Accadia Site Contracting, Inc. v. Northwest Savings Bank

Filing 57

DECISION AND ORDER denying 39 Motion for Summary Judgment; adopting Report and Recommendations in its entirety re 50 Report and Recommendations.; finding as moot 55 Motion to Adjourn; and further ordering that the deadline for Northwest to file its answer to the complaint is extended until twenty-one (21) days after the date of entry of this decision and order. Signed by Hon. Michael A. Telesca on 2/8/17. (JMC)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

ACCADIA SITE CONTRACTING, INC.
Plaintiff,
DECISION and ORDER
No. 1:14-cv-341(MAT)(JMM)

-vsNORTHWEST SAVINGS BANK,
Defendant.

I.

Introduction
Accadia Site Contracting, Inc. (“Accadia” or “Plaintiff”),

represented by counsel, instituted this action against Northwest
Savings

Bank

(“Northwest”

or

“Defendant”)

alleging

breach

of

contract and negligence based on Defendant’s charging of over
$700,000

in

forged

or

fraudulently

signed

drafts

against

Plaintiff’s account. This matter is before the Court upon the
Report and Recommendation, dated December 5, 2016, issued by
Magistrate

Judge

Jeremiah

M.

McCarthy

(“the

R&R”)

denying

Defendant’s renewed motion for summary judgment.
II.

Background
On April 30, 2010, Paul Marinaccio (“Marinaccio”) opened a

commercial account (“the Account”) at Northwest on behalf of his
company, Accadia. The main dispute is whether Marinaccio received
and assented to the Deposit Account Agreement and Disclosure
(“DAAD”), which includes a notice provision absolving Northwest of
liability

unless

certain

stringent

notice

periods

are

met.

Unauthorized

drafts

made

payable

to

Debra

Gramza

(“Gramza”),

Accadia’s corporate secretary, were drawn against the Account until
July

2013,

when

the

fraud

was

uncovered.

Gramza’s

account

privileges were rescinded at that time, and she pleaded guilty to
second degree larceny and related offenses arising from her theft
of about $700,000 from Accadia from December 12, 2008, to July 29,
2013.
Gramza accomplished the fraud by using a stamp, bearing
Marinaccio’s signature, that had been created for a separate
restaurant

business

he

owned.

The

last

check

drawn

against

Accadia’s account made payable to Gramza was dated July 22, 2013.
The first written notice of the alleged forgeries was made by an
October 10, 2013, letter from Accadia’s counsel.
Northwest initially filed a pre-answer motion for summary
judgment, and Accadia cross-moved for a stay to conduct discovery
necessary to oppose the motion. Limited discovery ensued, and the
parties subsequently agreed to withdraw their pending motions.
Northwest then filed renewed motion for summary judgment. As noted
above, Magistrate Judge McCarthy issued an R&R recommending the
denial

of

Defendant’s

renewed

summary

judgment

motion

for.

Defendant filed objections, and Plaintiff filed a response. For the
reasons discussed below, the Court adopts in full Magistrate Judge
McCarthy’s R&R, and denies Northwest’s renewed motion for summary
judgment.

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III. Standard of Review
To preserve a claim for review by the district court, the
party must make sufficiently specific objections to the R&R. E.g.,
Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002).
“In reviewing the R&R of a dispositive matter from a magistrate
judge, the district court ‘may adopt those portions of the Report
to which no objections have been made and which are not facially
erroneous.’” Nansaram v. City of N.Y., No. 12-CV-5038 NGG RLM, 2015
WL 5518270, at *2 (E.D.N.Y. Sept. 17, 2015) (quotation and citation
omitted); see also FED. R. CIV. P. 72(b), Advisory Comm. Notes (when
a party makes no objection, or only general objections to a portion
of an R&R, the district judge reviews it for clear error or
manifest injustice). When a party makes specific objections, the
district judge must undertake a “de novo determination of those
portions

of

the

recommendations

report
to

or

which

specified

objection

is

proposed
made[,]”

findings
28

or

U.S.C.

§ 636(b)(1)(C), and “may . . . receive further evidence[.]” Id.;
see also Grassia v. Scully, 892 F.2d 16, 19 (2d Cir. 1989)
(discussing § 636(b)(1)(B)).
IV. Discussion
A.

