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Sussex Environmental Health Consultants, LLC v. Citizens Bank

Superior Court of Delaware, Sussex

April 3, 2014

Sussex Environmental Health Consultants, LLC
Citizens Bank

Dear Counsel:

Before the Court is Defendant Citizens Bank's ("Defendant's") Motion for Judgment on the Pleadings against Plaintiff Sussex Environmental Health Consultants, LLC ("Plaintiff"). This Motion is DENIED.

Plaintiff is a Delaware limited liability company. Susan White ("White") serves as its managing member. Plaintiff held two accounts with Defendant, account #7921, a money market account, and account #9755, a checking account. In June 2012, #7921 held approximately $43, 000.00. White only drew on this account once or twice a year. Also in June 2012, White invited a friend of her family, James Poole ("Poole"), a man recently out on work release from the Sussex Correctional Institution, to stay in her home on occasion.

In August 2012, White noticed checks missing from #7921. She confronted Poole, who stated that his uncle had taken the checks, that Poole was attempting to recover the purloined money, and that he had reported the theft to the police. White believed Poole. She also contacted Defendant to report the missing checks, in an effort to determine whether it was necessary for her to file a claim. A representative of Defendant did not advise White to file a claim. White therefore believed that Poole's reporting the matter to the police would settle the situation.

In December 2012, White noticed missing checks from #9755. Poole apparently vanished with more checks and a Jeep Wrangler, which White recovered. On December 27, 2012, White filed reports with the police and Defendant. Defendant later notified Plaintiff that it declined to reimburse the wrongly paid funds.

A Deposit Account Agreement ("Agreement") existed between White and Defendant. In it, White agreed (1) that she would use care in safeguarding unsigned checks against theft or misuse; (2) that she would carefully review her monthly account statements and notify Defendant in writing of any issues within 30 days; (3) that she could not pursue any claims against Defendant if she did not follow the 30-day notification procedure; (4) that she understood that Defendant processed checks automatically, without visual inspection; (5) that Defendant did not fail in exercising ordinary care if it paid a check that was forged in such a manner that a reasonable person could not detect the forgery. Trial for this matter is scheduled for January 5, 2015. Discovery has not yet been performed.

Defendant principally argues that the Agreement bars Plaintiff bringing this action, at least with respect to #7921.[1]

Plaintiff argues that the Agreement does not bar it from bringing this action because Defendant contributed to its loss. From June to September 2012, #7921 experienced an enormous depletion of funds, which Defendant neither spotted nor reported. Also, White informed a representative of Defendant of the missing checks in August 2012, and was advised not to file a claim.

Plaintiff cites Defendant's obligation to act with ordinary care and in good faith.[2] Under local banking standards, which Plaintiff claims control Defendant's duties to its customers, and under White's own experience, live tellers typically inspect all checks and request identification. Evidence exists that this was not done. Plaintiff also notes that one account specifically instructed Defendant to pay out only to authorized signatures. Additionally, #7921 is a money market account that mostly remained dormant.[3] Therefore, White would only view the account once or twice a year, hence her contacting Defendant's representative in August 2012. White did not report a problem until December because that was when she learned of Poole's conduct.[4] Regardless of the Agreement, the facts support a reasonable inference that Defendants did not exercise ordinary care, which Plaintiff must be entitled to prove through discovery.[5]

Defendant counters that Plaintiff's arguments rest heavily on facts not asserted in its complaint, which should thus be ignored. Also, the alleged facts asserted by Plaintiff do not overcome the established facts that White trusted Poole's explanations of the missing funds, that she received regular bank statements that should have notified White of the problem, and that she never informed Defendant of the problem in writing. Additionally, Plaintiff does not allege that Defendant payed a forged check that would be detected as a forgery by a reasonable person.

This Court's Civil Rule 12(c) lays out the standard by which this Court adjudicates a motion for judgment on the pleadings:

After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the Court, the motion shall be treated as one for summary judgment and disposed of as provided in [Civil] Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.[6]

"On such a motion, the Court must accept all the complaint's well-pled as true and construe all reasonable inferences in favor of the non-moving party."[7] This analysis "is almost identical to the standard for a motion to dismiss."[8] The Court will grant the motion "when no material issues of fact exist, and the moving party is entitled to judgment as a matter of law."[9]

Although Plaintiff was bound by its Agreement with Defendant, with which Plaintiff may or may not have complied, Defendant's exercise of ordinary care is a triable issue.[10] Furthermore, despite Plaintiff's assertion of extraneous facts in its brief, [11] Plaintiff's Complaint clearly states that upon learning of the problem, White informed a representative of Defendant of the problem, and was advised not to make a claim for the funds. Such an ...

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