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March 19, 2003


The opinion of the court was delivered by: Shira A. Scheindlin, United States District Judge


Tomaz Mendes Regatos, a citizen of Brazil, is suing the Commercial Bank of New York*fn1 and North Fork Bank as its successor-in-interest*fn2 (collectively, "CBNY" or the "Bank"), seeking reimbursement in the amount of $600,000 for two allegedly unauthorized wire transfers out of his account. The Bank now moves for summary judgment under Federal Rule of Civil Procedure 56, claiming that Regatos is estopped from seeking reimbursement because he failed to comply with the notice provision of an agreement between the parties. This case presents an important question of first impression: whether the one year period to object to an erroneous funds transfer provided for in Article 4A of the Uniform Commercial Code may be shortened by agreement.


The following facts are undisputed, or where disputed, presented in the light most favorable to Regatos, the non-moving party.*fn3

On July 11, 1997, Regatos opened a deposit account with CBNY in his name and the names of his wife and daughter. See Application, attached to Def. 56.1 Stmt. The Account Agreement accompanying the application, which Regatos signed on the bottom of each page, includes the following language:

The Bank will, unless the depositor has authorized to the contrary, send to the depositor at his address of record not less frequently than quarterly, a statement of accounts accompanied, when applicable, by items paid in support of the debit entries on such statement. The depositor will exercise reasonable care and promptness in examining such statement and items to discover any irregularity including, but not limited to, any unauthorized signature or alteration and will notify the Bank promptly in writing of any such discovery, and in no event more than fifteen (15) calendar days subsequent to the time that such statement and items were first mailed or available to the depositor. In those situations in which the depositor has authorized the Bank to hold his correspondence, this section shall apply as if the depositor received such statement on the date shown on the statement. . . .
Account Agreement, Terms and Conditions, attached to Def. 56.1 Stmt., ¶ 8 (emphasis added).

In addition to the Account Agreement, the Bank contends that Regatos agreed to an additional form, entitled "Account Information," in which Regatos gave CBNY consent to hold his bank statements, rather than mail each one to him. Unlike the Account Agreement, Regatos never signed this form and claims that he has never seen it. See Affidavit of Tomaz Mendes Regatos ("Regatos Aff. "), Ex. 2 to Appendix to Plaintiff's Contentions of Disputed Facts ("Pl. App."), ¶ 5 ("Not only is my signature missing from that page, but also no part of the page is in my handwriting. Evidently this page is an additional form that was filled out by a bank employee after the agreement was signed.").

Regatos admits, however, that he had a conversation with Joao Almada, a director of CBNY, in which Almada informed Regatos that he would be provided with documents related to his account only upon request. See Deposition of Tomaz Mendes Regatos ("Regatos Dep."), Ex. C to the Badillo Aff., at 10-11. Regatos claims that, at the time he opened the account, Almada informed him that it was CBNY's practice to retain the monthly account statements of its Brazilian customers. See Regatos Aff. ¶ 5. Regatos admits that he requested and received bank extracts on a monthly basis in 1997, and as needed in 1998, 1999, 2000 and 2001. See Regatos Dep. at 11-12. In 2001, Regatos requested the bank extract only two or three times, once or twice in January, February or March and once on August 9. See id. at 13.*fn4

Pursuant to the Account Agreement, Regatos was permitted to make wire transfers out of his New York CBNY account from his home in Brazil without ever dealing directly with the New York office. See Affidavit of Rachelle Abadi ("Abadi Aff.").*fn5 Regatos described the procedure he used to effectuate such transfers as follows. First, Regatos would sign a payment order form and fax it to the CBNY representative office in Sao Paulo, Brazil. See Regatos Dep. at 43-44. He would then follow up with a phone call to Abadi, confirming that she had received the fax. See id. at 44. In the rare instances when Regatos would not call right away, Abadi would call him on his cell phone to confirm. See id. Regardless of who initiated the phone call, Regatos would then verbally approve the amount of the payment order and authorize Abadi to execute the transaction. See id. After receiving confirmation, Abadi would fax the payment order form to the New York office. In New York, a CBNY employee would check the signature on the faxed payment order against Regatos' signature card, which the Bank kept on file. See Abadi Aff. ¶ 2; see also Deposition of Nelson Badillo ("Badillo Dep.") at 37.*fn6 This procedure — sending a facsimile followed by a call-back — was instituted by Regatos. See Badillo Dep. at 45. CBNY did not provide Regatos with a password or algorithm for purposes of identification. See id.

