmark could not have discovered all of the details of CoreStates's actions taken on its behalf.
The plaintiff's failure to exercise due diligence is exacerbated by the fact that Cumis is a subrogee by virtue of having paid Benchmark's insurance claim. When Cumis settled the claim in February 1992 it had its own opportunity to conduct an independent investigation into the facts and circumstances surrounding the claim or to collect documentation from Benchmark. In its papers submitted in opposition to this motion, the plaintiff explains that "only after receiving the December 11 telex from Citibank during discovery, because, for some reason, CoreStates has no copy of it, did Cumis discover that CoreStates's actions caused its loss." (Pl.'s Mem. Opp'n at 11.) Even if Benchmark and Cumis never had a copy of the December 11 telex, the fact that Citibank did eventually produce it in litigation illustrates how little effort was required to obtain information about the facts and circumstances of the plaintiff's negligence claim against CoreStates. In any event, the plaintiff's proffered explanation does not excuse its failure to exercise reasonable diligence at any time from December 12, 1991 to March 31, 1993.
Accordingly, based on the plaintiff's own allegations in the complaint, I find that Benchmark, and therefore its subrogee Cumis, was aware of its injury in December 1991 and was under a duty to exercise reasonable diligence to discover the facts and circumstances forming the basis for a negligence claim against CoreStates. Because its claim was brought after March 31, 1993, more than two years after discovery of the injury, and because it is clear from the pleadings that the plaintiff cannot avoid the Pennsylvania two-year statute of limitations, the claim is time barred. CoreStates's motion to dismiss the negligence claim is therefore granted.
In accordance with the foregoing, CoreStates's motion to dismiss is granted. Citibank's motion to dismiss is granted without prejudice to plaintiff's filing an amended complaint within thirty (30) days of the date of this Opinion with respect to the claim for fraud. Cumis's remaining claims against Citibank are dismissed with prejudice.
Dated: New York, New York
March 31, 1996
John G. Koeltl
United States District Judge