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In re Estate of Ray

March 10, 2009


The opinion of the court was delivered by: Diana A. Johnson, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Upon the foregoing papers, respondent JP Morgan Chase Bank moves for an order pursuant to CPLR §3211 (a)(1) & (7) dismissing this turnover proceeding as against it. In the alternative Chase moves to dismiss or stay the proceeding to permit arbitration of the claims asserted against it.

Petitioner Dolores McCullough commenced the underlying turnover proceeding citing LaVerne Cave, Alvin Eugene Leonard and JP Morgan Chase. The petition seeks, 1) a decree directing Alvin Eugene Leonard to turnover the $470,000 he converted from the Estate of Gertrude Ray from the date of the conversion along with legal fees paid to him of $39,739.54, plus statutory interest and; 2) a decree directing JP Morgan Chase ("Chase") to turnover the $470,000 plus statutory interest from the date of the conversion.

Petitioner's claim against Chase is premised on three causes of action: Its payment on checks some seventeen months after expiration of the preliminary letters; its alleged failure to use ordinary care and acceptable banking practices in not sending copies of the banking statements to the home or office of Dolores McCullough and LaVerne Cave and; its alleged failure to make even a cursory comparison of the signature on the checks with that of LaVerne Cave on file at Chase.

The underlying facts are as follows. On October 29, 2004, petitioner Dolores McCullough and LaVerne M. Cave*fn1 , Esq., were appointed preliminary co-executers in the Estate of Gertrude Ray. On December 9, 2004 the co-executors retained Alvin Eugene Leonard, Esq., as counsel. The co-executors marshaled the assets of the estate depositing approximately $702,000 into an account ("Account") at Chase opened on November 10, 2004. The Preliminary Letters Testamentary expired on April 29, 2005 and were not renewed until February 19, 2008. Between November 9, 2006 and March 27, 2007, Mr. Leonard drew seventeen checks on the Account totaling $470,000. The checks were made payable to him as attorney. He signed them using the name of LaVerne Cave, and deposited them in his attorney-at-law checking account. These withdrawals were made without the knowledge or approval of LaVerne Cave or Dolores McCullough. On or about May 16, 2007 demand was made upon Mr. Leonard for return of the converted funds, and on or about May 22, 2007 a complaint was filed with the Departmental Disciplinary Committee of the Appellate Division, First Department.*fn2 Petitioner does not allege when notice was given to Chase concerning the forged checks.

In support of its motion Chase submits the affidavit of Charles J. Buckheit dated May 21, 2008, a Vice-President at Chase. Mr. Buckheit is in charge of the daily operation of Chase's Statement Services Department responsible for insuring that statements are processed in an accurate and timely manner. He relates that the statements were mailed by the end of each month to the address specified when the Account was opened. There is no record of anyone ever complaining of non-receipt of any statement or of any being returned to Chase due to non-delivery. He points out that true and accurate copies of the monthly statements for the Account for the period November 10, 2004 through May 12, 2008 are attached as Exhibit B to the motion.

Chase also submits two affidavits from Juliette N. Tran, a Sales Manager at Chase. In her affidavit dated May 20, 2008, she indicates that the opening documents (Exhibit E) are true and accurate copies of the documents maintained by Chase for the Account. She relates that on November 10, 2004, petitioner McCullough and LaVerne Cave opened the Account. A Business Signature Card, Business Account Application and an Authorization Form were completed and signed by them. The opening documents directed that statements be mailed to 299 Broadway New York, NY In the opening documents they acknowledged receiving the Terms and Conditions for the Account. In her reply affidavit dated July 2, 2008 she identifies and provides a true and accurate copy of the Terms and Conditions that were in effect when the Account was opened.

Finally Chase submits the affidavit of Jacobson Bathelmy, dated May 21, 2008, an Assistant Vice President at Chase. He indicates that on November 10, 2004, the co-executers and their attorney appeared before him and opened the Account. The opening documents were completed using the information and documents provided by the co-executors. The documents were given by him to the co-executors for review and signature. He provided the co-executors with the Account's Terms and Conditions which they acknowledged receipt of when they signed the opening documents. He indicates that the opening documents for the Account annexed to the motion are true and accurate copies of the documents he received and prepared in connection with the opening of the Account.

The affidavits of Buckhiet, Tran and Bathelmy collectively constitute evidence in admissible form by individuals with personal knowledge (see Zukerman v City of New York, 49 NY2d 557 [1980]).

In her affidavit in opposition to the motion petitioner McCullough alleges that the seminal issue before the court is not the forgery, but the willful disregard of the limiting order on the preliminary letters' validity to six months. In addition plaintiff avers that neither she nor anyone else received or was shown a copy of the terms and conditions for the Account. She further states that neither she nor her co-fiduciary were given the signature cards or opening documents to read, but were merely told to sign them.

The Uniform Commercial Code ("UCC") §4-406(1) imposes strict liability on banks for items paid which were not properly payable, such as forged checks (Woods v MONY Legacy Life Ins. Co., 84 NY2d 280 [1994]). However UCC §4-404(4) bars a suit to recover amounts paid on a forged instrument where the customer fails to give notice of the forgery within one year of the time the account statement was made available (id; Vantrel Enters. v Citibank, 272 AD2d 609 [2d Dept 2000]). Statements are considered "made available" to the customer for purposes of the UCC where a customer requests that the bank mail statements to him/her or another person, and the bank complies (Robinson Motor Xpress, Inc. v HSBC Bank, USA, 37 AD3d 117 [2d Dept 2006]).

Petitioner does not dispute that the address, 299 Broadway, N.Y, NY, Mr. Leonard's business address, was the address that she and Mrs. Cave provided in the opening documents for the mailing of statements, or that Mr. Leonard was designated as the contact person on the Account. In Section 9 of the Authorization Form, McCullough and Cave acknowledged that they, "understood that credit account agreements, billing statements and other notices will only be sent to the business mailing address indicated on this application"(compare Robinson Motor Xpress, Inc., supra and Matin v Chase Manhattan Bank, 10 AD3d 447 [2d Dept 2004]), statements mailed to an address other than which the customer had designated were not considered "made available" under the UCC).

As the statements herein were mailed to the address designated by petitioner and her then co-executor which they acknowledged would be the only address the statements would be sent to, there is no basis for the claim that Chase should have sent copies of its banking ...

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