Zerjav v. PNC Bank, National Association et al
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that the motion of defendant PNC Bank, National Association to dismiss Counts I, III, and V of the complaint for failure to state a claim [Doc. # 10 ] is granted.. Signed by District Judge Carol E. Jackson on 5/11/16. (KKS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
JP MORGAN CHASE NATIONAL
CORPORATE SERVICES, INC., et al.,
No. 4:15-CV-1858 (CEJ)
MEMORANDUM AND ORDER
This matter is before the Court on the motion of defendant PNC Bank,
National Association to dismiss the claims asserted against it pursuant to Federal
Rule of Civil Procedure 12(b)(6).
Plaintiff has responded in opposition, and the
issues are fully briefed.
Plaintiff Christine Zerjav brings this action to recover damages resulting from
the fraudulent indorsement and negotiation of checks that were issued in payment
of an insurance claim.
Plaintiff and her then-husband, Frank Zerjav, were both
insured under an insurance policy covering a house they owned in St. Louis County,
In November 2010, the house was damaged in a fire and a claim was
submitted to the insurance company.
The insurer paid the claim by issuing ten
separate checks that were drawn payable jointly to plaintiff and her husband. The
checks were mailed to Frank Zerjav’s business address, to which plaintiff had no
connection and no access.
Between November 11, 2010 and October 15, 2012, Frank Zerjav presented
nine of the checks for deposit in two accounts he held at defendant PNC Bank.
Plaintiff was not an owner of and did not have signatory authority for either of the
accounts. According to the complaint, plaintiff did not indorse the checks, did not
authorize anyone to indorse them on her behalf, and did not receive any of the
proceeds of the checks.
Plaintiff alleges that PNC Bank accepted the checks for
deposit without requiring the signatures of all payees, or without verifying that the
provided signatures were authentic and authorized.
Plaintiff alleges that she did not have actual knowledge or notice of the
negotiation of any of the checks until November 29, 2012. Plaintiff commenced this
lawsuit in the Circuit Court of St. Louis County, Missouri on November 30, 2015.
Thereafter, the action was timely removed the to this Court. As to defendant PNC
Bank, plaintiff asserts claims of conversion (Count I), violation of the Uniform
Commercial Code (UCC), as codified in Missouri Revised Statutes §§ 400.3-206 and
400.3-420 (Count III), and negligence (Count V).
II. Legal Standard
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal
sufficiency of the complaint. Fed. R. Civ. P. 12(b)(6). The factual allegations of a
complaint are assumed true and construed in favor of the plaintiff, “even if it strikes
a savvy judge that actual proof of those facts is improbable.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 556 (2007) (citing Swierkiewicz v. Sorema N.A., 534 U.S.
506, 508 n.1 (2002)); Neitzke v. Williams, 490 U.S. 319, 327 (1989) (“Rule
12(b)(6) does not countenance . . . dismissals based on a judge’s disbelief of a
complaint’s factual allegations.”); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)
(stating that a well-pleaded complaint may proceed even if it appears “that a
recovery is very remote and unlikely”). The issue is not whether the plaintiff will
ultimately prevail, but whether the plaintiff is entitled to present evidence in
support of his claim. Scheuer, 416 U.S. at 236. A viable complaint must include
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550
U.S. at 570; see id. at 563 (stating that the “no set of facts” language in Conley v.
Gibson, 355 U.S. 41, 45–46 (1957), “has earned its retirement”); see also Ashcroft
v. Iqbal, 556 U.S. 662, 678–84 (2009) (holding that the pleading standard set forth
in Twombly applies to all civil actions).
“Factual allegations must be enough to
raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.
Uniform Commercial Code
Defendant PNC Bank contends that plaintiff’s UCC claim is barred by the
three-year statute of limitations codified in Mo. Rev. Stat. § 400.3-118(g). Section
400.3-118(g) provides that “an action . . . for conversion of an instrument, for
money had and received, or like action based on conversion . . . or . . . to enforce
an obligation, duty, or right arising under this Article . . . must be commenced
within three years after the cause of action accrues.” Thus, the defendant argues,
a cause of action accrued with the deposit of each check and the limitations period
began to run when each check was deposited at PNC Bank.
Because the latest
deposit occurred on October 15, 2012, the deadline for asserting the UCC claim was
October 15, 2015.
The plaintiff argues that the limitations period did not begin to run until
November 29, 2012, when she first learned of the checks.
