Opinion
CIVIL ACTION NO. 03-CV-5208
March 22, 2004
MEMORANDUM ORDER
Presently before the Court is Defendant Chevy Chase Bank's Motion to Dismiss Counts II, III, IV, and V of Plaintiff's Complaint for Failure to State a Claim Upon Which Relief can be Granted. (Doc. No. 3.) For the following reasons, Defendant's Motion will be granted.
I. BACKGROUND
Plaintiff Citizens Bank of Pennsylvania is a bank with its principal place of business in Pennsylvania. (Doc. No. 1 ¶ 1.) Defendant Chevy Chase Bank is a bank with its principal place of business in Maryland. ( Id. ¶ 2.) On or about February 26, 2003, Plaintiff issued a bank check payable to Columbia National Inc. ("CM") in the amount of $91,553.82 (the "Check"). ( Id. 1 5.) The purpose of the Check was to pay off a loan secured by a mortgage on property owned by William and Debra Beattie (collectively, "Beattie"). CNI held the mortgage on the property. ( Id. 1 6.) After issuing the Check, Plaintiff demanded that CNI satisfy its mortgage. ( Id. ¶ 7.) CNI advised Plaintiff that it never received the Check, and refused to satisfy its mortgage. ( Id.)
After investigating, Plaintiff discovered that the Check had been misappropriated and accepted for deposit over a forged endorsement at one of Defendant's branches. ( Id. 1 8.) According to an affidavit by Joseph A. Moschetto, Sr., vice president of CNI, the Check "was neither stamped nor endorsed by [CNI] or with its authority. [CNI] received no payment and no benefit from this; and the endorsement of [CNI] is a forgery and was made without [CNI's] knowledge or approval." ( Id. ¶ 9.) Plaintiff alleges that Defendant permitted an unauthorized individual to open an account with Defendant in the name of CNI. Defendant then accepted the Check for deposit over the endorsement of an individual named Devon Ivey. ( Id. ¶ 10.)
Plaintiff alleges that Defendant has recovered approximately $30,000 of the funds that it wrongfully accepted upon payment of the Check. ( Id. ¶ 11.) Defendant has been advised that the proceeds of the Check were for the satisfaction of Beattie's mortgage, and that unless CNI receives payment, CNI will not satisfy Beattie's mortgage and intends to commence foreclosure proceedings. Defendant has also been advised that in order to prevent foreclosure proceedings against Beattie, Plaintiff will pay CNI sufficient funds to avoid foreclosure proceedings and shall hold Defendant responsible for all such payments and costs. ( Id. ¶ 12.) Defendant refuses to return the funds. ( Id. ¶ 13.)
Plaintiff asserts five claims against Defendant. Count I is for breach of warranty under Pennsylvania's version of the Uniform Commercial Code (the "UCC"), 13 PA. CONS. STAT. §§ 3416 and 4207. Counts II, III, and IV are common law claims for unjust enrichment, conversion, and money had and received. Count V is for punitive damages. Defendant moves to dismiss Counts II, III, and IV on the grounds that the UCC displaces those common law claims. Defendant moves to dismiss Count V on the grounds that Pennsylvania does not recognize an independent cause of action for punitive damages.
II. ANALYSIS
A. Legal Standard
When considering a motion to dismiss a complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6), we must "accept as true the facts alleged in the complaint and all reasonable inferences that can be drawn from them. Dismissal under Rule 12(b)(6) . . . is limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved." Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990). For this reason, courts strongly disfavor Rule 12(b)(6) motions. Melo — Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965); Kuromiya v. United States, 37 F. Supp.2d 717, 722 (E.D. Pa. 1999). We will only dismiss a complaint if "`it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50 (1989) (quoting Hishon v. King Spalding, 467 U.S. 69, 73 (1984)). In considering a motion to dismiss, however, we need not assume the truth of legal conclusions. Papasan v. Allain, 478 U.S. 265, 286 (1986).
B. Defendant's Motion to Dismiss Counts II, III, and IV
Defendant argues that the UCC displaces Plaintiff's common law claims for conversion, unjust enrichment, and money had and received. The Court of Appeals for the Third Circuit has held that "the UCC does not displace the common law of tort as it affects parties in their commercial dealings except insofar as reliance on the common law would thwart the purposes of the code." New Jersey Bank, N.A. v. Bradford Sec. Operations, 690 F.2d 339, 346 (3d Cir. 1982). Furthermore, when the UCC "provide[s] a comprehensive remedy for parties to a transaction, a common-law action will be barred." Id.
Applying these principles to this case, we conclude that Plaintiff's common law claim for conversion is barred by the UCC and therefore must be dismissed. Under the UCC, the Check is an "instrument," see 13 PA. CONS. STAT. § 3104, and Plaintiff is the "issuer" of the instrument, see 13 PA. CONS. STAT. § 3105. UCC section 3420(a) bars issuers of instruments from bringing an action for conversion of the instrument. See 13 PA. CONS. STAT. § 3420(a) ("An action for conversion of an instrument may not be brought by the issuer or acceptor of the instrument. . . ."). Thus, Plaintiff may not bring an action for conversion of the Check. If we were to allow Plaintiff to bring such a suit, we would thwart the purposes of the UCC, one of which is to standardize the commercial laws of the various jurisdictions. See 13 PA. CONS. STAT. § 1102(b)(3). Other courts agree that section 3420 displaces the common law tort of conversion. See Gress v. PNC Bank, Nat'l Assoc., 100 F. Supp.2d 289, 292 (E.D. Pa. 2000); Sebastian v. DS Express, Inc., 61 F. Supp.2d 386, 390-91 (D.N.J. 1999). Thus, we must dismiss Plaintiff's claim for conversion.