Northwest’s Objection No. 1: No Issue of Fact as to
Accadia’s Actual Receipt of the DAAD

The R&R concluded that there is a triable issue of material
fact as to whether Marinaccio received the DAAD at the time he
opened the account at Northwest based on the following evidence in
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the record: Marinaccio did not recall receiving the DAAD at the
time the account was opened; Marinaccio did not sign any document
expressly acknowledging his receipt of the DAAD; and Northwest
employee

Harenda

had

no

specific

recollection

of

meeting

Marinaccio at the time the account was opened or of providing him
with the DAAD.
Northwest objects to this conclusion on a number of grounds.
First, Northwest asserts that Harenda was “absolutely positive”
that she gave the DAAD to Marinaccio. At her deposition, Harenda
was asked, “As you sit here today, can you be absolutely sure that
you gave Mr. Marinaccio the account disclosure documents?” Harenda
replied, “I give everyone their disclosures.” (Harenda: 80-81).
Counsel asked if she was “absolutely positive[,]” and Harenda
replied, “Yes.” (Id.). On subsequent questioning by Accadia’s
counsel, Harenda admitted she had no specific recollection of
meeting with Marinaccio at the time of the account opening, because
she opened up “hundreds” of accounts, and in fact had no specific
recollection of meeting with anybody from Accadia Site Contracting
when that account was opened. (Harenda: 80-81). Harenda maintained
that she did provide Marinaccio with the DAAD because “[she] opened
their

account.

[She]

hand[s]

the

disclosures

to

everyone.”

(Harenda: 81).
Northwest thus is relying on an internal policy or procedure
to establish actual receipt of the DAAD. Accadia argues that the

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evidence does not establish the existence of a policy, reliably and
consistently

followed

by

Northwest’s

employees,

sufficient to

establish the presumption of receipt. Accadia notes that when
questioned about a procedure for disseminating account documents to
customers,

Harenda

testified

that

she

would

“print

all

the

documents,” “go over them with the customer,” and give “that” to
the

customer.

(Harenda:

33).

Although,

at

the

time

of

her

deposition, Harenda had a “basic like outline of the documents that
print[,]” during an account opening, this outline was not in use in
2010, when Accadia opened its account. (Harenda: 40). Harenda also
testified

that the

DAAD

would

be

pre-filled

by

Northwest’s

computer system with the name of the Depositor (here, Accadia) and
the Financial Institution (here, Northwest). (Harenda: 43-44).
However, the DAAD in the record here does not contain any of that
information.

(See DAAD, Exhibit (“Ex.”) C to Affidavit of Linda

Panaro (“Panaro Aff.”) [Dkt #41-3, p. 2 of 9]).
Northwest also argues customers agree to abide by the DAAD
when they sign signature pad which, Harenda testified, “contains
words

saying

that

you’re

agreeing

to

the

deposit

account

disclosures.” (Harenda: 49-50). As Accadia points out, Harenda was
not “absolutely positive” that she gave the DAAD to Marinaccio;
rather, she testified at her deposition that she had no specific
recollection of giving the DAAD to anyone from Accadia. (Harenda:
80-81). Importantly, Northwest has not produced any image or

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document that depicts the language or the “words” that supposedly
appeared on the signature pad. Harenda acknowledged that when the
customer signed the signature pad, purportedly agreeing to the
DAAD, the customer “hasn’t seen [the DAAD] yet”, and stated she
“d[id]n’t know” if there was a “way to show that that was the
customer’s signature acknowledging and agreeing to that form versus
one of the other forms[.]” (Harenda: 55). Furthermore, none of the
documents executed by Marinaccio at the time of the account opening
included any reference to the DAAD. (See Exs. A, B & D to Panaro
Aff. [Dkt ##41-1, 41-2, 41-4]).
B.

Northwest’s Objection 2: No Issue of Fact as to Accadia’s
Inquiry Notice of the DAAD

The R&R concluded that there was a genuine issue of material
fact as to whether Accadia had inquiry notice of the DAAD based on,
inter alia, Harenda’s testimony that the DAAD was provided to the
customer until

after

all

of

the necessary

signatures

by

the

customer, including a signature on the signature pad, had been
obtained by a Northwest employee. (R&R at 7 (citing Harenda: 46,
52, 54-55, 64-65); Schnabel v. Trilegiant Corp., 697 F.3d 110, 123
n. 14 (2d Cir. 2012) (“But even had the email more clearly
indicated that it contained an arbitration clause, the fact that it
was delivered after enrollment and did not require any affirmative
acknowledgment of receipt, undermines Trilegiant’s assertion that
the plaintiffs received sufficient notice to bind them to the
additional

terms

through

their

inaction.”)

