Court Opinion

ID: 9649637
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:04:17.99931+00
Date Added: 2024-06-11T12:24:43.088393
License: Public Domain

DISSENTING OPINION BY
BECK, J.
¶ 1 I respectfully dissent from the majority’s decision to affirm the judgment with regard to liability for conversion. I believe the common law cause of action of conversion is inapplicable. This case is controlled by Article 4A of the Uniform Commercial Code, which governs the procedures, rights, and liabilities arising out of commercial electronic funds transfers. The AFMC Funds Transfers at issue were clearly governed by Article 4A, which authorized CoreStates’s conduct in accepting and setting off the Funds Transfer. Contrary to the majority’s conclusion, I believe that CoreStates acted within its rights under Article 4A-502 because I agree with CoreStates that ultimate ownership of the funds is not relevant under Article 4A. Moreover, common law principles of ownership that vary from state to state are ill-suited for the national regulation of financial institutions.
¶ 2 The position that the U.C.C. controls this case is supported by the Official Comment to Section 4A-102 which states that
[bjefore this Article was drafted there was no comprehensive body of law— statutory or judicial — that defined the judicial nature of a funds transfer or the rights and obligations flowing from payment orders. Judicial authority with respect to funds transfers is sparse, undeveloped and not uniform. Judges have had to resolve disputes by referring to general principles of common law or equity ... but attempts to define rights and obligations in funds transfers by general principles or by analogy to rights and obligations in negotiable instrument law or the law of check collection have not been satisfactory ... The rules that emerge represent a careful and delicate balancing of interests and are intended to be the exclusive means of determining the rights, duties, and liabilities of the affected parties in any situation covered by particular provisions of the Article. Consequently, resort to principles of law or equity outside of Article 4A is not appropriate to create rights, duties and liabilities inconsistent with those stated in the Article.
U.C.C. § 4A-102, Official Comment.
¶ 3 Furthermore, many courts have found that common law claims, such as conversion, are precluded when such claims would impose liability inconsistent with the rights and liabilities expressly created by Article 4A. See, e.g. Grain Traders, Inc. v. Citibank, 160 F.3d 97 (2d Cir.1998) (finding that plaintiffs claim for conversion was precluded under state’s commercial code as inconsistent with commercial code); Banco de la Provincia de Buenos Aires v. BayBank Boston N.A., 985 F.Supp. 364 (S.D.N.Y.1997) (stating that for conversion claim to stand it cannot be inconsistent with Article 4A); Cumis Ins. Soc., Inc. v. Citibank, N.A., (921 F.Supp. 1100) (S.D.N.Y.1996) (finding claim for conversion failed because bank’s actions were expressly authorized by Article 4A).
*294¶ 4 There are sound policy reasons underlying the conclusion that Article 4A pre-empts inconsistent provisions of state law. Having a uniform method of transferring funds provides a national set of rules and regulations giving the system discipline, stability, predictability, efficiency, liquidity and finality. The integrity of this complex system will be compromised if state actions inconsistent with Article 4A are permitted against participating institutions. If the U.C.C. has established an imperfect vehicle for the transfer of funds then the proper course is to amend the U.C.C. rather than impair the effectiveness of the system by injecting inconsistent common law tort actions.