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Domestic Bank v. Urbaez

Superior Court of Rhode Island

March 25, 2014


Providence County Superior Court

For Plaintiff:Paul M. Sanford, Esq.; Benjamin C. Caldwell, Esq.

For Defendant:Douglas J. Emanuel, Esq.; Frank A. Mayer, III, Esq.;Herbert F. DeSimone, Jr., Esq.



In the within action, Johanny Urbaez (Urbaez) carried out a kiting scheme using mostly Memo Money Order Co., Inc.'s (MEMO) money orders at Domestic Bank (Domestic).[1] Both Domestic and MEMO have suffered losses as a result of Urbaez's conduct, and at issue is who bears responsibility between them.[2] Before this Court is Domestic's Super. R. Civ. P. 56 motion for summary judgment on Counts I-V of the Second Amended Claim of Intervenor MEMO against Domestic (MEMO's Second Amended Claim) and on Count I of Domestic's Amended Counterclaim. Domestic also moved for dismissal of Counts VI and VII of MEMO's Second Amended Claim pursuant to Super. R. Civ. P. 12(b)(6). MEMO cross-moved for summary judgment on all counts of Domestic's Amended Counterclaim and on Counts IV and V of MEMO's Second Amended Claim.


Facts and Travel

Domestic is a federally chartered bank with a principal place of business in Cranston, Rhode Island. MEMO is a Pennsylvania corporation licensed to do business in Rhode Island. Urbaez conducted his banking at Domestic, where he was a customer since 2000. Urbaez and the Money Order Defendants maintained multiple accounts at Domestic.[3]

In October 2006, Urbaez individually and as President of Johnny Cash Check Cashing, Inc. (Johnny Cash)[4] entered into a Personal Money Order Trust Agreement (Trust Agreement) with MEMO, whereby Urbaez and Johnny Cash would serve as special agents and trustees for the benefit of MEMO. The Trust Agreement imposed various conditions on how Johnny Cash was to handle funds associated with the sale of MEMO money orders (Money Order Funds), including that Johnny Cash was to hold Money Order Funds separate and apart from other funds of the Money Order Defendants. Initially, MEMO retrieved the funds from the sale of money orders deposited with Domestic by an Automatic Clearing House (ACH) electronic funds transfer that MEMO was able to initiate on its own accord. However, in March 2009, MEMO changed its policy so that all future transfers of Money Order Funds were accomplished by wire transfer, initiated by Johnny Cash.

The fraudulent activity by Johnny Cash took place in May 2009, when Johnny Cash deposited by remote capture[5] device forged items into the Money Order Defendants' accounts at Domestic.[6] Included in these forged items were MEMO money orders that Johnny Cash deposited between May 11, 2009 and May 18, 2009. Before the fraudulent activity was detected, Domestic presented the MEMO money orders to MEMO's bank, BancFirst Stratford (BancFirst) for payment. BancFirst honored and paid approximately $1.2 million of MEMO money orders. However, BancFirst returned to Domestic three hundred thirty-seven (337) MEMO money orders totaling $235, 737.49 pursuant to a stop payment instruction ordered by MEMO on May 20, 2009.

During the month when the fraudulent activity took place, Domestic was investigating the various Money Order Defendants' accounts. On May 11, 2009, Domestic increased its internal monitoring of the accounts based on an unusually large cash deposit made by Johnny Cash. (Jenkins Dep. 16:20 – 16:22, Nov. 18, 2010.) On May 15, 2009, a Domestic bank teller was instructed to ask Johnny Cash why cash withdrawals were necessary, in response to which Johnny Cash gave "a legitimate response." On May 16, 2009, after learning that Johnny Cash had made another large withdrawal, Domestic froze all of the Money Order Defendants' accounts. This freeze was implemented on Monday, May 18, 2009. Domestic met with Johnny Cash on May 18, 2009, regarding the freeze, and Domestic requested documentation from Johnny Cash to substantiate his need for access to the funds. Johnny Cash did not provide the documentation to Domestic, and the freeze stayed in place until the accounts were closed.

Domestic's Amended Counterclaim against MEMO arises from the returned and unpaid 337 MEMO money orders that were issued by the Money Order Defendants. Domestic asserts a claim that MEMO breached its obligation as the drawer of the money orders under G.L. 1956 § 6A-3-414 (Domestic Count I). Domestic also asserts a tortious interference with business relations claim (Domestic Count II) that is pled in the alternative, should MEMO be found not to be the issuer/drawer of the MEMO money orders. Finally, Domestic alleges negligence against MEMO (Domestic Count III).

In its Second Amended Claim, MEMO asserts seven claims against Domestic. Those claims are conversion (MEMO Count I), aiding and abetting (MEMO Count II), [7] unjust enrichment (MEMO Count III), [8] negligence pursuant to Article 3 of the Uniform Commercial Code (UCC) (MEMO Count IV), breach of implied warranties (MEMO Count V), violation of the Rhode Island Uniform Fiduciaries Act (RIUFA) (Count VI), and an additional claim of conversion (Count VII).[9]

II Standard of Review


Summary Judgment

"Summary judgment is a proceeding in which the proponent must demonstrate by affidavits, depositions, pleadings and other documentary matter . . . that he or she is entitled to judgment as a matter of law and that there are no genuine issues of material fact." Palmisciano v. Burrillville Racing Ass'n, 603 A.2d 317, 320 (R.I. 1992) (citing Steinberg v. State, 427 A.2d 338 (R.I. 1981)). The court, during a summary judgment proceeding, "does not pass upon the weight or the credibility of the evidence but must consider the affidavits and other pleadings in a light most favorable to the party opposing the motion." Id. (citing Lennon v. MacGregor, 423 A.2d 820 (R.I. 1980)). Moreover, "the justice's only function is to determine whether there are any issues involving material facts." Steinberg, 427 A.2d at 340. The court's purpose during the summary judgment procedure is issue finding, not issue determination. O'Connor v. McKanna, 116 R.I. 627, 359 A.2d 350 (1976). Therefore, the only task for the judge in ruling on a summary judgment motion is to determine whether there is a genuine issue concerning any material fact. Id.

"When an examination of the pleadings, affidavits, admissions, answers to interrogatories and other similar matters, viewed in the light most favorable to the party opposing the motion, reveals no such issue, the suit is ripe for summary judgment." Id. "[T]he opposing parties will not be allowed to rely upon mere allegations or denials in their pleadings. Rather, by affidavits or otherwise they have an affirmative duty to set forth specific facts showing that there is a genuine issue of material fact." Bourg v. Bristol Boat Co., 705 A.2d 969, 971 (R.I. 1998). However, it is not an absolute requirement that the nonmoving party file an affidavit in opposition to the motion. Steinberg, 427 A.2d at 338. If the affidavit of the moving party ...

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