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(internal citation

omitted)). Likewise, as the R&R noted, Harenda did not provide any
explanation to the customers about the substance or significance of
the DAAD, stating that she simply advised them that “by signing the
signature pad, you’re agreeing to the terms and conditions of the
account that you’re about to open.” (R&R at 8 (citing Harenda:
47)). The Court finds that the R&R did not err in concluding that
there was a triable issue of fact as to whether Accadia had inquiry
notice of the DAAD. See Hirsch v. Citibank, N.A., No. 12 CIV. 1124
DAB, 2014 WL 2745187, at *17 (S.D.N.Y. June 10, 2014) (“Defendant’s
notice argument also fails because Citibank's employees indicated
that they provide Client Manuals to clients only after clients sign
the signature card. When signature cards are presented to clients
to

sign,

furthermore,

employees

do

not

explain

their

significance.”) (internal citations to record omitted), aff’d, 603
F. App’x 59 (2d Cir. 2015).
C.

Northwest’s Objection 3: No Issue of Material Fact as to
Whether the DAAD Was Incorporated by Reference

The R&R found that the applicability of the incorporation-byreference doctrine could not be resolved on summary judgment
because, inter alia, the DAAD was not identified with sufficient
clarity in the Electronic Deposit Agreement (“EDA”) signed on
behalf of Accadia. (R&R at 9 (citing PaineWebber Inc. v. Bybyk, 81
F.3d 1193, 1201 (2d Cir. 1996) (“New York follows that common law
rule by ‘requir[ing] that the paper to be incorporated into a
written

instrument

by

reference
-7-

must

be

so

referred

to

and

described in the instrument that the paper may be identified beyond
all reasonable doubt.’”) (quoting Chiacchia v. National Westminster
Bank USA, 124 A.D.2d 626, 628, 507 N.Y.S.2d 888, 889–90 (2d Dep’t
1986) (emphasis and brackets in original)). The Court agrees with
the R&R’s analysis and conclusion that the EDA, which does not
refer to the DAAD by its complete title, and only “generically
refers to incorporation of the terms of the ‘Customer’s Deposit
Agreement(s),’” did not identify the DAAD “‘beyond all reasonable
doubt’” as required by New York law. (R&R at 9).
D.

Northwest’s Objection 4: Accadia Did Not Comply with
Uniform Commercial Code § 4-406(4)

Northwest argues that as a result of finding material issues
of fact regarding the enforceability of the DAAD against Accadia,
the R&R erroneously failed to address the question of whether
Accadia is barred from suit based on its failure to provide written
notice of the allegedly unauthorized signatures within the period
prescribed by contract or statute. (Def’s Objs. at 11 (citing R&R
at 10 n. 7 (finding it unnecessary to address whether Accadia’s
July 2013 oral notice of the fraud was sufficient)). However,
Northwest omits mention of the fact that R&R found that it had not
actually provided argument regarding the timeliness of the notice
under Uniform Commercial Code (“UCC”) § 4-406(4), but had instead
only argued the limitations period set forth in the DAAD. (R&R at
4 n. 3 (“Although Northwest’s argument in support of summary

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judgment is captioned ‘Plaintiff Failed to Provide Timely Written
Notice Under the UCC or [DAAD],’ its argument focuses on the
limitations period of the DAAD. Even after this was highlighted in
Accadia’s opposition, Northwest did not attempt to clarify this
issue. Therefore, I have treated Northwest’s motion as relying
solely on the . . . DAAD.”) (internal citations to record omited).
Accadia argues that the Court should reject the argument asserted
in Objection 4 because it was not properly raised in Northwest’s
original motion papers and, in contravention of F.R.C.P. 72(c) and
this

