Opinion
No. 511414/14.
07-21-2015
JAG ORTHOPEDICS, P.C., Plaintiff, v. AJC Advisory Corp., Lydia Vecchio Ferrante, Thomas Ferrante, John Coscia, Angelo Coscia, John marinelli, Alexander Krutiey, and Santandar Bank, N.A., Defendants.
Charles I. Epstein, Esq., Hackensack, NJ, for Plaintiff. Ilana Sable, Esq., Internicola Law Firm, Staten Island, NY, for Defendant.
Charles I. Epstein, Esq., Hackensack, NJ, for Plaintiff.
Ilana Sable, Esq., Internicola Law Firm, Staten Island, NY, for Defendant.
Opinion
CAROLYN E. DEMAREST, J.
The following e-filed papers read herein:
| Papers | Numbered |
|---|---|
| Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits (Affirmations) Annexed | 44 45–47, 48, 53, 56–63 |
| Opposing Affidavits (Affirmations) Reply Affidavits (Affirmations) | 51, 31–37, 38–43, 68–72, 73 |
| Memorandum of Law and Reply Memorandum of Law | 49, 7955, 78 |
| Other Papers Second Amended Complaint | 76 |
Defendants AJC Advisory Corp. (AJC), John Coscia, Angelo Coscia, and Alexander Krutiy (collectively referred to as the AJC Defendants) move for an order: (1) pursuant to CPLR 3211(a)(1) and CPLR 3211(a)(7) and 3016(b), dismissing the complaint as against them; and (2) awarding the AJC Defendants fees, costs and sanctions based on the frivolous and meritless causes of action alleged against the AJC Defendants (Motion Sequence No. 2). Defendant Santander Bank, N.A., (Santander) moves for an order, pursuant to CPLR 3211(a)(7), dismissing the complaint for failing to state a cause of action (Motion Sequence No. 3).
The court will apply the defendants' respective motions to the second amended complaint, which plaintiff filed and served after the defendants made their respective motions to dismiss, in light of the defendants request, made in their reply papers, that their motions be applied to the second amended complaint (see Sobel v. Ansanelli, 98 AD3d 1020, 1022 [2d Dept 2012] ). The court notes that plaintiff should have sought leave to amend the amended complaint since a party is only entitled to amend a complaint once as of course (CPLR 3025[a] ). Nevertheless, the court will ignore this defect as a mere irregularity since the second amended complaint makes no prejudicial substantive changes to the action as against the AJC Defendants, and Santander has not objected to this defect with the second amend complaint in its reply papers (see State Univ. Constr. Fund v. Aetna Cas. & Sur. Co., 169 A.D.2d 52, 54 [3d Dept 1991] ; Felix v. Tischler, 73 A.D.2d 609, 609 [2d Dept 1979], overruling on other grounds recognized Dauernheim v. Lendlease Cars, Inc., 202 A.D.2d 624, 625 [2d Dept 1994] ; CPLR 2001 ).
PLEADINGS
Plaintiff's claims against defendants arise out its allegations that defendant Lydia Vecchio Ferrante, plaintiff's officer manager from September 2009 to June 2014, misappropriated/embezzeled hundreds of thousands of dollars from plaintiff by: (1) writing checks to herself well in excess of her monthly salary of $4,000; (2) obtaining, without authorization from plaintiff, a debit/credit card tied to plaintiff's checking account and charging items for her own personal use; (3) forging the signature of plaintiff's owner and president, Andrew Miller, M.D., on checks made out in her name, and (4) misappropriating funds from a checking account that plaintiff had closed prior to the misappropriation. Santander's liability is premised on its alleged failure to close a checking account in plaintiff's name from which Ferrante appropriated funds and also its processing checks forged by Ferrante made out to Ferrante. The AJC Defendants' liability is primarily premised on their failure to inform plaintiff of Ferrante's misappropriation of plaintiff's assets that was evident from financial records submitted to the AJC Defendants for them to prepare plaintiff's taxes.
