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Roberts v. Wachovia Bank

September 16, 2010

DARREN ROBERTS, PLAINTIFF,
v.
WACHOVIA BANK, N.A. AND T.D. BANK, N.A., DEFENDANTS.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge.

MEMORANDUM OPINION & ORDER

Plaintiff Darren Roberts seeks to recover the proceeds of two checks, totaling $85,000, from Defendants Wachovia Bank, N.A. ("Wachovia") and T.D. Bank N.A. ("T.D. Bank"). Plaintiff made the checks in question payable to "Michael Howard," but Howard was in fact a convicted felon named Michael Howard Clott ("Clott"). Upon receiving the checks, Clott allegedly altered the payee's name by adding "Clott" after "Michael Howard." Clott then endorsed the checks and deposited them into his account at Wachovia. Wachovia presented the altered checks to T.D. Bank's predecessor, Commerce Bank N.A. ("Commerce"), for payment. Commerce, in turn, accepted the altered checks and debited $85,000 from Plaintiff's account. Clott, who is not a party to this action, allegedly misappropriated the $85,000.

Defendants move for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. They claim the benefit of the "intended payee defense": Plaintiff intended Clott to receive the proceeds of the two checks, and he did. Plaintiff argues, however, that the so-called "intended payee defense" is applicable only when the drawer of an improperly paid check does not suffer a loss. Since the Plaintiff's Complaint alleges a loss, the intended payee defense cannot apply.

For the reasons that follow, Defendants' motion for judgment on the pleadings is DENIED.

Background

I. Facts*fn1

The facts alleged in the Complaint assert that Clott told Plaintiff that his name was Michael Howard. (Compl. ¶ 10). Plaintiff was unaware that Howard was in fact Michael Howard Clott, a felon with multiple mortgage fraud convictions. (Id.) In late February, 2008, Clott told Plaintiff that he had advanced funds to Chad Adler ("Adler"), Plaintiff's friend and business associate, for the purchase of a defaulted mortgage note. (Id. ¶ 11). Clott said that the note was secured by a mortgage on an apartment in Margate, New Jersey. (Id.)

In the weeks following his discussion with Clott about Adler's debt, Plaintiff drew two checks on his checking account at Commerce -- one for $80,000 and the other for $5,000 -- and gave them to Clott. (Id. ¶¶ 9, 11, 14.) Both the $80,000 check and the $5,000 check were made payable to the order of "Michael" or "Mike Howard." (Id. ¶¶ 11, 14.) According to Plaintiff, he drew both checks at Clott's request, and based on Clott's representation that the money would be used to partially repay Adler's debt. (Id.)

After receiving the checks, Clott allegedly altered the payee's name by adding "Clott" after "Michael Howard" and "Mike Howard." (Id. ¶¶ 12, 15.) The alterations, according to the Complaint, were "clearly apparent." (Id. ¶ 17.) Clott endorsed the altered checks to Wachovia, and Wachovia in turn presented the checks to Commerce for payment. (Id. ¶¶ 12-13, 15-16.) Commerce accepted both checks and debited a total $85,000 from Plaintiff's account. (Id. ¶¶ 13, 16.) The funds were then transmitted to Wachovia and deposited into Clott's account. (Id.)

At some point, Plaintiff discovered Clott's true identity. He also discovered that Clott never lent Adler money to purchase a defaulted mortgage note. (Id. ¶ 18). It was a swindle, plain and simple; Clott had misappropriated the $85,000. (Id.) Thus, Plaintiff alleges that he "was fraudulently induced to draw and deliver his $80,000 and $5,000 checks to Clott." (Id.) After discovering the fraud, Plaintiff and Alder entered a judgment by confession against Clott in Westchester County Supreme Court for $539,675. (Id. ¶ 19.)

II. Procedural History

Plaintiff commenced this action on March 4, 2009. He claims (rather cryptically) that due to Clott's fraud "in obtaining . . . [the] $80,000 and $5,000 checks," Plaintiff has suffered a loss of $85,000 and "is entitled to rescind Clotts' [sic] and Wachovia's negotiation of those checks and to the proceeds thereof and Commerce's acceptance and honor of these checks and charges to his account therefore." (Id. ¶ 20). Plaintiff seeks to recover $85,000, in addition to costs and attorneys' fees.

In a joint Answer filed on May 1, 2009, Defendants deny the allegations in the Complaint, raise thirty-two affirmative defenses, and jointly move for judgment on the pleadings on October 26, 2009. The motion was fully briefed on November 20, 2009.*fn2

Discussion

III. Motion for Judgment on the Pleadings Standard

A motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure is governed by the same standard as a Rule 12(b)(6) motion to dismiss. See Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994). All factual allegations in the complaint are accepted as true and all reasonable inferences are drawn in favor of the nonmoving party. See Johnson v. Rowley, 569 F.3d 40, 43 (2d Cir. 2009). The complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir. 2010). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, __ U.S. __, __, 129 S.Ct. 1937, 1949 (2009). "The ...


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