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HomeMy WebLinkAbout97-4331 civilYORK FEDERAL SAVINGS ·THE COURT OF COMMON PLEAS OF AND LOAN ASSOCIATION ·CUMBERLAND COUNTY, Plaintiff ·PENNSYLVANIA VS. : : RAFAEL B. BELLIDO : No. 97-4331-Civil and STATOD ENTERPRISES, INC., : a Pennsylvania Corporation, t/a : HARRISBURG AUTO AUCTION : Defendants: IN RE: CROSS MOTIONS FOR SUMMARY JUDGMENT BEFORE HOFFER, P.J., OLER, J. AND GUIDO, J. ORDER OF COURT AND NOW,/~~~'"~ ,1999, after consideration of the Cross Motions for Summary Judgment,~e facts of record, and the applicable law, Plaintiff York Federal Savings and Loan Association's Motions for Summary Judgment against Defendant Bellido and Defendant Harrisburg Auto Auction are hereby granted and Defendant Harrisburg Auto Auction's Cross Motion for Summary Judgment is denied. By the Court, ~ p,j. 97-4331 CIVIL TERM Benjamin F. Riggs, Jr., Esquire 101 South George Street York, PA 17405-7068 Attorney for Plaintiff James M. Bach, Esquire 352 S. Sporting Hill Road Mechanicsburg, PA 17055 Attorney for Defendant Harrisburg Auto Auction Thomas D. Gould, Esquire 2 East Main Street Shiremanstown, PA 17011 Attorney for Defendant Bellido YORK FEDERAL SAVINGS : THE COURT OF COMMON PLEAS OF AND LOAN ASSOCIATION : CUMBERLAND COUNTY, Plaintiff :PENNSYLVANIA : VS, : : : RAFAEL B. BELLIDO :No. 97-4331 CIVIL and : STATOD ENTERPRISES, INC., a Pennsylvania Corporation, t/a : HARRISBURG AUTO AUCTION Defendants: IN RE: CROSS MOTIONS FOR SUMMARY JUDGMENT BEFORE HOFFER, P.J., OLER, J. AND GUIDO, J. OPINION HOFFER, J.: In this opinion we address Cross Motions for Summary Judgment. The facts in the case are as follows: on March 6, 1997, defendant Bellido, a licensed dealer at Harrisburg Auto Auction, trading as Sabec's Auto Sales, brought a 1996 Toyota Land Cruiser (hereinafter referred to as "Motor Vehicle") to defendant Harrisburg Auto Auction to offer the vehicle for sale. (Hoytinski Depo. p.8, In. 21-24, Bellido Depo. p. 23, In. 23-25 and p. 24, In. 1-2 ). The Motor Vehicle was purchased that day by Tyler Run Auto Sales. (Hoytinski Depo. p. 9, In. 3-5). On that same day, Harrisburg Auto Auction wrote a check (hereinafter referred to as "Check") to Bellido, payable to Sabec's A/S 4-105, in the amount of $27,965.00 in exchange for the Motor Vehicle. (Bellido Depo. p. 21, In. 24-25, and p. 22, In. 1-2). Bellido 97-4331 CIVIL TERM deposited the Check on the afternoon of the same day in the Camp Hill Branch of plaintiff York Federal Savings and Loan Association. (Bellido Depo. p. 24, In. 13- 22). When plaintiff accepted the Check, there were no alterations on the Check. (Hershey Depo. p. 16, In. 1-3). As the Check was from a well established business in the area, plaintiff placed a one-day local hold on the Check. (Hershey Depo. p. 16, In. 19-20). A one-day local hold means that $100.00 would be available the next business day and the full proceeds of the Check would be available on the third business day, March 8, 1997. (Hershey, pp. 7-9, Bellido 25). Plaintiff followed normal banking procedures in processing the Check based upon its experience with Bellido as a regular customer and Harrisburg Auto Auction as a reputable local business. (Hershey Depo. p. 15, In. 6-14). On March 7, 1997, Harrisburg Auto Auction learned from the buyer, Tyler Run Auto Sales, that the Motor Vehicle was a stolen vehicle when brought in for sale.~ Harrisburg Auto Auction immediately attempted to contact Bellido, but could not reach him until March 11, 1997. (Hoytinski Depo. p. 10, In. 3-18, p.15, In. 15- 25). As a result, Harrisburg Auto Auction called in a stop payment request on the Check to Pennsylvania State Bank on March 7. (Hoytinski Depo. p. 12, In. 9-12). All of the parties involved, including Bellido, deny knowing that the Motor Vehicle ~Harfisburg Auto does not run any background check on its vehicles unless they suspect a problem. (Hoytinski Depo. p. 8, ln. 10-16). 