Under the “discovery
rule” endorsed in some jurisdictions, the “statute of limitations for a particular claim
does not accrue until that claim is discovered, or could have been discovered with
reasonable diligence, by the plaintiff.” Gabelli v. SEC, 133 S. Ct. 1216, 1220 (U.S.
2013) (quoting SEC v. Gabelli, 653 F.3d 49, 59 (2d Cir. 2011)). Missouri courts,
however, have rejected the discovery rule.
The general limitations provision contained in the Missouri Revised Statutes
provides that a cause of action “shall not be deemed to accrue . . . [until] the
damage resulting therefrom is sustained and is capable of ascertainment.” See Mo.
Rev. Stat. § 516.100. Missouri courts have held that damage from a legal injury is
“sustained and capable of ascertainment” within the meaning of section 516.100
“whenever it is such that it can be discovered or made known.”
Basic Union, Local No. 1744 v. Arnold Sav. Bank, 411 S.W.2d 159, 164 (Mo. banc
1966); Carr v. Anding, 793 S.W.2d 148, 150 (Mo. Ct. App. 1990).
Supreme Court specifically rejected the “discovery rule” for determining the
commencement of a statute of limitations for a civil cause of action in Jepson v.
Stubbs, 555 S.W.2d 307, 311–12 (Mo. banc 1977). See Lane v. Non-Teacher Sch.
Emp. Ret. Sys. of Mo., 174 S.W.3d 626, 638 n.5 (Mo. Ct. App. 2005) (“[T]he
‘discovery rule,’ as a general rule of accrual, has been rejected in Missouri as being
contrary to the ‘capable-of-ascertainment’ rule adopted in § 516.100.”); Anderson
v. Griffin, Dysart, Taylor, Penner & Lay, P.C., 684 S.W.2d 858, 860 (Mo. Ct. App.
Accordingly, the statute of limitations for a civil cause of action in Missouri
begins to run when the fact of damage “can be discovered or made known,”
regardless of when a plaintiff actually discovers the damage. Sheehan v. Sheehan,
901 S.W.2d 57, 58–59 (Mo. banc 1995); see Carr, 793 S.W.2d at 150 (describing
this principle as a “middle-of-the road” test). This test “is an objective test to be
decided as a matter of law.” Carr, 793 S.W.2d at 150; see Chem. Workers Basic
Union, 411 S.W.2d at 165 (“[M]ere ignorance of the plaintiff of his cause of action
will not prevent the running of the statute.” (quoting Clapp v. Leavens, 164 F. 318,
321 (8th Cir. 1908))).
The “consistent approach” promulgated by the Missouri
Supreme Court is that “the statute of limitations begins to run when the evidence
was such to place a reasonably prudent person on notice of a potentially actionable
Powel v. Chaminade Coll. Preparatory, Inc., 197 S.W.3d 576, 582 (Mo.
Further, the general statute of limitations provisions do not apply to the
claims based on
See Mo. Rev. Stat. § 516.300 (“The provisions of
sections 516.010 to 516.370 shall not extend to any action which is or shall be
otherwise limited by any statute; but such action shall be brought within the time
limited by such statute.”). The UCC, as codified by the Missouri Revised Statutes,
has its own statute of limitations which provides that an action based on check
conversion must be commenced within three years after the cause of action
Mo. Rev. Stat. § 400.3-118(g).
The Missouri Supreme Court “has
uniformly held that where a statute of limitations is a special one, not included in
the general chapter on limitations, the running thereof cannot be tolled because of
fraud, concealment or any other reason not provided in the statute itself.” State ex
rel. Bier v. Bigger, 178 S.W.2d 347, 350 (Mo. banc 1944); see also State ex rel.
Beisly v. Perigo, 469 S.W.3d 434, 438 (Mo. banc 2015) (same).
The statute of
limitations set forth in section 400.3-118 for actions based on conversion contains
no exception for tolling.
The Court concludes that the statute of limitations in section 400.3-118(g)
applies to plaintiff’s claim in Count III.
The complaint alleges that Frank Zerjav
deposited the checks into accounts at PNC Bank between November 11, 2010 and
October 15, 2012. The deposit of each check constituted a separate cause of action
with its own statute of limitations. Cf. Johnson Dev. Co. v. First Nat. Bank of St.
