Bandy et al v. Fitzpatrick et al

Filing 182

Order. Defendant First National Bank's Second Amended Request for Judgment on the Pleadings (Related doc # 180 ) is granted. Plaintiffs' Motion for a Ruling (Related Doc # 181 ) is granted. Plaintiffs' Motion to Strike and M otion for Default Judgment (Related Doc # 179 ) is denied. Defendant First National Bank's Motion to Dismiss (Related Doc # 175 ) and Motion for Judgment on the Pleadings (Related Doc # 176 ) are denied as moot. All claims against all the parties in the within action have now been resolved. Judge Solomon Oliver, Jr on 9/27/2011.(H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

BRUCE BANDY, et al.,
Plaintiffs
v.
FIFTH THIRD BANK, et al.,
Defendants

)
)
)
)
)
)
)
)
)

Case No.: 1:08 CV 1064

JUDGE SOLOMON OLIVER, JR.

ORDER

On May 25, 2008, Plaintiffs Bruce Bandy, et al.1 (collectively , “Plaintiffs”) filed the abovecaptioned proposed class action suit against various banks for claims arising out of a Ponzi scheme
orchestrated by James P. Carpenter III (“Carpenter”). (Compl., ECF No. 1; Second Am. Compl.
(“SAC”) at ¶ 1, ECF No. 69.) Plaintiffs are victims of Carpenter’s scheme, who he defrauded by
selling them investments in a company “that performed no substantial economic activity . . . called

1

The Second Amended Complaint (ECF No. 69) names the following Plaintiffs:
Bruce Bandy, Barbara Anthony, Lisa Ashby, Jerald Baker, Ruthella Barr, Allan
and Della Boyle, Nadine Breisch, Rita Brodnik, Stanley Brodnik, Loretta Bunsey,
Kathryn Cerbin, Anthony Champa, Robert Coufalik, Charles Crout, John Dauer,
John Dipre, John Dragan, Dale Duerr, Marcia Ehresmann, Kenneth Englert,
Edward Eschman, Elain Fatica, Kevin Fitzpatrick, Jo Ann Floyd, Flora Fye, David
Gruel, James Henley, Robert Heston, Aubrey Howard, Robert Joyce, Ira Katz,
Thomas Krena, Nancy Leonhard, Gail Lythos, Edward Mickey, Victor Miller,
Gertha Moore, Marilyn Myers, Robert Neubert, Clarence Ohl, Francis Pate,
Gizella Poulos, Robert Prosen, Kathryn Rinella, Clarence Rogers, Horst Shultz,
Patrick Smith, Mary Stenner, James Stoops, Daniel Valvoda, John Vargo, Grazina
Varnelis, Charlie and Diane Verkamp, Leo and Raymond Verkamp, Michael R.
Weigand, Carolyn Wesolowski, Harold West, and Wesley and Mary Jane Wilcox.

variously ‘International Real Estate Investment Group, Ltd.,’ ‘Lac Ste. Marie,’ and ‘Canadian
Resorts, International’” (collectively, “International”). (SAC at ¶ 1.) They allege that various banks
helped and participated in Carpenter’s scheme. Specifically, Plaintiffs claim that a group of
“depositary banks,” or those banks where Carpenter maintained his accounts, helped convert, steal,
and deliver Plaintiffs’ checks made payable to International to Carpenter. They further maintain that
a group of “drawee banks,” or the personal banks of individual Plaintiffs, paid to the depositary
banks the checks that Plaintiffs had written to International and refused to refund the value of these
checks to Plaintiffs when requested, purportedly in violation of the law.
The Second Amended Complaint names the following “drawee banks” as Defendants in this
case: Bank of America Corp. (“Bank of America”); Branch Banking and Trust Co. (“Branch
Banking”); Charter One Bank; Deutsche Bank Trust Company Delaware (“Deutsche Bank”); Day
Air Credit Union (“Day Air”); Dollar Bank Federal Savings Bank (“Dollar Bank”); Fifth Third Bank
(“Fifth Third”); First Merit Corporation (“First Merit”)2; Huntington National Bank (“Huntington”)
(for itself, and as the corporate successor to Bank First National of Zanesville, First National Bank
of Zanesville, Unizan Bank, Metropolitan Bank, and the Second National Bank of Warren, Ohio);
J.P. Morgan Chase Bank, N.A. (“Chase Bank”); Keybank, N.A. (“Keybank”); Manufacturers and
Traders Trust Company (“M&T Bank”); National City Bank; Old National Bank (for itself and as
successor to Dubois County Bank and Security Bank and Trust Company); Sunflower Bank; Town
& Country Bank and Trust Company (“Town & Country Bank”) (as the corporate successor to