Plaintiff argues that Gress is distinguishable because in Gress, the plaintiffs were payees of an instrument and in this case, Plaintiff is the drawer/drawee of the instrument. We do not agree that Gress can be distinguished on this basis. Gress held that section 3420 displaces the common law tort of conversion with respect to negotiable instruments. 100 F. Supp.2d at 292. Section 3420 bars issuers of an instrument from maintaining an action for conversion of that instrument. 13 PA. CONS. STAT. § 3420(a); Sebastian, 61 F. Supp.2d at 391 ("[T]he plaintiffs as issuers, makers or drawers, of the checks cannot maintain the conversion action because such is barred by 13 Pa. C.S.A. § 3420(a).").
Though Plaintiff may not bring an action for conversion of the Check, Plaintiff is not left without a remedy, assuming its allegations are true. The comments to the UCC make clear that when a check falls into the hands of a thief who obtains payment after forging the signature of the payee as an indorsement, the drawee's remedy "is against the depositary bank for breach of warranty under Section 3-417(a)(1) or 4-208(a)(1)." 13 PA. CONS. STAT. § 3420, cmt. 1. Plaintiff is the drawee of the Check, and Defendant is the depository bank. Thus, Plaintiff may sue Defendant for breach of warranty under the UCC. Defendant argues that these are Plaintiffs exclusive remedies, and therefore that its claims for unjust enrichment and money had and received must also be dismissed. We agree.
As above indicated, when the UCC "provide[s] a comprehensive remedy for parties to a transaction, a common-law action will be barred." New Jersey Bank, 690 F.2d at 346. Accordingly, in Gress the court held that because the plaintiff had a conversion remedy under section 3420, it could not bring an action for negligence based on the wrongfully paying a negotiable instrument. 100 F. Supp.2d at 292. Significantly, the court stated that, "[t]he effect of § 3420 for displacement purposes is not confined to any particular legal theory; instead, its intended purpose is to provide exclusive regulations to govern the unauthorized payment of negotiable instruments." Id. Therefore, the court dismissed all of the plaintiff's common law claims based on the alleged wrongful payment of the instrument. Id.; see also Sebastian, 61 F. Supp.2d at 391 (dismissing plaintiff's negligence claim because the UCC provided plaintiff with a comprehensive remedy under section 3404).
Similarly, in the instant case, the UCC provides Plaintiff with a comprehensive remedy against Defendant. Specifically, Plaintiff may bring an action against Defendant for breach of warranty under the UCC. If Plaintiff can prove its allegations, the UCC allows Plaintiff to recover from Defendant its losses arising from the breach of warranty plus its expenses and loss of interest. 13 PA. CONS. STAT. §§ 3416(b), 4207(b). Plaintiff has not cited any authority and we have found none that supports the proposition that Plaintiff may also maintain an action for unjust enrichment or money had and received. Because the UCC provides Plaintiff with a comprehensive remedy against Defendant, we conclude that Plaintiff's common law claims are barred.
C. Defendant's Motion to Dismiss Count V
Defendant also moves to dismiss Count V, which states a claim for punitive damages. Defendant cites several cases for the proposition that Pennsylvania law does not recognize an independent cause of action for punitive damages. See, e.g., Nix v. Temple Univ., 596 A.2d 1132, 1138 (Pa.Super. 1991) (citing Feingold v. SEPTA, 517 A.2d 1270 (Pa. 1986)). Plaintiff argues that its claim for punitive damages is proper because Defendant was aware that it was liable for breach of warranty under the UCC, but refused to pay Plaintiff in an attempt to force Plaintiff to release all or part of its claims rather than incur the costs of litigation. (Doc. No. 1 ¶ 31.)
Because we have dismissed Plaintiff's common law claims, we must also dismiss its claim for punitive damages. "A request for punitive damages does not constitute a cause of action in an of itself. Rather, a request for punitive damages is merely incidental to a cause of action." MX, 596 A.2d at 1138 (citing Feingold). Plaintiff's only remaining causes of action are for breach of warranty under the UCC. The UCC does not allow punitive damages to be awarded "unless as specifically provided in this title or by other rule of law." 13 PA. CONS. STAT. § 1106(a). Punitive damages are not recoverable under the UCC for breach of warranty. See 13 PA. CONS. STAT. §§ 3416(b), 3417(b), 4207(b), 4208(b). Furthermore, punitive damages are not recoverable under Pennsylvania common law for breach of warranty. A claim for breach of warranty arises under the law of contracts. AM/PM Franchise Ass'n v. All. Richfield Co., 584 A.2d 915, 926-27 (Pa. 1990). Punitive damages are not recoverable in an action based solely on a breach of contract. Id.; see also Samuel — Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 402 (3d Cir. 2004). Accordingly, we will dismiss Count V of Plaintiff s complaint.
An appropriate Order follows.
ORDER
AND NOW, this ___ day of March, 2004, upon consideration of Defendant Chevy Chase Bank's Motion to Dismiss Counts II, III, IV, and V of Plaintiff's Complaint for Failure to State a Claim Upon Which Relief can be Granted (Doc. No. 3), and all papers filed in support thereof and opposition thereto, it is ORDERED that Defendant's Motion is GRANTED. Counts II, III, IV, and V of Plaintiff's Complaint are DISMISSED with prejudice.IT IS SO ORDERED.