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OLMECA, S.A. v. MANUFACTURERS HANOVER TRUST CO.

December 24, 1985;

OLMECA, S.A., Plaintiff,
v.
MANUFACTURERS HANOVER TRUST COMPANY, Defendant and Third-Party Plaintiff MANUFACTURERS HANOVER TRUST COMPANY, Defendant and Third-Party Plaintiff, vs. PIERRE GAZANIOL, LOUIS EDMUND GAZANIOL and PHILIPPE GAZANIOL, Third-Party Defendant



The opinion of the court was delivered by: SWEET

SWEET, D.J.

The defendant and third party plaintiff in this action, Manufacturers Hanover Trust Company ("MHT") has moved pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment dismissing the complaint of plaintiff Olmeca S.A. ("Olmeca") against MHT or in the alternative granting partial summary judgment with respect to the second transfer at issue. MHT also seeks Rule 12(b)(6) dismissal of Olmeca's second cause of action for failure to state a claim for which relief can be granted. Olmeca has cross-motioned for an order dismissing the Tenth and Eleventh defenses asserted by MHT in its amended answer to the complaint, under Rules 12 and 56, Fed.R.Civ.P. In addition, both parties have moved for a hearing on the validity of the power of attorney or "Escritura No. 1515" in the event that these motions for summary judgment are denied. For the reasons set forth below, MHT's motion for summary judgment on the first and second transfers is denied, as is Olmeca's motion to dismiss MHT's Tenth and Eleventh defenses. MHT's motion to dismiss the second claim in Olmeca's complaint is granted, and the court will hold a hearing on the validity of the power of attorney under Panamanian law.

 Facts

 Olmeca's complaint in this action arises out of two transfers made by MHT in 1981 from Olmeca's account at MHT totaling approximately $1,695,000. Olmeca's first claim for relief seeks recovery for a purported breach of contract with regard to these two transfers, and the second seeks recovery for the same loss of an alternative theory of breach of fiduciary duty.

 The disputed transfers occurred as a result of a complex set of banking relationships which set the state for inter-family mischief. In 1977, Andre Gazaniol, sole shareholder and president of Olmeca, a Panamanian corporation, contacted Banque Pariente ("BP"), a Swiss bank, located in Geneva, Switzerland, to ask BP to recommend a "trustworthy" bank in the United States in which to open an account for Loaned S.A. ("Loaned"), a Panamanian corporation which Andre Gazaniol had organized in 1959. Loaned entered into a written letter agreement with BP on November 9, 1977, which provided that BP would transmit Loaned's orders for transfer, investments and securities purchases to MHT in New York, and would forward all account documentation from MHT to Loaned. BP monitored Loaned's BP account and reviewed Loaned's MHT account to make suggestions to Loaned, but had no investment authority over the accounts. For these services BP received a one-half percent (.05%) per annum fee on Loaned's total assets at the MHT account. This same agreement also structured BP's duties with regard to Olmeca's accounts at MHT, which were actually successor accounts which received funds from the Loaned accounts at MHT. In order to open the Loaned account, BP forwarded Loaned's corporate resolution and corporate charter containing the names and addresses of Loaned's officers to MHT. Josiane Fleming ("Fleming"), the MHT account officer responsible for MHT's relationship with BP, opened the account in Region I of MHT's international division rather than the personal banking division because of BP's involvement with the account.

 Olmeca and Loaned would relay account instructions to BP in Geneva, Switzerland which would then transmit these instructions to MHT in New York. MHT routed all account information through BP, which would then forward the information to Jose Ales Romero ("Romero") at Banco Hispanico Americano in Marbella, Spain, where Andre Gazaniol would periodically visit from Tangiers, Morocco to retrieve his mail. Andre Gazaniol, a citizen of France, a thirty-seven year resident of Morocco, and a tourist living in Spain for three years, admittedly established this complex chain of banking relationships to avoid the foreign exchange laws of Morocco.