Louis, 999 S.W.2d 314, 318 (Mo. Ct. App. 1999) (“Under [the ‘continuing or
repeated wrong rule’ in Missouri], each continuation or repetition of wrongful
conduct may be regarded as a separate cause of action for which suit must be
brought within the period beginning with the occurrence.” (internal quotations and
Plaintiff’s cause of action accrued upon the deposit of each
check. See Powel, 197 S.W.3d at 582; Chem. Workers Basic Union, 411 S.W.2d at
165 (holding that plaintiff could have discovered the unauthorized indorsement of
the check upon any inquiry with reasonable diligence, because they knew they had
an insurance policy from which they could expect annual dividends, but they did
nothing to find out when or what dividends were paid or who received the dividend
checks; moreover, the defendant bank did nothing but cash the check and in no
way concealed the transaction from anyone).
As such, plaintiff was required to
assert her claims against PNC Bank within three years of the deposit of each check.
See Mo. Rev. Stat. § 400.3-118(g). The deadline for plaintiff to assert a claim for
any of the checks was October 15, 2015.
Because plaintiff did not file suit until
November 30, 2015, her UCC claim in Count III is time-barred.
Counts I and V – Conversion and Negligence
Defendant argues that plaintiff cannot circumvent the UCC’s three-year
statute of limitations by asserting common law claims based on the same
underlying factual allegations that fit squarely within the UCC. As such, defendant
asserts that plaintiff’s conversion and negligence claims should also be dismissed.
Article 3 of the UCC, as codified in the Missouri Revised Statutes, provides that
“[u]nless displaced by the particular provisions of this chapter, the principles of law
and equity . . . shall supplement its provisions.”
Mo. Rev. Stat. § 400.1-103;
Mitchell v. Residential Funding Corp., 334 S.W.3d 477, 504 (Mo. Ct. App. 2010)
(“The UCC does not act to the exclusion of the common law absent an express
provision within the UCC.”). “Nothing short of an express code provision limiting
plaintiff’s remedy demonstrates displacement.” Penalosa Co-op. Exchange v. A.S.
Polonyi Co., 745 F. Supp. 580, 584 (W.D. Mo. 1990) (quoting Morgan Guar. Trust
Co. v. Am. Sav. & Loan, 804 F.2d 1487, 1495 (9th Cir. 1986)). Thus, for defendant
to prevail on its argument, a “particular provision” of the UCC must displace a
common law claim; otherwise, the UCC merely supplements plaintiff’s common law
With respect to Count I, the circumstances giving rise to plaintiff’s common
law conversion claim are explicitly covered by section 400.3-420 of the Missouri
Specifically, a comment to section 400.3-420 states that the
statute “covers cases in which an instrument is payable to two persons and the two
persons are not alternative payees . . . . Under [section 400.]3-110(d) the check
can be negotiated or enforced only by both persons acting jointly.” Comment, Mo.
Rev. Stat. 400.3-420(a), n. 1.
If a depository bank accepts such a check for
deposit into one of the payee’s accounts without the valid indorsement and consent
of the co-payee, the bank is liable for conversion.
As an initial matter, it is not clear whether plaintiff has a common law
conversion claim against defendant under these facts outside the framework of
sections 400.3-110 and 400.3-420. Moreover, allowing plaintiff to proceed with a
common law conversion claim here, for which Missouri sets a five-year statute of
limitations, would be inconsistent with the three-year statute of limitations the UCC
sets for such claims. Compare Mo. Rev. Stat. § 400.3-118(g) (“[A]n action . . . for
conversion of an instrument, for money had and received, or like action based on
conversion . . . or . . . to enforce an obligation, duty, or right arising under this
Article . . . must be commenced within three years after the cause of action
accrues.”) with Gaydos v. Imhoff, 245 S.W.3d 303, 306 (Mo. Ct. App. 2008)
(“Under [Mo. Rev. Stat. §]516.120, all actions upon contracts, obligations or
liabilities, including actions for conversion, must be brought within a five-year
statute of limitations.”). Accordingly, the Court concludes that Article 3 of the UCC,
as codified in the Missouri Revised Statutes, displaces plaintiff’s common law
conversion claim against defendant in Count I under this set of facts. See Choice
Escrow & Land Title, LLC v. BancorpSouth Bank, No. 10-03531-CV-S-JTM, 2011 WL
2601209, at *3 (W.D. Mo. June 30, 2011) (collecting cases and concluding that
Missouri would adopt the rule that “the UCC displace[s] any and all common law
claims that: (1) create rights, duties, or liabilities inconsistent with the UCC, and
(2) where the circumstances giving rise to the common law claims are specifically
covered by the provisions of the UCC”) (internal quotations omitted). Count I will
In contrast to plaintiff’s conversion claim, it is not clear that plaintiff’s
common law negligence claim is preempted by the UCC under the set of facts
Defendant has not pointed to any particular provision of the UCC that
displaces plaintiff’s negligence claim.
