                                  NO. COA13-691

                     NORTH CAROLINA COURT OF APPEALS

                             Filed: 1 April 2014


LAWYERS MUTUAL LIABILITY INSURANCE
COMPANY OF NORTH CAROLINA,
     Plaintiff,

      v.                                     Wake County
                                             No. 11 CVS 16860
SUE E. MAKO; R. SCOTT GIRDWOOD;
and MAKO & ASSOCIATES, P.A.,
     Defendants.


      Appeal by defendants from order entered 18 December 2012 by

Judge Lucy N. Inman in Wake County Superior Court.              Heard in the

Court of Appeals 5 November 2013.


      Poyner Spruill LLP, by T. Richard                Kane   and   Andrew   H.
      Erteschik, for plaintiff-appellee.

      Girdwood & Williams, PLLC, by Benjamin D. Williams, for
      defendant-appellants.


      BRYANT, Judge.


      As our General Statutes hold that a cashier’s check is to

be   treated   in   the    same   fashion    as   a   traditional   check,   a

cashier’s   check   must    undergo   a     provisional   settlement   period

before it can be deemed irrevocably credited by the payor bank.

Where there is no issue as to any material fact regarding our
                                           -2-
statutory       language      concerning     the      processing      of    a   cashier’s

check, summary judgment is appropriate.

      Defendants        Sue   E.   Mako;    R.     Scott      Girdwood;       and    Mako    &

Associates,      P.A.    (“defendants”)          had    a    professional       liability

insurance policy (“the policy”) with plaintiff Lawyers Mutual

Liability Insurance Company (“Lawyers Mutual”) for the period of

7   August      2011    through    7   August       2012.        On    17     June    2011,

defendants received an email from a potential client, Oliver

Burkeman (“Burkeman”).             Burkeman contacted defendants seeking

assistance in collecting $350,000.00 allegedly owed him by his

former   employer,       Crest     Iron    and     Steel;      Burkeman     claimed     the

money was part of a workers’ compensation claim settlement.

      On 23 June 2011, Burkeman sent a signed Fee Agreement to

defendants,       and    defendants       agreed       to    represent      Burkeman        in

collecting       his    settlement        money.        Defendants         would      assess

Burkeman a contingent fee of 20% of any amount obtained.

      On 11 July 2011, defendants received an initial check for

$175,000.00 from Crest Iron and Steel in partial payment of the

amount purportedly owed to Burkeman.                        Defendants deposited the

check    into    their     trust   account       on    12     July    2011.         Although

defendants had a policy of holding funds for ten days prior to

distribution, the policy was not enforced and distribution of
                                     -3-
the funds was authorized that same day.           Burkeman was to collect

$140,000.00 after defendants’ contingent fee of $35,000.00 had

been deducted from the $175,000.00 check.            Defendants attempted

to wire $140,000.00 to a bank account in Japan per Burkeman’s

instructions.     However, due to an error in account information,

the wire was unsuccessful and defendants could not collect their

contingent fee.1

     On 14 July 2011, defendants received a second check for

$175,000.00 from Crest Iron and Steel in partial payment of the

amount     purportedly   owed   to    Burkeman.      On   15    July   2011,

defendants deposited the second check and, again not abiding by

their policy of holding funds for ten days, immediately wired

$140,000.00 to the Japanese bank account.            Defendants collected

from the     second check   a   $35,000.00 contingent fee        which was

deposited to defendants’ trust account.            Also on 15 July 2011,

defendants were notified by RBC Bank that the first of the two

checks was being returned unpaid.          On 18 July 2011, RBC Bank

notified    defendants   that   the    second     check   was   also   being

returned unpaid.     Both checks were determined to be fraudulent.

1
  Defendants charged Burkeman a 20% contingent fee for any amount
recovered; as such, defendants’ contingent fee for assisting
Burkeman   with   the  first   purported   settlement   check  of
$175,000.00 was $35,000.00.   Defendants would likewise assess a
contingent   fee   of  $35,000.00  for   assisting   Burkeman  in
collecting the second purported settlement check of $175,000.00.
                                     -4-
As a result, defendants suffered a total loss of $175,000.00

from their client trust account.

    On 1 November 2011, defendants filed a claim with Lawyers

Mutual to recover $175,000.00 in funds lost as a result of the

fraud.    Lawyers Mutual filed a complaint for declaratory relief

on 2 November 2011.      On 12 December 2011, Lawyers Mutual filed a

motion   for   summary   judgment    but   withdrew    that      motion    on   21

December 2011.       Lawyers Mutual then filed a motion for judgment

on the pleadings that same day, but the motion was not heard.

Defendants filed a motion for summary judgment on 23 December

2011, which was denied by the trial court on 3 April 2012.

    On 30 May 2012, Lawyers Mutual filed an amended complaint

for declaratory relief.         Lawyers Mutual then filed for summary

judgment on 15 October 2012.           On 18 December 2012, the trial

court    granted    Lawyers    Mutual’s    motion   for    summary       judgment

determining in relevant part that: “It is undisputed that the

funds at issue in this action were lost at a time when the

deposit had not yet ‘cleared’ Defendants’ trust account at the

depositary     bank.      The    court     concludes      that     the    phrase

‘irrevocably       credited’    in   the   insurance      policy     precludes

coverage of Defendants’ claim of loss.” Defendants appeal.