District’s

Local

Rules,

Northwest

did

not

provide

an

explanation of why this Court should consider the argument now.
Although “[w]hether a party may raise a new legal argument, or
present an entire previously unasserted cross-motion or opposition,
for the first time in objections to an R&R has not yet been decided
in this Circuit[,]” Amadasu v. Ngati, No. 05-CV-2585 RRM LB, 2012
WL 3930386, at *5 (E.D.N.Y. Sept. 9, 2012) (citation omitted), some
district courts in this Circuit have adopted the six-factor test
set forth in Williams v. McNeil, 557 F.3d 1287, 1291–92 (11th Cir.
2009). See Amadasu, 2012 WL 3930386, at *5 (collecting cases). One
of the factors favoring consideration of the new argument is that
“the resolution of the new legal issue is not open to serious
question,” id. at *6 (citation omitted).
Here, as Accadia contends, the UCC § 4-406(4) notice issue is
not clearly

settled

in

the

New

-9-

York

courts,

and

Northwest’s

position is based on an incomplete analysis of New York law. UCC
§ 4-406(4) provides as follows:
Without regard to care or lack of care of either the
customer or the bank a customer who does not within one
year from the time the statement and items are made
available to the customer (subsection (1)) discover and
report his unauthorized signature or any alteration on
the face or back of the item or does not within three
years from that time discover and report any unauthorized
indorsement is precluded from asserting against the bank
such unauthorized signature or indorsement or such
alteration.
N.Y. U.C.C. Law § 4-406(4). Thus, by its terms, UCC § 4-406(4) does
not require the notice of a fraudulent or forged signature to be in
writing.
Northwest relies on the first sentence of Woods v. MONY Legacy
Life Ins. Co., 84 N.Y.2d 280 (1994), stating that “UCC 4-406(4)
bars suit to recover amounts paid by a bank on a forged instrument
unless the customer gives written notice of the forgery within one
year of the time the account statement was made available.” Id. at
282 (emphasis supplied). However, the form of the notice by the
bank customer was not at issue in Woods. See Robinson Motor Xpress,
Inc. v. HSBC Bank, USA, 37 A.D.3d 117, 124, 826 N.Y.S.2d 350
(2d Dep’t 2006) (“Viewed in this light, we do not read the Court of
Appeals’ reference to ‘written’ notice in Woods to be controlling
with respect to the question before us. The issue of ‘written’
notice was simply not presented in that case. Since a contrary rule
is consistent with both the language of the statute and UCC

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jurisprudence generally, we conclude that written notice of the
unauthorized signature is not required to satisfy the requirements
of UCC 4-406(4). Accordingly, the Supreme Court erred in granting
the defendant’s motion for summary judgment in this case.”). In the
cases on which Northwest relies, the form of notice was not at
issue, see New Gold Equities Corp. v. Chemical Bank, 674 N.Y.S.2d
41, 41 (1st Dep’t 1998), or the court simply cited the dicta from
Woods and did not conduct an independent analysis, see Ryan v.
Fleet Bank of N.Y., 730 N.Y.S.2d 628, 628 (4th Dep’t 2001).
Accordingly, the Court declines to resolve the newly raised notice
issue

in Defendant’s fourth objection.

E.

Northwest’s Objection 5: No Issue of Material Fact as to
Accadia’s Contributory Negligence

The R&R determined that while “there is evidence in the record
suggesting that Accadia should have been on notice of the fraud and
did not take sufficient action to prevent it, there is also
evidence,

if

credited

by

a

jury,

which

demonstrates

the

reasonableness of Accadia’s conduct.” (R&R at 12). As the R&R
noted, Marinaccio testified that he directed Gramza not to use the
signature stamp, directed another employee to destroy the stamp,
had Accadia’s accountants review its bank statements quarterly,
and, after its bonding company alerted him to an issue with
Accadia’s accounting records, hired another accountant, who found
nothing amiss. (R&R at 12 (citing Marinaccio: 29-30, 36-37)). The
Court agrees with the R&R that this is not one of those “extreme
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situations,” Ortiz v. Rosner, 817 F. Supp. 348, 350 (S.D.N.Y.
1993), where the question of negligence can be resolved as a matter
of law. See INA Aviation Corp. v. United States, 468 F. Supp. 695,
699

(E.D.N.Y.

1979)

(“As

a

general

proposition,

negligence

questions are properly resolved at trial because, upon a motion for
summary judgment, a court may not try issues of fact; it may only
determine whether there are factual issues to be tried.”), aff’d,
610 F.2d 806 (2d Cir. 1979).
V.

Conclusion
For the foregoing reasons, the Court adopts the R&R in full

and

denies

Northwest’s

renewed

motion

for

summary

judgment

(Dkt #39). The Court further orders that the deadline for Northwest
to file its answer to the complaint is extended until twenty-one
(21) days after the date of entry of this decision and order.
SO ORDERED.
S/Michael A. Telesca
HONORABLE MICHAEL A. TELESCA
United States District Judge
DATED:

February 8, 2017
Rochester, New York

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