According to the second amended complaint, plaintiff, a provider of orthopedic services, hired Lydia Ferrante in September 2009, and in her role as office manager, she was, among other things, in charge of billing, payment of office bills, and receiving and reconciling bank statements (Second Amended Complaint at ¶¶ 12–13). In order to carry out these duties, plaintiff made Ferrante an authorized signatory on its checking account (the 4933 account) with Santander (Second Amended Complaint at ¶ 15). In August 2013, Dr. Miller went to a Santander branch and requested that it close the 4933 account and that it transfer the funds in that account to a new account for plaintiff (the 0089 account) opened by Dr. Miller (Second Amended Complaint at ¶¶ 18–19, 29). Although plaintiff gave Ferrante a check book relating to the new 0089 account, Ferrante was not given any authority to write checks on that account, which authority was only maintained by Dr. Miller (Second Amended Complaint at ¶ 20).
All references to Ferrante without a surname relate to defendant Lydia Ferrante.
In or around July 2014, Dr. Miller went to a Santander branch to order new checks for the 0089 account, and discovered that the last check number in the check book did not correspond with Santander's records (Second Amended Complaint at ¶ 21). Upon a review of Santander's bank statements relating to the 0089 account, Dr. Miller discovered that Ferrante had taken checks from the back of the check book and forged his signature on 16 checks made out to Ferrante, beginning with a check dated September 20, 2013, and ending with a check dated June 6, 2014 (Second Amended Complaint at ¶ 26). At or around the same time, Dr. Miller found out that, despite his request made in August 2013 that Santander close the 4933 account, Santander never closed the 4933 account and that a balance of $4,058.03 had remained in that account (Second Amended Complaint at ¶¶ 29–30). In addition, he discovered that in February 2014, Ferrante had written checks to herself from the 4933 account, and thereafter made additional deposits and debits from the 4933 account, ending only in July 2014 when that account was finally closed (Second Amended Complaint at ¶ 30).
Dr. Miller terminated Ferrante's employment with plaintiff in or around June 2014, when he discovered some of Ferrante's misconduct (Second Amended Complaint at ¶¶ 27–28).
In the same time period, Dr. Miller requested that AJC, the entity employed by plaintiff to prepare its tax returns, provide him with copies of tax documents and plaintiff's ledgers and other documents received by it in order to prepare plaintiff's taxes (Second Amended Complaint at ¶ 31). In the tax returns, AJC had described Ferrante's credit card purchases as materials for plaintiff's orthopedic practice, and treated them as deductions for tax purposes and plaintiff's ledgers and other documents showed that Ferrante had paid herself significantly more than her $50,000 annual salary (Second Amended Complaint at ¶¶ 33–34). Dr. Miller also discovered that AJC issued 1099's instead of W–2 forms and never filed a tax return on plaintiff's behalf for the 2012 tax year, only filing a tax return for the 2013 tax year after plaintiff had terminated AJC's services (Second Amended Complaint at ¶¶ 32, 35 and Second Amended Complaint at Fifth Cause of Action ¶ 4).
Based on this factual background and plaintiffs additional allegations that AJC failed to inform plaintiff of Ferrante's misappropriation of plaintiff's assets and that she had written numerous checks to herself and to cash well in excess of her salary, plaintiff has pled causes of action against AJC for breach of contract (fifth cause of action). Relying on the same essential allegations, plaintiff has also alleged causes of action against AJC and its owner/tax preparer John Coscia, independent tax preparer Angelo Coscia and employee/tax preparer Alexander Krutiy premised on malpractice, fraud and breach of fiduciary duty (respectively, the six, seventh and eighth causes of action in the Second Amended Complaint). Regarding Santander, plaintiff has pled a cause of action premised on breach of contract (ninth cause of action), based on Santander's failure to close the 4933 account and allowing plaintiff to withdraw the remaining funds, and pled a cause of action (tenth cause of action) based on Santander's processing and paying the forged checks with respect to the 0089 account.