                       ________________________________
                                        -5-
       On appeal, defendants argue that the trial court erred in

granting    Lawyers     Mutual’s    motion    for   summary    judgment.       We

disagree.

       Summary    judgment    is     appropriate      "if     the      pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that any party is

entitled to a judgment as a matter of law."                  N.C. Gen. Stat. §

1A-1, Rule 56(c) (2013).           Thus, this Court must “determine, on

the basis of the materials presented to the trial court, whether

there is a genuine issue as to any material fact and whether the

moving    party   is   entitled    to   judgment    as   a    matter    of   law.”

Coastal Plains Utils., Inc. v. New Hanover Cnty., 166 N.C. App.

333, 340, 601 S.E.2d 915, 920 (2004) (citation omitted).                       We

review the granting of summary judgment de novo.                    Va. Elec. &

Power Co. v. Tillett, 80 N.C. App. 383, 385, 343 S.E.2d 188,

190—91 (1986).

       Defendants contend that the trial court erred in granting

summary judgment to Lawyers Mutual because, under Provision I.,

Section (r) of their insurance policy with Lawyers Mutual, the

term     “irrevocably     credited”      is   ambiguous.         Specifically,

defendants argue that they understood “irrevocably credited” to
                                            -6-
mean    that     the     policy    would       cover   losses     involving       forged

cashier’s checks because they assumed that a cashier’s check is,

like    cash,    irrevocably           credited     upon    deposit.       Defendants’

insurance policy provides in part that:

               I.   Exclusions . . . [T]his policy does not
               afford to any Insured any coverage or
               benefits whatsoever, including, but not
               limited to, any right to any defense, with
               respect to:

                . . .

               (r) any claim, or any theory of liability
               asserted in a suit, based in whole or in any
               part upon disbursement by any Insured, or
               any employee or agent of any Insured, of
               funds, checks or other similar instruments
               deposited to a trust, escrow or other
               similar account unless such deposit is
               irrevocably credited to such account[.]

       Pursuant to N.C. Gen. Stat. § 25-3-104(f), “‘Check’ means

(i) a draft, other than a documentary draft, payable on demand

and    drawn    on   a   bank     or    (ii)    a   cashier’s   check   or    teller’s

check.”        N.C.G.S.     §     25-3-104(f)        (2013);    Thompson     v.    First

Citizens Bank & Trust Co., 151 N.C. App. 704, 707, 567 S.E.2d

184,   187     (2002)    (“Negotiable          instruments,     also   called     simply

"instruments," may include, e.g., a personal check, cashier's

check, traveler's check, or CD [pursuant to] N.C.G.S. § 25-3-

104.”).      A settlement agreement to pay a negotiable instrument

can be either provisional or final.                        N.C. Gen. Stat. § 25-4-
                                             -7-
104(11) (2013).        A negotiable instrument may also be referred to

as an “item.”        Id. § 25-4-104(9).

               An item is finally paid by a payor bank when
               the   bank  has  first   done  any   of  the
               following:

               (1)   Paid the item in cash;

               (2)   Settled for the item without having a
                     right to revoke the settlement under
                     statute,    clearing-house rule,   or
                     agreement; or

               (3)  Made a provisional settlement for the
                    item    and   failed   to   revoke    the
               settlement      in   the  time   and    manner
               permitted by    statute, clearing-house rule,
               or   agreement.

Id.   §   25-4-213(a).         A     payor    bank   may    revoke    a    provisional

settlement prior to making final payment and before its midnight

deadline by returning the item.                Id. § 25-4-301(a).

      Defendants argue that “irrevocably credited” is ambiguous

because    a    cashier’s     check     differs      from   a   traditional     check.

Defendants further argue that it was their understanding that a

cashier’s check was as good as cash.                    Defendants’ argument is

without    merit,      as     pursuant       to    N.C.G.S.      §   25-3-104(f),     a

cashier’s check is treated the same as a traditional check.                           A

traditional      check      cannot    be   deemed    fully      credited    until   its

provisional settlement period has elapsed without action by the

bank to reject the check; the same is true for a cashier’s
                                       -8-
check.      Therefore,      the    provisional       settlement          period     that

accompanies    traditional        checks    must    also       apply   to    cashier’s

checks.     As such, Lawyers Mutual’s policy’s use of “irrevocably

credited”    refers    to   the    statutory       provisions      which     govern    a

check’s     acceptance       or    rejection        during       its      provisional

settlement period.          Accordingly, Provision I., Section (r) of

Lawyers Mutual’s insurance policy would not protect defendants

unless    defendants     deposited     a     check       and    waited      until    the

provisional settlement period had finally elapsed to ensure that

the check had been accepted and fully credited by the payor

bank,    regardless    of    whether   it    was     a    traditional        check    or

cashier’s check.        Therefore, the trial court did not err in

granting Lawyers Mutual’s motion for summary judgment.

    Affirmed.

    Judges McGEE and STROUD concur.
