Travelers Cas. and Sur. Co. of Am. v. Bank of Am., N.A., 2009 NY Slip Op 33014(U) (N.Y. Sup. Ct. 12/16/2009)
| Decision Date | 16 December 2009 |
| Docket Number | Motion Seq. No. 4.,Motion Seq. No. 3.,No. 020580-07.,020580-07. |
| Parties | TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Plaintiff, v. BANK OF AMERICA, N.A., Defendant. BANK OF AMERICA, N.A., Third-Party Plaintiff, v. MICHAEL CICCARELLI, Third-Party Defendant. |
| Court | New York Supreme Court |
This matter is before the Court for decision on 1) the motion filed by Plaintiff Travelers Casualty and Surety Company of America on July 20, 2009, and 2) the motion filed by Defendant Bank of America, N.A. on August 25, 2009, both of which were submitted on October 9, 2009. For the reasons set forth below, the Court 1) denies Plaintiffs motion to compel in its entirety; and 2) grants Defendant's motion for summary judgment in part and denies it in part. The Court denies Defendant's motion for summary judgment with respect to the first cause of action in the Complaint, sounding in negligence, and grants Defendant's motion for summary judgment and dismissal of the remaining causes of action in the Complaint.
Plaintiff Travelers Casualty and Surety Company of America ("Travelers") moves for an Order, pursuant to CPLR § 3124, compelling Defendant Bank of America, N.A. ("BOA") to 1) supplement its responses to Travelers' First Request for Production of Documents; and 2) respond fully and completely to Travelers' Second Request for Production of Documents and Second Set of Interrogatories. Travelers also seeks an Order requiring BOA to pay Travelers' reasonable counsel fees associated with making this motion.
Defendant BOA opposes Travelers' motion, and cross moves, pursuant to CPLR § 3212, for an Order granting summary judgment and dismissing the Complaint. Travelers opposes BOA's motion.
The Complaint alleges as follows:
Travelers is the insurer of Amana Tool Corp. ("Amana Tool") and its subsidiaries Austin Mini Storage, Necharon Realty Corp. and A.N. Glory Associates, L.L.C. ("A.N. Glory"). Amana Tool and its subsidiaries are corporations organized and existing under the laws of the State of New York.
At times relevant to this action, third-party Defendant Michael Ciccarelli ("Ciccarelli") was the controller of Amana Tool and Michelle Hannasch was the assistant controller. In that capacity, Ciccarelli 1) reviewed Amana Tool's banking statements; 2) prepared checks to pay invoices or transfer funds between Amana Tool and its subsidiaries; and 3) interacted with BOA concerning bank transactions of Amana Tool and its subsidiaries.
Prior to November 2004, Amana Tool maintained its business checking accounts at BOA. One of those accounts was A.N. Glory's Small Business Simplified Checking Account bearing account number 9427-089893 ("A.N. Glory Account"). In or around November 2004, Amana Tool decided to close its three accounts at BOA ("Accounts") and transfer those funds to a different financial institution, and instructed Ciccarelli to complete that process. Ciccarelli contacted BOA and directed them to close those Accounts and complete a wire transfer of the funds in the Accounts to the new accounts. Plaintiff alleges that, "[t]hrough these instructions, Amana tool made clear to BOA that it had terminated its banking relationship with BOA" (Complaint at ¶ 12).
Plaintiff alleges that BOA properly closed two of the Accounts but failed properly to close the A.N. Glory Account. As a result, BOA improperly continued to charge service fees to the A.N. Glory Account, and obtained a benefit from those fees. Following the allegedly improper closing of the A.N. Glory Account, BOA sent a December 2004 bank statement ("Statement") regarding that Account to Amana Tool, which included an advertisement for BOA's on-line business banking service with free unlimited on-line bill payment. The Statement reflected a negative balance of $50 on the A.N. Glory Account, related to wire transfer and other fees associated with the closing of this Account.
Ciccarelli received the Statement and thereby learned that BOA had not closed the A.N. Glory Account. Ciccarelli allegedly developed an embezzlement scheme whereby he deposited checks into the A.N. Glory Account without the knowledge of Amana Tool or A.N. Glory. He then used those funds for his personal benefit. Plaintiff alleges that Ciccarelli was improperly able to convert these funds to his own use because of certain conduct by BOA, including the following:
BOA allegedly permitted Ciccarelli to establish on-line banking with on-line bill paying for the A.N. Glory Account without requiring him to obtain the authorization of the account signatories. BOA also issued an automated teller machine ("ATM") card to Ciccarelli for the A.N. Glory Account, even though no authorized signatory had ever requested such a card. In addition, as part of the on-line banking service, BOA provided Ciccarelli with banking statements on-line, further preventing detection of Ciccarelli's alleged fraud. As a result, Ciccarelli was able to gain access to those funds which he used to pay his own personal expenses.
