Opinion
No. CV 06-500 29 35 S
September 6, 2007
MEMORANDUM OF DECISION RE MOTION TO STRIKE ISSUE AND SUBMISSION
FACTS
On May 30, 2006, the plaintiffs, Dominic Cammarota (Dominic) and 3404 Madison Avenue, Inc. (corporation), filed a six-count complaint against Alfonso Cammarota (Alfonso), Bella Investors, LLC (Bella), and People's Bank (bank). The complaint alleges the following facts. In 2004, Dominic entered into a contract with Alfonso and Bella in which Dominic and Alfonso would convey their joint ownership of property located at 3404 Madison Avenue in Bridgeport to the corporation. The contract provided that Dominic and Alfonso each held a fifty percent interest in the corporation, of which Dominic was the sole officer and sole director. Pursuant to the contract, Bella was to build six condominium units on the property and Dominic and Alfonso were each to receive the net proceeds of three of the units. All six of the units were built and sold and the proceeds were paid to Anthony Guerrera, who worked as counsel for the corporation. Guerrera subsequently issued three checks from his trustee account in 2005. The first check was for $215,000 payable to Dominic. The second check was for $189,005 payable to the corporation. The third check was for $269,003 also payable to the corporation. Alfonso took possession of the three checks and proceeded to open an account at the bank in the name of the corporation, absent the corporation's authorization and absent a corporate resolution. Alfonso then deposited all three checks into the account and subsequently drew checks from it, reducing the balance to nearly zero dollars. When the corporation learned about these events, it demanded a full accounting and payment of its share of the condominium sale proceeds pursuant to the contract. In 2006, Alfonso returned the sum of $372,717 to Guerrera, who issued two checks. The first check was for $157,717.66 and was payable to the corporation and the second check was for $215,000 and was payable to Dominic. The corporation continues to demand a full accounting and the payment of all funds owed pursuant to the contract.
Subsequent to the filing of the instant motion to strike, Dominic Cammarota withdrew his claims contained in Count 6 from this action. Accordingly, the court will treat the bank's motion to strike as applying solely to the corporation.
Count six of the complaint alleges negligence against the bank. The corporation alleges that the bank was negligent in that it failed to follow the policies and procedures that it had in place to verify that a corporation's account was properly authorized. It alleges that the bank owed it a duty, as one of the bank's customers, to review and verify that all of its policies and procedures were followed. It also alleges that, as a result of the bank's negligence, it sustained damages.
On August 30, 2006, the bank filed a motion to strike count six of the complaint on the ground that it did not owe a duty to the corporation and that the corporation has not alleged damages. On October 27, 2006, the corporation filed an objection to the motion, contending that it sufficiently alleged all of the elements of a common-law claim of negligence. On June 8, 2007, the bank filed a reply memorandum of law.
DISCUSSION
"A motion to strike challenges the legal sufficiency of a pleading . . . and, consequently, requires no factual findings by the trial court. [The court takes] the facts to be those alleged in the complaint . . . and [construes it] in the manner most favorable to sustaining its legal sufficiency . . . [I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Thus, [the court assumes] the truth of both the specific factual allegations and any facts fairly provable thereunder." Batte-Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007).
The bank argues that the corporation has not alleged that it was actually a customer of the bank, and that, as a result, it cannot claim the duty of care that the bank owes to its customers. The bank argues that the policies and procedures that it had in place to ensure the proper creation of corporate accounts exist solely to protect the bank from potential losses associated with the account and not for the purposes of determining liability. The bank also contends that, because the complaint alleges that the account created by Alfonso was not authorized by the corporation, the corporation cannot claim that the bank owed it a duty. In response, the corporation counters that its complaint sufficiently alleges that the bank owed it a duty, as it is one of the bank's customers.
I
The court will first address the bank's argument that it did not owe the corporation a duty of care. The "[e]ssential elements of a cause of action in negligence are well established: duty; breach of that duty; causation; and actual injury." (Internal quotation marks omitted.) Winn v. Posades, 281 Conn. 50, 56, 913 A.2d 407 (2007). "Duty is a legal conclusion about the relationships between individuals, made after the fact, and imperative to a negligence cause of action . . . The ultimate test of the existence of the duty to use care is found in the foreseeability that harm may result if it is not exercised . . . [In other words], would the ordinary [person] in the defendant's position, knowing what he knew or should have known, anticipate that harm of the general nature of that suffered was likely to result?" (Internal quotation marks omitted.) Monk v. Temple George Associates, LLC, 273 Conn. 108, 115, 869 A.2d 179 (2005).