 In 1979, Andre Gazaniol instructed BP to open an account on behalf of Olmeca at MHT and to transfer certain of Loaned's funds to the new Olmeca account. In September, 1979, BP instructed MHT to open this new account, and sent MHT Olmeca's articles of incorporation and a power of attorney executed in favor of Andre Gazaniol. However, some procedural formalities were omitted in the opening of the account, as signature cards and account agreements were not forwarded to Olmeca for execution until approximately five months after the account had been opened. While MHT forwarded these cards and account agreements to Olmeca through BP on February 1, 1980, Olmeca claims it never received the documents, and nothing was returned to MHT.

 On February 27, 1980, Andre Gazaniol notified BP to instruct MHT to close Loaned's accounts and transfer the remaining funds to the new Olmeca account. BP relayed such instructions in a cover letter to MHT, and Fleming implemented them. Until the events surrounding the allegedly negligent transfers took place, every action in the Loaned and Olmeca accounts had been similarly based on written instructions from Olmeca's offices, translated and transmitted to MHT via BP.

 In March, 1981, Pierre Gazaniol, Andre's nephew, and Louis Edmund Gazaniol, Andre's son, appeared at the New York office of MHT and presented Fleming with a document entitled "Escritura No. 1515 of February 12, 1981" (hereinafter "power of attorney"). Louis Edmund Gazaniol's signature authority had been removed from Loaned's account in June of 1978, pursuant to Andre Gazaniol's instructions as relayed by BP. The power of attorney, which purported to give Pierre and his grandmother power over the Olmeca accounts, was protocolized by Olmeca's registered agent in Panama, but contained only typed signatures and did not contain stamps indicating that it had been filed in the Panamanian public registry. The parties contest the legal validity of the document under Panamanian Law.

 The facts surrounding Fleming's treatment of this power are hotly contested. According to Fleming, she could not read or did not recognize the document, which was written in Spanish, and gave it to her supervisor, Henry Bewer, to review. Fleming remembers that Bewer told her that the document gave Pierre Gazaniol a power of attorney over the account. Henry Bewer's deposition testimony states that it would have been "highly unlikely" for him to reach this conclusion after a cursory review of the document, and he claims to have advised Fleming to discuss the purported power with BP. Fleming had received a similar power of attorney executed in favor of Andre Gazaniol in connection with the opening of the Loaned accounts, and had forwarded it to MHT's legal department for examination. The next day, acting on the authority of the power of attorney, Fleming permitted Pierre Gazaniol to execute signature cards, sign an account agreement and direct MHT to stop rolling over regularly scheduled time deposits in the account. Although Fleming did not tell Pierre Gazaniol of these certificates of deposit, Pierre Gazaniol knew that these funds would be soon credited to Olmeca's account.

 On March 30, 1981, approximately two weeks after the power was first presented, Fleming made a business trip to Switzerland and met with Joseph and Stanley Abensur, BP's managing directors. While both parties concede that Fleming had a conversation with Stanley Abensur on April 10, 1981, where the subject of power arose, the contents and character of the discussion is in doubt, Fleming's deposition testimony on the issue is equivocal, and Olmeca has not produced counter testimony of Stanley Abensur on the issue. Fleming claims that she "mentioned" that Pierre Gazaniol gave her a document which purported to give him power of attorney over Olmeca's account. Abensur reportedly confirmed that Pierre was a member of the Gazaniol family and expressed no reservations concerning MHT's receipt of the document. Olmeca characterizes this conversation as "incidental," and "informal" observing that Fleming did not show the power of attorney to Stanley Abensur and was not seeking approval for transfer of funds based on the power because no such request had been made.

