Justice Motion R/D: Submission Date: 11-I Motion Sequence No.:

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1 INDEX NO SUPREME COURT - STATE OF NEW YORK IAS TERM PART 23 NASSAU COUNTY PRESENT: HONORABLE LEONARD B. AUSTIN Justice Motion R/D: Submission Date: 11-I Motion Sequence No.: ,0041MOT D CATHERINE A. SIMUNEK and JOHN SIMUNEK II, Plaintiffs, F? COUNSEL FOR PLAINTIFFS O Donnell & Fox, P.C. 880 Third Avenue New York, New York FLEET BANK - against r Defendant. COUNSEL FOR DEFENDANT Wilson, Elser, Moskowitz, Edelman Dicker, LL P 3 Gannett Drive White Plains, New York & The following papers were read on Defendant s motion for summary judgment and Plaintiffs cross-motion for summary judgment: Notice of Motion, dated October 3, 2002; Affirmation of Constance A. Despotakis, Esq. dated October 3, 2002; Affidavit of Mark Fallon sworn to on October 2, 2002 Affidavit of Lisa 6. Friedman sworn to on October 2, 2002; Affidavit of Susan M. Doolan sworn t on October 2, 2002; Affidavit of Roza Razov sworn to on October 2, 2002; Affidavit of Fernanda Eslick sworn to on October 2, 2002; Defendant s Memorandum of Law; Notice of Cross-motion dated November I, 2002; Affidavit of Catherine A. Simunek sworn to on October 22, 2002; Affidavit of John F. Simunek II sworn to on October 22, 2002; Defendant s Memorandum of Law: Affirmation of Constantine A. Despotakis, Esq. dated November 8, 2002; Affidavit of Mark Fallon sworn to on November 6, 2002; 1

2 Affidavit of Fernanda Eslick sworn to on November 6, 2002 Defendant s Reply Memorandum of Law. BACKGROUND In late June, 2000, Plaintiff John F. Simunek, II received a sales commission check from his employer, Global Financial Press, in the amount of check was drawn on Global s Fleet Bank payroll account.. $72, The On Thursday, June 29, Simunek deposited the check into a Fleet joint account which he maintained with his wife, Plaintiff Catherine Simunek. A provisional credit in the check amount was posted to the account. The Global and Simunek accounts were maintained at different Fleet branches. On Friday, June 30, Mrs. Simunek made inquiries at a Fleet branch office in Syosset, Long Island. She was allegedly informed that the check had cleared and that the funds were available. On that day, Mrs. Simunek transferred $60, of the check proceeds into a new, individual Fleet account she opened after a bank employee allegedly dissuaded her from withdrawing the funds. The Simuneks were apparently concerned about the viability of the check because a conflict had arisen between Global and her husband and because Global been experiencing financial difficulties. According to Defendant Fleet -which was both depositary and payor bank with respect to the transaction - the Global check deposited by Plaintiffs hit its system on Thursday night. The check was later dishonored for insufficient funds at approximately II:00 a.m. on Friday, June 30, The provisional debit posted to 2

3 Global s account was therefore reversed on that day and a notice of insufficient funds was issued to Global. On that same day, the check was dispatched to a different, central Fleet office (not to the branch where it was originally deposited) for further processing as a returned item. On Monday, July 3, 2000, the dishonored check was returned unpaid to the Plaintiffs. As a result, their account was thereafter charged back in the amount of the dishonored instrument. Mrs. Simunek contends that a Fleet employee called her a few days later and demanded that she transfer money from her other accounts to cover the amount of the dishonored check. She complied with that request. When Fleet later declined to refund the check proceeds, the Plaintiffs commenced the this action sounding in breach of contract, negligence and wrongful conversion. Fleet and the Simuneks now move and cross-move for relief on their respective claims. Fleet s motion should be granted. DISCUSSION Plaintiffs principally contend that Fleet untimely when measured against the so-called s dishonor of the Global check was midnight deadline imposed by of the Uniform Commercial Code ( UCC ). The Court disagrees. Insofar as applicable here, the midnight deadline rule requires, infer alia, that a bank pay or return a check, or transmit notice of its dishonor, prior to midnight on its next banking day following the banking day on which it receives the relevantitem * * * 3

4 UCC 5s (I); (1) (h). See also, Hanna v. First Nat. Bank of Rochester, 87 N.Y. 2d 107 (1995); SOS Oil Corp. v. Norstar Bank of Long Island, 76 N.Y. 2d 561 (1990); and Citibank. N.A. v. Rakower, 256 A.D. 2d 265 (I Dept. 1998). See also, 6A Hawkland, Uniform Commercial Code Series (revised), 4-302, at Rev. Art Where compliance with the midnight deadline rule is established and final payment on the instrument has not been made (UCC 4-213), a depositary bank which issues a provisional credit for a deposited check may charge back the provisional credit to its customer pursuant to UCC 4-212(l) if it does not receive settlement from the payor bank. Mahopac Nat. Bank v. Gelardi, A.D. 2d_, 750 N.Y.S. 2d 115, I 16 (2nd Dept. 2002). See also, Hanna v. First Nat. Bank of Rochester, supra at 119; Roslvn Sav. Bank v. Jude Thaddeus Glen Cove Marina, Inc., 266 A.D. 2d 198 (2nd Dept. 1999); Citibank, N.A. v. Rakower, supra; Sunshine v. Bankers Trust Co., 34 N.Y. 2d 404, (1974); and UCC (3). This is because, [a]collecting bank acts as the agent of its customer, and until such time as the collecting bank receives final payment, the risk of loss continues in the customer, the owner of the item. Hanna v. First Nat. Bank of Rochester, supra at 119. See also, Mahopac Nat. Bank v. Gelardi, supra, where the Second Department recently held relying upon its decision in Roslvn Savinqs Bank v. Jude Thaddeus Glen Cove Marina, Inc. (266 A.D. 2d provisional credit granted by a depository bank, may, pursuant to UCC 198), that a 4-212,(l), be charged back to its customer if the payor bank does not issue payment. While funds must be made available to a depositor on an expedited basis 4

