Opinion
No. FST CV 08 5007268
September 1, 2010
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (143.00)
FACTS
On April 25, 2008, the plaintiff, Roger Kaye, M.D., P.C., commenced this action by service of process on the defendant, T.D. Banknorth, N.A. In its second amended complaint dated May 20, 2009, the plaintiff alleges the following facts. Between the period of January 4, 1999 and January 12, 2008, Virginia Robie was employed as a secretary to Dr. Kaye and receptionist for the plaintiff, a professional corporation located in Norwalk. At no time during her employment did Robie have the responsibility or authority to sign or endorse any negotiable instruments on the plaintiff's behalf or the ability to endorse any checks that were made payable to the plaintiff. During the period of Robie's employment with the plaintiff, both Robie and the plaintiff maintained bank accounts at the defendant's branch located at 148 Main Street in Norwalk. The plaintiff alleges that "[d]uring that same period, [the defendant], and its successors, knew or should have known that Robie was not authorized to cash or otherwise negotiate checks issued by or on behalf of or payable to [the plaintiff']."
The plaintiff alleges that between January 4, 1999 and January 12, 2008, Robie wrongfully appropriated checks made payable to the plaintiff, and presented these checks bearing either no endorsement or a forged endorsement to the defendant for collection. The defendant then obtained the amount owed on the checks from the relevant banks and deposited that amount into Robie's account. According to the second amended complaint, the defendant "through its agents, officers and employees, knew or should have known that the nature of each of the checks payable to [the plaintiff] was irregular and further inquiry was required." Despite this fact, employees of the defendant cashed or deposited the checks received from Robie without making any reasonable attempts to verify the endorsement on the checks or determine whether Robie had the authority to cash them. Accordingly, in counts one and two, the plaintiff alleges claims against the defendant for negligence and conversion.
In count three, which states a claim for breach of agreement, the plaintiff alleges that the defendant "agreed with [the plaintiff] that [the defendant] in the conduct of its banking relationship, would handle collection of checks payable to [the plaintiff] in a correct, proper, and lawful manner." The plaintiff further alleges in count three that the defendant has breached this agreement and that the plaintiff has demanded, without success, that the defendant reimburse the plaintiff the amounts that the defendant paid to Robie from checks bearing forged endorsements.
Count four states a cause of action for unjust enrichment. In this count, the plaintiff alleges that the defendant failed to pay the plaintiff for the use of money deposited into the bank, including interest, and that the defendant has failed to reimburse the plaintiff for the money it received into its bank. Furthermore, the plaintiff alleges that the defendant "has been unjustly enriched, by virtue of receiving, cashing and depositing the checks into its customer Robie's bank account which caused it to have the use of money in its banking business and receiving interest thereon and also in retaining the money."
On November 9, 2009, the defendant filed a motion for summary judgment, as well as a memorandum of law in support of its motion. The defendant moves for judgment as a matter of law in its favor as to counts three and four, breach of agreement and unjust enrichment. In support of its motion, the defendant has attached: (1) the sworn affidavit of Suzanne Ricciardelli, who is a regional security officer with the defendant; (2) a copy of the signature card executed by Roger Kaye when he opened the plaintiff's account with the defendant's predecessor, Lafayette American Bank Trust Company and (3) copies of various documents titled "Deposit Account Agreement and Disclosure Information" from Hudson United Bank and the defendant dated between March 26, 1999 and September 2009.
The plaintiff has filed a memorandum of law in opposition to the defendant's motion, which is currently under seal pursuant to Practice Book § 7-4C. Attached to the plaintiff's opposition are: (1) the sworn affidavit of Roger Kaye; (2) an "explanatory affidavit" submitted by Dr. Kaye setting forth reasons, pursuant to Practice Book § 17-47, why additional discovery was required; (3) a copy of the defendant's supplemental responses to the plaintiff's first set of interrogatories; (4) a copy of the defendant's responses to the plaintiff's first set of interrogatories; (5) a sales associate training manual from Hudson United Bank and (6) a document titled "Hudson United Bank Conversion Teller Quick Reference Guide." On May 24, 2010, the defendant also filed a reply memorandum. The court heard argument in this matter at short calendar on June 15, 2010.
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.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way . . . [A] summary disposition . . . should be on evidence which a jury would not be at liberty to disbelieve . . . and which would require a directed verdict for the moving party." (Citations omitted; internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003). The burden is on the moving party to demonstrate an absence of any triable issue of material fact and "[t]o satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).
