Date: 03-25-2002

Case Style: Coregis Insurance Company v. Fleet National Bank

Case Number: (AC 22136)

Judge: Unknown

Court: Supreme Court of Connecticut

Plaintiff's Attorney: Eric J. Foy, with whom, on the brief, was Joel M. Fain, for the appellee (plaintiff).

Defendant's Attorney: Gerald L. Garlick, with whom was Kenneth M. Rozich, for the appellant (defendant).

Description: This is a case of statutory construction. Under General Statutes § 42a-4-401, a bank may charge against a customer’s account only those items that are ‘‘properly payable.’’1 The sole issue in this appeal is whether, under General Statutes §§ 42a-3-110 (d) and 42a-3-205 (d), a check made payable in the alternative to one of several payees authorizes a payor to honor the check, even if it contains two unauthorized signatures, if the check is presented for payment bearing one valid endorsement. We hold that the one valid endorsement was sufficient and reverse the contrary judgment of the trial court.

The following factual history is relevant to our resolution of this appeal. In October, 1996, Joseph Walton sustained physical injuries at West Feliciana High School where he was a student. Attorney Trudy Avants was retained by Walton’s mother, Delores Carpenter, to represent them in a personal injury action against the West Feliciana school board and the plaintiff, Coregis Insurance Company.

In August or September of 1996, the plaintiff and Avants agreed to settle the claim for $50,000. On September 11, 1996, Avants and two unknown individuals representing themselves to be Carpenter and Walton signed settlement documents. The plaintiff issued a settlement check made payable to:

‘‘TRUDY AVANTS ATTORNEY FOR MINOR CHILD JOSEPH WALTON,
MOTHER DELORES CARPENTER
11762 S. HARRELLS FERRY ROAD # E
BATON ROUGE LA 70816’’

The check subsequently was endorsed by Avants and by two unknown individuals who fraudulently signed the names of Carpenter and Walton. The settlement check was cashed at Hibernia Bank in Baton Rouge and later was presented for payment to the defendant, Fleet National Bank. The defendant honored the check and charged the plaintiff’s account in that amount.

On May 19, 1998, the plaintiff filed a complaint alleging that the check was not properly payable under § 42a- 4-401 (a) because the check contained unauthorized endorsements. Both parties filed motions for summary judgment, supported by proper documentation. Each party filed a memorandum of law in opposition to the other’s motion. After oral argument, the trial court denied the defendant’s motion and granted the plaintiff’s cross motion for summary judgment.

In its memorandum of decision, the court held that the language describing the payees was ambiguous and that the check thus should be treated as payable in the alternative under § 42a-3-110 (d).2 The court stated that Avants’ signature was, therefore, a sufficient endorsement to permit negotiation of the check. Nonetheless, in light of the other unauthorized signatures, the court held that the check was not properly payable under § 42a-4-401.

On appeal, the defendant claims that the court improperly denied its motion for summary judgment by concluding (1) that the check, which was payable in the alternative, was not properly payable even though it contained one valid signature, because the other signatures were unauthorized and (2) that the additional unauthorized endorsements were not ‘‘anomalous’’ under General Statutes § 42a-3-205 (d).3 These two claims merge into one claim about the payability of the disputed check under the provisions of the Uniform Commercial Code as adopted in this state in General Statutes § 42a-1-101 et seq.4

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Our approach to this issue is guided by well established principles of statutory construction. ‘‘[O]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature. . . . In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter.’’ (Internal quotation marks omitted.) Herbert S. Newman & Partners v. CFC Construction Ltd. Partnership, 236 Conn. 750, 755–56, 674 A.2d 1313 (1996). Furthermore, it is an ‘‘elementary rule of statutory construction that we must read the legislative scheme as a whole in order to give effect to and harmonize all of the parts.’’ (Internal quotation marks omitted.) Connecticut Light & Power Co. v. Dept. of Public Utility Control, 216 Conn. 627, 636, 583 A.2d 906 (1990). When statutes relate to the same subject matter, they must be read together and ‘‘specific terms covering the given subject matter will prevail over general language of the same or another statute which might otherwise prove controlling.’’ (Internal quotation marks omitted.) State v. State Employees’ Review Board, 239 Conn. 638, 653, 687 A.2d 134 (1997).

The questions raised in this appeal relating to the negotiability and payment of instruments are governed by the provisions of the Uniform Commercial Code as adopted in General Statutes § 42a-1-101 et seq. Under these statutes, only a ‘‘holder’’ or someone who has the rights of a holder may properly present an instrument for payment. General Statutes § 42a-3-301. A ‘‘holder’’ of an instrument that is payable to an identified person is defined as ‘‘the person in possession . . . if the identified person is in possession.’’ General Statutes § 42a- 1-201 (20). A check payable to more than one person may be payable jointly, requiring valid signatures of all payees, or it may be payable in the alternative, in which case it is ‘‘payable to any of them and may be negotiated . . . by any or all of them in possession of the instrument.’’ (Emphasis added.) General Statutes § 42a-3-110 (d). In the case of ambiguity, § 42a-3-110 (d) treats the check as payable in the alternative. According to General Statutes § 42a-3-205 (d), any endorsement made ‘‘by a person who is not the holder of the instrument’’ is ‘‘anomalous’’ and ‘‘does not affect the manner in which the instrument may be negotiated.’’

The trial court properly determined that the language of the settlement check was ambiguous as to whether it was payable jointly or payable in the alternative and that, due to that ambiguity, the check must be treated as payable in the alternative. Therefore, the check was properly negotiable by any or all of the payees in possession. The court acknowledged that Avants was one of the payees in possession and thus her signature alone was sufficient to negotiate the check.

Nonetheless, the court held that the two unauthorized signatures invalidated the one otherwise proper endorsement. The court relied on comment 1 to § 42a- 4-401, which states that ‘‘[a]n item containing a forged drawer’s signature or forged [e]ndorsement is not properly payable.’’5 General Statutes Ann. § 42a-4-401, comment 1 (West 1990). The court held that the signatures constituted ‘‘endorsements’’ as defined by General Statutes § 42a-3-204 and that their forgery made the instrument not properly payable.6 Furthermore, the court held that the unauthorized endorsements did not fall within the definition of ‘‘anomalous’’ endorsements because, although the two unknown parties were not holders, they were ‘‘acting as’’ holders and their unauthorized signatures impaired the negotiability of the check.

The defendant challenges the court’s conclusion regarding the effect of the unauthorized endorsements. The defendant argues that those signatures were ‘‘anomalous’’ endorsements because they were made by persons who were not holders and, therefore, did not affect the negotiability of the instrument. We agree.

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Click the case caption above for the full text of the Court's opinion.

Outcome: The judgment is reversed and the case is remanded with direction to render judgment for the defendant.

Plaintiff's Experts: Unavailable

Defendant's Experts: Unavailable

Comments: None