Court Opinion

ID: 812209
Source: CourtListenerOpinion
Date Created: 2012-11-20 15:36:46+00
Date Added: 2024-06-11T18:00:44.097766
License: Public Domain

11-4090
         2006 Frank Calandra, Jr. Irrevocable Trust, et al. v. Signature Bank Corp.

                                 UNITED STATES COURT OF APPEALS
                                     FOR THE SECOND CIRCUIT

                                              SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1,
2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Daniel Patrick Moynihan
 3       United States Courthouse, 500 Pearl Street, in the City of
 4       New York, on the 20th day of November, two thousand twelve.
 5
 6       PRESENT: JOHN M. WALKER,
 7                RICHARD C. WESLEY,
 8                PETER W. HALL,
 9                         Circuit Judges.
10
11
12       2006 Frank Calandra, Jr. Irrevocable Trust, Karl Anthony
13       Calandra, as Trustee of 2006 Frank Calandra, Jr. Irrevocable
14       Trust, Kara Marie Calandra Charbonneau, as Trustee of 2006
15       Frank Calandra, Jr. Irrevocable Trust, Kristin Hassoun, as
16       Trustee of 2006 Frank Calandra, Jr. Irrevocable Trust,
17
18                             Plaintiffs-Counter Defendants-Appellants,
19
20                      v.                                           11-4090
21
22       Signature Bank Corporation,
23
24                             Defendant-Counter-Claimant-Appellee,
25
26       Cushner & Garvey, LLP, Signature Bank, AKA Signature Bank
27       Corp.,
28
29                             Defendants.
30
31
32
33       FOR APPELLANTS:               ROY A. POWELL (Leon F. DeJulius, Jr., on
34                                     the brief), Jones Day, Pittsburgh, PA.
35
1    FOR APPELLEE:     ROBERT M. ROSENBLITH, Chestnut Ridge, NY.
2
3         Appeal from the United States District Court for the
4    Southern District of New York (Daniels, J.).
5
6        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED

7    AND DECREED that the judgment of the United States District

8    Court for the Southern District of New York is AFFIRMED.

9        The 2006 Frank Calandra, Jr. Irrevocable Trust (the

10   "Trust") and its Trustees Kristin Hassoun, Kara Calandra

11   Charbonneau, and Karl Calandra (collectively, the

12   "Plaintiffs") appeal from an August 31, 2011 order of the

13   United States District Court for the Southern District of

14   New York (Daniels, J.), granting summary judgment for the

15   Defendant-Appellee Signature Bank Corp. (“Signature Bank”)

16   and denying Plaintiffs' motion for partial summary judgment.

17   2006 Frank Calandra, Jr. Irrevocable Trust v. Signature Bank

18   Corp., 816 F. Supp. 2d 222 (S.D.N.Y. 2011).   In the

19   underlying suit, Plaintiffs allege that Signature Bank was

20   liable under New York common law and the New York Uniform

21   Commercial Code (“NY UCC”) for the depletion of Trust funds

22   by former Trustee Edward Stein.   The panel has reviewed the

23   briefs and the record in this appeal and agrees unanimously

24   that oral argument is unnecessary because “the facts and

25   legal arguments [have been] adequately presented in the

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1    briefs and record, and the decisional process would not be

2    significantly aided by oral argument.”      Fed. R. App. P.

3    34(a)(2)(C).     We assume the parties’ familiarity with the

4    underlying facts, the procedural history, and issues on

5    appeal.

6        Plaintiffs contend that the district court erred in

7    analyzing its various negligence and gross negligence

8    claims.     We disagree.   Plaintiffs contend that the district

9    court erred by failing to address their claim that Signature

10   Bank negligently accepted and established the Trust Account.

11   This claim is not apparent from the face of the complaint,

12   which focuses on Signature Bank’s alleged failure "to make

13   any reasonable inquiries or to safeguard the trust funds

14   after Stein's large transactions."      J.A. 21, Compl. ¶ 12.

15   (emphasis added).     Indeed, under the claims for relief, the

16   complaint describes the negligence/gross negligence claim as

17   follows: "Signature Bank breached its duty to the Calandra

18   Trust . . . by refusing to make reasonable inquiries or

19   safeguard Trust funds in the face of clear evidence that

20   Stein was misappropriating Trust funds."      J.A. 22-23, Compl.

21   ¶ 19.     Claims not adequately raised below are generally

22   deemed waived on appeal.      See Allianz Ins. Co. v. Lerner,

23   416 F.3d 109, 114 (2d Cir. 2005).

                                      3
1        Nevertheless, as a matter of law, Signature Bank did

2    not act negligently in setting up the Trust Account.     In

3    this vein, Plaintiffs argue that Signature Bank should have

4    had “a dedicated trust department” with special policies and

5    procedures to ensure that employees “understood the purpose

6    of the Trust, the responsibilities of the Trustees, the

7    safeguarding of trust assets and the contents of the

8    underlying Trust Agreement."   While this argument might make

9    sense when a bank undertakes to manage a trust, it is far

10   less persuasive where, as here, the bank was only asked to

11   open a typical bank account for the Trust.   Accepting

12   Plaintiffs’ view would impose on every banking institution

13   the duty to have a dedicated trust department in order to do

14   any business with trusts.   New York courts will not, "as a

15   matter of policy," create a duty of care that essentially

16   makes banks trustees of every trust with which they do

17   business.   Lauer v. City of New York, 95 N.Y.2d 95, 100

18   (2000).