5 pursuant to the Expedited Funds Availability Act ( EFA Act ) (12 USC 4001, et seq.; 12 CFR ef seq., [Federal Reserve Board Regulation CC ]), a customers right of withdrawal under the EFA Act does not affect the bank s right to charge back its customer s account in the event the funds at issue are not ultimately collected 6A Hawkland, Uniform Commercial Code Series (revised) : 2, at Rev. Art ; 12 USC $4006 (c) (2) (9); and 12 CFR (c) (2) (ii). See also, Essex Const. Corp. v. Industrial Bank of Washinston. Inc., 913 F. Supp. 416,418 (D. Md. 1995). The Court of Appeals in Hanna v. First Nat. Bank of Rochester, supra at 116, discussed both the midnight rule which requires the payor bank to settle an item on the day of its receipt and the midnight deadline which mandates dishonor or return of an item by midnight of the next day. Both the midnight rule and the midnight deadline were codified in UCC Significantly, UCC provides, in part, that [a] branch or separate office of a bank is a separate office for the purpose of computing the time within which * * * action may be taken * * * under this Article * * *. Here, Fleet did not receive a settlement or make final payment in connection with the Global check, which was instead, dishonored for insufficient funds. Moreover, the documentary submissions demonstrate that Fleet, in it is capacity as payor bank, timely dishonored the Global check within the constraints imposed by the midnight rule. UCC That is, prior to midnight of Friday, June 30, Fl.eet, as payor bank, determined that the check was drawn against insufficient funds, reversed the provisional debit entered against 5

6 Global s account and issued a notice of insufficient funds. Fleet also timely and seasonably discharged its midnight deadline obligation as the depositary bank. UCC See also, White & Summers, Uniform Commercial Code, 20-4, at 309 (qfh ed. 1995). A review of the banking records submitted confirms that the check was dishonored and then dispatched to a separate Fleet office on Friday, June 29, Pursuant to the midnight rule, the time from which Fleet - as depositary bank - could act was extended to midnight of the next banking day; to wit: Monday, July 3, 2000, on which date the check was returned unpaid to the Simuneks. Notably, Fleet s papers demonstrate - and the Plaintiffs have not shown otherwise - that Saturday does not constitute a Fleet banking day See,. UCC (1) (c) which defines the term banking day as that part of any day on which a bank is open to the public for carrying on substantially all of its banking functions. See, e.g., United Bank of Crete-Steoer v. Gainer Bank, N.A., 874 F. 2d 475 (7th Cir. 1989). There is no dispute that Fleet Bank s activities is performing rudimentary banking functions, as a convenience for its customers on Saturday, do not satisfy the substantially all of its banking functions standard. Further, to the extent that Mrs. Simunek was permitted to transfer the check proceeds, or was informed on Saturday that the funds had cleared in accord with federal funds availability rules (Cf. Golden Gulf. Inc. v. AmSouth Bank, N.A., 565 So.2d 114, 118 [Ala, Sup Ct., 1990]), Fleet s right to charge back the Plaintiffs account upon 6

7 compliance with applicable provisions of the Uniform Commercial Code would not be extinguished or waived. See, Essex Const. Corp. v. Indust. Bank of Washinqton, Inc., supra. It bears noting in this respect that while Fleets Personal Deposit Account Agreement refers to next day availability for checks drawn on Fleet accounts, the deposit agreement also contains a qualifying provision which advises that, [w]e have the right to charge back your account for an item which is returned to us unpaid. Thus, Plaintiffs reliance thereon is misplaced. The Court has considered the Plaintiffs remaining contentions and concludes that none supports the denial of Fleets motionfor summary judgment. Accordingly, and inasmuch as Fleet has demonstrated timely compliance with the applicable provisions of the Uniform Commercial Code, its motion for summary judgment dismissing the complaint must be granted. Therefore, it is ORDERED that Fleet s motion for summary judgment is granted and the complaint is dismissed, and it is further, ORDERED, that the Plaintiffs cross motion for summary judgment is denied. This constitutes the decision and Order of the Court. Dated: Mineola, NY January 23,2003 L ONARD 9. AUSTIN, J.S.C. EN-I-ERE@#f - _ JAN

SUPREME COURT - STATE OF NEW YORK IAS TERM. PART 19 NASSAU COUNTY. Justice

5ca INDEX NO. 4091-01 SUPREME COURT - STATE OF NEW YORK IAS TERM. PART 19 NASSAU COUNTY PRESENT: HONORABLE FORD MOTOR CREDIT COMPANY, Plaintiff, - against - Justice LEONARD B. AUSTIN Motion RID: 6- Submission