I BREACH OF AGREEMENT
The defendant first moves for summary judgment on count three, breach of agreement, because it contends that there is no genuine issue of material fact that there was no agreement in place between the parties that regulated the conduct alleged by the plaintiff. In its memorandum of law, the defendant argues that the only contracts between the parties are deposit account agreements that govern items that are actually deposited and withdrawn from the plaintiff's account. The defendant argues that "[t]he [a]greements do not purport to govern more generally the relationship between the parties or the disposition generally of checks payable to [the plaintiff], and therefore do not contain any terms, conditions, representations or warranties which are applicable to the alleged activities which form the basis [of the plaintiff's] claims." Furthermore, the defendant argues that the subject agreements contain no promise that the defendant would handle the collection of checks deposited into another person's account in a correct manner. Finally, the defendant argues that the terms of the contracts state that the defendant is not liable unless it acts in bad faith, and the plaintiff has failed to allege such conduct on the part of the defendant.
In response, the plaintiff argues that prior to May 19, 2006, the defendant operated under deposit account agreements promulgated by its predecessor, Hudson United Bank. Under these agreements, Hudson United Bank bound itself to use "customary banking practices" in its dealings with customers. The plaintiff argues that the defendant's actions in allowing the deposit of the plaintiff's money into Robie's account were a violation of ordinary care and customary banking practices. Moreover, the plaintiff contends that the deposit account agreements had an implied requirement that the defendant would use ordinary care in depositing funds. In support of this position, the plaintiff cites to an Illinois appellate case, Continental Casualty Co., Inc. v. American National Bank and Trust Co. of Chicago, 329 Ill.App.3d 686, 693, 768 N.E.2d 352 (2002), which holds that there is such a duty when a bank disburses funds. Alternatively, the plaintiff argues that the court should not rule on this motion until the plaintiff can conduct more discovery. The plaintiff argues that it should receive more time to finish discovery because no depositions have been taken and no experts have been disclosed. Specifically, the plaintiff contends that it has not had the opportunity to question four of the defendant's employees as to customary banking practices. In support of this position, the plaintiff offers an affidavit from Dr. Kaye.
Practice Book § 17-47 provides: "Should it appear from the affidavits of a party opposing the motion that such party cannot, for reasons stated, present facts essential to justify opposition, the judicial authority may deny the motion for judgment or may order a continuance to permit affidavits to be obtained or discovery to be had or may make such other order as is just." "The trial court has wide discretion under § [17-47] to determine whether the party seeking additional time to conduct discovery already has had a sufficient opportunity to establish facts in opposition to the summary judgment motion . . ." Peerless Ins. Co. v. Gonzalez, 241 Conn. 476, 489, 697 A.2d 680 (1997). Although it is within the court's discretion to accept the validity of the plaintiff's argument that it has not had enough time to complete adequate discovery, this argument is not particularly persuasive considering the fact that this case has been pending since April 2008 and the summary judgment motion presently before the court was filed in November 2009.
The defendant's reply memorandum reiterates the defendant's position that the deposit account agreements apply only to deposits and withdrawals involving the plaintiff's account. Furthermore, the defendant argues that "[t]he language in the Hudson Agreements upon which [the plaintiff] relies is merely a statement limiting [the defendant's] liability, and not an affirmative undertaking by [the defendant] to act according to a certain standard of care." Accordingly, the defendant argues that it was not contractually obligated to handle deposits in accordance with customary banking practices.
"A contract must be construed to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms." (Internal quotation marks omitted.) Office of Labor Relations v. New England Health Care Employees Union, District 1199, AFL-CIO, 288 Conn. 223, 231-32, 951 A.2d 1249 (2008). "If a contract is unambiguous within its four corners, intent of the parties is a question of law . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . ." (Internal quotation marks omitted.) O'Connor v. Waterbury, 286 Conn. 732, 744, 945 A.2d 936 (2008). "A contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself . . . Accordingly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms . . . When the language of a contract is ambiguous, the determination of the parties' intent is a question of fact." (Internal quotation marks omitted.) Id., 743.