19       The district court also did not err in concluding that

20   Signature Bank was not grossly negligent in monitoring the

21   Trust Account.   It is well settled that "a depositary bank

22   has no duty to monitor fiduciary accounts maintained at its

23   branches in order to safeguard funds in those accounts from

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1    fiduciary misappropriation."   Lerner v. Fleet Bank, N.A.,

2    459 F.3d 273, 287 (2d Cir. 2006) (citing Norwest Mortgage,

3    Inc. v. Dimes Sav. Bank of N.Y., 2 A.D.2d 653, 654 (2d Dep’t

4    2001) (internal quotation marks omitted)).   “The bank has

5    the right to presume that the fiduciary will apply the funds

6    to their proper purposes under the trust."   Id. (quoting

7    Bischoff ex rel. Schneider v. Yorkville Bank, 218 N.Y. 106,

8    111 (1916) (internal quotation marks omitted)).   It was up

9    to the Trustees, not Signature Bank, to make sure that Trust

10   funds were being used appropriately.

11       It is true, as Plaintiffs point out, that a bank has a

12   duty to make reasonable inquiries to prevent fraud where it

13   has "notice or knowledge that a diversion is intended or

14   being executed."   Id. at 287 (quoting In re Knox, 64 N.Y.2d

15   434, 438 (1985) (internal quotation marks omitted)).   But

16   here, Signature Bank had every reason to believe that the

17   transactions were valid and authorized by the Trust.   At the

18   time of the transactions, Signature Bank had two documents

19   governing the Trust Account that were signed by all three

20   Trustees.   The Trust Account Application reflected that each

21   Trustee had signing authority and could act individually

22   with respect to the account.   The Funds Transfer Agreement

23   (“FTA”) further authorized each of the Trustees to remove

                                    5
1    funds from the account individually.   Given this

2    documentation, Signature Bank did not act negligently in

3    processing the transactions, each of which was signed by a

4    Trustee and was consistent with the aforementioned

5    agreements.

6        Plaintiffs also contend that the district court erred

7    in focusing solely on their gross negligence claim without

8    separately addressing their negligence claim.   Both claims

9    require a showing that the defendant breached a duty of care

10   owed to the plaintiff.   Solomon ex rel. Solomon v. City of

11   New York, 66 N.Y.2d 1026, 1027 (1985) (Mem.).   The only

12   difference between the two claims is that gross negligence

13   requires an additional showing that the defendant's conduct

14   "evinces a reckless disregard for the rights of others or

15   ‘smacks’ of intentional wrongdoing."   Colnaghi, U.S.A., Ltd.

16   v. Jewelers Prot. Servs., Ltd., 81 N.Y.2d 821, 823 (1993)

17   (citation and internal quotation marks omitted).     Because

18   the basis for the district court's dismissal was Plaintiffs'

19   failure to establish "the existence of a legally recognized

20   duty of care to the Trust," 816 F. Supp. 2d at 239, there

21   was no need for the district court to independently reach

22   the same conclusion as to the negligence claim, see, e.g.,

23   Kerusa Co. LLC v. W10Z/515 Real Estate, L.P., 810 N.Y.S.2d

24   861, 866 (N.Y. Sup. Ct. 2005).

                                   6
1        The district court also did not err in dismissing

2    Plaintiffs’ NY UCC claims.     Under the NY UCC, a bank is

3    strictly liable to refund wire transfers, with interest,

4    where the bank "accepts a payment order issued in the name

5    of its customer as sender which is . . . not authorized and

6    not effective as the order of the customer under Section

7    4-A-202."     N.Y. UCC § 4-A-204(1).     A bank is also strictly

8    liable for charging against the customer's account a check

9    with an unauthorized signature.        N.Y. UCC § 4-401.   An order

10   is authorized if the sender "authorized the order or is

11   otherwise bound by it under the law of agency."        N.Y. UCC §

12   4-A-202(1).

13       Here, the Trust Account Application and FTA are

14   unambiguous contracts that authorized Signature Bank to

15   process the wire transfers and check at issue.        These

16   documents, both signed by all three Trustees, unequivocally

17   identify the authorized individuals to act on behalf of the

18   Trust.   There are no provisions that place limitations or

19   conditions on a Trustee’s access to or use of the Trust

20   funds.   Thus, the Trust authorized Signature Bank to process

21   the four wire transfers and check at issue.

22       We have considered Plaintiffs’ remaining arguments and,

23   after a thorough review of the record, find them to be

24   without merit.

                                     7
1        For the foregoing reasons, the judgment of the district

2    court is hereby AFFIRMED.

3
4                                FOR THE COURT:
5                                Catherine O’Hagan Wolfe, Clerk
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