2

Plaintiffs improperly name First Merit as First Merit Corporation in the caption of
the case in the Second Amended Complaint yet refers to it as Firstmerit Bank
N.A. in paragraph 56 of the Second Amended Complaint. These are two separate
entities, and for the purpose of this Order the court will presume that they meant
First Merit Corporation, as that was the entity that was served.
-2-

Farmers Bank & Trust Co.); Wright-Patt Credit Union; First National Bank (Orrville, Ohio branch);
UMB Bank, N.A.; and United Western Bank (collectively, “Drawee Bank Defendants”).
The “depositary banks” named as Defendants in the case are as follows: U.S. Bank National
Association (“U.S. Bank”); Fifth Third; and Park National Bank (“PNB”) (as corporate successor
to Century National Bank) (collectively, “Depositary Bank Defendants”). Fifth Third is named as
both a drawee and depositary bank. The court refers to all banks collectively as “Defendants.”3
Previously, all Defendants except Defendant First National Bank (“FNB”) each separately
filed Motions to Dismiss Plaintiffs’ Second Amended Complaint (ECF Nos. 70, 74, 77, 78, 80, 82,
83, 85, 90, 93, 96, 97, 98, 99, 100, 108, 111, 117), which were all granted. Currently pending before
the court are Defendant FNB’s Second Amended Request for Judgment on the Pleadings or in the
Alternative, Motion to Dismiss (ECF No. 180), Motion to Dismiss (ECF No. 175) and Amended
Motion for Judgment on the Pleadings (ECF No. 176), Plaintiffs’ Motion to Strike and Motion for
Default Judgment (ECF No. 179), and Plaintiffs’ Motion for A Ruling (ECF No. 181).
I. FACTS AND PROCEDURAL HISTORY
The following facts substantially derive from Plaintiffs’ Second Amended Complaint, and
are nearly identical to those in Blair v. J.P. Morgan Chase Bank N.A. (1:08 CV 971), which was
before this court, and for which the court issued an Order regarding the similar Motions to Dismiss
filed by defendant banks in that case.
A. Carpenter’s Ponzi Scheme
In 1991, Carpenter pled guilty and was sentenced to jail for aggravated theft as well as bank
fraud. (SAC at ¶ 116.) He was also disbarred from practicing law in the State of Ohio for
misappropriating client funds. (SAC at ¶ 115.) Approximately seven years later, between 1998 and
3

Plaintiffs voluntarily dismissed the following Defendants: Edward Jones; United
Mine Workers of America Health and Retirement Funds; AG Edwards; and
Indianapolis Life Insurance Co. (Jan. 15, 2009 Order, ECF No. 69.)
-3-

2000, Carpenter created a Ponzi scheme, whereby he sold investments in four fraudulently-created
or non-existent companies. (SAC at ¶ 119.) He induced Plaintiffs in the instant case to purchase
worthless debentures in a company called “International.” (SAC at ¶ 121.) Carpenter, through
“alter ego corporations and his dupe salespeople,” convinced Plaintiffs to make this investment by
promising that they would receive a guaranteed return of 10.625% interest per annum. (SAC at ¶¶
3-4.) He further represented that these notes were guaranteed by a company entitled “Global
Insurance Company” or “Guaranty & Reserves, Inc.” (SAC at ¶ 4.)
To uphold the appearance of a legitimate company, Carpenter, in addition to hiring and
paying salespeople, also made interest payments and paid partial redemptions to those “investors”
who requested it. (SAC at ¶ 6.) International, while a registered Ohio corporation, “did not perform
any substantial economic activity from 1999 through 2001 except to execute and conceal Carpenter’s
fraud.” (SAC at ¶ 5.) Carpenter stole nearly all of the money purportedly invested in this company.
(SAC at ¶ 125.)
B. Purported Participation by Banks
Plaintiffs admit that they wrote checks payable to International, many of which were “equal
to or greater than $10,000.” (SAC at ¶ 2.) They maintain, however, that:
None of these checks would have benefited [sic] Carpenter any, or
harmed the Plaintiffs at all, unless Carpenter could find a bank or banks
willing to let him open a corporate checking account in the name of a
corporation that either had no legal existence in Ohio or for which he
did not produce proper corporate banking authorization.
(Id.) They state, with regard to these Depositary Bank Defendants, that Carpenter could only carry
out this Ponzi scheme if he had bank accounts titled to International that he had 100% control over.
(SAC at ¶ 123.) Furthermore, they allege in the Second Amended Complaint that these banks have
a duty to protect against Ponzi artists, and also have internal security measures designed to prevent
this type of activity, with which Defendants failed to comply. (SAC at ¶ 2.)
-4-