As provided in the "deposit" section of the March 26, 1999 Hudson United Bank deposit account agreement, which is the defendant's exhibit B: "In receiving any item (such as a check) for deposit or collection, the Bank will process the item in order to collect payment of it . . . In processing the item, the Bank will not be responsible beyond the exercise of ordinary care . . . Items may be handled in accordance with customary banking practices." There is similar language in the March 1, 2004 and July 1, 2005 Hudson United Bank deposit account agreements, which are the defendant's exhibits C and D. These agreements were in place during much of the time that Robie was allegedly depositing the plaintiff's money into her bank account. Moreover, Hudson United Bank merged with the defendant in early 2006, and on May 19, 2006, all Hudson United Bank accounts were transferred to the defendant. The plaintiff argues that this cited language creates a contractual duty for the defendant to use due care and customary banking practices when handling deposits generally, whereas the defendant contends that its contractual obligations were limited to funds deposited into the plaintiff's account.
The defendant is probably right that the intent of the statement "the Bank will not be responsible beyond the exercise of ordinary care" is to establish a limitation on the defendant's liability, as opposed to a contractual obligation to act in a certain manner. Nevertheless, such a conclusion is not dispositive because the Appellate Court has determined that "[u]nder General Statutes § 42a-4-103, banks come under the general obligations of the use of good faith and the exercise of ordinary care in the handling of negotiable instruments." (Internal quotation marks omitted.) Sheiman v. Lafayette Bank Trust Co., 4 Conn.App. 39, 43, 492 A.2d 219 (1985). Accordingly, § 42a-4-103 provides that, at a minimum, banks have an affirmative duty to exercise due care when handling deposits. In some instances, a statute can be integrated into a contract as an express term. See, e.g, Deming v. Nationwide Mutual Ins. Co., 279 Conn. 745, 780, 905 A.2d 623 (2006) (stating that "[t]he law . . . is that statutes existing at the time a contract is made become a part of it and must be read into it just as if an express provision to that effect were inserted therein, except where the contract discloses a contrary intention"). Perhaps for this reason, the First District of the Illinois Appellate Court has determined that "[t]he relationship between a bank and its depositor is contractual in nature . . . A binding contract between a bank and its depositor is created by signature cards and a deposit agreement . . . Implicit in such contracts is the common-law duty of the bank to use ordinary care in disbursing the depositor's funds." (Citations omitted.) Continental Casualty Co., Inc. v. American National Bank and Trust Co. of Chicago, supra, 329 Ill.App.3d 692-93. Although the Illinois case is arguably factually distinguishable from the present matter because that case involved the withdrawal of funds as opposed to the depositing of money into an incorrect account, it is still illustrative of a general principle that banks have a contractual obligation to exercise due care when they handle negotiable instruments.
General Statutes § 42a-4-103 provides:
(a) The effect of the provisions of this article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.
(b) Federal reserve regulations and operating circulars, clearinghouse rules, and the like have the effect of agreements under subsection (a), whether or not specifically assented to by all parties interested in items handled.
(c) Action or nonaction approved by this article or pursuant to federal reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearinghouse rules and the like or with a general banking usage not disapproved by this article, is prima facie the exercise of ordinary care.
(d) The specification or approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.
(e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.
It should be noted that the Connecticut Supreme Court has limited this principle to statutes that govern a contract's validity, construction, discharge or enforcement. As stated by the Supreme Court, "although we incorporate a law as if an express term of the contract to construe the scope or validity of an obligation already embraced within the terms of the contract, we do not incorporate the law to create a substantive obligation where none previously had existed." Deming v. Nationwide Mutual Ins. Co., supra, 279 Conn. 781.
Furthermore, although this is not mentioned by either party in their respective briefs, in both the March 1, 2004 and July 1, 2005 Hudson United Bank agreements, there is a definition provided for "standard of care." It states as follows: `Standard of Care. We use automated systems in the processing of checks in order to handle a high volume of items at a lower cost to you. You agree that, to the extent that such systems are consistent with general banking practice, their use will constitute ordinary care and we may not be liable to you for forgeries or alterations not detected by such systems. You also agree that the exercise of ordinary care will not require detecting forgeries or alterations that could not be detected by a person observing reasonable commercial standards." This quoted passage demonstrates that the defendant's predecessor had inserted into its deposit account agreements a specific definition of practices that qualified as the exercise of ordinary care and general banking practices when processing checks. As banks already have a statutory obligation in Connecticut to exercise due care when handling negotiable instruments, it is plausible that these deposit account agreements implied a contractual obligation on the part of the defendant to adhere to customary banking practices. Accordingly, the defendant has failed to establish conclusively that the deposit account agreements between the parties did not contain a contractual obligation for the defendant to handle the collection of checks payable to the plaintiff in a correct, proper and lawful manner, as alleged in the second amended complaint.
