Foucher v. First Vermont Bank & Trust Co.
| Citation | 821 F. Supp. 916 |
| Decision Date | 07 April 1993 |
| Docket Number | File No. 2:91-CV-404. |
| Court | United States District Courts. 2nd Circuit. District of Vermont |
| Parties | Linda FOUCHER, Plaintiff, v. FIRST VERMONT BANK & TRUST CO., and Charles J. Marro, Administrator, C.T.A. of the Estate of Raymond Reilly, Sr., Defendants. FIRST VERMONT BANK & TRUST CO., Third-Party Plaintiff, v. Charles J. MARRO, Administrator, C.T.A. of the Estate of Raymond Reilly, Sr., Third-Party Defendant. |
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Arthur J. Kenlan, Abell, Kenlan, Schwiebert & Hall, Rutland, VT, for plaintiff.
Gary R. Kupferer, Webber & Costello, Rutland, VT, for defendant First Vermont Bank and Trust Co.
Alan Philip Biederman, Biederman & Rakow, Rutland, VT, for third-party defendant Charles J. Marro, Adm'r C.T.A. of the Estate of Raymond Reilly, Sr.
Plaintiff, Linda Foucher, has sued the defendants, First Vermont Bank & Trust Co. ("the Bank" or "First Vermont Bank") and Charles J. Marro, in his capacity as administrator of plaintiff's father's estate ("the Estate), for damages arising out of an alleged conversion of her assets. Foucher states four claims against the Bank: (1) wrongful conversion of assets held in joint tenancy; (2) breach of duty as a bailee; (3) breach of a fiduciary duty as an agent; and (4) bad faith. In her claim against the Estate, Foucher asserts that the Estate is liable for the value of the converted assets because it is vicariously liable for the decedent's misdeeds in forging the plaintiff's name to obtain the wrongful transfer and ultimate conversion of the assets.1 The Bank has filed a third party complaint against the Estate for indemnification, alleging that the Bank acted in reliance on the decedent's representations.
The Bank has filed numerous summary judgment motions which can be summarized as asserting four grounds for judgment in its favor. First, the Bank claims that Foucher has no ownership interest in the properties in issue. Second, by statute, the Bank's liability as a signature guarantor does not extend to the owner of a security, only to those taking or dealing with the security in reliance on the guarantee. Third, the appropriate statute of limitations bars the plaintiff's breach of duty claims against the Bank. Finally, the Bank moves for summary judgment on its indemnification claim against the Estate claiming that it was acting in accordance with the decedent's instructions.
Foucher has responded to these various motions and has filed a cross-motion for partial summary judgment on the issue of her ownership interest in the assets in question. She has also separately filed a motion for summary judgment on the conversion claim. Finally, and not surprisingly, the Estate opposes the Bank's claim for indemnification.
This Opinion and Order addresses all of the issues raised in the various motions.2
1. The plaintiff, Linda Foucher, is a resident of Florida.
2. First Vermont Bank, a defendant, is a Vermont banking corporation with its office
and principal place of business in Brattleboro, Vermont.
3. The decedent, Raymond A. Reilly, Sr. ("Reilly"), was Foucher's father and a resident of Vermont at the time of his death in November, 1990. The Estate of Reilly, a defendant in this action, was opened and is pending in Probate Court in the District of Rutland. Florence Reilly, the decedent's wife, and Raymond Reilly, Jr., his son, were named co-executors of the Estate. Charles Marro was thereafter named Administrator, C.T.A. of the Estate.
4. Prior to September, 1988, the following assets were titled in Foucher and Reilly's names as joint tenants with rights of survivorship:
5. Up until his death, Reilly retained all income generated from these joint assets and declared that income on his income tax returns. Furthermore, Reilly managed the Edwards account and made investment decisions relative to all the joint accounts. Foucher was aware of the existence of these accounts having signed signature cards for them and understood that her father would manage them.
