J-A13037-18


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    AEGIS SECURITY INSURANCE                   :   IN THE SUPERIOR COURT OF
    COMPANY                                    :         PENNSYLVANIA
                                               :
                                               :
                v.                             :
                                               :
                                               :
    GREATER JOHNSTOWN WATER                    :
    AUTHORITY, RDM JOHNSTOWN, LLC,             :
    AMERISERV FINANCIAL BANK, AND              :
    AMERISERV FINANCIAL TRUST                  :
                                               :
    APPEAL OF: GREATER JOHNSTOWN               :
    WATER AUTHORITY                            :      No. 1520 WDA 2017

              Appeal from the Judgment Entered October 10, 2017
               in the Court of Common Pleas of Cambria County,
                       Civil Division at No(s): 2009-0278

BEFORE: OLSON, J., DUBOW, J., and MUSMANNO, J.

MEMORANDUM BY MUSMANNO, J.:                          FILED FEBRUARY 12, 2019

       Greater Johnstown Water Authority (“GJWA”) appeals from the

Judgment entered in its favor, and against AmeriServ Financial Bank and

AmeriServ Financial Trust (collectively “AmeriServ”),1 in the amount of

$60,000 plus post-judgment interest. We affirm.

       The trial court set forth the relevant procedural history, and findings of

fact and conclusions of law, as follows:


____________________________________________


1 While AmeriServ Financial Bank and AmeriServ Financial Trust are distinct
companies, and AmeriServ Financial Trust processed the transactions at issue
in this case, the trial court treated the companies interchangeably in
addressing the claims. See Brief for Appellees at 15 n.2. Thus, to avoid
further confusion, we will refer to the companies collectively.
J-A13037-18


     [In January 2009,] Aegis Insurance Security Company (Aegis)
     initiated this action against [GJWA] and RDM Johnstown, LLC
     (RDM)[,] alleging that GJWA and RDM were liable to Aegis for
     $162,356.63. Aegis alleged liability based on the failure of a
     check[,] in said amount[,] to reach Aegis pursuant to an
     agreement entered into between Aegis and GJWA as part of a
     larger Escrow Agreement.       GJWA also asserted cross-claims
     against [AmeriServ] alleging that, should GJWA be found liable to
     Aegis, the actions of [AmeriServ] were the cause of GJWA’s
     breach.

     Summary Judgment was entered by the [trial c]ourt[,] dismissing
     all of Aegis’s claims against RDM and dismissing all claims against
     GJWA except Aegis’s claim for breach of contract. On May 2,
     2017, Aegis [and] GJWA [] entered into a Consent Judgment in
     favor of Aegis and against GJWA[,] in the amount of $120,000
     plus post-judgment interest at the legal rate from the date of the
     judgment. Thus, the only issue remaining at the time of the non-
     jury trial was GJWA’s cross-claims against [AmeriServ]. Upon
     careful and thorough review of the evidence presented, the briefs
     of [the] parties, and the laws of this Commonwealth, the [trial
     c]ourt makes the following Findings of Fact and Conclusions of
     Law:

     1.   GJWA is a municipal water authority that provides water
          services in and around Johnstown, Pennsylvania.

     2.   On or about December 5, 2006, GJWA awarded William H.
          Duriez, Jr.[,] and Lynn A. Duriez, dba Duriez Excavating
          (collectively, “Duriez”)[,] a contract in the amount of
          $826,397.75 to perform excavation work for a public works
          project known as the Conemaugh Township Interconnection
          Project (the “Project”).

     3.   [Aegis] issued payment and performance bonds for the
          Project as surety for Duriez.

     4.   Aegis, Duriez, North American Construction Services
          (“NACS”), and Bremer Bank entered [into] a written Escrow
          Agreement dated December 12, 2006, whereby they agreed
          that funds paid to Duriez in connection with the Project were
          to be deposited into an Escrow Account to be established at
          Bremer Bank and administered by NACS.


                                    -2-
J-A13037-18


     5.   GJWA was not a party to the Escrow Agreement. However,
          Duriez provided GJWA with written instructions, entitled
          “Instructions to Obligee,” which were signed by a
          representative of GJWA and specified the manner in which
          GJWA was to disburse payments for Duriez’s work on the
          Project.

     6.   With respect to payments made by check, the Instructions to
          Obligee provide:

          Checks are to be made payable to: “William H. Duriez, Jr[.,]
          dba Duriez Excavating, Escrow Account #6736246[,]” and
          sent to the following address:

           Bremer Bank, National Association - Corporate Services
           P.O. Box 64346
           St. Paul, Minnesota 55164-0346

     7.   GJWA funded public works projects it conducted, including the
          [Project], with a “Construction Fund” in an account known as
          the “1998 Capital Improvement and Redemption Fund.”

     8.   At all relevant times[,] AmeriServ held the Construction Fund
          as trustee for GJWA under a September 1, 1992 “Trust
          Indenture” entered [into] between GJWA and AmeriServ’s
          predecessor, United States National Bank in Johnstown.

     9.   [RDM], with whom GJWA has a services agreement, initiated
          the disbursement of Construction Fund monies for GJWA’s
          various projects by preparing payment “requisitions” and
          sending them to AmeriServ.

     10. The requisition packages that RDM sent to AmeriServ would
         ordinarily first be received by David Margetan (“Margetan”).
         Margetan is an AmeriServ employee who[,] at all relevant
         times[,] held the positions of Assistant Vice-President and
         Corporate Trust Officer, and served as the trust administrator
         for the Construction Fund.

     11. Upon receiving a requisition package, Margetan would review
         the documents to check that they were properly prepared and
         to determine how payment was to be disbursed.