MOTION TO DISMISS
Defendants now move to dismiss based on documentary evidence (CPLR 3211[a][1] ) and for failure to state a cause of action (CPLR 3211[a][7] ). In considering a motion to dismiss for failing to state a cause of action under CPLR 3211(a)(7), the pleading is to be afforded a liberal construction (CPLR 3026 ), and the court should accept as true the facts alleged in the complaint, accord plaintiff the benefit of every possible inference, and only determine whether the facts, as alleged, fit within any cognizable legal theory (see Hurrell–Harring v. State of New York, 15 NY3d 8, 20 [2010] ; Leon v. Martinez, 84 N.Y.2d 83, 87–88 [1995] ). Although evidentiary material may be considered in determining the viability of a complaint, the complaint should not be dismissed unless defendant has established “that a material fact alleged by the plaintiff is not a fact at all and that no significant dispute exists regarding it” (Stewart v. New York City Tr. Auth., 50 AD3d 1013, 1014 [2d Dept 2008] [internal quotation marks and citations omitted]; see also Lawrence v. Miller, 11 NY3d 588, 595 [2008] ; Nunez v. Mohamed, 104 AD3d 921, 922 [2d Dept 2013] ). Similarly, a motion to dismiss pursuant to CPLR 3211(a)(1) may be granted “only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law” (Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d 314, 326 [2002] ; Harris v. Barbera, 96 AD3d 904, 905 [2d Dept 2010] ). To qualify as documentary evidence, printed materials “must be unambiguous and of undisputed authenticity” (Fontanetta v. John Doe 1, 73 AD3d 78, 86 [2d Dept 2010] ; see Flushing Sav. Bank, FSB v. Siunykalimi, 94 AD3d 807, 808 [2d Dept 2012] ).
AJC DEFENDANTS' MOTION
Initially, the court addresses the portion of the AJC Defendants' motion seeking dismissal of plaintiff's malpractice claim against them. “A claim of professional negligence requires proof that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury” (Bruno v. Trus Joist a Weyerhaeuser Bus., 87 AD3d 670, 672 [2d Dept 2011] ; see also Schwartz v. Leaf, Salzman, Manganelli, Pfiel & Tendler, LLP, 123 AD3d 901, 902 [2d Dept 2014] ; Kristina Denise Enters., Inc. v. Arnold, 41 AD3d 788, 788 [2d Dept 2007] ). The AJC Defendants' primary contention regarding the malpractice claim is that they were simply hired to prepare plaintiff's income taxes, not to audit plaintiff's books or to act as bookkeepers, and as such, had no duty to discover or report Ferrante's misappropriations. Plaintiff's claim, however, is not that the AJC Defendants were hired to discover or ferret out Ferrante's wrongdoing through an audit or a financial review, but rather, that information in plaintiff's ledgers and the financial information used by the AJC Defendants in order to prepare the tax returns raised questions about the propriety of Ferrante's payments to herself such that they had a duty to inform plaintiff of the questionable practices. Based upon the Affidavit of Gary Hoffman, a licensed tax preparer and tax accountant, describing the standards applicable to tax preparers such as defendants, these allegations sufficiently plead a departure from accepted accounting practices (see 1136 Tenants' Corp. v. Rothenberg & Co. (36 A.D.2d 804 [1st Dept 1971], affd 30 N.Y.2d 585 [1972] ) (“even if defendant were hired to perform only write-up' services, it is clear, beyond dispute, that it did become aware that material invoices purportedly paid by Riker were missing, and, accordingly, had a duty to at least inform plaintiff of this. But even this it failed to do. Defendant was not free to consider these and other suspicious circumstances as being of no significance and prepare its financial reports as if same did not exist”); see also Collins v. Esserman & Pelter, 256 A.D.2d 754, 756–757 [3d Dept 1998] ; Board of Trustees of IBEW Local 43 Elec. Contrs. Health & Welfare, Annuity & Pension Funds v. D'Arcangelo & Co., LLP, 124 AD3d 1358, 1359 [4th Dept 2015] ; Hall & Co. v. Steiner & Mondore, 147 A.D.2d 225, 228 [3d Dept 1989] ).
Indeed, plaintiff does not allege that the AJC Defendants were hired for any purposes other than preparing plaintiff's federal and state tax returns.
