Aguilar v. PNC Bank, N.A.

• Decision Date: 07 February 2017
• Docket Number: No. 15–3514,15–3514
• Citation: 853 F.3d 390
• Parties: Richard AGUILAR ; Melba Aguilar; Albert Carrell; Sharon Cobb; Clayton Givens; Linda Givens ; Stanley Kuhlo; Gina Mastrantonia; Phil Rosemann; Loren Winterhof; Mary Winterhof; Lewis Vollmar ; Brian Waffle; William Wantling; Brad Werner, in a representative capacity; Eric Wittenmeyer; Jill Wittenmeyer; Dorothy Zeigler; Clark Amos; Preston Amos; Thomas Barnes; Henry Barthel ; Julia Barthel; Northwest Properties (1973), LTD; Tom Bertani; Donna Bertani; Kristy Bova; David Caldwell; Bonita Cobb; Casey Cook ; Delores Cook ; Jerry Cronkite; Mark Cunningham; Daryll Currier; Roy Currier; Sam Currier; Thomas Currier; Charles Davis; Charlotte Garrett ; William Gaylor; Robert Givens ; Suzanne Glisson; Carol Green; Randall Harp; Aubrey Harp; Billy Harrison; Odis Hash; Donna Hogshooter; John Holland; Audrey Holland ; Donald Horner ; Doris Howard ; Barbara Jordan ; Gifford Jordan; David Kellogg; Mary Kellogg ; Stanko Matayo; Daren Mays; Sheila Mays ; William McCalla ; Carol McCarthy, in representative capacity; Barbara O'Hanlon, in representative capacity; William McLemore; Mark Merlotti; Cindy Merlotti; Marie Merlotti; Lorena Messenger; Ben Miller; Bob Moore; Jim Neill; Mary O'Sullivan, individually and in a representative capacity; Rudolf Ouwens; Ronald Pastor ; William Phillips; Carol Phillips ; Buddy Quessenberry; Elaine Reed ; Darren Rogers ; Debbie Rogers; Betty Rollon; Leonard Roman ; David Schultz; John Shahan ; Arlene Sincoski; Homer Smith ; Dorothy Smith; Gary Smith; Judith Smith ; Kent Sturhahn; Arlene Stevens ; Winston Vines; Barbara Vollmar, Plaintiffs–Appellants v. PNC BANK, N.A., Defendant–Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

853 F.3d 390

Richard AGUILAR ; Melba Aguilar; Albert Carrell; Sharon Cobb; Clayton Givens; Linda Givens ; Stanley Kuhlo; Gina Mastrantonia; Phil Rosemann; Loren Winterhof; Mary Winterhof; Lewis Vollmar ; Brian Waffle; William Wantling; Brad Werner, in a representative capacity; Eric Wittenmeyer; Jill Wittenmeyer; Dorothy Zeigler; Clark Amos; Preston Amos; Thomas Barnes; Henry Barthel ; Julia Barthel; Northwest Properties (1973), LTD; Tom Bertani; Donna Bertani; Kristy Bova; David Caldwell; Bonita Cobb; Casey Cook ; Delores Cook ; Jerry Cronkite; Mark Cunningham; Daryll Currier; Roy Currier; Sam Currier; Thomas Currier; Charles Davis; Charlotte Garrett ; William Gaylor; Robert Givens ; Suzanne Glisson; Carol Green; Randall Harp; Aubrey Harp; Billy Harrison; Odis Hash; Donna Hogshooter; John Holland; Audrey Holland ; Donald Horner ; Doris Howard ; Barbara Jordan ; Gifford Jordan; David Kellogg; Mary Kellogg ; Stanko Matayo; Daren Mays; Sheila Mays ; William McCalla ; Carol McCarthy, in representative capacity; Barbara O'Hanlon, in representative capacity; William McLemore; Mark Merlotti; Cindy Merlotti; Marie Merlotti; Lorena Messenger; Ben Miller; Bob Moore; Jim Neill; Mary O'Sullivan, individually and in a representative capacity; Rudolf Ouwens; Ronald Pastor ; William Phillips; Carol Phillips ; Buddy Quessenberry; Elaine Reed ; Darren Rogers ; Debbie Rogers; Betty Rollon; Leonard Roman ; David Schultz; John Shahan ; Arlene Sincoski; Homer Smith ; Dorothy Smith; Gary Smith; Judith Smith ; Kent Sturhahn; Arlene Stevens ; Winston Vines; Barbara Vollmar, Plaintiffs–Appellants