The Eighth Circuit has determined that the
Missouri Supreme Court “would not hold [that] all common-law actions of
negligence by a bank in connection with its handling of checks are preempted by
Cassello v. Allegiant Bank, 288 F.3d 339, 341 (8th Cir. 2002)
(disregarding City of Wellston v. Jackson, 965 S.W.2d 867, 869 (Mo. Ct. App.
1998), in which the Missouri Court of Appeals had held that the UCC preempted
negligence claims involving negotiable instruments, bank deposits and collections).
In holding thus, the Eighth Circuit “discovered no ‘particular provision’ of the UCC
that would ‘displace’ a common-law claim of negligence” in Missouri. Id. As such,
in Cassello the Eighth Circuit concluded “that the Missouri Supreme Court would
hold that a drawer of a check could have a common-law cause of action against a
depositary bank for negligently handling the drawer’s check.” Id.
However, Cassello has not been extended to establish a cause of action for
common law negligence to non-customers of the depository bank. In the Missouri
Supreme Court case upon which Cassello relied, the court found that the duty the
bank owed to the plaintiff-customer was the “duty of inquiry.” Dalton & Marberry,
P.C. v. NationsBank, N.A., 982 S.W.2d 231, 233–34 (Mo. banc 1998) (“A payee
bank is liable if it fails to inquire as to the authority of an agent of the drawerdepositor who wrongfully diverts the proceeds of a check made payable to the order
of the bank itself.”). Cassello narrowly held that a drawer of a check “could have a
common-law cause of against a depository bank for negligently handling the
drawer’s check” “in the proper circumstances.” 288 F.3d at 341. Since its ruling in
Cassello, the Eighth Circuit has had the opportunity to extend a bank’s duty of
inquiry set forth in Dalton & Marberry to non-customers. However, the court has
declined to do so. See Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Raczkowski,
764 F.3d 800, 804–06 (8th Cir. 2014) (“Dalton & Marberry established that banks
owe a duty of inquiry to customers; however, we decline to extend that duty
further in this case.”).
Plaintiff here is neither a customer nor an account holder at PNC bank. The
Court declines to impose a duty of care in these circumstances that extends beyond
the limits set forth by the Missouri Supreme Court and the Eighth Circuit in
interpreting Missouri law. See Nat’l Union Fire Ins. Co., 764 F.3d at 803–04 (citing
Zabka v. Bank of Am. Corp., 127 P.3d 722, 724 (Wash. Ct. App. 2005) (“Many
other jurisdictions have held that third party non-customers are not owed a duty of
care by a bank, absent a direct relationship or statutory duty.”) and Software
Design & Application, Ltd. v. Hoefer & Arnett, Inc., 56 Cal. Rptr. 2d 756, 760 (Cal.
Ct. App. 1996) (agreeing with “[r]ecent cases [that] have held that absent
extraordinary and specific facts, a bank does not owe a duty of care to a
noncustomer”)). As such, the Court finds that plaintiff has failed to establish that
defendant owed her a duty of care under a common law negligence theory.
The only cognizable duty plaintiff cites in the complaint is a statutory duty
arising under the framework of the UCC. See Pet. ¶¶ 106–109 [Doc. #4] (citing
Mo. Rev. Stat. § 400.3-110, requiring the indorsement of all named payees on a
draft to negotiate a multiple-party draft).
As with plaintiff’s common law
conversion claim, the Court finds that plaintiff’s negligence claim is displaced
inasmuch as it involves circumstances specifically covered by or inconsistent with
the provisions of the UCC. See Choice Escrow, 2011 WL 2601209, at *3. Pursuant
to the thus controlling statute of limitations in section 400.3-118(g), “an action . . .
to enforce an obligation[ or] duty . . . arising under this Article . . . must be
commenced within three years.”
Accordingly, Count V will also be dismissed.
For the reasons set forth above,
IT IS HEREBY ORDERED that the motion of defendant PNC Bank, National
Association to dismiss Counts I, III, and V of the complaint for failure to state a
claim [Doc. #10] is granted.
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 11th day of May, 2016.
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