Opinion
101268/2006.
Decided September 4, 2008.
Plaintiff commenced this action on or about April 17, 2006, alleging that defendant SI Bank Trust; SI Bank Trust a division of Independence Community Bank Corp.; and Independent Community Bank Corp.; [hereinafter collectively SI Bank] and Richmond County Savings Bank; Richmond County Savings Bank, a division of New York Community Bank; New York Community Bank; New York Community Bankcorp, Inc.; and Gail Grande [hereinafter collectively Richmond Bank], inter alia, committed commercial bad faith and fraud in failing to take appropriate action in stopping the embezzlement scheme of defendant Michelle Grande. It is undisputed that defendant Michelle Grande was hired as a bookkeeper, by Mario Canzoneri, her uncle and the President of the corporate plaintiffs. During her employment, defendant Michelle Grande stole approximately $311,000 from the plaintiffs and pled guilty to criminal charges relating to embezzlement in May 2006.
Plaintiff's claims against defendant SI Bank regarding incidents prior to April 2004 were discontinued by stipulation.
Defendant Gail Grande is the mother of co-defendant Michelle Grande and a branch manager at a Richmond County Bank location.
Michelle Grande perpetrated her scheme by forging her uncle's name on business checks and cashing them at different branches of the defendant banks. Plaintiff held no accounts at defendant Richmond Bank but held four at SI Bank. The plaintiff concedes, in a letter dated August 18, 2005, that he did not realize the forgeries until April 2005, upon which the plaintiffs commenced this action alleging that the defendant banks failed to take appropriate action in preventing the cashing of the checks along with breach of contract and negligence causes of action. The defendant's SI Bank and Richmond Bank, are now separately moving for summary judgment on the ground that they did not breach any duty owed to plaintiffs and cannot be held liable for the independent acts of defendant Michelle Grande.
Summary judgment is a drastic remedy that should not be granted where there is any doubt as to the existence of triable issues of fact ( see Alvarez v Prospect Hosp., 68 NY2d 320, 324; Herrin v Airborne Freight Corp., 301 AD2d 500, 500-501 [2d Dept 2003]). The party moving for summary judgment bears the initial burden of establishing its right to judgment as a matter of law ( see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853), and in this regard "the evidence is to be viewed in a light most favorable to the party opposing the motion, giving [it] the benefit of every favorable inference" ( Cortale v Educational Testing Serv., 251 AD2d 528, 531 [2d Dept 1998]). Nevertheless, upon a prima facie showing by the moving party, it is incumbent upon the party opposing the motion to produce "evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" ( Alvarez v Prospect Hosp., 68 NY2d at 324; see Zuckerman v City of New York, 49 NY2d 557, 562).
Generally, a bank must exercise a duty of ordinary care in cashing checks (UCC 4-406). The Uniform Commercial Code imposes strict liability on banks for any instrument presented that is not "properly payable" (UCC 4-401; Monreal v. Fleet Bank, 95 NY2d 204, 206-207). A check with a forged signature is not properly payable and generally cannot be charged to the customers account ( id.). However, the UCC also places a heavy burden on the customer to promptly review bank statements and notify the bank within one year of the date of the bank statement of any irregularity (UCC 4-401; id.; Guardian Life Ins. Co. of Am. v. Chemical Bank, 94 NY2d 418, 422[holding that UCC "provisions relating to check fraud further a policy of assigning loss based upon the relative responsibility of the parties . . . [and generally] shifts the risk of loss from the drawee to the drawer in situations where the drawer is the party best able to prevent the loss"]). Courts have further supported the proposition that, "the drawer should bear the loss occasioned by its own employee or agent as a risk of his business enterprise,' because the drawer is normally in a better position to prevent such forgeries by reasonable care in the selection or supervision of his employees [or agents], or, if he is not, is at least in a better position to cover the loss by fidelity insurance; and the cost of such insurance is properly an expense of his business rather than of the business of the holder or drawee'" ( Guardian Life Ins. Co. of Am. v. Chemical Bank, 94 NY2d 418, 422).
In order to establish a claim for commercial bad faith, the plaintiff must prove the defendant banks had "actual knowledge of the alleged fraud . . . so as to constitute knowing and intentional participation in the fraudulent scheme" ( Prudential-Bache Securities, Inc. v. Citibank, N.A., 73 NY2d 263). Commercial bad faith claims against a bank require allegations of a scheme or acts of wrongdoing, that when coupled with allegations of the bank's actual knowledge of the scheme or wrongdoing, amount to bad faith by the bank in concert with the defendants ( Peck v. Chase Manhattan Bank, N.A., 190 AD2d 547, 548 [1st Dept. 1993]).
Further, the plaintiff, in bringing a cause of action for fraud "must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury" (Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 421; Tenenbaum v. Gibbs, 27 AD2d 722, 723 [2d Dept., 2006])). For a conversion cause of action "the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorized dominion over the thing in question . . . to the exclusion of the plaintiff's rights" ( Castaldi v. 39 Winfield Assoc. , 30 AD3d 458 , 458 [2d Dept., 2006]).
Here, the defendants have both separately established their entitlement to summary judgment on all of plaintiff's causes of action ( Alvarez v Prospect Hosp., 68 NY2d at 324; see Zuckerman v City of New York, 49 NY2d 557, 562). Specifically, the defendants have shown that they did not possess any knowledge of the scheme by defendant Michelle Grande; knowingly or unknowingly commit, or know about, any fraud; or provide anything other than ordinary care, as required by the UCC, in cashing the fraudulent checks.
In opposition, the plaintiff has failed show any conduct on the part of either bank sufficient to warrant denial of the collective summary judgment motions. The plaintiff has failed to present any evidence creating a question of fact regarding whether defendants Richmond Bank or SI Bank lacked ordinary care in paying the checks. The plaintiff claims that defendant banks were negligent in not being sufficiently vigilant and/or not providing satisfactory instruction to its staff, and such allegations are insufficient to establish conduct falling outside the allocation of the business risks contemplated by UCC 3-405(1)(c). Plaintiffs were in the best position to detect the loss by defendant Michelle Grande and they also had a duty to exercise reasonable care in selecting and supervising employees, along with timely reviewing their bank statements.
Further, the plaintiff has failed to rebut defendant's prima facie entitlement to summary judgment on conversion, fraud and commercial bad faith claims. The plaintiff has failed to show that the defendant banks knew of the fraud taking place or that the banks exercised "unauthorized dominion" over the checks. As a result, the defendant's motions for summary judgment are both granted.
Accordingly, it is
ORDERED that the defendants SI Bank Trust, SI Bank Trust a division of Independence Community Bank Corp., and Independent Community Bank Corp.'s motion for summary judgment is hereby granted, and it is further
ORDERED that the defendants Richmond County Savings Bank Richmond County Savings Bank, a division of New York Community Bank, New York Community Bank, New York Community Bankcorp, Inc., and Gail Grande's motion for summary judgment is hereby granted, and it is further
ORDERED that plaintiff's complaint is dismissed against the aforementioned defendant's only, and it is further
ORDERED that all cross claims between Richmond Bank and SI Bank are also dismissed, and it is further
ORDERED that the Clerk enter Judgment accordingly.
THIS IS THE DECISION AND ORDER OF THE COURT.