The AJC Defendants argument that they may not be held liable for malpractice because plaintiff made Ferrante its agent in dealing with the AJC Defendants is improperly raised for the first time in reply (see U. S. Bank N.A. v. Sarmiento, 121 AD3d 187, 208 [2d Dept 2014] ; Congel v. Malfitano, 61 AD3d 809, 810 [2d Dept 2009] ). Even if this argument could be seen as a response to arguments raised by plaintiff in its opposition papers, plaintiff's giving Ferrante the responsibility for “interacting” with AJC on plaintiff's behalf (Second Amended Complaint at ¶ 13) does not, in itself, vitiate AJC's duty to plaintiff, as in performing the tax preparation services on plaintiff's behalf, Ferrante's improper conduct was undoubtedly recognizable as adverse to plaintiff's interests (see Schwartz, 123 AD3d at 902–903 ; Capital Wireless Corp. v. Deloitte & Touche, 216 A.D.2d 663, 666 [3d Dept 1995] ; see also Collision Plan Unlimited, Inc. v. Bankers Trust Co., 63 N.Y.2d 827, 830 [1984] ; 1136 Tenants' Corp., 36 A.D.2d at 804–805 ; 2A N.Y. Jur 2d, Agency and Independent Contractors § 103 ). Similarly, while it appears that plaintiff's own negligence in monitoring Ferrante enabled Ferrante to continue her scheme for several years, the pleadings do not show it to be the sole proximate cause of the loss since such negligence does not appear to have impeded the AJC Defendants performance of their duties in reviewing plaintiff's tax materials (see Collins, 256 A.D.2d at 757 ).
Accordingly, plaintiff's allegations sufficiently plead a departure from accepted accounting practices. In addition, this alleged failure to inform plaintiff of the improprieties apparent from the financial record certainly could be seen as a proximate cause of damages suffered in that plaintiff, if it had earlier knowledge of Ferrante's misdeeds, may have been able to prevent some of her misconduct (see Collins, 256 A.D.2d at 756–758 ; see also Kocak v. Egert, 280 A.D.2d 335, 336 [1st Dept 2001] ; CAE Indus. v. KPMG Peat Marwick, 193 A.D.2d 470, 473 [1st Dept 1993] ; cf. Leigh Mgt. Assoc. v. Weinstein, 251 A.D.2d 225, 226 [1st Dept 1998] ).
The AJC Defendants also assert that the complaint must be dismissed as against the individual defendants because plaintiff has failed to allege facts demonstrating their individual liability. The second amended complaint itself simply states that John Coscia was the owner and president of AJC and that Angelo Coscia and Alexander Krutiy were employees of AJC, without identifying their roles in reviewing plaintiff's documents or preparing the tax returns. These allegations are insufficient to demonstrate the liability of these individuals because an employee or even owner/president of a corporation may only be held liable in tort based on his or her own active fault or negligent supervision of another employee (see Oviedo v. Weinstein, 102 AD3d 844, 847 [2d Dept 2013] ; Keital v. Kurtz, 54 AD3d 387, 392 [2d Dept 2008] ; Ecker v. Zwaik & Bernstein, 240 A.D.2d 360, 361–362 [2d Dept 1997] ; Connell v. Hayden, 83 A.D.2d 30, 49–59 [2d Dept 1981] ; see also Salazar v. Sacco & Fillas, LLP, 114 AD3d 745, 747 [2d Dept 2014] ).
John Coscia states in his affidavit in opposition that Angelo Coscia, who is his father, is an independent contractor for AJC.
