Saint Bernard School of Montville, Inc. v. Bank of America (2012)

MEMORANDUM OF DECISION RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (# 140)

FACTS

On October 17, 2011, the plaintiff, Saint Bernard School of Montville, Inc., filed a five-count third amended complaint against the defendant, Bank of America.   In the third amended complaint, the plaintiff alleges the following facts.   The plaintiff opened several bank accounts with Fleet Bank of Boston.   One of those accounts was the “St. Bernard High School Operating Fund” (the operating fund account), which was opened in 1985.   The parties entered into a contract pursuant to the opening of the operating fund account and other accounts.   The defendant acquired Fleet Bank in 2004, assuming all of its assets and liabilities.   Salvatore Licitra was an employee of the plaintiff, but was not a party to the contract, was not an authorized signatory for the operating fund account or any other accounts, was not authorized to sign for the plaintiff in any capacity and was not authorized to enter into any contracts on behalf of the plaintiff.   Further, the defendant was not authorized by the plaintiff to transact business with, disclose information to or release funds to Licitra.

Between August 2002, and September 30, 2006, the defendant transacted business, released documents, released funds, disclosed information and processed or paid checks belonging to the plaintiff with Licitra without authorization and in breach of the parties' contract.   In November 2002, the defendant opened an unauthorized account named “Saint Bernard's High School Norwich Diocese Camp Sunshine, c/o Sal Licitra” (the Camp Sunshine account) without the plaintiff's knowledge or authorization in breach of the parties' contract.   The defendant also improperly withdrew funds and allowed unauthorized persons to withdraw funds from the operating fund account and other accounts and deposited the funds in the Camp Sunshine account.   Further, the defendant improperly deposited and allowed unauthorized persons to deposit checks and other funds payable to the operating fund account and other accounts in the Camp Sunshine account.   In doing so, the defendant breached the parties' contract by failing to require the appropriate proof of authority or documentation to conduct transactions and open the unauthorized Camp Sunshine account.

The plaintiff alleges that the defendant processed the unauthorized transactions resulting in a breach of contract and the misappropriation of funds rightfully belonging to the plaintiff in an amount in excess of $840,000.   The plaintiff further alleges that the defendant “failed to act in good faith, observe reasonable commercial standards of fair dealing, exercise ordinary care, adhere to the covenant of good faith and fair dealing, comply with federal banking regulations, comply with the [d]efendant's own policies and comply with the terms of the parties' contract.”

Counts one through five of the plaintiff's third amended complaint set forth claims for (1) unauthorized account and transactions, (2) forged checks, (3) fraudulent indorsements, (4) negligence and (5) conversion.   On November 28, 2011, the defendant filed a motion for summary judgment on the grounds that (1) the allegedly unauthorized transactions are time-barred under the relevant contractual documents between the parties, and (2) alternatively, certain allegedly unauthorized transactions are time-barred under General Statutes § 42a–4–406.   The motion is accompanied by a memorandum of law and supporting evidence.   The plaintiff filed a memorandum of law in opposition to the defendant's motion on January 4, 2012, and submitted supporting evidence.   This matter was heard at short calendar on March 19, 2012.

DISCUSSION

“Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Brooks v. Sweeney, 299 Conn. 196, 210, 9 A.3d 347 (2010).  “In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact.   The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law.”  (Internal quotation marks omitted.)  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10–11, 938 A.2d 576 (2008).

The defendant argues that all unauthorized transactions are time-barred under the “Deposit Account Agreement for Small Business Accounts” (the deposit agreement) entered into between the parties.   The deposit agreement gave the plaintiff a maximum of sixty days in which to notify the defendant of unauthorized items, which the defendant argues the plaintiff did not do.   The plaintiff counters that the contractual defenses asserted by the defendant were not pleaded until after the defendant moved for summary judgment.   Further, the plaintiff argues that the evidence relied on by the defendant is inadmissible, and that questions of fact exist as to whether the contractual documents are binding on the plaintiff.

“The existence of a contract is a question of fact to be determined by the trier on the basis of all of the evidence.”  (Internal quotation marks omitted.)  Hawley Avenue Associates LLC v. Robert D. Russo, MD. & Associates Radiology, P.C., 130 Conn.App. 823, 828, 25 A.3d 707 (2011).  “Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact ․ [when] there is definitive contract language, the determination of what the parties intended by their ․ commitments is a question of law ․” (Internal quotation marks omitted.)   Bristol v. Ocean State Job Lot Stores of Connecticut, Inc., 284 Conn. 1, 7, 931 A.2d 837 (2007).

In support of its motion for summary judgment, the defendant has submitted two affidavits of Donna Hoskins Poitevien, a bank officer for the defendant.   The first affidavit was submitted along with the defendant's motion on November 28, 2011, and contains several excerpts of the deposit agreements purportedly entered into between the parties.   Sworn copies of the deposit agreements were not attached to the affidavit,¹ so the defendant attached copies of several deposit agreements to a supplemental affidavit of Poitevien, which was filed on February 24, 2012.   The plaintiff filed an objection to the supplemental affidavit on March 2, 2012, and the defendant filed a reply on March 7, 2012.   The court need not rule on the plaintiff's objection to Poitevien's supplemental affidavit, however, because even assuming that the affidavit is admissible, there still remain genuine issues of material fact precluding summary judgment.   First, the two affidavits are inconsistent with respect to when the deposit agreements governed the plaintiff's accounts.   While the first affidavit describes a deposit agreement that was in effect “through 2004,” the second affidavit describes deposit agreements that were effective “as of January 2004,” and “as of December 1, 2005.”   Additionally, the first affidavit states that the same deposit agreement governed the plaintiff's account in 2005 and 2006, while the second affidavit describes separate deposit agreements for those years.   These inconsistencies require the court to delve into issues of credibility, which it cannot do for purposes of summary judgment.   See Battistoni v. Weatherking Products, Inc., 41 Conn.App. 555, 564, 676 A.2d 890 (1996).