2 97-4331 CIVIL TERM was a stolen vehicle. (Hershey Depo., p. 17, In. 3-8, Bellido Depo. p. 40, In. 2-3, Hoytinski Depo. p. 27, In. 1-6). Plaintiff received an internal memo indicating that payment had been stopped on the Check, March 11, 1997. (Luff Depo. p. 19, In. 20-25, p. 20, In. 1). On March 8, 1997, Bellido attempted to withdraw $24,000.00 cash from his account at York Federal Savings and Loan Association. (Bellido Depo. p. 25, In. 11-18, p. 26, In. 1-2, Luft Depo. p. 6, In. 23-24). Bellido was informed that plaintiff's Mechanicsburg Branch could not provide him with $24,000.00 cash, but it could provide him with $14,000.00. (Bellido Depo. p.26, In. 2-4, Luft Depo. p. 7, In. 14-15). An arrangement was made for Bellido to travel to plaintiff's Hershey Branch to obtain the additional $10,000.00. (Bellido Depo. p. 26, In. 9-12, Luft Depo. p.7, In. 22-25). Bellido received the additional $10,000.00 the same day. (Bellido Depo. p. 41, In. 13-15). After receiving notice that payment had been stopped on the Check, plaintiff contacted Bellido regarding the repayment of the $24,000.00, but he has failed to repay the money. (Bellido Depo. p. 40, In. 18-23). Plaintiff filed this action against Bellido on August 12, 1997, and Bellido was served on August 12, 1997. Bellido filed an Answer with New Matter and Counterclaim on September 15, 1997. Plaintiff filed a Reply to the New Matter and Answer to Counterclaim on October 3, 1997. Plaintiff filed an Amended Complaint 3 97-4331 CIVIL TERM against Bellido and Harrisburg Auto Auction on January 26, 1998. Harrisburg Auto Auction was served on January 28, 1998, and filed an Answer to Plaintiff's Amended Complaint and a Counterclaim, in addition to a Cross-Complaint against Bellido on March 5, 1998. Bellido filed his Answer/New Matter and Counterclaim to Plaintiff's Amended Complaint on March 11, 1998. Plaintiff filed its Answer to Counterclaim of Harrisburg Auto Auction and its Answer to Counterclaim of Bellido on March 24, 1998. Plaintiff filed a Motion for Summary Judgment against both defendants on September 9, 1998. Harrisburg Auto Auction filed a Cross Motion for Summary Judgment on October 7, 1998. Bellido has not responded to Plaintiff's Motion for Summary Judgment. DISCUSSION Motions for summary judgment are governed by Pa. R. Civ. P. 1035.2. The rule states: After the relevant pleadings are closed, but within such time as to not unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law (1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or (2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an 4 97-4331 CIVIL TERM adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury. Pa. R. Civ. P. 1035.2. In deciding a motion for summary judgment, the Court will "view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party." Ertel v. Patriot News Co., 44 Pa. 93, 98-99, 674 A.2d 1038, 1041 (1996). Plaintiff's Motion for Summary Judgment Against Defendant Bellido A party opposing summary judgment, may not rest upon the mere allegations or denials of the pleadings but must file a response within thirty days after service of the motion identifying (1) one or more of the issues of fact arising out from evidence in the record controverting the evidence cited in support of the motion or from a challenge to the credibility of one or more witnesses testifying in support of the motion, or (2) evidence in the record establishing the facts essential to the cause of action or defense which the motion cites as not having been produced. Pa. R. Civ. P. 1035.3(a). It is permissible to grant summary judgment against a party who fails to respond. Pa. R. Civ. P. 1035.3(d). Parties must be given a full and fair opportunity to argue against motions for 5 97-4331 CIVIL TERM summary judgment. Smitley v. Holiday Rambler Corp., 707 A.2d 520, 526 (Pa. Super. 