Nevertheless, in opposition to the motion, plaintiff has submitted copies of the tax returns supplied by AJC, which showed that Alex Krutiy prepared the 2010 and 2011 tax returns and that Angelo Coscia prepared the 2012 tax return. In the context of this pre-answer motion to dismiss, where it is sufficient to base an allegation of individual liability on inferences drawn from a person's position and responsibilities, this evidence that Angelo Coscia and Alex Krutiy performed AJC's tax preparer functions for plaintiff is a sufficient basis to infer their involvement in the alleged malpractice (see Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 492–493 [2008] ; Selechnik v. Law Off. of Howerd R. Birnbaach, 82 AD3d 1077, 1079 [2d Dept 2011] ; DDJ Mgt., L.C.C. v. Rhone Group, L.C.C., 78 AD3d 442, 443 [1st Dept 2010] ). On the other hand, as the complaint does not allege that John Coscia was in any way involved in performing or supervising the tax preparation work at issue, and plaintiff, in opposition to the motion, has failed to provide any basis to infer the involvement of John Coscia, the complaint must be dismissed as against him (see Salazar, 114 AD3d at 747 ).
The motion to dismiss by AJC Defendants must be granted as to the seventh cause of action for fraud, which as alleged, duplicates the malpractice claim.
The eighth cause of action for breach of fiduciary duty, premised upon defendants' failure to disclose and concealment of its own awarness of the illegal acts and diversion of plaintiff's assets by Ferrante, is actionable (see Nate B. & Frances Spingold Foundation v. Wallin, Simon, Black & Co., 184 A.D.2d 464 [1st Dept 1992] ; Lavin v. Kaufman, Greenhut, Lebowitz & Forman, 226 A.D.2d 107 [1st Dept 1996] ). While the accountant-client relationship does not generally implicate a fiduciary duty, where, as here, the complaint alleges the failure to advise the client of known improprieties revealed in records necessarily reviewed in the course of serving the client, to the extent that complicity in the fraud perpetrated by an employee is suggested, a fiduciary duty arises and may have been breached (id. ). However, dismissal of the eight cause of action is also warranted as the allegations duplicate the professional malpractice cause of action (see Schwatz, 123 AD3d at 902 ).
The fifth cause of action for breach of contract is also duplicative of the malpractice cause of action to the extent that it is premised on allegations that AJC failed to perform its services in a professional, non-negligent manner (Kvetnaya v. Tylo, 49 AD3d 608, 609 [2d Dept 2008] ). That aspect of the breach of contract action based on the assertion that AJC failed to file a return for the 2012, and did not file the 2013 return until after its services were terminated, however, is properly considered as a breach of contract, and is not duplicative of the malpractice claim (see New York State Workers' Compensation Bd. v. SGRisk, LLC, 116 AD3d 1148, 1153 [3d Dept 2014] ).
In this regard, the assertions that AJC filed improper tax returns, improperly issued 1099 forms instead of W–2 forms, and failed to inform plaintiff of Ferrante's misappropriations, are, in essence, assertions that AJC failed to perform its services in a professional manner as set forth in the sixth cause of action for malpractice.
Finally, with respect to the AJC Defendant's request that plaintiff be sanctioned for frivolous conduct, the court finds that, while several of plaintiff's causes of action must be dismissed, they are not so devoid of merit as to warrant sanctioning plaintiff pursuant to 22 NYCRR 130–1.1 (see Global Events LLC v. Manhattan Ctr. Studios, Inc., 123 AD3d 449, 450 [1st Dept 2014] ; Stone Mtn. Holdings, LLC v. Spitzer, 119 AD3d 548, 550–551 [2d Dept 2014] ).
SANTANDER'S MOTION
Santander, among other things, alleges that the ninth cause of action relating to Santender's failure to close the 4933 account, which was initially pled as negligence, but is now pled as a breach of contract cause of action in the second amended complaint, fails to properly plead a breach of contract. The relationship between a bank and its customer holding a deposit account is that of a debtor and creditor, and from this relationship the law implies a contract between a bank and its customer requiring the bank to pay money from a depositor's account only upon the depositor's order (see Stella Flour & Feed Corp. v. National City Bank of NY, 285 App.Div. 182, 184 [1st Dept 1954], affd 308 N.Y. 1023 [1955; see also Gibralter Realty Corp. v. Mount Vernon Trust Co., 276 N.Y. 353, 356 [1938] ; Middle East Banking Co. v. State Street Bank Int., 821 F.2d 897, 901–902 [2d Cir1987] ). Given this duty, the allegations that Santander failed to follow plaintiff's direction to close the account, which failure allowed Ferrante to withdraw money from the account, states a cause of action in breach of contract (see General Apparel Sales Corp. v. Chase Manhatten Bank, N.A., 321 F Supp 891, 894 [SDNY 1970] ; see also Commonwealth Motor Parts v. Bank of Nova Scotia, 44 A.D.2d 375, 379 [1st Dept 1974] ). Since such a common law contractual claim is not facially inconsistent with the requirements of the Uniform Commercial Code (UCC), it is not barred by the UCC (id; see also Fisher & Mandell LLP, 632 F3d 793, 797–798 [2d Cir2011] ; Elden v. Merrill Lynch, Pierce, Fenner & Smith Inc., 2011 WL 1236141 * 10 [SDNY 2011] ).