With regard to Drawee Bank Defendants, Plaintiffs maintain as follows:
[E]ach time Carpenter got a depositary bank to convert and or
wrongfully negotiate one of these checks, the drawee bank for that
check, upon transfer and presentment of the converted check by the
depositary bank, would wrongfully pay the depositary bank the value
of that check, without authorization and it would then wrongfully debit
the checking account of the Plaintiff that had written that check the
amount the check was made out for.
(SAC at ¶ 7.) In short, they allege that Drawee Bank Defendants improperly honored the checks
that they had written to International by paying out of their respective accounts the amount of the
checks that were paid “over forged or unauthorized endorsements and to parties unauthorized to
receive such payments.” (Id.)
C. The Instant Suit
In Plaintiffs’ Second Amended Complaint, they assert nine counts against Defendants.
However, Plaintiffs only assert one count, Count I, against Defendant FNB. Plaintiffs allege that
FNB violated Ohio Rev. Code § 1304.30 (UCC 4-401) by honoring checks that were not properly
payable. Defendant FNB argues that the court should dismiss the sole count against it, under the
Ohio Uniform Commercial Code (“UCC”), because it is barred by the governing statute of
limitations.
II. PLAINTIFFS’ MOTION TO STRIKE AND MOTION FOR DEFAULT JUDGMENT
Plaintiffs filed a Motion to Strike and Motion for Default Judgment. (ECF No. 179.)
Plaintiffs seek to strike Defendant FNB’s filings for its failure to sign its Answer (ECF No. 109),
Motion to Dismiss (ECF No. 175), and Amended Motion for Judgment on the Pleadings (ECF No.
176), in violation of Rule 11(a) of the Federal Rules of Civil Procedure and Local Rule 10.1.
Plaintiffs contend that the docket entries by the court, identifying the Answer and Motions as
unsigned, were sufficient to timely draw FNB’s attention to the filing errors. Plaintiffs also assert

-5-

that FNB failed to include any page numbers, also in violation of Rule 11(a), and Local Rule 10.1.
If the court grants their Motion to Strike, Plaintiffs move for the entry of a Default Judgment in their
favor pursuant to Rule 55 of the Federal Rules of Civil Procedure.
Defendant FNB submitted a signed Amended Motion for Judgment on the Pleadings or in
the Alternative, Motion to Dismiss, in August of 2010, approximately two months after its previous
unsigned Motions were filed. The court finds that the error was remedied within sufficient time, and
that Plaintiffs were not prejudiced by the delay or the mistake. The court also finds that Plaintiffs
were not prejudiced by the lack of page numbers. Therefore, the court denies Plaintiffs’ Motion to
Strike on this basis. The court also denies as moot Defendant’s Motion to Dismiss (ECF No. 175)
and Amended Motion for Judgment on the Pleadings (ECF No. 176).
Defendant has not submitted a signed Answer in the preferred format, as of the date of this
Order. However, one cannot say he has not signed the document within the meaning of the Rules,
FED . R. CIV . P. 11(a) or Local Rule 10.1, which require signing of the pleading. Because the court
allows electronic filing, no true signature is required. The preferred method is to place “s/” next to
a person’s typewritten name, which indicates that this is the signature of the named attorney. Here,
the attorney simply placed an “s/” above his typewritten name, which could be construed as
indicating that his signature was that of the person who appeared below the line. Further, the
pleading contained the other information required by FED . R. CIV . P. 11(a), “the signer’s address,
e-mail address and telephone number.” This technical noncompliance with the preferred method of
signing a document in our electronic filing system, as stated on page 10 of the User’s Manual for
CM/ECF, Northern District of Ohio, is not equivalent to failure to sign a pleading as required by
FED . R. CIV . P. 11(a) and Local Rule 10.1. Therefore, the court denies Plaintiffs’ Motion to Strike

-6-

and Motion for Default Judgment (ECF No. 179) in its entirety.
III. DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS
A. Standard
Under Federal Rule of Civil Procedure 12(c), a party may move for judgment on the
pleadings “after the pleadings are closed - but early enough not to delay trial.” The standard for
evaluating a motion for judgment on the pleadings is identical to the standard a court applies to a
motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Ziegler v. IBP Hog Mkt., Inc.,
249 F.3d 509, 511-12 (6th Cir. 2001). Under a motion to dismiss standard, the court examines the
legal sufficiency of the plaintiff’s claim. See Mayer v. Mulod, 988 F.2d 635, 638 (6th Cir. 1993).
As the Sixth Circuit noted in Association of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d
545, 548 (6th Cir. 2007), the Supreme Court has clarified the law in Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007), regarding what the plaintiff must plead in order to survive a Rule 12(b)(6)
motion.
When determining whether the plaintiff has stated a claim upon which relief can be granted,
the court must construe the Complaint in the light most favorable to the plaintiff, accept all factual
allegations as true, and determine whether the Complaint contains “enough facts to state a claim to
relief that is plausible on its face.” Id. The plaintiff’s obligation to provide the grounds for relief
“requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Id. at 555. Additionally, even though a Complaint need not contain “detailed”
factual allegations, its “[f]actual allegations must be enough to raise a right to relief above the
speculative level on the assumption that all the allegations in the Complaint are true.” Id. A court
is “not bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v.