1998). The Rule 1035.3 is a mechanism which allows a court to enter judgment against a party who fails to respond to motions for summary judgment. !d. Cumberland County Rules of Procedure require briefs to be filed before argument is held. C.C.R.P. 210-6. "Issues raised, but not briefed, shall be abandoned." C.C.R.P. 210-7. Parties who fail to file brief may be denied argument. C.C.R.P. 210-8. Bellido, in the case at bar, has had ample opportunity to respond to Plaintiff's Motion for Summary Judgment and has failed to do so. Plaintiff's Motion for Summary Judgment was filed September 9, 1998. Plaintiff listed its motion for argument September 29, 1998. Bellido did not file a written response to Plaintiff's motion. In accordance with the Pennsylvania Rules of Civil Procedure and the Cumberland County Rules of Procedure, Plaintiff's Motion for Summary Judgment against Bellido is granted. Plaintiff's Motion for Summary Judgment Against Defendant Harrisburg Auto Auction Plaintiff claims that it is entitled to summary judgment against Harrisburg Auto Auction because it is a holder in due course of the Check and has the right 6 97-4331 CIVIL TERM to enforce the payment of the Check against Harrisburg Auto Auction, pursuant to 13 Pa.C.S. §3305(b). The Court agrees. Pennsylvania's Commercial Code § 3104(b)(2) defines a "check" as a draft drawn on a bank and payable on demand. In order for a check to be a negotiable instrument it must: (1) be signed by the maker or drawer; (2) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this division; (3) be payable on demand or at a definite time; and (4) be payable to order or to bearer. 13 Pa.C.S.§3104(a). The Check in the present case was presented by Bellido to plaintiff for deposit on March 6, 1997. The Check, signed by defendant Harrisburg Auto Auction, contained an unconditional promise to pay $27,965.00, on demand, to Sabec's A/S. Consequently, the Check meets the requirements of a negotiable instrument. One becomes a "holder," within the meaning of 13 Pa.C.S.§3201, if they acquire an instrument by means of negotiation. If an instrument is payable to the bearer, it may be negotiated by transfer of possession. 13 Pa.C.S.§3201(b). 7 97-4331 CIVIL TERM Plaintiff obtained possession of the Check when Bellido deposited it at plaintiff's Mechanicsburg branch and, consequently, is a "holder" pursuant to 93201(a). The Pennsylvania Commercial Code 9 3302(a)(2) defines a "holder in due course" as a holder who takes the instrument: (i) for value; (ii) in good faith; (iii)without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series; (iv) without notice that the instrument contains an unauthorized signature or has been altered; (v) without notice of any claim to the instrument described in 93306 (relating to claims to an instrument); and (vi) without notice that any party has a defense or claim in recoupment described in 93305(a) (relating to defenses and claims in recoupment). 13 Pa.C.S.93302(a). First, we must consider whether plaintiff took the Check for value. Section 3303(a)(2) of the Pennsylvania Commercial Code states that an instrument is issued and transferred for value if the transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding. A 8 97-4331 CIVIL TERM collecting bank has a security interest in an item and any accompanying documents, or the proceeds in the case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied. 11 Pa.C.S.A. § 4210(a). In the present case, Bellido deposited the Check and plaintiff permitted Bellido to withdraw $24,000.00 after all holds on the Check had expired. When plaintiff allowed Bellido to withdraw the funds, it obtained a security interest over the Check. This security interest meets the definition of "value" pursuant to § 3303 and §4210(a). Consequently, the plaintiff took the Check for value. Next, we must consider whether Plaintiff acted in good faith when it accepted the Check for deposit. Defendant asserts that plaintiff was negligent and careless due to its failure to inquire whether a stop payment order had been received from Harrisburg Auto Auction before cashing the Check? The proper test for 2It should be noted that Harrisburg Auto Auction required all dealers, including Bellido, to provide background information, including a copy of a blank check from their banks. Bellido provided Harrisburg