The court notes that plaintiff's mislabeling of this claim as a negligence cause of action in the prior complaints would not have been a bar to the court considering it a cognizable cause of action (Commonwealth Motor Parts, 44 A.D.2d at 379 ).
Plaintiff's tenth cause of action in which it alleges that Santander improperly paid the checks forged by Ferrante with respect to the 0089 account in violation of its UCC obligations likewise states a valid cause of action. “The Uniform Commercial Code fastens strict liability on a bank that charges against its customer's account any item' that is not properly payable” ' (Monreal v. Fleet Bank, 95 N.Y.2d 204, 207 [2000] ; see UCC 4–401 ; see also Clemente Bros. Contr. Corp. v. Hafner–Milazzo, 23 NY3d 277, 283–284 [2014] ). “A check bearing a forgery of the customer's signature is an item' not properly payable' and therefore may not be charged against the customer's account” (Monreal, 95 N.Y.2d at 207 ; see UCC 3–404 [1] ; UCC 4–104 [1] [g] ; UCC 4–401 [1] ; see also Clemente Bros. Contr. Corp., 23 NY3d at 284 ). Plaintiff's factual allegations are sufficient to make out a prima facie cause of action in light of these requirements.
Santander, however, further asserts that both the ninth and tenth causes of action must be dismissed because of the reciprocal duties imposed on a bank's customer by UCC 3–406 and UCC 4–406 . Under UCC 3–406 , a bank will be excused from the strict liability imposed for paying on a forged check where the customer's own negligence contributes to allowing the alteration to the check and the bank pays the check in good faith despite exercising due diligence. UCC 4–406 , in essence, provides that a bank will not be held liable for paying on forged or unauthorized signatures where the bank has sent statements of account to the customer and the customer fails to timely notify the bank of the unauthorized items. Both UCC 3–406 and UCC 4–406 , however, are defenses that must be affirmatively pleaded by a defendant (see Royal Ins. Co. of Am. v. Citibank, 306 A.D.2d 158, 159 [1st Dept 2003] ; Five Towns Coll. v. Citibank, 108 A.D.2d 420, 426 [1st Dept 1985] ; Eldon, 2011 WL 1236141 * 6 ; Weafri Well Servs., Co., Ltd. v. Fleet Bank, N.A., 2000 WL 1472724 [SDNY 2000] ; CPLR 3018(b) ). As such, plaintiff bears no burden to disprove such defenses in order to plead a cause of action and the absence of allegations regarding such defenses in no way affects the sufficiency of the second amended complaint at issue here (CAE Indus., 193 A.D.2d at 473 ; Holland v. Fulbert, Inc., 49 A.D.2d 86, 91–92 [3d Dept 1975], appeal dismissed 39 N.Y.2d 772 [1976] ; see also TIAA Global Invs., LLC v. One Astoria Sq., LLC, 127 AD3d 75, 89 [1st Dept 2015] ). Santander's motion, to the extent that it is premised on CPLR 3211(a)(7), must thus be denied.