-7-

Allain, 478 U.S. 265, 286 (1986).
The Sixth Circuit has held that a court may consider allegations contained in the Complaint,
as well as exhibits attached to or otherwise incorporated in the Complaint, all without converting
a Motion to Dismiss to a Motion for Summary Judgment. FED . R. CIV . P. 10(c); Weiner v. Klais &
Co., 108 F.3d 86, 89 (6th Cir. 1997). However, pursuant to Federal Rule of Civil Procedure 12(d),
“[i]f on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and
not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.”
B. Application
Defendant asserts that the court should dismiss Plaintiffs’ Second Amended Complaint
because Plaintiffs’ Ohio UCC claims are time-barred.
1. Statute of Limitations for Ohio UCC Claims
Plaintiffs assert the following Ohio UCC claim against Defendant: Count I, checks not
properly payable under Ohio Rev. Code § 1304.30. Defendant argues that Plaintiffs’ Ohio UCC
claims are time-barred under the applicable statutes of limitations. The parties agree that Ohio Rev.
Code § 1304.09 applies to Plaintiffs’ claim. Ohio Rev. Code § 1304.09 states as follows:
An action to enforce an obligation, duty, or right arising under sections
1304.01 to 1304.40 of the Revised Code shall be brought within three
years after the cause of action accrues.
The parties, however, dispute the meaning of the term “after the cause of action accrues” for the
purpose of these statutes. Defendant argues that Plaintiffs’ cause of action accrued at the time the
purportedly wrongful conduct was committed. The Second Amended Complaint states that
Plaintiffs wrote checks over to International, which were paid by Drawee Bank Defendants and
deposited in accounts with Depositary Bank Defendants, in 1999 or 2000. (SAC at ¶ 3.) Defendant

-8-

maintains that because Plaintiffs’ causes of action accrued at the latest in 2000, Plaintiffs’ claims
are barred after 2004, since their filing date of April 25, 2008 was well-beyond the statute of
limitations.4
Plaintiffs, however, maintain that the three-year statutes of limitation set forth in Sections
1304.09 and 1303.16(G) are supplemented by the discovery rule found in Ohio Rev. Code §
2305.09. The pertinent portion of this provision reads as follows:
If the action is . . . for the wrongful taking of personal property, the
causes thereof shall not accrue until the wrongdoer is discovered; nor,
if it is for fraud, until the fraud is discovered.
Ohio Rev. Code § 2305.09.5 They contend that this provision extends the date of accrual until the

4

The court notes that in its previous Order, the date used by the court was 2001 for
the latest date the cause of action accrued. Defendant FNB uses the 2000 date as
the latest date the cause of action accrued. However, as the filing date falls
outside both time frames, the issue of the dates is not dispositive.

5

Ohio Rev. Code § 2305.09 states, in its entirety:
Except as provided for in division (C) of this section, an action for any of
the following causes shall be brought within four years after the cause
thereof accrued:
(A) For trespassing upon real property;
(B) For the recovery of personal property, or for taking or
detaining it;
(C) For relief on the ground of fraud, except when the cause of
action is a violation of section 2913.49 of the Revised Code, in
which case the action shall be brought within five years after the
cause thereof accrued;
(D) For an injury to the rights of the plaintiff not arising on
contract nor enumerated in sections 1304.35, 2305.10 to 2305.12,
and 2305.14 of the Revised Code;
-9-

date Plaintiffs discovered Carpenter’s fraud and the banks purported wrongful conduct in paying and
depositing the checks written to International.
Generally, federal courts sitting in diversity jurisdiction “apply state law in accordance with
the then controlling decision of the highest state court.” Bailey Farms, Inc. v. NOR-AM Chem. Co.,
27 F.3d 188, 191 (6th Cir. 1994). However, the Ohio Supreme Court has not yet reached the issue
of whether the discovery rule applies to these statutes of limitations. In cases such as this, federal
courts must make their determination of state law issues based on how they anticipate the court
would rule. Id.
Plaintiffs proffer nearly identical arguments to those offered in Blair (1:08-CV-971, ECF No.
126-2) and that they offered in response to the previous Motions to Dismiss filed by Defendants, to
support their contention that the discovery rule applies under Ohio law. The court, consistent with
its prior Order and Blair, divides these arguments as follows: (1) pursuant to Ohio Rev. Code §
1301.03, the discovery rule supplements the Ohio UCC statutes of limitations; (2) other cases have
applied the discovery rule to these claims; and (3) statutory construction supports their argument that
the discovery rule applies. The court discusses each issue in turn, and rejects each of Plaintiffs’
arguments again for the same reasons stated in Blair. In addition, the court includes a fourth section,
which discusses Plaintiffs’ new argument, regarding the constitutionality of the interpretation of the
statute of limitations.