                                    -3-
J-A13037-18


     12. Following his review, Margetan would give the requisition
         package to his Trust Clerk, Toni Schuller (“Schuller”), with
         instructions to have the requisition paid. Schuller, in turn,
         typically passed the requisition package[,] along with any
         relevant payment instructions[,] to the Disbursement Clerk,
         who then used the information provided by Schuller to
         generate a check and mail it to the person or entity to be paid.

     13. On January 3, 2007, an RDM employee named Nancy Miller
         (“Miller”) received an email from Mike Pecard (“Pecard”), the
         Escrow Account Manager for NACS.

     14. The subject line of Pecard’s email reads, “Duriez Excavating-
         Conemaugh Township Interconnection[,]” and a copy of the
         Instructions to Obligee was attached to the email.

     15. The body of Pecard’s email states:

           In regards to the attached directive of funds that [was]
           signed, I’m just following up to verify that this process is in
           place and that funds on the above referenced project will be
           directed to:

                 Bremer Bank, NA - Corporate Services
                 P.O. Box 64346
                 St. Paul, MN 55164-0346

           If you could please respond to my email or give me a call to
           verify this, that would be greatly appreciated.

         The account number for the Escrow Account at Bremer Bank
         does not appear in the email.

     16. Pecard’s email included the “Instructions to Obligee” as an
         attachment.

     17. At approximately the same time in January 2007, Miller
         initiated a phone call with Schuller, who served as Miller’s
         primary point of contact at AmeriServ, regarding payments to
         Duriez for the Project.

     18. At or about the time she called [] Schuller, Miller made
         handwritten notes on a paper copy of the email stating “Spoke
         to Toni @ AmeriServ about this.”

                                    -4-
J-A13037-18



     19. Miller further testified that she did not make any additional
         record of her phone conversation with Schuller. Miller stated
         that this was her usual practice in similar situations.

     20. Schuller testified that she was authorized to receive special
         instructions in matters such as this and that she could recall
         that Miller normally called Schuller anytime Miller had special
         instructions.

     21. Schuller further testified that, although she could not recall
         working on this matter, her usual practice was to receive oral
         instructions without requiring further written instructions.
         Schuller would then attach the instruction to each individual
         requisition.

     22. Schuller reiterated multiple times that she could not recall
         working specifically on this matter or the contents of any
         conversations with Miller.

     23. Testimony by Miller revealed that[,] after speaking to
         Schuller, Miller forwarded a copy of Pecard’s email, along with
         the Instructions to Obligee as an attachment, to Betty
         Rhoades (“Rhoades”), another RDM employee, and told
         Rhoades to attach Pecard’s email as well as the attached
         Instructions to Obligee to all future requisitions in this matter.

     24. However, evidence of record and the testimony of Rhoades
         show[s] that Rhoades did not include the attached
         Instructions to Obligee as part of subsequent requisitions.
         Rhoades only included Pecard’s cover email that instructed
         payments be sent to Bremer Bank.

     25. RDM sent the first of six monthly requisitions to AmeriServ to
         disburse progress payments for Duriez’s work on the Project
         in February of 2007.

     26. The first payment requisition that RDM sent to AmeriServ for
         the Project is dated February 15, 2007.

     27. The first requisition states:

           Payee: Duriez Excavating


                                     -5-
J-A13037-18


          Amount to be Paid: Sixty-three thousand eight-hundred
          fifty-six and 02/100 dollars

          Purpose of Obligation: Est. #1 Conemaugh Township
          Interconnection

     28. After receiving the first requisition package, AmeriServ
         prepared check number 498986, dated February 21, 2007,
         made payable in the amount of $63,856.02 to:

          WILLIAM H DURIEZ JR
          dba DURIEZ EXCAVATING
          ESCROW ACCOUNT 673624

     29. AmeriServ mailed check number 498986 to Bremer Bank, and
         the proceeds of the check were deposited into the Escrow
         Account.

     30. The second payment requisition that RDM sent to AmeriServ
         for the Project is dated March 15, 2007.      The second
         requisition states:

          Payee: Duriez Excavating

          Amount to be Paid: Three hundred seven thousand two
          hundred fifty-six and 71/100 dollars

          Purpose of Obligation: Est. #2 Conemaugh Township
          Interconnection

     31. After receiving the second requisition package, AmeriServ
         prepared check number 500897, dated March 20, 2007, made
         payable in the amount of $307,256.71 to:

          DURIEZ EXCAVATING
          121 DURIEZ LANE
          NORTHERN CAMBRIA PA 15714

     32. AmeriServ mailed check number 500897 to Bremer Bank, and
         the proceeds of the check were deposited into the Escrow
         Account.

     33. The third payment requisition that RDM sent to AmeriServ for
         the Project is dated April 12, 2007.

                                  -6-
J-A13037-18



     34. The third requisition states:

           Payee: Duriez Excavating

           Amount to be Paid: One hundred thirteen thousand three
           hundred and 46/100 dollars

           Purpose of Obligation: Est. #3 Conemaugh Township
           Interconnection

     35. After receiving the third requisition package, AmeriServ
         prepared check number 502994, dated April 16, 2007, made
         payable in the amount of $113,300.46 to:

           WILLIAM H DURIEZ JR DBA DURIEZ EXCAV
           BREMER BANK
           CORP SRVS ATTN MIKE PEC[]ARD
           PO BOX 64346
           ST PAUL MN 55164-0346

     36. AmeriServ mailed check number 502994 to Bremer Bank, and
         the proceeds of the check were deposited into the Escrow
         Account.