6. Foucher and Reilly held accounts at First Vermont Bank. The Bank had in its possession a signature card bearing Foucher's signature.
7. On June 6, 1988, Reilly opened an investment account solely in his name at the Bank and executed an Investment Management Agreement with the Bank. Kyle Fisher ("Fisher"), Vice President and Trust Officer of the Bank, assisted Reilly in these transactions.
8. On June 14, 1988, Reilly deposited the stocks issued to Foucher and Reilly in the Bank's Trust Department. The Bank issued a receipt executed by Fisher acknowledging joint ownership. The stocks were held in a safety deposit box to which both Foucher and Reilly had access. Fisher acknowledges that at that time he was aware that Foucher was a customer of the Bank.
9. Assisted by Fisher, Reilly advised A.G. Edwards in a letter dated July 28, 1988, that he wished to transfer the assets in the Edwards account to the Bank and that a letter from Fisher would follow with instructions for the transfer. A.G. Edwards was further advised to contact Fisher should any questions arise regarding the transfers. On August 8, 1988, Fisher instructed A.G. Edwards to transfer the assets in the Edwards account to various locations. Electronic transfers and physical deliveries were to be made to the Bank's nominee, Marine Midland Bank, government securities were to be transferred to the Federal Reserve Bank of Boston, and cash was to be delivered to First Vermont Bank.
10. In his letter to A.G. Edward, Fisher noted that he had enclosed authorization letters from Reilly for the transfer. The Burlington office of A.G. Edwards forwarded the documentation to the A.G. Edwards office in St. Louis, Missouri, for processing. Upon receipt of the documentation, A.G. Edwards personnel in St. Louis noticed that Foucher's signature was missing. The documents were returned to the Burlington office for her signature. Later, when A.G. Edwards received them back, Foucher's name had been signed below Reilly's on the July 28 letter authorizing the transfer. This signature was not Foucher's, and it is conceded that Reilly affixed her signature without authority to effect the transfer. A.G. Edwards did nothing to verify the genuineness of the signatures.
11. On September 13 and 14, 1988, A.G. Edwards delivered the bonds from the Edwards account to Marine Midland to be deposited into the Bank's account there. When the bonds were electronically transferred they were accompanied by a trailer which indicated joint ownership. The Bank was aware that the bonds were held in a joint account for the benefit of Foucher and Reilly, but that the bonds themselves were titled in their street names. It was the testimony of Michael French, an agent for A.G. Edwards, that when an entire account is transferred, as it was in this case, it is transferred "in kind." That is, a joint account is transferred to the next financial institution as a joint account. Upon receiving the assets in the Bank's account at Marine Midland however, the Bank credited Reilly's investment account titled solely in his name.
12. On September 21, 1988, A.G. Edwards disbursed the cash from the Edwards account to the Bank by delivering a check in the amount of $12,911.40 to the Bank, payable to the Bank, "A/C of Raymond A. Reilly, Sr. and Linda Foucher." The check was endorsed by the Bank and deposited into Reilly's investment account. Fisher agreed that there was no basis for such deposit as Foucher had not agreed to it. Furthermore, he conceded that it would have been prudent banking practice to deposit the proceeds of this check in an account titled in both Reilly and Foucher's names.
13. On August 22, 1988, Fisher executed a guarantee of signature on letters written by Reilly to Fidelity Investments and Dreyfus Tax Exempt Bond Fund. These letters purported to be authorizations to liquidate the joint accounts held by Foucher and Reilly.4 The letters further instructed both Fidelity and Dreyfus to make a check for the proceeds of the accounts payable to the registered shareholders, Reilly and Foucher. The check was to be mailed to Fisher at the Bank. Although Linda Foucher's name appeared in a signature form on the letters, those signatures were invalid. It is conceded by the Bank that Reilly had forged Foucher's signature to effect the transfer. Dreyfus and Fidelity were apparently unaware of...
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