Further, the defendant relies on FCT Electronics, LP v. Bank of America, N.A., Superior Court, judicial district of Litchfield, Docket No. CV 10 6002699 (September 22, 2011, Pickard, J.) (52 Conn. L. Rptr. 661), in arguing that the relevant deposit agreements render the plaintiff's claims time-barred.   In FCT Electronics, the court confronted the issue of “whether a deposit agreement given to a customer upon an account being opened at a bank constitutes a binding, enforceable contract.”  Id., 664.   The court answered in the affirmative, holding that “because the plaintiff did not report the unauthorized transactions within the specified time period set forth in the Deposit Agreement, the plaintiff's claims are time-barred.”  Id., 668.   In doing so, the court relied on cases from other jurisdictions, as no prior Connecticut decisions had addressed this issue.  Id., 664.

The present case is factually distinguishable from FCT Electronics.   The plaintiff in FCT Electronics opened its accounts with the defendant in 2003, and the parties did not dispute the relevant language of the deposit agreement.   Id., 662, 663 n.4. In fact, the plaintiff in that case expressly acknowledged by way of affidavit of its president and managing partner that it received the deposit agreement upon opening its accounts with the defendant.   Id., 664.   The plaintiff's argument was that the defendant provided no evidence that the plaintiff ever negotiated, signed or accepted the terms of the deposit agreement.  Id., 663.   Conversely, in the present case, the defendant has presented no evidence that any deposit agreement was ever provided to the plaintiff.   Poitevien's two affidavits simply state that the deposit agreements “governed” the plaintiff's accounts without establishing any connection between the plaintiff and the agreements.   Moreover, the plaintiff has alleged that the operating fund account was opened in 1985, while the deposit agreements referred to in Poitevien's affidavits begin in 2002.   For these reasons, FCT Electronics is distinguishable, as there remain genuine issues of material fact as to the existence and terms of any deposit agreement that governed the plaintiff's accounts.   Accordingly, the defendant's motion for summary judgment for this reason is denied.

The defendant also argues that all of the unauthorized transactions are time-barred under § 42a–4–406(c), (d) and (f) due to the plaintiff's failure to timely notify the defendant.   The plaintiff counters that § 42a–4–406 does not apply in this case, as the statute is not applicable to claims based on endorsements.   Alternatively, the plaintiff argues that questions of fact remain as to whether the statements provided by the defendant were sufficient to allow discovery of the illegal activity, whether the defendant acted in good faith and whether the defendant exercised ordinary care in paying the checks at issue.

Assuming that § 42a–4–406 applies in this case, the defendant has not met its burden of showing the nonexistence of any genuine issue of material fact.   The provisions of § 42a–4–406 cited by the defendant give bank customers a specific time frame in which to notify a bank of unauthorized signatures or alterations.  Section 42a–4–406(c) and (d) ² gives a customer thirty days in which to notify the bank, while § 42a–4–406(f) ³ provides a one year period to notify the bank.   These provisions, however, incorporate § 42a–4–406(a), which provides:  “A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid.   The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.”  (Emphasis added.)   Thus, the statements provided by the bank must be sufficient in order for the time limitations of § 42a–4–406(c), (d) and (f) to apply.

In the present case, the defendant has submitted as evidence the plaintiff's response to the defendant's requests for admission.   The defendant's first request for admission states:  “The alleged unauthorized transactions ․ were reflected in the monthly bank statements regarding the Bank Account sent by Defendant to Plaintiff.”   The plaintiff denied this request for admission.   Moreover, while Poitevien's affidavits state that the withdrawal of funds from the plaintiff's accounts with the defendant were reflected in the monthly bank statements sent to the plaintiff, there is no evidence as to the sufficiency of the statements.   Thus, the defendant has not met its burden of establishing the nonexistence of a genuine issue of material fact as to whether the statements were “sufficient to allow the customer reasonably to identify the items paid.”   Accordingly, the defendant's motion for summary judgment pursuant to § 42a–4–406 is denied.

CONCLUSION

For the foregoing reasons, the defendant's motion for summary judgment is hereby denied.

Martin, J.

FOOTNOTES

FN1. Practice Book § 17–46 provides in relevant part that “[s]worn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto.”.  FN1. Practice Book § 17–46 provides in relevant part that “[s]worn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto.”

FN2. Section 42a–4–406(c) provides:  “If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized.   If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.”  Section 42a–4–406(d) provides:  “If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (c), the customer is precluded from asserting against the bank:  (1) The customer's unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure;  and (2) the customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding thirty days, in which to examine the item or statement of account and notify the bank.”.  FN2. Section 42a–4–406(c) provides:  “If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized.   If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.”  Section 42a–4–406(d) provides:  “If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (c), the customer is precluded from asserting against the bank:  (1) The customer's unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure;  and (2) the customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding thirty days, in which to examine the item or statement of account and notify the bank.”

FN3. Section 42a–4–406(f) provides:  “Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer pursuant to subsection (a) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration.   If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under section 42a–4–208 with respect to the unauthorized signature or alteration to which the preclusion applies.”.  FN3. Section 42a–4–406(f) provides:  “Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer pursuant to subsection (a) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration.   If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under section 42a–4–208 with respect to the unauthorized signature or alteration to which the preclusion applies.”

Martin, Robert A., J.