     37. The fourth payment requisition that RDM sent to AmeriServ
         for the Project is dated May 10, 2007.

     38. The fourth requisition states:

           Payee: Duriez Excavating

           Amount to be Paid: One-hundred sixty-two thousand three-
           hundred fifty-six and 63/100 dollars

           Purpose    of   Obligation:     Conemaugh      Township
           Interconnection

     39. After receiving the fourth requisition package, AmeriServ
         prepared a fourth check dated May 15, 2007, bearing check
         number 504782, and made payable in the amount of
         $162,356.63 to:

           DURIEZ EXCAVATING

                                    -7-
J-A13037-18


           121 DURIEZ LN
           NORTHERN CAMBRIA PA 15714-1805

     40. [] Margetan did not review the fourth requisition package or
         approve disbursement of the fourth check because he was on
         vacation at the time.

     41. The fourth check was prepared by Schuller because she was
         filling in for the regular disbursement clerk, Deb Swincinski,
         who was absent from work that day.

     42. Schuller did not mail the fourth check to Bremer Bank.

     43. AmeriServ sent the fourth check directly to [William H. Duriez,
         Jr.]

     44. On May 17, 2007, [William H. Duriez, Jr.,] deposited the check
         at AmeriServ’s Northern Cambria location and applied the
         proceeds to pay amounts owed on two AmeriServ loan
         accounts.

     45. [William H. Duriez, Jr.,] applied $62,356.63 to pay down
         principal and interest on AmeriServ Flex Line of Credit Loan
         account number 1800960, and $100,000.00 to pay off
         AmeriServ Home Equity Loan account number 20051.

     46. Th[e trial c]ourt finds that the evidence and testimony
         established that [AmeriServ] w[as], at some time, instructed
         by GJWA as to how to make out checks and where to send
         said checks. Such was proved by the testimony of Miller and
         Schuller, as well as the email from Pecard confirming that
         payments were to be sent to Bremer Bank[,] which was
         attached as part of the fourth requisition. The evidence
         further showed that the initial check included the escrow
         number[,] as required in the Instructions to Obligee.

     47. The [trial c]ourt finds that the check for the first requisition
         was properly executed. The check contained the escrow
         account number as required by the Instructions to Obligee
         and was sent to Bremer Bank. [AmeriServ] could not have
         done so without receiving direction from GJWA.




                                    -8-
J-A13037-18


     48. [AmeriServ], acting as trustee, owed fiduciary duties to GJWA
         as a result of the Trust Indenture entered into by [AmeriServ]
         and GJWA on September 1, 1992.

     49. The [trial c]ourt finds that [AmeriServ] breached their
         fiduciary duties to GJWA by failing to follow instructions given
         by GJWA.

     50. [AmeriServ’s] breach of fiduciary duties resulted in the
         payment of $162,356.63 for the fourth requisition being
         improperly sent to Duriez instead of Bremer Bank as
         instructed by GJWA. Such misdirection resulted in Duriez
         applying said monies to other existing obligations at
         AmeriServ.

     51. The [trial c]ourt further finds that both GJWA and [AmeriServ]
         were causes of the eventual misdirection of the check. But
         for the failure of GJWA to attach the Instructions to Obligee
         and include the correct “payee” information on its
         requisitions, such misdirection would not have happened.
         However, but for [AmeriServ’s] failure to follow GJWA’s
         original instructions to fill out checks consistent with the first
         check executed in this matter, or, at least, seek clarification
         from GJWA as a result of the attached Pecard email, the
         misdirection of the check would not have occurred.

     52. Thus, based on GJWA’s failure to give consistently clear
         instructions to [AmeriServ,] and [AmeriServ’s] breach of
         fiduciary duties, the [trial c]ourt finds that GJWA and
         [AmeriServ] are equally responsible for the misdirection of the
         $162,356.63 check resulting in damages to Aegis.

     53. Accordingly, th[e trial c]ourt finds that [AmeriServ is] liable
         to GJWA for one-half of the $120,000 to be recovered from
         GJWA by Aegis: $60,000 plus post-judgment interest at the
         legal rate from the date of judgment.




                                     -9-
J-A13037-18


Trial Court Opinion, 5/22/17, at 1-7 (unnumbered).2

       GJWA filed a timely Motion for Post-Trial Relief. Following a hearing, the

trial court denied GJWA’s Motion for Post-Trial Relief. Judgment was entered

in GJWA’s favor, and against AmeriServ, in the amount of $60,000 plus post-

judgment interest. Thereafter, GJWA filed a timely Notice of Appeal and a

court-ordered Pennsylvania Rule of Appellate Procedure 1925(b) Concise

Statement.

       On appeal, GJWA raises the following questions for our review:

       1. Does the trial court’s finding that AmeriServ failed to follow
          GJWA’s instructions as to the proper and intended recipient of
          a payment entitle GJWA[,] as a matter of law[,] to the remedy
          prescribed by Pennsylvania’s [Uniform] Commercial Code
          [(“UCC”)], which is a refund of the misdirected payment with
          interest from the date of payment?

       2. Aside from any legal error, is GJWA entitled to recover the full
          amount of its settlement with [Aegis] because there is no
          competent evidence to support, and the trial court’s findings of
          fact are inconsistent with, the conclusion that GJWA’s loss
          would have occurred absent AmeriServ’s breach of fiduciary
          duties[,] or that GJWA’s instructions were inadequate such that
          it shares responsibility for AmeriServ’s failure to direct the
          payment to the proper and intended recipient?