(E) For relief on the grounds of a physical or regulatory taking of
real property.
If the action is for trespassing under ground or injury to mines, or for the
wrongful taking of personal property, the causes thereof shall not accrue
until the wrongdoer is discovered; nor, if it is for fraud, until the fraud is
discovered.
- 10 -

(a) Ohio Rev. Code § 1301.03
Plaintiffs argue that Ohio Rev. Code § 1301.03 dictates that the discovery rule supplements
the statutes of limitations in Sections 1303.16(G) and 1304.09. This provision states that, “[u]nless
displaced by the particular provisions of [the Ohio UCC], the principals of law and equity . . . shall
supplement their provisions.” Ohio Rev. Code § 1301.03. Plaintiffs maintain that because sections
1304.09 and 1303.16(G) do not expressly define when a cause of action accrues for the purpose of
determining when the statute begins to run, the court must turn to “principals of law and equity” to
supplement these statutes. They next conclude that because § 2305.09 relates to claims for
“wrongful taking of property,” which they contend are analogous to the Ohio UCC claims asserted
against Defendant, the discovery rule contained within this provision applies.
The court, however, finds Plaintiffs’ arguments not well-taken. The court finds that the
statutes of limitations in these provisions do not require supplementation. Both of these provisions
clearly state that a claim must be filed within three years of the date that the cause of action accrued.
These provisions are the undisputed statutes of limitations that apply in this case. There is no
plausible argument that the language of Ohio Rev. Code § 1301.03 requires that § 2305.09 should
be construed as supplementing those sections at issue here under principles of law and equity.
Furthermore, if the legislature had intended for the discovery rule to apply to these statutes, it could
have engrafted such an exception onto these provisions themselves.
In addition, Ohio courts generally define the time when the “cause of action accrues” to mean
the date on which the wrongful conduct occurred. Harris v. Liston, 714 N.E.2d 377, 379 (Ohio
1999) (“Generally, a cause of action accrues at the time the wrongful act is committed.”); O’Stricker
v. Jim Walter Corp., 447 N.E.2d 727, 730 (Ohio 1983) (“In general, a cause of action exists from

- 11 -

the time the wrongful act was committed.”). It is the discovery rule that merely serves as an
exception in certain cases. See Harris, 714 N.E.2d at 379; O’Stricker, 447 N.E.2d at 730. A
determination regarding whether the discovery rule applies where one is not expressly included by
the legislature is for Ohio courts to determine. See id. The Ohio Supreme Court has extended the
discovery rule exception in the following cases: medical malpractice, wrongful adoption, fraud or
conversion, negligent credentialing of a physician, exposure to asbestos and other toxins, sexual
abuse of children, and wrongful death. See Harris, 714 N.E.2d at 379 (citing the relevant cases
applicable to these exceptions). None of these cases include the Ohio UCC provisions asserted here.
While it appears that the Ohio Supreme Court has yet to reach this issue, the following three
Ohio Court of Appeals cases have applied the general rule, without the discovery exception, when
applying Sections 1304.09 and 1303.16(G): Mattlin Holdings, L.L.C. v. First City Bank, 937 N.E.2d
1087, 1091 (Ohio Ct. App. 2010);W. Ohio Colt Racing Ass’n v. Fast, No. 10-08-15, 2009 Ohio App.
LEXIS 1168 (Ohio Ct. App. March 23, 2009); and Connors v. U.S. Bank, No. 07AP-649, 2008 Ohio
App. LEXIS 1568 (Ohio Ct. App. Apr. 17, 2008). In Mattlin, 937 N.E.2d at 1091, the court found
that for a UCC conversion claim, “the statute of limitations set forth in R.C. 1303.16(G) is not tolled
by a discovery rule.” In Fast, 2009 Ohio App. LEXIS 1168, at *19, the court, in construing Ohio
Rev. Code § 1303.16(G), held that cause of action under this provision accrues at the time the
wrongful act was committed. The court, in Connors, 2008 Ohio App LEXIS 1568, at *23, also
applied the three-year statute of limitations in Ohio Rev. Code §§ 1304.09 and 1303.16(G) from the
date in which the wrongful conduct occurred. In addition, the Sixth Circuit has recently held that it
“decline[s] to apply a discovery rule to the statute of limitations in either §§ 1304.09 or 1303.16(G)
when considering the timeliness of the Plaintiffs’ UCC claims.” Metz v. Unizan Bank, Nos. 09-