The procedure used by Regatos was confirmed by Abadi. In her affidavit, Abadi stated that

[t]he Sao Paulo office regularly followed the practice of not forwarding a customer's payment order facsimile to New York unless there was telephonic confirmation in Sao Paulo that the customer had in fact sent the facsimile payment order. This confirmation could be in a telephone call by the customer to the Sao Paulo office or by a call from the office to the customer. In the case of a payment order sent to the Sao Paulo office by Mr. Regatos, after following such steps, I would countersign the order, assign an order number and forward it to CBNY in New York for processing.
Abadi Aff. ¶ 5.

On March 23, 2001, $450,000 was wired out of Regatos' CBNY account to Citibank New York.*fn7 See 3/23/01 Account Statement, attached to Def. 56.1 Stmt. On April 6, 2001, another $150,000 was wired to Citibank from Regatos' account. See 4/25/01 Account Statement, attached to Def. 56.1 Stmt. In both cases, the transfers represented more than half of the money in the account.

Regatos contends that he neither initiated nor authorized these transfers. See Regatos Dep. at 35. According to Regatos, the Sao Paulo office never called him to confirm the payment orders initiating these transfers, and he would not have authorized either transfer if he had been called. See id. According to the Bank, the payment orders in issue were authentic and the transfers were authorized. See Abadi Aff. ¶ 6 ("I do not remember originating the specific transactions here in issue, but I have examined the payment orders here in issue. They bear my signature and order numbers, and based on our office procedures I am certain that telephonic verification of these payment orders would have been received by the Sao Paulo office before dispatching them to New York."); Badillo Dep. at 63 (stating that the client's signature was the basis for the Bank's position that the transfers were authorized). Regatos notified CBNY of these allegedly improper transfers on August 9, 2001, almost five months after the first relevant account statement became available (and four months after the second became available), but on the same day that he received actual notice of the transfers. See Def. 56.1 Stmt. ¶ 5.


Rule 56 of the Federal Rules of Civil Procedure provides for summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002).*fn8

The party seeking summary judgment has the burden of demonstrating that no genuine issue of material fact exists. See Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). In turn, to defeat a motion for summary judgment, the non-moving party must raise a genuine issue of material fact. To do so, she "`must do more than simply show that there is some metaphysical doubt as to the material facts,'" Caldarola, 298 F.3d at 160 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)), and she "`may not rely on conclusory allegations or unsubstantiated speculation.'" Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 428 (2d Cir.), cert. denied, 534 U.S. 891 (2001) (quoting Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998)). See also Gayle, 313 F.3d at 682. Rather, the non-moving party must produce significant admissible evidence that supports her pleadings. See First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289-90 (1968). In this regard, "[t]he `mere existence of a scintilla of evidence' supporting the non-movant's case is also insufficient to defeat summary judgment." Niagara Mohawk Power Corp. v. Jones Chem., Inc., 315 F.3d 171, 175 (2d Cir. 2003) (quoting Anderson, 477 U.S. at 252).

In determining whether a genuine issue of material facts exists, the court is to construe the evidence in the light most favorable to the non-moving party and draw all inferences in that party's favor. See Niagara Mohawk, 315 F.3d at 175. Accordingly, the court's task is not to "weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. Summary judgment is therefore inappropriate "if there is any evidence in the record that could reasonably support a jury's verdict for the non-moving party." Marvel, 310 F.3d at 286 (emphasis added) (citing Pinto v. Allstate Ins. Co., 221 F.3d 394, 398 (2d Cir. 2000)).


In support of its motion for summary judgment, the Bank advances only one argument: that Regatos' failure to object to the wire transfers within fifteen days of the issuance of the statements reflecting them, as required by the Account Agreement, estops him from asserting this claim. In response, Regatos argues that (1) because he never agreed to the provisions instructing the Bank to hold his mail, he was denied notice of the transfers; (2) that even if he did agree to the hold mail order, the fifteen day notice period is unenforceable, and (3) that even if the fifteen day notice period is enforceable, the Bank did not act with ordinary care in making the transfers.

A. Article 4-A of the Uniform Commercial Code Controls Wire Transfers
As an initial matter, the parties disagree over which section of New York's Uniform Commercial Code ("UCC") governs the instant dispute. Regatos urges the application of Article 4 (entitled "Bank Deposits and Collections"), while the Bank argues that Article 4-A ("Funds Transfers") applies.*fn9 The Bank is correct.

Article 4-A "applies to funds transfers defined in Section 4-A-104," unless those funds transfers are governed by the Electronic Fund Transfer Act of 1978, 15 U.S.C. § 1693 et seq. ("EFTA"). N.Y. U.C.C. § ...

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