Chester Twp. Bd. of Trustees v. Bank One, N.A., 2007 Ohio 3365 (Ohio App. 6/29/2007), 2005-G-2660.

Decision Date29 June 2007
Docket NumberNo. 2005-G-2660.,2005-G-2660.
Citation2007 Ohio 3365
PartiesChester Township Board of Trustees, etc., Plaintiff-Appellant, v. Bank One, N.A., et al., Defendant-Appellee.
CourtOhio Court of Appeals

James C. Carpenter, 140 East Town Street, Suite 1100, Columbus, OH 43215 (For Defendant-Appellee).

OPINION

WILLIAM M. O'NEILL, J.

{¶1} Appellant, Chester Township Board of Trustees ("the Trustees"), appeals the judgment entered by the Geauga County Court of Common Pleas. The trial court granted a motion for summary judgment filed by appellee, Bank One, N.A. ("Bank One").

{¶2} In 1992, Michael Spellman was elected clerk of Chester Township. Chester Township had a checking account with Bank One. The version of R.C. 507.11(B) in effect during the relevant times of this matter provided:

{¶3} "No money belonging to the township shall be paid out, except upon an order signed by at least two of the township trustees, and countersigned by the township clerk."

{¶4} Thus, on a properly payable check, two of the Trustees and Spellman, at a minimum, needed to sign the check. Beginning in 1996, Spellman engaged in an embezzlement scheme, in which he stole over $4 million from the township. Spellman drafted checks payable to himself. Then, he forged the names of two of the trustees and signed his own name. Bank One paid over 300 checks of this nature. Spellman deposited the money into his personal bank accounts at other banks.

{¶5} In 1999, the Trustees became concerned about the possibility of Spellman embezzling money. Detective Harry Eidan of the Chester Township Police Department was assigned to investigate the matter. The Trustees gave Detective Eidan a letter of authorization to obtain the township's banking records at Bank One. Detective Eidan contacted Margaret Lodge, a Senior Investigator in Bank One's Security Department. Detective Eidan met with Lodge on two occasions, once at a restaurant in Chesterland and once at Lodge's office in Cleveland. At the meetings, Detective Eidan told Lodge that "there were suspicions that [Spellman] may have been embezzling money and the trustees and the chief wanted [him] to look into it." Also, Detective Eidan informed Lodge that the Trustees did not have the original bank statements or cancelled checks.

{¶6} As a result of the meetings, Lodge provided copies of the township's bank statements to Detective Eidan. Detective Eidan was unable to determine any wrongdoing by inspecting the bank statements, because the statements did not contain the payees' names. Detective Eidan knew he would have to inspect the cancelled checks in order to determine whether Spellman was engaged in inappropriate activity. However, when Detective Eidan approached Chester Township Police Chief Oros about this undertaking, Chief Oros told him that the Trustees had decided to halt the investigation. At that point, Detective Eidan ceased working on this matter. Since the investigation was terminated, the Trustees did not become aware of Spellman's embezzlement activities at that time. Moreover, while Bank One assisted Detective Eidan in his investigation, it did not conduct its own internal investigation.

{¶7} The forgeries were finally discovered in 2003. As a result of his activity, Spellman was indicted by the grand jury. Spellman pled guilty to 334 felony counts.1 In addition to a prison term, Spellman was ordered to pay $4,286,893.46 in restitution.2 Presumably, Spellman did not pay this restitution. Thus, the Trustees initiated the instant action against Spellman, Bank One, and other banks involved in the processing of the checks. This appeal only concerns Bank One and the Trustees.

