Donmar Enterprises, Inc. v. Southern Nat. Bank of North Carolina

• Decision Date: 13 September 1995
• Docket Number: No. 93-2101,93-2101
• Citation: 64 F.3d 944
• Parties: 27 UCC Rep.Serv.2d 941 DONMAR ENTERPRISES, INCORPORATED, Plaintiff-Appellant, v. SOUTHERN NATIONAL BANK OF NORTH CAROLINA, Defendant-Appellee, and Southern International Corporation, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 944

64 F.3d 944

27 UCC Rep.Serv.2d 941

DONMAR ENTERPRISES, INCORPORATED, Plaintiff-Appellant, v. SOUTHERN NATIONAL BANK OF NORTH CAROLINA, Defendant-Appellee and Southern International Corporation, Defendant.

No. 93-2101.

United States Court of Appeals Fourth Circuit.

Argued March 9, 1994.

Decided Sept. 13, 1995.

ARGUED: Robert Spencer Adden, Jr., Ruff, Bond, Cobb, Wade & McNair, Charlotte, NC, for appellant. Josephine Herring Hicks, Parker, Poe, Adams & Bernstein, Charlotte, NC, for appellee. ON BRIEF: James O. Cobb, Ruff, Bond, Cobb, Wade & McNair, Charlotte, NC, for appellant. Irvin W. Hankins, III, Parker, Poe, Adams & Bernstein, Charlotte, NC, for appellee.

Before ERVIN, Chief Judge, WIDENER, Circuit Judge, and BRINKEMA, United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge WIDENER wrote the opinion in which Chief Judge ERVIN and Judge BRINKEMA concurred.

OPINION

WIDENER, Circuit Judge:

Donmar Enterprises, Inc. (Donmar) appeals from the district court's grant of summary judgment to Southern National Bank of North Carolina (Southern National) as to Count I of Donmar's complaint, which was predicated on Federal Reserve Board Regulation J, Subpart B, Appendix B, and dismissal of Counts II and III, which raised negligence and wrongful payment claims under state law. The district court held that a private cause of action can be maintained pursuant to Regulation J, and that Regulation J pre-empted Donmar's state law claims of negligence and wrongful payment. It granted summary judgment to Southern National as to the Regulation J claim since the requirements of Regulation J were satisfied, and along the same line, dismissed the state law counts. See Donmar Enters., Inc. v. Southern Nat'l Bank, 828 F.Supp. 1230, 1239 (W.D.N.C.1993). We affirm.

I.

We recount the facts and inferences in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986). Donmar, located in Florida, engages in the selling of automobile sunroofs and accessories, which involves purchasing inventory from businesses in foreign countries. In making foreign purchases, Donmar pays by converting U.S. currency to foreign currency. For this conversion, Donmar used Stephen's Trading Company (Stephen's), a North Carolina company. After a transaction in which Donmar wired funds directly into Stephen's account at Wachovia Bank in North Carolina, Donmar's president, Kal Levinson, and Stephen Selleck, Stephen's owner and president, agreed that future transfers would be handled through the defendant, Southern National, and that Donmar would be a beneficiary of Donmar's wire transfers to Southern National, which would be sent to Southern National with a Stephen's transaction code. Donmar did not have an account with Southern National, Stephen's did have. Donmar would then fax to Stephen's its authorization for the purchase of foreign currency and where it was to be transferred, and Stephen's would deliver the facsimile from Donmar to Southern National as authorization to transfer the funds. Southern National, however, was not advised of this agreement. On two occasions in 1990, Donmar caused its bank, First Union of Jacksonville, Florida (First Union) to transmit funds by wire to Southern National. On August 10, 1990, the first wire transfer was sent with the notation "ATTN INT DIV R E STC DONMAR WIRE 102 1003" and, with reference to that August 10th transfer, Stephen's sent Southern National a facsimile message authorizing deposit of the funds into its account. Southern National credited the funds to Stephen's account. Seven days later, at Stephen's direction, Southern National transferred funds to a bank in Great Britain, referencing STC/Donmar No. 102-1003 as the order customer and sent Donmar confirmation of this transaction. This confirmation from Southern National led Donmar to believe that Southern National was acting pursuant to Donmar's authorization facsimile sent to Stephen's. A second similar wire transaction occurred in October of 1990, when Donmar had First Union wire money to Southern National with the notation "ATN INTL DIV REF STC DON MAR WIRE 102 1007," and Southern National, pursuant to instructions received from Stephen's, credited Stephen's account and thereafter transferred funds to Great Britain. However, Selleck does not recall receiving confirmation of this wire transfer.

