556 F.Supp.3d 544
D. Maryland2021Background
- Melvin Kabik was listed as a mortgagee/loss payee on a commercial property insurance policy issued by State Auto for property at 5302 Edmondson Ave.; policy included a standard mortgagee clause.
- A July 9, 2018 fire damaged the property; State Auto issued three settlement checks (Oct–Dec 2018) payable to three parties (owner/IIS, adjuster Goodman‑Gable‑Gould, and Kabik) in stacked payee form and delivered the checks to the adjuster.
- The first check was indorsed by Kabik and deposited; the plaintiff alleges the second and third checks bore forgeries of Kabik’s signature and were deposited into a Bank of America account controlled by IIS/its representatives.
- Plaintiff Reamer sued State Auto (breach of contract) and Bank of America (conversion and negligence); BofA filed a third‑party complaint against IIS and Nottage.
- Court denied Reamer’s late motion for leave to file a surreply that advanced a new theory, dismissed the breach claim against State Auto, granted BofA’s motion for judgment on the pleadings (dismissing conversion/negligence claims), and dismissed BofA’s third‑party complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Motion for leave to file surreply | Reamer sought to add new theory that State Auto was required to list Kabik as a joint payee so IIS alone could not negotiate checks | State Auto opposed as untimely and not responsive to its reply | Denied — surreply disfavored; new theory could have been raised earlier |
| Breach of contract (State Auto) — did insurer discharge payment obligation? | Reamer: payment not discharged until Kabik personally received funds from the 2nd and 3rd checks (forgery alleged) | State Auto: listing Kabik on checks and delivering them to the adjuster satisfied the mortgagee clause; payment was conditionally made and discharged when the bank accepted the checks | Dismissed — delivery to adjuster constituted conditional payment; obligation discharged when bank accepted checks under UCC principles |
| Conversion / negligence (Bank of America) — liability for cashing checks with forged/missing Kabik indorsement | Reamer: forged indorsements made Kabik entitled to recover for conversion | BofA: checks listed payees in stacked format; under Md. law a stacked/ambiguous check is payable alternatively so any listed payee’s indorsement sufficed | Judgment for BofA — no conversion where check payable alternatively; negligence displaced by UCC remedy |
| BofA third‑party complaint against IIS/Nottage | Reamer’s success would allow BofA to pursue reimbursement from IIS/Nottage | BofA asserted indemnity/recoupment claims contingent on BofA’s liability | Dismissed as contingent on claims against BofA, which failed |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Pelican Nat’l Bank v. Provident Bank of Md., 381 Md. 327 (stacked payee checks are ambiguous and are deemed payable alternatively)
- Rezapolvi v. First Nat’l Bank of Md., 296 Md. 1 (bank acceptance of check can discharge drawer’s obligation)
- Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159 (courts may consider documents integral to the complaint on a Rule 12 motion)
- Clemons v. Am. Cas. Co., 841 F. Supp. 160 (mortgagee clause creates separate contract between insurer and mortgagee)
- Advance Dental Care, Inc. v. SunTrust Bank, 816 F. Supp. 2d 268 (UCC conversion remedy displaces common‑law negligence claims against depository banks)