- 12 -

3751, 09-3879, 09-4363, 2011 WL 3629714, at *3 (6th Cir. Aug. 19, 2011).
The court also rejects Plaintiffs’ contention that Ohio Rev. Code § 2305.09 is applicable to
the Ohio UCC claims asserted here, because the Ohio UCC claims are analogous to claims for
“wrongful taking of property” under section 2305.09. A claim for wrongful taking of property (i.e.
conversion) lies where one improperly exercises dominion over property to the exclusion of the
rights of an owner, or withholds the property from the owner’s possession under a claim inconsistent
with the owner’s rights. Kimble Mixer Co. v. Hall, No. 2003 AP 01 0003, 2005 Ohio App. LEXIS
762, at *30 (Ohio Ct. App. Feb 22, 2005). In Count I, Plaintiffs allege that FNB violated Ohio Rev.
Code § 1304.30, contending that it honored checks that were not “properly payable.” This provision
does not require that the bank paid these checks “wrongfully” or “fraudulently,” only that they were
unauthorized checks that were paid out by the bank. Additionally, the Ohio UCC contains a specific
provision regarding conversion, Ohio Rev. Code § 1303.60(A).

This claim, however, is not

asserted in the instant case, nor could it be asserted as drawers (or issuers) of checks are prohibited
from asserting this claim. See Fast, 2009 Ohio App. LEXIS 1168, at *16, *18 (“[A] cause of action
for conversion of a negotiable instrument is prescribed in R.C. 1303.60(A). . . . However, according
[sic] the statute and case law, a drawer may not bring an action for conversion.”); see also Metz,
2011 WL 3629714 at *2 (finding § 1303.60 “definitively bars [Plaintiffs] from bringing a claim for
the wrongful taking of personal property, and as a result, the Plaintiffs cannot possibly recharacterize their claims to make use of the discovery rule in § 2305.09.”)6 Accordingly, the court

6

Plaintiffs state that “note one of the UCC Drafters’ Notes for R.C. 1303.60(a) says
the maker or issuer [of an instrument] can bring his claim against his drawee bank
under R.C. 1304.30.” (Br. Opp. at 18, ECF No. 177-1/178-1. Although ECF No.
177 was withdrawn as requested by Plaintiffs, their brief remained, becoming a
part of 178-1.) Plaintiffs contend that the reference to 1304.30, in the context of
- 13 -

finds Plaintiffs’ argument that the court should supplement the statutes of limitations with the
discovery rule found in § 2305.09 not well-taken.
(b) Applicability of Discovery Rule in Similar Cases
Plaintiffs contend that there are cases that apply the discovery rule to claims similar to those
in the instant case. They cite two cases in particular to support this proposition: (1) Schofield v.
Cleveland Trust Co., 78 N.E.2d 167 (Ohio 1948); and (2) Geraldo v. First Dominion Mut. Life Ins.,
No. L-01-1210, 2002 Ohio App. LEXIS 4752 (Ohio Ct. App. Sept. 6, 2002). Both of these cases,
however, are readily distinguishable from the instant case. Schofield, 78 N.E.2d at 172, involves
a trustee who improperly diverted funds from the trust account in order to pay a debt he owed to a
bank. The suit alleges that the bank knew of the trustee’s crime and aided his fraud in order to
recoup the money owed for the debt. Id. The court held that the statute of limitations did not begin
to run until the plaintiffs were aware of the fraud. Id. at 171. This case, however, far pre-dates the
enactment of the Ohio UCC, which became effective in 1994, and the statutes of limitation pertinent
to this case. Furthermore, the claims asserted against the bank here amount to fraud, which is
distinguishable from the Ohio UCC claims asserted against Defendant.
Additionally, Geraldo, 2002 Ohio App. LEXIS 4752, involved a suit between a payor bank
and the forger’s bank based on a claim of conversion. The court applied the discovery rule in
Section 2305.09 to the conversion claim, but specifically noted that the cause of action accrued
before the effective date of Ohio Rev. Code 1303.16(G), which the court stated would have applied

the conversion statute of 1303.60(A), demonstrates that 1304.30 is also based on a
claim of conversion, and since the discovery rule covers such claims, it therefore
applies to their claims as well. However, after a thorough review of 1303.60 and
its UCC comments, the court finds there is no reference anywhere to 1304.30, and
therefore Plaintiffs argument must fail.
- 14 -