v.PNC BANK, N.A., Defendant–Appellee

No. 15–3514

United States Court of Appeals, Eighth Circuit.

Submitted: September 21, 2016

Filed: February 7, 2017

Counsel who presented argument on behalf of the appellant was Jonathan F. Andres, of Saint Louis, MO. The following attorney(s) also appeared on the appellant brief; Sebastian Rucci, of Huntington Beach, CA.

Counsel who presented argument on behalf of the appellee was Jeffrey Scott Russell, of Saint Louis, MO. The following attorney(s) also appeared on the appellee brief; Darci Faulkner Madden, of Saint Louis, MO., Herbert Richard Giorgio, Jr., of Saint Louis, MO.

Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges.

SMITH, Circuit Judge.

Ninety-two plaintiffs¹ filed suit against PNC Bank, N.A. (PNC), alleging, among other things, (1) violations of Missouri's Uniform Fiduciaries Law (UFL); (2) aiding and abetting the breach of fiduciary duties; (3) conspiracy to breach fiduciary duties; and (4) conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(d). These claims arise from the plaintiffs' investment in the British Lending Program (BLP)—a Ponzi scheme operated by Martin Sigillito. The plaintiffs allege that PNC's predecessor, Allegiant Bank ("Allegiant"), conspired with and aided Sigillito in his scheme to defraud investors when it served as the custodian for the self-directed individual retirement accounts (IRAs) of those who chose to invest in the BLP at its inception. The district court² granted summary judgment to PNC, and the plaintiffs appeal. We affirm.

I. Background

A. Martin Sigillito and the BLP

In the late 1990s, Sigillito, an attorney located in St. Louis, Missouri, and J. Scott Brown, an attorney in Kansas, formed the BLP. They organized the BLP as an investment program to facilitate loans to an English law firm, Mark Gilbert Morse (MGM), to fund "black lung

" claims brought on behalf of English coal miners. In approximately 2000 or 2001, the BLP began marketing loans for purported investments in real estate developments in England.

Sigillito solicited American investors for the BLP and often instructed them to hold the loan notes in self-directed IRAs. He directed them to fund the investments by depositing money into his Interest on Lawyers Trust Account (IOLTA). According to the unsworn declaration of John Morse, an MGM partner, MGM "agreed ... for each £100 [that MGM] borrowed[,] one third (32%) would be deducted at source representing [Sigillito's and Brown's] commission." MGM agreed to "pay interest of 25% on the full £100 of the loan." Although Morse considered "the fees and interest ... a huge amount," he found the deal agreeable because MGM "needed the money[,] and the rewards [MGM] stood to reap in the UK would outweigh the costs."

B. Allegiant's Role

Beginning in July of 2000, Allegiant, a Missouri trust company with banking powers, served as the custodian for the self-directed IRAs of those who chose to invest in the BLP.³ Allegiant was the first bank to serve as the IRA custodian for BLP loans; the majority of those loans went to fund MGM loans. "Nine of the Plaintiffs, Richard Aguilar, David Caldwell, Donald Horner, Rudolf Ouwens, William Phillips, Carol Phillips, Leonard Roman, Lewis Vollmar and Linda Givens, were customers of Allegiant Bank and held self-directed individual retirement accounts (‘IRAs') at Allegiant Bank (‘Customer Plaintiffs')."⁴