       3. Assuming[,] arguendo[,] the trial court [did] not err by
          depriving GJWA of the remedies provided by the [UCC,] and
          instead limiting GJWA’s potential recovery to the amount of its
          settlement with [Aegis], was it legal error for the trial court to
          award GJWA just half that amount despite having found that
____________________________________________


2 We note that the trial court did not cite to any relevant legal authority to
support its finding that AmeriServ and GJWA were liable for one-half of the
$120,000. Instead, the trial court merely states that AmeriServ’s breach of
its fiduciary duties caused the misdirection of the check, and that GJWA was
equally liable for failing to provide proper instructions.

                                          - 10 -
J-A13037-18


         the payment at issue was misdirected by AmeriServ in breach
         of fiduciary duties owed to GJWA as a trustee?

Brief for Appellant at 4-6 (issues renumbered).

      The relevant standard of review following a non-jury trial is as follows:

      Our appellate role in cases arising from non-jury trial verdicts is
      to determine whether the findings of the trial court are supported
      by competent evidence and whether the trial court committed
      error in any application of the law. The findings of fact of
      the trial judge must be given the same weight and effect on
      appeal as the verdict of a jury. We consider the evidence in a light
      most favorable to the verdict winner.            We will reverse
      the trial court only if its findings of fact are not supported by
      competent evidence in the record or if its findings are premised
      on an error of law. However, [where] the issue ... concerns a
      question of law, our scope of review is plenary.

      The trial court’s conclusions of law on appeal originating from
      a non-jury trial are not binding on an appellate court because it is
      the appellate court’s duty to determine if the trial court correctly
      applied the law to the facts of the case.

Stephan v. Waldron Elec. Heating & Cooling LLC, 100 A.3d 660, 664–65

(Pa. Super. 2014) (citation omitted). Further, “[i]n reviewing the award of

damages, the appellate courts should give deference to the decisions of the

trier of fact[,] who is usually in a superior position to appraise and weigh the

evidence.” Ferrer v. Trs. of Univ. of Pa., 825 A.2d 591, 611 (Pa. 2002)

(citation omitted).

      We address GJWA’s first two claims together. GJWA contends that the

trial court erred in limiting its recovery to $60,000 plus post-judgment interest

where the trial court failed to consider the provisions of the UCC, and found

that AmeriServ is responsible for the full amount of the misdirected check.


                                     - 11 -
J-A13037-18


Brief for Appellant at 24, 29, 30, 34, 40.         GJWA argues that AmeriServ’s

liability is not limited by joint tort-feasor principles, but instead is exclusively

governed by the UCC. Id. at 24, 30, 31-33, 34; see also id. at 33 (arguing

that “although there is no question that the trial court’s findings establish

AmeriServ’s liability under alternative legal theories that may provide a

different measure of damages, AmeriServ’s conduct and resulting liability is

squarely and exclusively governed by the [UCC].”).3

       GJWA argues that under Article 4 (section 4401) of the UCC, AmeriServ

could not charge GJWA’s account for the check that was not properly payable

to William H. Duriez, Jr. Id. at 29. GJWA asserts that AmeriServ “is strictly

liable for the full amount of a misdirected payment where, as here, it

improperly executes a customer’s payment instructions and charges the

customer’s account for a disbursement to an unauthorized payee.” Id. at 24;

see also id. at 24-25.      GJWA argues that based upon the trial court’s findings

of fact, GJWA instructed AmeriServ on the manner in which to prepare and



____________________________________________


3 AmeriServ counters that the provisions of the UCC are inapplicable to the
facts of this case. Brief for Appellee at 16; see also id. at 17 (asserting that
the “UCC simply does not address a scenario where a customer’s instructions
to its bank are either incomplete, misleading, or flat-out wrong (as here).”).
AmeriServ states that “the trial court obviously utilized its common sense and
principles of common law relating to comparative allocation of fault, and
determined that both parties were equally responsible for this bad outcome.”
Id. at 16-17; see also id. at 17 (noting that “[g]iven that the circumstances
confronting the trial court do not fit neatly within the statutory provisions of
the UCC, the trial court’s reliance on common-law principles (and common
sense) are entirely understandable, and are legally permissible.”).

                                          - 12 -
J-A13037-18


send the checks. Id. at 27-28, 37. GJWA claims that AmeriServ properly

directed multiple checks pursuant to its instructions, and that AmeriServ did

not indicate that the instructions were inadequate or required any follow-up

instructions. Id. at 37-39; see also id. at 38 (pointing to Schuller’s testimony

that the usual practice was to receive oral instructions without any further

written instructions); id. at 37-38 (arguing that the trial court’s finding that

AmeriServ would have properly directed the check, had GJWA given different

instructions, is speculative). GJWA argues that it did not authorize AmeriServ

to make the check payable to Duriez Excavating, and send the check directly

to William H. Duriez, Jr., rather than Bremer Bank. Id. at 30; see also id.

(arguing that AmeriServ’s actions were contrary to the agreement to issue the

checks in accordance with GJWA’s instructions).      GJWA contends that the

undisputed evidence, in addition to the trial court’s findings of fact,

demonstrates that GJWA was not to blame for the misdirected check. Id. at

39.4

       We must first determine whether the UCC governs the transactions at

issue in this case.       The UCC is intended to be a “semi-permanent and

infrequently-amended piece of legislation,” and “is intended to make it

possible for the law embodied in the [UCC] to be applied by the courts in the



____________________________________________


4In an apparent response to the trial court’s Findings of Fact and Conclusions
of Law, GJWA also contends that AmeriServ breached its fiduciary duty to
GJWA. Brief for Appellant at 35, 36, 39-40.

                                          - 13 -
J-A13037-18


light of unforeseen and new circumstances and practices.”           13 Pa.C.S.A.

§ 1103, cmt. 1; see also Triffin v. Dillabough, 716 A.2d 605, 608 (Pa.