{¶8} On November 12, 2004, the trial court issued an order regarding discovery. The trial court ruled "[e]xcept as otherwise ordered herein or agreed upon between counsel, no further discovery shall be conducted until further order of the court." Bank One filed its motion for summary judgment on November 22, 2004. Attached to Bank One's motion for summary judgment were several affidavits in support of the motion, including affidavits from Nancy Landholt, an IP manager in the IP Department at Bank One; Herman Counts, III, a First Vice President and the Midwest Region Statement Operations Manager in the National Statement Processing at Bank One; and Cheryl Cimperman, a Vice President and Security Manager in the Fraud Department and Investigations Department of Bank One. In December 2004, the Trustees filed a motion to stay the trial court's November 12, 2004 order regarding discovery and resume discovery in the matter. The Trustees sought to depose the three affiants mentioned above, as well as 14 other individuals.

{¶9} This matter was assigned to Judge Inderlied, who denied the Trustees' motion. Later, Judge Inderlied retired and was succeeded by Judge Fuhry. Judge Fuhry granted Bank One's motion for summary judgment, denied a motion for partial summary judgment filed by the Trustees, and denied the additional discovery request by the Trustees.

{¶10} The Trustees raise three assignments of error. The Trustees' first assignment of error is:

{¶11} "The trial court erred by GRANTING the appellee's motion for summary judgment."

{¶12} Pursuant to Civ.R. 56(C), summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.3 In addition, it must appear from the evidence and stipulations that reasonable minds can come to only one conclusion, which is adverse to the nonmoving party.4 The standard of review for the granting of a motion for summary judgment is de novo.5

{¶13} In Dresher v. Burt, the Supreme Court of Ohio set forth a burden-shifting exercise to occur in a summary judgment determination. Initially, the moving party must point to evidentiary materials to show that there are no genuine issues of material fact and it is entitled to judgment as a matter of law.6 If the moving party meets this burden, a reciprocal burden is placed on the nonmoving party to show that there is a genuine issue of fact for trial.7

{¶14} Initially, we will address the Trustees' argument that the trial court erred in concluding that the statute of limitations applied to bar the Trustees' claim regarding three warrants. The Trustees claim Spellman, with the assistance of Bank One, converted three warrants payable to Chester Township into checks payable to himself and, then, deposited those checks in his personal account. This conduct occurred in 1996.

{¶15} The trial court concluded that the Trustees' claim was barred by the statute of limitations set forth in R.C. 1109.69, which provides, in part:

{¶16} "(A) Every bank shall retain or preserve the following bank records and supporting documents for only the following periods of time:

{¶17} " ***

{¶18} "(2) For six years:

{¶19} "(c) Official checks, drafts, money orders, and other instruments for the payment of money issued by the bank and that have been canceled, after the date of issue.

{¶20} " ***

{¶21} "(F) Any action by or against a bank based on, or the determination of which would depend on, the contents of records for which a period of retention or preservation is set forth in divisions (A) or (B) of this section shall be brought within the time for which the record must be retained or preserved."

{¶22} In analyzing this statute, which has since been renumbered, the Supreme Court of Ohio held that the six-year statute of limitations set forth in R.C. 1109.69 applies to bar all relevant claims, even if there is a more liberal statute of limitations elsewhere in the Revised Code.8

{¶23} In this matter, Bank One was permitted to destroy the warrants, pursuant to R.C. 1109.69(A)(2)(c), in 2002, which was six years after the date of issue. The Trustees' complaint was not filed until 2004. Thus, the trial court correctly determined that the Trustees' claims regarding the conversion of the warrants were barred by the statute of limitations.

{¶24} This matter primarily concerns the forgery of checks and the respective duties of the customer and the bank in relation thereto. These matters are governed by the Uniform Commercial Code ("UCC"), which has been adopted by Ohio and codified in the Revised Code.9 The applicable Revised Code section for consideration in this appeal is R.C. 1304.35.

{¶25} It is undisputed that Spellman forged the names of two of the Trustees on the checks. As such, the checks were not "properly payable," and Bank One improperly paid these checks pursuant to R.C. 1304.30. The focus of this matter is the affirmative defense established by R.C. 1304.35, which provides, in part:

{¶26} "(A) 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.

{¶27} "(B) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the...

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