had it been enacted. Id. at *28. Because the court in Geraldo did not apply Section 1303.16(G) as
it was not yet in effect at the time the cause of action arose in that case, the court’s holding therein
is inapplicable to the instant case.
Moreover, Mattlin, Fast, and Connor, explained in detail above, further demonstrate that
Ohio courts have not applied the discovery rule to these cases. Furthermore, as the court detailed
in Metz, courts are reluctant to extend statutes of limitations in the context of commercial
transactions because of policy reasons. Metz v. Unizan, 416 F. Supp. 2d 568 (N.D. Ohio 2006). The
court stated “the UCC was enacted to advance the uniformity of commercial transactions and to
provide finality and predictability in the trade and transfer of commercial paper and other negotiable
instruments in order to encourage commercial transactions.” Id. at 577 (citing Palmer Mfg. &
Supply v. BancOhio Nat’l Bank, 637 N.E.2d 386, 390 (Ohio 1994) (“Strict application of the
limitations period, while predictably harsh in some cases, best serves the twin goals of swift
resolution of controversies and ‘certainty of liability’ advanced by the UCC.”); and John Hancock
Fin. Svcs., Inc. v. Old Ken Bank, 346 F.3d 727, 734 (6th Cir. 2004) (“[S]trong public policy favoring
finality in commercial transactions, protecting a defendant from stale claims, and requiring a
plaintiff to diligently pursue his claim outweigh the prejudice to plaintiffs and militate against
applying the discovery rule in the context of commercial conversion cases.”) (internal quotations
omitted)).
Therefore, the court rejects Plaintiffs’ argument that Ohio courts apply the discovery rule in
cases such as this.
(c) Statutory Construction
Plaintiffs further maintain that the rules of statutory construction require a discovery rule

- 15 -

exception to the Ohio UCC statutes of limitations. First, they direct the court to Ohio Rev. Code
§ 2305.09(D), which states that “an action . . . shall be brought within four years after the cause
thereof accrued (D) [f]or an injury to the rights of the plaintiff not arising on contract nor
enumerated in sections 1304.35 . . . .” Section 1304.35 (UCC 4-406) relates a customer’s duty
under the Ohio UCC to discover and report unauthorized signatures or alterations to a check.
Plaintiffs maintain that because § 2305.09 expressly excludes § 1304.35 of the Ohio UCC, it means
that it must impliedly include all other provisions of the Ohio UCC.
This argument, however, is equally unavailing. Section 1304.35 expressly states that a
customer has one year to examine their bank statements and notify their bank of any checks that
were altered or forged. Ohio Rev. Code § 2305.09 simply states that the four-year statute of
limitations contained therein does not apply to extend the one-year limitation. It does not mention
the discovery rule as it relates to Section 1304.35 or other Ohio UCC claims, nor does it state or
otherwise imply that the Ohio UCC claims are subject to section 2305.09.
Second, Plaintiffs cite to the repealed statute Ohio Rev. Code § 1303.21, which specifically
defined when a cause of action accrued. Plaintiffs maintain that the court should find that the
legislature meant for § 2305.09 to supplement the statutes of limitations at issue given that it
repealed the provision explicitly stating when a cause of action accrues. The court finds this
argument not well-taken. As discussed above, the court finds § 2305.09 inapplicable to the claims
at issue here. Furthermore, former § 1303.21 did not provide for a discovery rule regarding the
provisions at issue. There are other indications from the legislature that it did not intend for the
discovery rule to apply to these provisions. The legislature has included a discovery rule in other
provisions, i.e., Ohio Rev. Code § 2305.09, and therefore, if it had intended for one to exist with

- 16 -

regard to these statutes, it would have merely placed this similar language in the statute.
The provisions involved here do not define when the cause of action accrues. One would
apply the general rule absent some pertinent authority to the contrary. In order for the discovery
exception to apply, the Ohio Supreme Court would need to carve out such an exception, which it
has yet to do and which the court finds it is unlikely to do so based on the holdings in the Ohio
appellate court cases, as well as the policy rationale that certainty in statute of limitations is preferred
in commercial transactions cases. Therefore, the court rejects Plaintiffs’ contention that the
legislature intended that the discovery rule supplements these statutes.
(d) Unconstitutionality of Construction of Statutes
As their final argument, Plaintiffs make a four sentence argument that the “interpretation of
R.C. 1303.16(g), 1304.09, R.C. 1301.03 and 2305.09 is unconstitutional.” Plaintiffs’ only citations
are to a section of the Ohio Constitution regarding the right to a remedy, and a 1987 Ohio Supreme
Court case discussing the unconstitutionality of a statute of limitations governing medical
malpractice claims. Plaintiffs include no citation to any of the recent cases that have engaged in
discussions of how Ohio courts resolve constitutional issues governing statute of limitations.
As numerous Ohio courts have already stated, “[a]ll legislative enactments enjoy a
presumption of constitutionality.” See M. Williams v. Dayton Police Dept., No. 3:04-CV-117, 2005
WL 3132322, at *3 (S.D. Ohio Nov. 22, 2005) (citing Sedar v. Knowlton Constr. Co., 551 N.E.2d
938 (Ohio 1990); Hardy v. VerMeulen, 512 N.E.2d 626, 629 (Ohio1987); State v. Dorso, 446
N.E.2d 449, 450 (Ohio 1983); State, ex rel. Dickman v. Defenbacher, 128 N.E.2d 59 (Ohio 1955).
The M. Williams court further stated that “[c]ourts must apply all presumptions and germane rules
of construction to uphold a challenged statute if at all possible. Sedar, supra, at 199. Only if the