Plaintiff alleges, further, that BOA improperly accepted certain other checks for deposit, including three checks payable to Amana and two checks drawn by Amana and payable to Smith Barney Corp. totaling $255,379.37 ("Checks"). Ciccarelli allegedly received these Checks, forged the payees' endorsements, wrote endorsement restrictions ("For Deposit Only" and "Deposit Only") and the A.N. Glory Account number on the Checks and deposited those Checks into the A.N. Glory Account. Plaintiff alleges that it was not commercially reasonable for BOA to accept these Checks for deposit into the A.N. Glory Account in violation of the restrictive endorsements.
Upon discovering the loss, Amana Tool notified BOA of the alleged embezzlement scheme, the allegedly fraudulent deposits and withdrawals, and the Checks that BOA accepted in violation of the restrictive indorsements, and submitted a claim to Travelers pursuant to its fidelity bond. Travelers, upon Amana Tool's execution of a Release and Assignment, paid the sum of $536,703.50 in connection with that claim. Pursuant to the Release and Assignment, Travelers was the assignee of Amana Tool's rights and claims against any person or organization responsible for some or all of the loss that Amana Tool suffered as a result of the alleged embezzlement. By virtue of its payment to Amana, Travelers is subrogated to Amana Tool's claims against BOA.
The Complaint contains four causes of action1 which are as follows: 1) negligence, 2) conversion (related to Amana Tool as payee of certain checks), 3) money had and received (related to Amana Tool as payee of certain checks), 4) conversion, and money had and received (related to Amana Tool as the drawer of certain checks), and 5) breach of fiduciary duty, and aiding and abetting the breach of fiduciary duty (related to BOA's breach of its fiduciary duty to Amana Tool, and BOA's alleged aiding and abetting of Ciccarelli's breach of his fiduciary duty to Amana tool).
BOA thereafter filed a Third-Party Complaint against Ciccarelli in which it alleges that Ciccarelli only requested that BOA close two accounts, and did not request that the A.N. Glory Account be closed. The Third-Party Complaint contains four third-party claims in which BOA contends that 1) if BOA is liable to Travelers, then it is entitled to indemnification from Ciccarelli; 2) if liability is apportioned, then Ciccarelli is liable to BOA for the amount in excess of BOA's share of the judgment; and 3) BOA is entitled to judgment against Ciccarelli for breaches of warranties on presentment and transfer, and breach of his contract with BOA.
With respect to Amana Tool's request that BOA close the Accounts, BOA's Cross Motion includes as an exhibit its Response to Plaintiffs First Request for Production of Documents (Ex. D to the Cross Motion). That Response includes a copy of a letter dated November 4, 2004 on A.N. Glory letterhead ("Letter"). That Letter, addressed to BOA, 1) requested BOA to wire the remaining balance in A.N. Glory's checking account to an account at JP Morgan Chase Bank; 2) directed the recipient to contact Ciccarelli regarding any questions; and 3) contained the signature of Aaron Einstein, the President of A.N. Glory ("Einstein"). The letter also contained handwritten notes which appear to read "Done the wire transfer..WT Form signed and filed," as well as handwritten numbers.
In opposition to BOA's motion for summary judgment, Travelers provides an Affidavit in Support of Einstein. Einstein affirms that he sent the Letter to BOA for the purpose of closing the A.N. Glory Account, and that he does not recognize the handwritten notes on the Letter. He affirms, further, that on November 17, 2004, all funds were transferred out of the A.N. Glory Account, resulting in a balance of negative $50.00, and provides a copy of the corresponding November 30, 2004 account statement. BOA, however, failed to close the A.N. Glory Account.
Einstein affirms, further, that the December 2004 bank statement for the A.N. Glory Account continued to show a negative balance of $50.00, and provides a copy of that bank statement. Einstein submits that BOA, in light of its ongoing business relationship with Amana Tool, should have known that Amana Tool and its subsidiaries would not have maintained a business checking account with a very low, or negative, balance. Moreover, with respect to BOA's providing Ciccarelli with on-line banking services, Einstein affirms that A.N. Glory never had on-line services at BOA, and never requested such a service. Einstein also affirms that, on or about November 17,2004, Amana Tool asked BOA to close its other two Accounts, and that BOA properly closed those accounts. Thus, Einstein believed that BOA had properly closed all three Amana Tool Accounts.
Travelers also...
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