1998) (noting that the purpose of the UCC is to allow people to trade with

confidence). The Legislature directed that the UCC

      must be liberally construed and applied to promote its underlying
      purposes and policies, which are:

      (1) to simplify, clarify and     modernize    the   law     governing
          commercial transactions;

      (2) to permit the continued expansion of commercial practices
          through custom, usage and agreement of the parties; and

      (3) to make uniform the law among the various jurisdictions.

13 Pa.C.S.A. § 1103(a). “The text of each section [of the UCC] should be read

in the light of the purpose and policy of the rule or principle in question, as

also of the [UCC] as a whole, and the application of the language should be

construed narrowly or broadly, as the case may be, in conformity with the

purposes and policies involved.” Id. § 1103, cmt.

      “Unless displaced by the particular provisions of [the UCC], the

principles of law and equity, including the law merchant and the law relative

to   capacity   to   contract,   principal   and   agent,       estoppel,     fraud,

misrepresentation, duress, coercion, mistake, bankruptcy and other validating

or invalidating cause, supplement its provisions.” Id. § 1103(b); see also id.

§ 1103, cmt. 4 (noting that “[t]he list of sources of supplemental law in

subsection (b) is intended to be merely illustrative of the other law that may

supplement the [UCC], and is not exclusive.”).

                                    - 14 -
J-A13037-18


       [W]hile principles of common law and equity may supplement
       provisions of the [UCC], they may not be used to supplant its
       provisions, or the purposes and policies those provisions reflect,
       unless a specific provision of the [UCC] provides otherwise. In the
       absence of such a provision, the [UCC] preempts principles of
       common law and equity that are inconsistent with either its
       provisions or its purposes and policies.

Id. § 1103, cmt. 2 (emphasis in original); see also id. (stating that “the

proper scope of [UCC] preemption … extends to displacement of other law

that is inconsistent with the purposes and policies of the [UCC], as well as

with its text.”).     Thus, in furtherance of the UCC’s goal of uniformity in

commercial transactions, common law claims are displaced where both the

UCC and the common law would provide a means of recovery for the same

loss. See, e.g., Bucci v. Wachovia Bank, N.A., 591 F. Supp. 2d 773, 779

(E.D. Pa. 2008) (stating that “parallel [UCC] and common law claims may be

maintained except in circumstances where (1) the [UCC] provides a

comprehensive remedial scheme, and (2) reliance on the common law would

undermine the purposes of the [UCC].”).

       Here, the matter at issue involves a misdirected check that was drawn

on GJWA’s account.5 Articles 3 and 4 of the UCC set forth the rights, duties

and liabilities of banks and customers concerning negotiable instruments, of

____________________________________________


5 During the check collection process, the “drawer” of a check issues to the
“payee” a check drawn on an account of the drawer at the “drawee bank.” A
“drawer” is defined as “[a] person who signs or is identified in a draft as a
person ordering payment.” 13 Pa.C.S.A. § 3103. A “drawee” is defined as
“[a] person ordered in a draft to make payment.” Id. §§ 3103; 4104.



                                          - 15 -
J-A13037-18


which checks are a subset.6 See Bucci, 591 F. Supp. 2d at 779 (stating that

“Article 3 of the [UCC] regulates negotiable instruments, including checks and

the check collection process. Article 4 defines the rights between parties with

respect to bank deposits and collections involving banks located in

Pennsylvania.”) (citation omitted); Nisenzon v. Morgan Stanley DW, Inc.,

546 F. Supp. 2d 213, 224 (E.D. Pa. 2008) (stating that “Articles 3 and 4 of

the [] UCC govern the collection and payment of the checks.”); see also 13

Pa.C.S.A. § 3102 (stating that Article 3 “applies to negotiable instruments.”);

id. § 4101, cmt. 3 (stating that “Article 4 defines rights between parties with




____________________________________________


6 See 13 Pa.C.S.A. § 3104(f) (under the section specifying what constitutes a
negotiable instrument, defining “check,” in relevant part, as “a draft, other
than a documentary draft, payable on demand and drawn on a bank[.]”);
Pavex, Inc. v. York Fed. Sav. & Loan Ass’n, 716 A.2d 640, 644 (Pa. Super.
1998) (stating that checks are negotiable instruments); see also 13 Pa.C.S.A.
§ 3104(a) (defining a negotiable instrument as an unconditional promise to
pay a fixed amount of money if it “(1) is payable to bearer or to order at the
time it is issued or first comes into possession of a holder; (2) is payable on
demand or at a definite time; and (3) does not state any other undertaking or
instruction by the person promising or ordering payment to do any act in
addition to the payment of money....”).

                                          - 16 -
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respect to bank deposits and collections.”).7        The subject check, which