- 17 -

unconstitutionality of a statute is shown beyond a reasonable doubt can the statute be declared
invalid.” Id. (citing Bd. of Edn. v. Walter, 390 N.E.2d 813 (Ohio 1979)). Plaintiffs have not shown
that the interpretation of the statutes is unconstitutional. Plaintiffs do not even attempt to engage
in the complex analysis utilized by courts when a challenge is made to the constitutionality of a
statute of limitations under Ohio law. As one Ohio Court of Appeals noted, “[t]he Ohio Supreme
Court has repeatedly stated that courts should avoid answering constitutional questions unless it is
absolutely necessary to do so.” See State v. Ohio, No. 04-MO-14, 2005 WL 3642690, at *2 (Ohio
Ct. App. Dec. 3, 2005) (citing State v. Talty, 814 N.E.2d 1201, ¶ 9 (Ohio 2004); Norandex, Inc. v.
Limbach, 630 N.E.2d 329, 331 (Ohio 1994); In Re Boggs, 553 N.E.2d 676, 680 (Ohio 1990); Hall
China Co. v. Public Utilities Commission, 364 N.E.2d 852, 854 (Ohio 1977)). Thus, this court will
not address Plaintiffs’ constitutional arguments when Plaintiffs fail to put forth argument and
discussion detailing how FNB’s interpretation of the statute of limitations is unconstitutional.
Accordingly, Plaintiffs’ argument that the interpretation of the statutes is unconstitutional must fail.
Because the court finds that the discovery rule does not apply, the statute of limitations for
Plaintiffs’ Ohio UCC claims began to run when the allegedly wrongful conduct occurred (at the
latest) in 2001.7 Plaintiffs, thereafter, had until 2004 to file these claims. As Plaintiffs failed to file
7

Even if the discovery rule applied, Plaintiffs’ claims would still be time-barred. The
Sixth Circuit held in Metz that even if the discovery rule applied, Plaintiffs had until
2003 at the latest to file their UCC claims, but waited until 2008. 2011 WL 3629714
at *4. Plaintiffs knew of wrongdoing three years before bringing claims, and the
plaintiff does not need all the “relevant facts necessary to file a claim.” Id. (internal
citation omitted). Instead,
under the discovery rule, a statute of limitations begins
running once plaintiffs are deemed to be on ‘notice to
investigate the facts and circumstances relevant to [their]
claim in order to pursue [their] remedies.’ Information
‘sufficient to alert a reasonable person to the possibility of
- 18 -

the instant suit until 2008, Plaintiffs’ claims are time-barred. Therefore, Defendant FNB’s Second
Amended Request for Judgment on the Pleadings is granted, and the court need not address its
alternative Motion to Dismiss.
IV. CONCLUSION
For the foregoing reasons, the court grants Defendant First National Bank’s Second
Amended Request for Judgment on the Pleadings (ECF No. 180), grants Plaintiffs’ Motion for a
Ruling (ECF No. 181), and denies Plaintiffs’ Motion to Strike and Motion for Default Judgment
(ECF No. 179), and denies as moot Defendant’s Motion to Dismiss (ECF No. 175) and Amended
Motion for Judgment on the Pleadings (ECF No. 176). All claims against all the parties in the within
action have now been resolved.
IT IS SO ORDERED.
/s/ SOLOMON OLIVER, JR.
CHIEF JUDGE
UNITED STATES DISTRICT COURT

September 27, 2011

wrongdoing’ gives rise to this duty to investigate.
Id. (internal citations omitted.) The Metz court found that “Plaintiffs were on notice
of the defendant banks’ possible wrongdoing by 2001,” since “[b]etween 1999 and
2001, Carpenter stopped making interest payments to the Plaintiffs from their
investments in his sham companies.” Id. The Metz court held that “[a] reasonable
person would have been alerted to the possibility that the drawee banks had debited
the Plaintiffs’ accounts with checks that were not properly payable because they were
made to fraudulent companies. Thus, under a discovery rule, the Plaintiffs would
have had until 2004 to bring their UCC claims.” Id.
- 19 -