Auto Auction with a copy of his check from York Federal Savings and Loan Association. A copy of Bellido's York Federal check was contained in Harrisburg Auto Auction's file on March 7, 1997, the day that Harrisburg Auto Auction placed a stop payment on the check issued to Bellido. Todd Hoytinski, part owner of Harrisburg Auto Auction, reviewed Bellido's file on March 7, 1997, prior to placing the stop payment order. Hoytinski observed the York Federal check but failed to contact York Federal regarding the stop payment order. A simple phone call to York Federal could have prevented this entire situation. (Hoytinski Depo. pp. 33-34). 9 97-4331 CIVIL TERM determining bad faith, however, "is not one of negligence or a duty to inquire, but rather one of willful dishonesty or actual knowledge." Valley Bank and Trust Co. v. American Utilities Inc., 415 F.Supp. 298, 301 [19 UCC Rep. 857] (E.D.Pa. 1976). Plaintiff did not receive notice of the stop payment order placed on the Check until 3 days after the cash was paid to Bellido. Plaintiff cannot be required to research every check it receives. Requiring a bank to inquire about stop payment orders on every check it processes would "bring the banking system to a grinding halt." Mellon Bank v. Donegal Ins. Co., 13 D. & C. 3d 103, 106. The Check was from a local, well established business and plaintiff had no reason to be suspicious of it. Plaintiff did not take the Check in bad faith. Plaintiff acted without notice that the instrument was overdue, dishonored, uncured or had been altered or contained any unauthorized signatures. Both defendants testified to these facts. (Hoytinski Depo. pp. 17-22; Bellido Depo. pp. 39-40). The plaintiff did not have notice of any claim under § 3306 of Pennsylvania's Commercial Code when taking the Check as to any property or possessory right in the instrument or its proceeds. Courts in Pennsylvania require that a defense under 13 Pa. C.S.A. § 3305 be specifically pled in the defendants' answers to plaintiff's complaint. See Delahanty v. First Pennsylvania Bank, N.A., 464 A.2d 1243 (Pa. Super. 1983). Neither defendant in this case included any 10 97-4331 CIVIL TERM defense provided by § 3305 in their Answers. In conclusion, the drawer of a check (in this case Harrisburg Auto Auction) contracts that upon dishonor of the draft and any necessary notice of dishonor or protest, he will pay the amount of the draft to the holder or to any endorser who takes it up. 13 Pa.C.S.§3413 (b). Every drawer has a right to order his bank to stop payment of an instrument. 13 Pa. C.S.A. § 4403 (a). However, "lhe drawer must realize that he remains liable on the instrument to a holder in due course," See Flagship Bank of Orlando v. Central Florida Coach Lines, Inc., 33 U.C.C. Rep. 613 (1981). Harrisburg Auto Auction's contract with the plaintiff, as a holder in due course, is not affected by a stop payment order where that order is unknown to plaintiff. "A stop payment order issued by the drawer (Harrisburg Auto Auction) to the drawee, which is unknown to the paying-collecting bank (plaintiff) cannot fasten uPon the bank any legal disability; particularly it cannot reduce the status of the collecting bank to a mere assignee of the instrument or a holder of a non-negotiable instrument, or a mere holder of a negotiable instrument." Mellon Bank v. Donegal Ins. Co., 13 D. & C. 3d 103, 106. Plaintiff has shown that it was the holder of the Check and took the Check for value, in good faith, and without notice that the Check had been dishonored; without notice of default; without notice of an unauthorized signature; without claims pursuant to 11 97-4331 CIVIL TERM §3306; and without claims pursuant to §3305(a). Accordingly, plaintiff is a holder in due course and has a right to enforce the payment of the Check against Harrisburg Auto Auction.3 3 Because the Court has granted Plaintiff's Motion for Summary Judgement against Harrisburg Auto Auction, it is unnecessary to address Harrisburg Auto Auction's Motion for Summary Judgment. 12