provided a fixed amount of money payable on demand, did not state any other

instruction, and included the indorsement of William H. Duriez, Jr., is a

negotiable instrument under the UCC. Thus, we must examine GJWA’s claims


____________________________________________


7 We note that GJWA relies extensively upon Article 4A of the UCC (Fund
Transfers), for the proposition that a customer who instructs a bank to make
a payment is ordinarily obliged to pay the payment order, unless the bank
erroneously executes the payment instructions. Brief for Appellant at 25-27;
see also id. at 27 (arguing that under Article 4A of the UCC, when the bank
erroneously executes the payment, the customer is entitled to a refund and
interest from the date of the payment). However, Article 4A of the UCC
governs       electronic    funds      transfers,    commonly        known      as
wholesale wire transfers. See 13 Pa.C.S.A. § 4A102, cmt. (stating that
“Article 4A governs a specialized method of payment referred to in the Article
as a funds transfer but also commonly referred to in the commercial
community as a wholesale wire transfer.”); Springfield Twp. v. Mellon
PSFS Bank, 889 A.2d 1184, 1192 n.10 (Pa. 2005) (stating that “[t]he General
Assembly has [] adopted that portion of the UCC[, 13 Pa.C.S.A. § 4A101,]
dealing with electronic funds transfers.”). Article 4A reflects “a deliberate
decision ... to write on a clean slate and to treat a funds transfer as a unique
method of payment to be governed by unique rules that address the particular
issues raised by this method of payment.” 13 Pa.C.S.A. § 4A102, cmt.; see
also id. (noting that Article 4A is “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.”). Thus, Article 4A
exclusively controls legal issues for fund or wire transfers within its scope, and
does not encompass GJWA’s claims regarding the misdirected check. See
Hospicomm, Inc. v. Fleet Bank, N.A., 338 F. Supp. 2d 578, 586 (E.D. Pa.
2004) (stating that electronic fund transfers were not contemplated by
drafters under Articles 3 and 4 because these articles govern check collection
and “depend upon bankers looking at particular words and numerals on the
face of a particular instrument.”) (citation omitted); see also 13 Pa.C.S.A.
§ 4104 (wherein Article 4, which applies to “items” and defines such term as
“[a]n instrument or a promise or order to pay money handled by a bank for
collection or payment. The term does not include a payment order governed
by Division 4A (relating to funds transfers) or a credit or debit card slip.”).



                                          - 17 -
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pursuant to Articles 3 and 4 of the UCC, as they displace the common law

causes of action relating to the remedies sought for the misdirected check. 8

See Envtl. Equip. & Serv. Co. v. Wachovia Bank, N.A., 741 F. Supp. 2d

705, 716 (E.D. Pa. 2010) (concluding that “in light of the [UCC’s]

comprehensive remedial scheme in relation to checks containing alterations

or forged indorsements, and in recognition of the likelihood that permitting

common law claims here would thwart the purposes of that scheme, [the]

negligence, breach of contract, and breach of the duty of good faith and fair

dealing claims are displaced.”); see also Pavex, Inc., 716 A.2d at 644

(stating that “[a]s part of an attempt to establish uniform rules governing the

relationship between banks and their customers, the UCC allocates the losses




____________________________________________


8  To the extent the trial court relied upon AmeriServ’s apparent breach of
fiduciary duties to reach its conclusion regarding the misdirected check, the
UCC displaces such a claim, as GJWA’s exclusive remedies for the subject
matter is set forth in Articles 3 and 4. See, e.g., Chelan Cty., Wash. v.
Bank of Am. Corp., 2014 WL 3101935, at *5 (E.D. Wash. 2014) (concluding
that a breach of fiduciary duties claim was displaced by the UCC where the
exclusive remedies for the subject matter at issue (unauthorized transfers)
were under Article 4A of the UCC). Moreover, we note that due to the
economic loss doctrine, GJWA could not raise a negligence cause of action as
there was no physical or property damage. See Ellenbogen v. PNC Bank,
731 A.2d 175, 188 n.26 (Pa. Super. 1999) (stating that the economic loss
doctrine “bar[s] a plaintiff from recovering purely economic losses suffered as
a result of a defendant’s negligent or otherwise tortious behavior, absent proof
that the defendant’s conduct caused actual physical harm to a plaintiff or his
property.”). Nevertheless, such a claim would have been displaced by the
UCC.



                                          - 18 -
J-A13037-18


caused by forged [i]ndorsements on negotiable instruments based on the

relative responsibilities of the parties to a transaction.”) (citation omitted).

       Under section 4401 of Article 4 of the UCC, “[a] bank may charge against

the account of a customer an item that is properly payable[.]          An item is

properly payable if it is authorized by the customer and is in accordance with

any agreement between the customer and the bank.” 13 Pa.C.S.A. § 4401(a).

Relevantly, “[a]n item containing a forged drawer’s signature or forged

indorsement[9] is not properly payable.” Id. § 4401, cmt. 1 (footnote added).

Thus, the drawee bank is generally liable for a forged check, and must credit



____________________________________________


9While the UCC does not define “forged indorsement,” it sets forth an example
of a forged indorsement as follows:

       An insurance company draws a check to the order of Sarah Smith
       in payment of a claim of a policyholder, Sarah Smith, who lives in
       Alabama. The insurance company also has a policyholder with the
       same name who lives in Illinois. By mistake, the insurance
       company mails the check to the Illinois Sarah Smith who indorses
       the check and obtains payment. Because the payee of the check
       is the Alabama Sarah Smith, the indorsement by the Illinois Sarah
       Smith is a forged indorsement.

13 Pa.C.S.A. § 3406, cmt. 3; see also id. § 3204(a) (defining “indorsement”);
Forgery, BLACK’S LAW DICTIONARY (8th ed. 2004) (defining forgery, in relevant
part, as follows: “1. The act of fraudulently making a false document or
altering a real one to be used as if genuine … 2. A false or altered document
made to look genuine by someone with the intent to deceive[.]”); see
generally 13 Pa.C.S.A. § 3405(a) (defining fraudulent indorsement, in
relevant part, as follows: “In the case of an instrument with respect to which
the employer is the issuer, a forged indorsement purporting to be that of the
person identified as payee.”). Thus, with regard to the plain language of the
UCC, a forged indorsement is a signature that is substantially similar to the
name of the intended signator or payee such that it is made to look genuine.