 When Fleming returned to MHT she found a letter dated April 3, 1981 from Pierre Gazaniol requesting her to transfer $890,000, or approximately 50% of the Olmeca account balances, to a numbered account at MHT's Zurich branch. On April 14, 1981 Fleming made the transfer. Pierre Gazaniol subsequently withdrew these funds from MHT's Zurich branch on April 21, 1981 and they have not been recovered. The parties are also in dispute as to the documentation of this transfer. Both parties concede that on April 14, 1981, MHT mailed a debit advice for the account to Olmeca via BP in the amount of $890,000. However, neither Fleming nor MHT has been able to determine exactly when the Olmeca account statements were sent to BP, although MHT does state that the statements were mailed "shortly after" April 30, 1981 and no later than May 6, 1981.

 The second transfer request was dated May 21, 1981, when Pierre Gazaniol instructed MHT to transfer $805,000 to Olmeca's account at BP. This transfer occurred seven weeks after the debit advice was mailed to BP after the first transfer, and four weeks after MHT allegedly mailed the account statements to forward to BP. On June 3, 1981, MHT made the requested transfer and debited the account, and mailed a similar debit statement to Olmeca via BP. These funds were transferred to Olmeca's account at BP and on April 23, 1981, June 4, and June 5, BP, acting on the same power of attorney which had been presented to MHT, paid Pierre Gazaniol $830,075 from the Olmeca account at BP.

 DISCUSSION

 Summary Judgment

 A motion for summary judgment may not be granted "unless the entire record shows a right to judgment with such clarity as to leave no room for controversy and establishes affirmatively that the adverse party cannot prevail under any circumstances." Heyman v. Commerce and Industry Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir. 1970). The Second Circuit strictly applies these rules, Rodrigues v. Village of Larchmont, 608 F. Supp. 467, 471 (D.C.N.Y. 1985), reserving summary judgment for cases which present no genuine issues of material fact. This strict standard is applied in recognition of the fact that summary judgment deprives the non-moving party of the opportunity for a full factual development of the record through trial, see Jaroslawicz v. Seedman, 528 F.2d 727, 731 (2d Cir. 1975), and the severity of its consequences requires the district courts to resolve all reasonable inferences in favor of the party opposing the motion. United States v. Diebold, 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962) (per curiam); United States v. One Tintoretto Painting Entitled "The Holy Family with Saint Catherine and Honored Donor," 691 F.2d 603, 606 (2d Cir. 1982).

 After thoroughly reviewing the record, neither MHT nor Olmeca has met its burdens of demonstrating that no material disputed facts exist on the issues which they propose for summary judgment. These issues present questions of due care, reasonableness and negligence which are particularly suited to resolution by jury. A brief sketch of the central arguments presented in these motions is necessary to demonstrate the materiality of these disputed facts.MHT's Motion

 MHT claims that Olmeca is equitably estopped from contesting both the first and second transfers from the account, because MHT, through Fleming's conversation with Stanley Abensur, gave notice of the power of attorney to BP which was bound, as Olmeca's agent, to transmit this information to Olmeca. It is claimed that Olmeca is therefore estopped from challenging the transfers because it had imputed knowledge of the impending fraud led MHT to rely on the validity of the power of attorney. To establish this equitable estoppel in New York, MHT must demonstrate that:

 1. Olmeca had actual or constructive knowledge of the real facts; 2. Olmeca demonstrated conduct which amounted to a false representation or concealment of material facts which gives the impression that the facts are other than as asserted. 3. Olmeca intended or expected that such conduct would be relied on by MHT. 4. MHT lacked the knowledge and means of acquiring knowledge of the real facts. 5. MHT relied on the conduct of the party to be estopped. 6. MHT acted in such a way as to prejudicially change his position.

 United States v. Bedford Associates, 491 F. Supp. 851, 866-67 (S.D.N.Y. 1980), aff'd in part and rev'd in part on other grounds, 657 F.2d 1300 (2d Cir. 1981), cert. denied, 456 U.S. 914, 102 S. Ct. 1767, 72 L. Ed. 2d 173 (1982), quoting State Bank of Albany v. Fioravanti , 70 A.D.2d 1011, 418 N.Y.S.2d 202 ...


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