On February 26, 1991, Donmar authorized First Union to wire transfer $15,000 to Southern National, with the wire noting "ATTN INTL DIV RE STC DONMAR TRANS CODE 1021011," pursuant to instructions from Stephen's to Donmar as to the notation on the wire. This $15,000 was the margin required to hold the purchase of pounds sterling 280,000. The supervisor of wire transfers in Southern National's international division, upon receipt of the $15,000 wire transfer, called Selleck of Stephen's to confirm that Stephen's was in fact the intended beneficiary of this wire transfer. Selleck confirmed the wire transfer and instructed the supervisor that it was to be credited to Stephen's account. Pursuant to instructions from Stephen's, Southern National wired this money to a bank in Pennsylvania, to be credited to the account of David A. Selleck.

On March 27, 1991, Stephen's sent a facsimile message to Donmar, requesting that it send "My USD to: Southern National Bank, Lumberton, N.C.... Re: STC/Donmar Trans Code 102-1011." The same day, Stephen's notified Southern National that it was expecting a wire transfer of $524,276.71 from First Union, referenced as "INCOMING WIRE STC/DONMAR CODE 102-1011" and again directed Southern National to deposit funds from the wire transfer into Stephen's account. Subsequently, Donmar authorized First Union to wire the $524,276.71 to Southern National and faxed instructions to Stephen's to wire pounds sterling 200,000 to Lloyds Bank in London and to hold or sell the other pounds sterling 80,000. First Union transferred the funds to Southern National at 1:39 p.m., with the notation "ATTN INTL DIV REF SLC/DONMAR TRANS CODE 102-1011." Southern National deposited the funds to Stephen's account. Also on March 27th, pursuant to instructions from Stephen's received at 2:32 p.m., Southern National wired $524,000 to Stephen's account at Discount Corp. of New York. ¹ On March 28, Stephen's directed Southern National to wire funds in the amount of pounds sterling 200,000 to Lloyd's Bank in England, but Southern National informed Stephen's that it lacked sufficient funds to accomplish the transfer. That same day, at 11:38 a.m., Stephen's sent Donmar a facsimile message to the effect that it was unable to complete the international wire for pounds sterling 200,000 "[d]ue to capital being held for hedging transactions in Stephen's Trading account," but estimated that the transaction should be completed on April 1, 1991. Shortly thereafter, Levinson of Donmar called First Union and instructed it to contact Southern National and requested that the $524,276.71 wire transfer be returned. At 12:10 p.m. on March 28, Levinson spoke directly with an employee at Southern National and informed her that the wire transfer beneficiary line was addressed RE: STC/DONMAR, but was told that a wire addressed in that manner would not have been accepted by Southern National. At 1:26 p.m. on March 28, Southern National received a wire from First Union stating that the SLC referred to in the wire transfer should have been STC, not SLC. ² On April 3, 1991, Southern National transferred the equivalent of pounds sterling 200,000 from Stephen's account to Donmar's British supplier's account at Lloyd's Bank, as directed by Stephen's.

While the foregoing recitation of some relevant facts may seem somewhat complicated, in actuality there is little complication. The unfamiliarity of the terms, we suggest, accounts for any apparent confusion. The following facts also stand out:

Donmar did not have and had never had an account in Southern National.

Donmar had never had an agreement with Southern National.

Donmar had never been a customer of Southern National.

Donmar never gave any direction to Southern National as to the disposition of any of the funds involved in this case until the calls from Levinson to First Union and Southern National on March 28, 1991.

Neither Stephen's nor Donmar gave any direction to Southern National to set up a joint account in their names or payable to their order.

Stephen's directed Donmar to wire the money immediately involved in this case (the $15,000 and $524,726.71) to Southern National, giving a code number to identify the transmission.

Donmar directed First Union to wire that same money involved to Southern National, using the code number given to it by Stephen's.

When the money was received at Southern National in the sum expected and with the same code number, it was deposited in Stephen's account in Southern National, as Stephen's had directed Southern National.

We find that the foregoing facts are not contradicted and support the judgment appealed from. We are of opinion there is no issue of fact in this case.

II.

Donmar claims that it lost $187,276.71 ³ and filed a complaint seeking recovery under three counts, alleging Southern National's violation of Federal Reserve Board Regulation J, 55 Fed.Reg. 40,791 (1990) (as amended Oct. 5, 1990) (codified at 12 C.F.R. Part 210 (Subpart B and Appendix B)); wrongful payment; and negligence. Southern National filed a motion to dismiss or for summary judgment. The district court granted summary judgment to Southern National on the Regulation J claim and dismissed the negligence and wrongful payment claims as being inconsistent with, and therefore pre-empted by, Regulation J.

Donmar raises three issues on appeal. First, Donmar claims that an issue of fact exists as to who was the beneficiary of the wire transfers and...