The defendant also argues that it is entitled to summary judgment on count three because the deposit account agreements indicate that the defendant is only liable if it acted in bad faith. While it is true that the agreements authored by the defendant T.D. Banknorth do contain such a clause, there is no analogous provision in the March 26, 1999 Hudson United Bank agreement that was in effect for almost five years until March 1, 2004. As the second amended complaint alleges that Robie misappropriated the plaintiff's funds between 1999 and 2008, the agreement that was in place for roughly half of this time period does not limit the defendant's liability to acts committed in bad faith. Consequently, the court rejects this argument as a total defense. As the defendant has failed to establish that it is clearly entitled to judgment as a matter of law on the breach of agreement count, the court denies the defendant's motion for summary judgment as to count three.
II UNJUST ENRICHMENT
The defendant next moves for summary judgment dismissing count four, a claim of unjust enrichment. In its memorandum of law, the defendant argues that the plaintiff cannot maintain an unjust enrichment claim because the undisputed facts establish that the defendant was not actually benefitted. Specifically, the defendant argues that the benefit to the defendant was the same whether the subject funds were held in the plaintiff's account or in Robie's account. The defendant notes that the plaintiff's account was a checking account that paid no interest, and, therefore, the defendant would not have owed the plaintiff any interest on the funds that should have been deposited into the plaintiff's account. In response, the plaintiff argues that "[j]ust because the benefit was arguably the same, does not mean there was no benefit to the transaction; the benefit being the use of the money and interest earned to the bank." The plaintiff further argues that it suffered a detriment originating from the money that should have been credited to its account but instead was placed in Robie's account. Alternatively, the plaintiff argues that the court should not rule on the defendant's motion because discovery has not been completed. In its memorandum of law in opposition, the plaintiff contends that it intends to seek discovery from the bank as to what money it made on the funds that were incorrectly deposited into Robie's account.
"A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another . . . Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy . . . Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 451-52, 970 A.2d 592 (2009). "Furthermore, the determinations of whether a particular failure to pay was unjust and whether the defendant was benefitted are essentially factual findings . . ." Utzler v. Braca, 115 Conn. App. 261, 267, 972 A.2d 743 (2009).
The main argument raised by the defendant in support of its summary judgment motion for this count is that the plaintiff cannot demonstrate that the defendant actually benefitted by depositing money into Robie's account as opposed to the plaintiff's account. At first blush, this argument seems logical because the defendant would have had equal access to the same amount of money regardless of which account held the funds. Nevertheless, a close examination of the attachments offered in support of the defendant's motion indicates that the defendant has not conclusively established that it did not receive a benefit from depositing the money into the wrong account. In her affidavit, Ricciardelli fails to attest that the defendant was not benefitted by its alleged malfeasances. The defendant's other evidence, the signature card opening the plaintiff's account and the deposit agreements, also do not speak to whether the defendant received a benefit.
Although it is true that the plaintiff has not brought forth any evidence establishing that the defendant was benefitted, this is the defendant's motion for summary judgment. "On a motion by [the] defendant for summary judgment the burden is on [the] defendant to negate each claim as framed by the complaint . . . It necessarily follows that it is only [o]nce [the] defendant's burden in establishing his entitlement to summary judgment is met [that] the burden shifts to [the] plaintiff to show that a genuine issue of fact exists justifying a trial . . . Accordingly, [w]hen documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue." (Internal quotation marks omitted.) Gianetti v. United Healthcare, 99 Conn.App. 136, 141, 912 A.2d 1093 (2007). As the moving party, it is the defendant's burden to establish the absence of any genuine issues of material fact regarding the plaintiff's claims. Although it is admittedly difficult for the defendant to establish a negative and prove that it received no benefit, that is the defendant's burden on summary judgment. One can imagine some factual scenarios where the defendant could have benefitted from depositing money into the wrong account, and since the defendant has failed to demonstrate the absence of all genuine issues of material fact on this issue, the court denies the defendant's motion as to count four.
CONCLUSION
For all of the reasons stated above, court denies the defendant's motion for summary judgment in its entirety.