In the context of negligence claims against banks, "[a] bank owes a duty of ordinary care to its customers." Dicks v. Fairfield First Bank Trust, Superior Court, judicial district of Fairfield, Docket No. CV 92 298564 (June 20, 1994, Ford, J.). See also DiChello v. Citytrust Bank Corp., Superior Court, judicial district of New Haven, Docket No. 270965 (February 22, 1991, Healey, J.T.R.); Collins v. City National Bank Trust Co., 131 Conn. 167, 170, 38 A.2d 582 (1944). Additionally, General Statutes § 42a-4-104(a)(5) defines the term customer as "a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank . . ."
In Thompson v. Capital One Bank, Inc., 375 F.Sup.2d 681, 682 (N.D.Ill. 2005), the court addressed a situation in which the plaintiff employer gave one of his employees instructions to pick up a check and to open an account in the employer's name at the defendant bank. The employee took possession of the check and, rather than open an account in the plaintiff's name, she opened an account in her own name and deposited the check into it. The plaintiff claimed that the bank was negligent in that it accepted the check, as the bank owed him a duty of care as a depositor. The court ultimately dismissed the claim, finding that "even if a bank does owe its depositors a general duty of care, [the plaintiff made] no allegation that he was a depositor or otherwise a customer of [the bank]." Id., 683.
In the present case, for the purposes of the bank's motion to strike, the court takes the allegations in the corporation's complaint as true. It alleges that the bank had a set of procedures and policies in place to ensure that corporate accounts are created and used with the proper authorization of the corporation. The fact that the bank has them in place is an indication that it anticipates potential losses and liability issues associated with the creation and use of unauthorized corporate accounts. Such anticipated losses are precisely the type that occurred here. It is reasonable to assume that an ordinary party in the bank's position should have anticipated this kind of loss as a potential result of not following the procedures designed to prevent such losses.
In the present case, as distinguished from Thompson, supra, the corporation also alleges very plainly that it is a customer of the bank, and that the bank took its funds for deposit in violation of its own policies. By alleging that the bank permitted the creation of an account in the name of the corporation and that the bank accepted for deposit checks made payable to the corporation, the corporation has sufficiently alleged that the bank took on the corporation as its customer and assumed a duty of care for the purposes of count six.
The bank argues that the corporation must choose between alleging that Alfonso's actions were unauthorized and alleging that it is a customer of the bank. Unless it authorized Alfonso's actions, the bank argues, the corporation is not a customer. The court, however, rejects this argument. As previously stated, the corporation became a customer of the bank when the bank created the account in the name of the corporation and accepted for deposit checks made payable to the corporation. Accordingly, the bank had a duty of care with regard to its handling of those funds.
II
The court next addresses the bank's arguments that the corporation has not alleged the damages element of a common-law negligence claim. First, the bank argues that the corporation does not have standing to bring a conversion claim pursuant to the Uniform Commercial Code. It maintains that General Statutes § 42a-3-420 precludes such a claim by the corporation because it never alleged to have received delivery of the checks that Alfonso deposited into the account he created. Next, the bank contends that none of its actions brought about harm to the corporation, because the three checks in question were intended to serve as a distribution of the net proceeds of a real estate development project in which it was not involved. Finally, the bank argues that, pursuant to General Statutes § 42a-3-310(b), Alfonso's and Bella's obligations on the checks were never deferred because the corporation never took delivery or possession of the checks.
General Statutes § 42a-3-420 provides, in relevant part: "An action for conversion of an instrument may not be brought by . . . (ii) a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee."
General Statutes § 42a-3-310(b) provides, in relevant part: "[I]f a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken . . ."
In response, the corporation argues that it sustained damages as a result of the bank permitting Alfonso to open the account, deposit funds into it, and draw checks from it. It maintains that, despite the fact that some of the funds were eventually returned, over $300,000 remains unaccounted for, and that those funds, at one point, were in the unauthorized account. Additionally, the corporation argues that the bank's contention that the Uniform Commercial Code deprives it of standing is incorrect because it has asserted a negligence claim and not a conversion claim.
The corporation has alleged that the three checks made payable to it and Dominic had a total value of $673,008 and were deposited into the account created by Alfonso at the bank, that they eventually recovered $372,717 from Alfonso and that the remaining funds, amounting to over $300,000, are unaccounted for. These allegations, along with the corporation's straightforward allegation that "[t]he Bank's negligence has caused the Plaintiff to sustain damages" would, if proven, sufficiently establish the injury element of a common-law claim for negligence.
Furthermore, the defendant's reliance on § 42a-3-420 is misplaced. That section governs conversion claims, and in the present case, the corporation's claim is one for common-law negligence. The Uniform Commercial Code does not displace common-law negligence claims, as "[a]n action based on tort theory is separate and distinct from any claim based on the instrument." Sheiman v. Lafayette Bank Trust Co., 4 Conn.App. 39, 44, 492 A.2d 219 (1985). The fact that the corporation did not actually take possession of the checks before Alfonso created the account and deposited the checks into it is not relevant to the corporation's common-law negligence claim against the bank.
CONCLUSION
For the aforementioned reasons, the defendant's motion to strike is denied.