                                          - 19 -
J-A13037-18


the drawer the amount of the check. See id. § 3404, cmt. 3 (stating that

“[n]ormally, the loss in forged check cases is on the drawee bank that paid

the check.”); Pavex, Inc., 716 A.2d at 644 (stating that “[g]enerally, a

drawee bank is not entitled to debit the drawer’s account when the bank pays

over a forged [i]ndorsement[.]”); see also Nisenzon, 546 F. Supp. 2d at 225

(noting that under section 4401, “a drawee may not debit the account of its

customer for the amount of a check that the drawee paid over a forged

indorsement, because such a check is not properly payable.”); id. (stating

that “[u]nder the UCC, a bank breaches its agreements with a customer when

it pays the holder of a forged check. It is this breach which constitutes the

customer’s cause of action against a bank to recover the sums paid out on

checks bearing forged signatures.”).

     However, the UCC provides the drawee bank a mechanism to reduce or

eliminate its legal responsibility under section 4401, i.e., by demonstrating

the drawer’s own negligence contributed to the forgery. See 13 Pa.C.S.A.

§ 3406; see also id., cmt. 4 (stating that “the loss may be allocated between

the two parties on a comparative negligence basis.”); Pavex, Inc., supra.

Specifically, section 3406(a) protects a drawee bank who paid a check against

the drawer where the drawee bank proves that (1) its customer, the drawer,

did not exercise ordinary care; (2) the drawer’s negligence “substantially

contributed” to the making of a forged signature; and (3) the drawee/payor

bank paid the check in “good faith.”    13 Pa.C.S.A. § 3406(a); see also


                                   - 20 -
J-A13037-18


Nisenzon, 546 F. Supp. 2d at 227 (stating that section 3406(a) “essentially

creates a ‘conditional estoppel’ shielding a bank from liability where a

plaintiff’s negligence substantially contributes to the forgery.”) (citation

omitted). In turn, the liability may be allocated on a comparative fault basis

if the drawer establishes that the drawee bank failed “to exercise ordinary

care in paying or taking the instrument and that failure substantially

contributes to loss.” 13 Pa.C.S.A. § 3406(b).

      The UCC defines “ordinary care” as follows:

      In the case of a person engaged in business, means observance
      of reasonable commercial standards, prevailing in the area in
      which the person is located, with respect to the business in which
      the person is engaged. In the case of a bank that takes an
      instrument for processing for collection or payment by automated
      means, reasonable commercial standards do not require the bank
      to examine the instrument if the failure to examine does not
      violate the bank’s prescribed procedures and the bank’s
      procedures do not vary unreasonably from general banking usage
      not disapproved by this division or Division 4 (relating to bank
      deposits and collections).

Id. § 3103; see also id., cmt. 4 (noting that the definition of ordinary care

applies to Articles 3 and 4). Under the UCC, courts must look at the totality

of the circumstances in determining whether a party failed to exercise ordinary

care. See id. § 3406, cmt. 1; see also Thompson Maple Prods. v. Citizens

Nat’l Bank of Corry, 234 A.2d 32, 36 (Pa. Super. 1967). The “substantially

contributes” test is “less stringent than a ‘direct and proximate cause’ test[,]”

and can be established if the party’s conduct “is a contributing cause of the

alteration or signature and a substantial factor in bringing it about.”       13


                                     - 21 -
J-A13037-18


Pa.C.S.A. § 3406, cmt. 2. Good faith is defined as “honesty in fact and the

observance of reasonable commercial standards of fair dealing.”              Id.

§ 1201(b)(20).10

       Here, the payee on the subject check is “DURIEZ EXCAVATING, 121

DURIEZ LN, NORTHERN CAMBRIA PA 15714-1805.” William H. Duriez, Jr.,

indorsed the subject check.          Because the indorsement was substantially

similar to the name on the payee line on the check (Duriez Excavating), the

indorsement was forged. See, e.g., Cont’l Cas. Co. v. Fifth/Third Bank,

418 F. Supp. 2d 964, 975–76 (N.D. Ohio 2006) (concluding that the checks

had forged indorsements where the signed indorsements were substantially

similar to the designated payee). Thus, the check was not properly payable,


____________________________________________


10 As with “forged indorsement,” the UCC does not define “forged signature.”
Section 3406 clearly states that this term is to be narrowly construed. See
id. § 3406, cmt. 2 (stating that the section refers to “forged signature” instead
of “unauthorized signature,” that was included in a prior section “because it
more accurately describes the scope of the provision. Unauthorized signature
is a broader concept that includes not only forgery but also the signature of
an agent which does not bind the principal under the law of agency.”); see
also id. § 3403(a) (stating that “[u]nless otherwise provided in this division
or Division 4 (relating to bank deposits and collections), an unauthorized
signature is ineffective except as the signature of the unauthorized signer in
favor of a person who in good faith pays the instrument or takes it for value.”).
But see 13 Pa.C.S.A. § 1201(b)(41) (defining “unauthorized signature” as
“[a] signature made without actual, implied or apparent authority. The term
includes a forgery.”).     However, consistent with our review of forged
indorsement, a signature is forged where it is similar to the name of the
intended payee such that the signature looks to be genuine. See 13 Pa.C.S.A.
§ 3406, cmt. 3; see also John Hancock Fin. Servs., Inc. v. Old Kent Bank,
346 F.3d 727, 731 (6th Cir. 2003) (defining “forged signature,” under a similar
statute as section 3406, as a signature “substantially similar to the name of
the intended signator such that it appears genuine.”) (citation omitted).

                                          - 22 -
J-A13037-18


and AmeriServ would be liable for the payment of the subject check containing

the forged indorsement pursuant to section 4401 of the UCC. See Nisenzon,

546 F. Supp. 2d at 225 (stating that brokerage firm was liable to clients for

the payment of checks over forged indorsements).