Although Allegiant acted as the custodian for these accounts, the Customer Plaintiffs were "solely responsible for deciding how to invest the money in these IRAs, and ... [the Customer] Plaintiffs made all investment decisions in these IRAs maintained at Allegiant Bank's trust department." Each Customer Plaintiff signed an IRA Simplifier, which provided, in relevant part:

8.03 Representations and Responsibilities : You represent and warrant to us that any information you have given or will give us with respect to this Agreement is complete and accurate. Further, you agree that any directions you give us, or action you take will be proper under this Agreement and that we are entitled to rely upon any such information or directions. We shall not be responsible for losses of any kind that may result from your directions to us or your actions or failures to act and you agree to reimburse us for any loss we may incur as a result of such directions, actions or failures to act .

* * *

8.05 Investment of Amounts in the IRA :

a. Direction of Investment—You have exclusive responsibility for and control over the investment of the assets of your IRA. You shall direct all investment transactions, including earnings and the proceeds from securities sales. Your selection of investments, however, shall be limited to publicly traded securities, mutual funds, money market instruments and other investments that are obtainable by us and that we are capable of holding in the ordinary course of our business.

* * *

b. Our Investment Powers and Duties—We shall have no discretion to direct any investment in your IRA. We assume no responsibility for rendering investment advice with respect to your IRA, nor will we offer any opinion or judgment to you on matters concerning the value or suitability of any investment or proposed investment for your IRA. We shall exercise the voting rights and other shareholder rights with respect to securities in your IRA but only in accordance with the instructions you give to us.

c. Delegation of Investment Responsibility—We may, but are not required to, permit you to delegate your investment responsibility for your IRA to another party acceptable to us by giving written notice of your delegation in a format we prescribe. We shall follow the direction of any such party who is properly appointed and we shall be under no duty to review or question, nor shall we be responsible for, any of that party's directions, actions or failures to act.

(Emphasis added in part.) (Bold omitted.)

After deciding to invest in the BLP, each Customer Plaintiff opened a self-directed IRA at Allegiant at Sigillito's direction (or at the direction of one of his associates). "Each of the Allegiant Customer Plaintiffs designated Martin Sigillito as his or her authorized representative in connection with their self-directed IRA account at Allegiant Bank" and "directed Allegiant Bank to accept direction from Sigillito on [their] behalf." Allegiant's trust department maintained the self-directed IRAs. Allegiant employees in the trust department knew that Sigillito represented the Customer Plaintiffs and had authority to act on their behalf.

During 2000 and 2001, Sigillito held an IOLTA and other retail banking accounts at Allegiant. "Sigillito's IOLTA was a demand deposit account maintained on the retail banking side of Allegiant with his other business accounts." "Sigillito owed fiduciary duties to persons whose money was deposited into [his] IOLTA...." The funds held in a Missouri IOLTA account may contain a variety of funds, including individual client funds, multiple client funds, and attorney's fees.⁵ In the present case, it is undisputed that

[i]n 2001, Allegiant Bank's understanding of the nature and function of IOLTA accounts was that an IOLTA account is an interest on lawyer's trust account and that funds in an IOLTA account can be funds for an individual client, multiple clients, and could include funds that belong to the lawyer , themselves, and that essentially, IOLTA accounts were accounts which were used to facilitate the operation of a law practice.

(Emphases added.)

Allegiant's retail and trust departments operated separately and used separate computer systems. Employees in the trust department lacked routine access to bank accounts in the retail department, including IOLTAs. Allegiant had no system to compare transactions between the two departments. But, upon proper request, employees in the trust department could review retail banking activities.

1. The Womack Transaction

On September 26, 2001, Sigillito informed Allegiant that his client, Betty Womack, wanted to liquidate her self-directed IRA. The only asset in Womack's IRA was an unmatured BLP loan note⁶ with a face value of $56,715.19. Womack had previously designated Sigillito as her authorized representative to conduct transactions on her account. On September 28, 2001, Allegiant's trust department received a check from Sigillito drawn on his...