To the extent that Santander's motion may be considered as a CPLR 3211(a)(1) motion premised on documentary evidence despite its failure to identify that ground for dismissal in its motion papers (see Dean R. Pelton Co. v. Moundsville Shopping Plaza, 173 A.D.2d 201, 201 [1st Dept 1991] [court may treat motion as having designated correct ground where opposing party has not been prejudice by failure to designate the correct ground] ), its papers fail to demonstrate its entitlement to dismissal based on UCC 3–406 and UCC 4–406 .
With respect to UCC 3–406 , a bank cannot establish a defense under that section if it fails to show that it acted in good faith and in accordance with reasonable commercial standards (Mouradian v. Astoria Fed. Sav. & Loan, 91 N.Y.2d 124, 131 [1997] ; R.A. Contr. Co. v. JP Morgan Chase Bank, N.A., 109 AD3d 600, 601 [2d Dept 2013] ; Royal Ins. Co. of Am., 306 A.D.2d at 159 ). Santander has submitted no documentary proof that it followed reasonable commercial standards in the handling of either of plaintiff's accounts. Concededly, the allegations in the second amended complaint may be sufficient to demonstrate that, among other things, plaintiff's own negligence in allowing Ferrante access to checkbooks contributed to Ferrante's forgeries and her ability to access the closed account (see Carmine Rest. v. Citibank, 300 A.D.2d 149, 149 [1st Dept 2002] ). Nevertheless, in the absence of evidence showing that Santander followed reasonable commercial standards, Santander's papers fail to conclusively establish its entitlement to a defense based on documentary proof premised on UCC 3–406 (see Mouradian, 91 N.Y.2d at 131 ; R.A. Contr. Co., 109 AD3d at 601 ; Royal Ins. Co. of Am., 306 A.D.2d at 159 ; see also Lindsay v. Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, ––– AD3d ––––, 2015 N.Y. Slip Op 04819 [2d Dept 2015] ; Fontanetta, 73 AD3d at 86 ).
Santander's papers with respect to UCC 4–406 are also defective. A defense under UCC 4–406 is premised on a bank sending out statements of account and a customer's failure to discover an item paid based on his or her unauthorized signature and timely notify the bank after discovery thereof (UCC 4–406 [1] and [2 ]; Clemente Bros. Contr. Corp., 23 NY3d at 284 ). This bar does not apply if the customer establishes that the bank failed to exercise ordinary care in paying the item or items (UCC 4–406 [3] ; Clemente Bros. Contr. Corp., 23 NY3d at 284 ). Regardless of a bank's failure to exercise ordinary care, however, UCC 4–406(4) “bars a customer's claim for recovery on a wrongfully paid item when the customer fails to report the irregularity within one year after the bank provides the statement and item” (Clemente Bros. Contr. Corp., 23 NY3d at 284 ). This one year limitation contained in UCC 4–406 can be shortened by agreement between the bank and the customer (Clemente Bros. Contr. Corp., 23 NY3d at 288–290 ).
Although Santander, among other things, asserts that its customer agreement with plaintiff relating to the accounts shortened UCC 4–406(4)'s one year time within which plaintiff had to report an irregularity in the accounts to 30 days, Santander has failed to demonstrate that the relevant bank statements were “made available” to plaintiff for purposes of UCC 4–406(1) or (2), within the one year period provided by UCC 4–406(4), or the shorter 30 day period contained in the purported customer agreement (see Clemente, 23 NY3d at 286–287 ; Estate of Merna v. Simuro, 74 AD3d 1277, 1278 [2d Dept 2010] ; Pippo v. Fleet Bank, N.A., 2002 N.Y. Slip Op 50052 * 5–6[U] [Sup Ct, Albany County 2002] ). In this respect, the attachment of a few bank statements to the affirmation of Santander's counsel, who does not purport to have personal knowledge of Santander's banking practices or its records (see Morales, 51 AD3d at 96 ), simply fails to demonstrate that the statements were mailed or otherwise “made available” (see Pippo, 2002 N.Y. Slip Op 50052 * 6; UCC 1–201 [36] ; see also Nocella v. Fort Darborn Life Ins. Co. of NY, 99 AD3d 877, 878 [2d Dept 2012] ; cf. Matter of Ray, 24 Misc.3d 285, 287–289 [Sur Ct, Kings County 2009] ). Plaintiff does not otherwise concede receipt of the statements. Without proof that the statements were sent or otherwise made available, Santander has not presented documentary evidence showing that UCC 4–406(1) or (2) may serve as a bar to plaintiff's UCC claim or that the claim is untimely under UCC 4–406(4) or the shorter time allowed under the purported account agreement (see Lindsay, ––– AD3d at ––––, 2015 N.Y. Slip Op 04819 ; Fontanetta, 73 AD3d at 86 ; see also Fairlane Financial Corp. v. Greater Metro Agency Inc., 109 AD3d 868, 870 [2d Dept 2013] ; NYCTL 1998–2 Trust v. Santiago, 30 AD3d 572, 573 [2d Dept 2006] ).