      Nonetheless, the trial court found that both GJWA and AmeriServ were

responsible for the misdirection of the subject check and the forged signature,

stating the following:

      But for the failure of GJWA to attach the Instructions to Obligee
      and include the correct “payee” information on its requisitions,
      such misdirection would not have happened. However, but for
      [AmeriServ’s] failure to follow GJWA’s original instructions to fill
      out checks consistent with the first check executed in this matter,
      or, at least, seek clarification from GJWA as a result of the
      attached Pecard email, the misdirection of the check would not
      have occurred.

Trial Court Opinion, 5/22/17, at 7 (unnumbered). Ostensibly, the trial court

found that both parties were equally negligent for the loss associated with the

subject check containing the forged signature based upon the failure of each

of the parties to exercise ordinary care.     In point of fact, the exercise of

ordinary care required the parties to review the instructions to guarantee the

proper disbursement of the payment. See Nisenzon, 546 F. Supp. 2d at 227

(stating that “only negligence which proximately relates or contributes to the

forgery, and not merely to the issuance of the checks, would relieve a

collecting bank of liability for improper payment of a fraudulently endorsed

check.”) (emphasis in original). Upon our review of the competent evidence,

we agree with the trial court’s finding that both parties were equally negligent

                                     - 23 -
J-A13037-18


in causing the misdirection of the check and subsequent forgery.             See

Stephan, 100 A.3d at 664 (noting that we are bound by the trial court’s

factual findings). Thus, we affirm the trial court’s Order dividing the damages,

albeit on different legal grounds. See Wilson v. Transp. Ins. Co., 889 A.2d

563, 577 n.4 (Pa. Super. 2005) (noting that “we can affirm the trial court’s

decision on any valid basis, as long as the court came to the correct result,

which in this case was to deny [a]ppellant relief.”).

      In its final claim, GJWA claims that the trial court erroneously limited its

potential recovery to $120,000, the amount set forth in the Consent Judgment

in favor of Aegis and against GJWA.       Brief for Appellant at 30-31.    GJWA

contends that the Consent Judgment does not limit AmeriServ’s liability. Id.

at 31. GJWA argues that under the Settlement Agreement, which led to the

entry of the Consent Judgment, it was free to prosecute its cross-claims

against AmeriServ. Id. Alternatively, GJWA claims that even if its recovery

is limited to $120,000.00, AmeriServ is responsible for the entire amount

based upon its breach. Id. at 34-36.

      A consent judgment is a contract, and is construed like a contract.

Lower Frederick Twp. v. Clemmer, 543 A.2d 502, 510 (Pa. 1988).                 In

interpreting a contract, our standard of review is de novo and our scope of

review is plenary. Newman Dev. Grp. of Pottstown, LLC v. Genuardi’s

Family Mkt., Inc., 98 A.3d 645, 653 (Pa. Super. 2014).

            [W]hen interpreting the language of a contract, th[e]
      Court’s goal is to ascertain the intent of the parties and give it

                                     - 24 -
J-A13037-18


      effect. When the words of a contract are clear and unambiguous,
      the intent of the parties must be ascertained from the language
      employed in the contract, which shall be given its commonly
      accepted and plain meaning.

TruServ Corp. v. Morgan’s Tool & Supply Co., 39 A.3d 253, 260 (Pa.

Super. 2012); see also Habjan v. Habjan, 73 A.3d 630, 640 (Pa. Super.

2013) (stating that courts “must construe the contract only as written and

may not modify the plain meaning of the words under the guise of

interpretation.”).

      Here, the Consent Judgment states, in relevant part, the following:

      IT IS on this 2nd day of May, 2017, ORDERED AND ADJUDGED that
      Judgment is entered in favor of [Aegis] and against [GJWA] in the
      amount of ONE HUNDRED AND TWENTY THOUSAND DOLLARS
      ($120,000.00), plus post[-]judgment interest at the legal rate
      from the date of this judgment until paid in full and in good funds,
      and it is further ordered that execution shall issue therefore;

      IT IS FUTHER ORDERED, ADJUDGED AND AGREED that [GJWA]
      waives any right to appeal this Consent Judgment and agrees that
      this Consent Judgment is final and non-appealable….

Consent Judgment, 5/2/17 (capitalization in original).

      Here, GJWA knowingly and voluntarily agreed to limit the damages owed

to Aegis to $120,000.00. Further, the plain language of the Consent Judgment

unequivocally and clearly states that the judgment in the amount of

$120,000.00 was final.    While the Consent Judgment did not limit GJWA’s

ability to file claims arising out of these damages against AmeriServ, we

decline to modify the amount of damages agreed to by the parties in the

Consent Judgment. See Cioffi v. Cioffi, 885 A.2d 45, 48 (Pa. Super. 2005)


                                     - 25 -
J-A13037-18


(stating that “[a] court may construe or interpret a consent decree as it would

a contract, but it has neither the power nor the authority to modify or vary

the decree unless there has been fraud, accident or mistake.”) (citation

omitted); see also Karkaria v. Karkaria, 592 A.2d 64, 71 (Pa. Super. 1991)

(noting that “[a] party who has acquiesced in an order or judgment will not

later be heard to challenge it.”). Because we cannot construe the Consent

Judgment as anything but clear on its face, we conclude that the damages

were limited to $120,000, to be properly apportioned between GJWA and

AmeriServ, and that GJWA’s self-serving attempt to increase the damages is

without merit.

      Judgment affirmed.

      Judge Dubow joins the memorandum.

      Judge Olson concurs in the result.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 2/12/2019




                                    - 26 -
