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Triffin v. Capital One

A-0212-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

CHECKS — A court has the authority to issue an order, applicable statewide, wherein a party, such as one who buys dishonored checks, would be required to provide a certification as to whether that litigant possessed original, signed copies of documents being presented to a court.

An individual was in the business of purchasing dishonored checks and taking assignments from his sellers by which he sought to recover, as a holder in due course, from banks and others. In a prior case, a lower court had found the check buyer liable for common law fraud. However, the Appellate Division reversed that judgment because, in that case, it did not find reasonable reliance on the check buyer’s misrepresentation by the complainant. However, the Appellate Division, noting a lack of redress for the check buyer’s wrongful conduct, recognized the lower court’s inherent power to sanction the check buyer for a fraud on the court. Therefore, the matter was remanded for further proceedings to determine whether the check buyer’s conduct constituted fraud upon the court.

On remand, the lower court, in that case, found that the check buyer had committed such a fraud and required him to provide a certification, under oath, to indicate whether he possessed a document with original signatures whenever he submitted a document to any lower court, either as a pleading, as an attachment to a motion, or even if he wanted to mark an exhibit for identification or to be admitted into evidence at trial. This order set forth three possible certifications, one of which the check holder was required to submit depending on whether he was seeking to file a document with an original signature, a copy of an original, or both.

In the present action, the check buyer sued a bank to recover a dishonored check. The assignment agreement from the original holder and copy of the dishonored check were attached to the complaint. The check buyer did not use any of the three possible certification forms, but instead filed an omnibus certification setting forth the language from all three of the certifications. He also did not specify whether he was submitting a document with an original signature or a copy or both. The bank counterclaimed that the check was fraudulent and that the check buyer had again committed fraud upon the court.

At a later date, the check buyer sought to amend the complaint and to add another defendant. Again, he did not follow the prescribed procedure required by the earlier court order. Also, he did not provide discovery in a timely manner and he failed to provide certain requested documents. The bank filed a moved for sanctions and requested a dismissal of the complaint with prejudice. The bank also filed a motion alleging that the check buyer had failed to file the required certification with his complaint and therefore had violated the earlier court order. The lower court granted the motion for sanctions and dismissed the complaint, with prejudice. It found that the check buyer’s complaint, its motion to amend the complaint, and its proposed amended complaint were filed without the appropriate certifications required by the earlier court order. The lower court also noted that the check buyer was obstructing justice by not complying with the discovery process.

On appeal, the check buyer made the same arguments that he had been rejected by the lower court. First, he argued that the original lower court did not have the authority to issue its order (requiring the specific certifications) after the first trial because doing so, in effect, constituted promulgation of a statewide procedural rule. The Appellate Division rejected this argument, finding the earlier court order to be constitutional. According to the Court, the earlier court order provided a policing mechanism to insure that pleadings and evidence in future cases brought by the check buyer properly reflected the facts. Further, according to the Court, the original lower court possessed the inherent power to issue an order that regulated the owner’s conduct.

Next, the check buyer argued that the lower court in the instant case did not have the authority to decide whether he had violated the earlier court’s order. Part of the original order, however, permitted enforcement by any court with jurisdiction over a matter. Therefore, the lower court in the instant case did have the proper authority. Then, the check buyer argued that the lower court in the instant matter erred by failing to rule as to which of the three certifications set forth in the omnibus certification would have satisfied the earlier court order’s terms. However the Court held that the order required the check buyer, not a court, to decide which of the three certifications was applicable.

Lastly, the check buyer argued that the lower court abused its discretion by dismissing his complaint with prejudice. New Jersey’s Court Rules allow a dismissal with prejudice as a sanction. However, it is the last and least favorable option. Thus, because the lower court did not articulate any reason for the dismissal with prejudice other than check buyer’s violation of discovery orders, nor did it explore the availability of lesser sanctions, the Court reversed the dismissal with prejudice, and remanded the matter for articulation of the basis of the award of fees and costs.

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