The purported account agreement, which is attached as an exhibit to an affirmation by Santander's counsel, is merely a copy of a generic customer agreement and is not self authenticating, is not signed by plaintiff, or elsewhere conceded by plaintiff to govern the relationship between it and the Santander. The affirmation of Santander's counsel, made without personal knowledge, provides no evidentiary basis to find that the customer agreement was in effect during the relevant time periods or that the agreement was ever provided to plaintiff (see Morales v. Coram Materials Corp., 51 AD3d 86, 96 [2d Dept 2008] ; see also Fairlane Financial Corp. v. Greater Metro Agency Inc., 109 AD3d 868, 870 [2d Dept 2013] ; NYCTL 1998–2 Trust v. Santiago, 30 AD3d 572, 573 [2d Dept 2006] ). Plaintiff's opposition papers, however, do not specifically address the issue of whether the account agreement governs the accounts at issue. As the motion must be denied in any event, the court has made no decision regarding the applicability of the agreement to plaintiff's accounts.
In any event, even if such an affidavit had been presented, it probably would not be considered as documentary proof for purposes of a 3211(a)(1) motion (see Flushing Sav. Bank, FSB, 94 AD3d at 808 ).
Counsel for plaintiff sufficiently raised the issue of whether Santander sent out the account statements in paragraph 35 of his affirmation in opposition to the motion. The court also notes that Miller's statements, in an unsworn and undated “certification” submitted in opposition to Santander's motion, may be considered an admission that he, acting on behalf of plaintiff, reviewed the statements and copies of the checks at issue sometime in June or July 2014 and thus his statements may be considered an admission that the statements were made available at that time. In this same certification, Miller also asserts that in July 2014 he filled out a report with the assistance of a Santander assistant branch manager, advising the bank of the forged checks relating to the 0089 account and the misappropriation of funds from the 4933 account. As such, any concession in this “certification” that the statements were made available in June or July of 2014 does not establish the untimeliness of the claim as Miller also suggests that, at least from Miller's conceded date that the statements were made available, he made a timely notice or report of the items improperly paid (see Robinson v. Motor Xpresss, Inc. v. HSBC Bank, USA, 37 AD3d 117, 122–124 [2d Dept 2006] ; cf. New Gold Equities Corp. v. Chemical Bank, 251 A.D.2d 91, 91–92 [2d Dept 1998] ). It is further noted that, in his Affirmation in Opposition, plaintiff's counsel, Charles Epstein, Esq., states that until 2013, plaintiff's checkbook and bank statements were sent directly to the home of L. Ferrante. The bank provides evidence that “all statements were directed to the JAG office” beginning in August 2013.
Accordingly, the AJC Defendants' motion (Motion Sequence No. 2) is granted to the extent that: (1) the seventh (fraud) and eighth (breach of fiduciary duty) causes of action are dismissed; (2) the fifth cause of action (breach of contract) is dismissed with respect to all the allegations contained therein except for the allegation that the AJC Defendants breached their agreement by failing to file a tax return for the 2012 tax year; and (3) the complaint is dismissed in its entirety as against defendant John Coscia and the action is severed accordingly. The AJC Defendants' motion is otherwise denied.
Santander's motion (Motion Sequence No. 3) is denied.
This constitutes the decision and order of the court.