A federal appeals court breathed life back into a Venezuelan man’s lawsuit that seeks to force his bank to reimburse him for a $329,500 transfer from his account under suspicious circumstances.
Mercantil Commercebank Trust Co., which is owned by a Venezuelan holding company, tried to seek shelter under Florida’s Uniform Commercial Code, claiming customer Roger Chavez and the bank agreed on a “security procedure” that absolved the bank of any liability for fraudulent transfers.
But a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit in a split decision Tuesday overturned a Miami federal magistrate’s decision to grant summary judgment to Mercantil.
The appeals court found the so-called agreed upon security procedure was more akin to an open vault.
“This case is right out of a novel,” said attorney Robert G. Post. “If you knew what happened in this case, it would blow your mind.”
Post represented Chavez along with Carlos A. Romero, Jr., both partners at Post & Romero in Coral Gables. They expect a 2013 trial before U.S. Magistrate Judge Edwin G. Torres in Fort Lauderdale.
Attorney Francis X. Sexton Jr., a partner at Fowler Rodriguez Valdes-Fauli in Coral Gables who was not involved in the case, does a significant amount of banking law. He said the decision is good for consumers because banks normally need to show only that they acted in good faith.
“It’s unusual the consumer wins,” he said. “As a guy who has represented customers in these situations, I like it.”
Certainly, Chavez’s claims could be any bank customer’s worst nightmare.
Chavez traveled to Miami in February 2008 partly because he had not been receiving his account statements from Mercantil. He visited the bank’s Doral branch and made a small deposit. He dropped off his rental car at 6:40 a.m. Feb. 6, 2008, and flew back to Venezuela.
Later that day, the bank said someone purporting to be Chavez went to the Doral branch with a written payment order for $329,500.
The order was processed by a greeter at the bank who sometimes did teller work. The patron wanted the money to be transferred to a beneficiary in the Dominican Republic.
Chavez checked his account online two months later and noticed the payment order. That’s when the case of the missing funds gets sticky.
The bank’s security camera, which would have captured the patron on video, was malfunctioning that day. The Dominican bank provided a notarized contract that Chavez’s representative bought property with the money.
Romero searched Dominican public records and discovered the property owner had been dead for three years and the notary had been dead for five.
When presented with the findings, the Coral Gables-based bank refused to reimburse Chavez.
“We were absolutely stunned,” Post said.
Bank attorneys Joseph D. Perkins and David S. Garbett, partners at Garbett, Stiphany, Allen & Roza in Miami, were out of town and could not be reached for comment by deadline.
Post said the bank suggested Chavez could have made the transfer the day before he left for Venezuela and it was recorded the following day.
The customer’s attorney suspects malfeasance at the bank.
“There’s no question. It was an inside job,” Post asserted.
Post said the bank had a digital copy of Chavez’s passport when he opened the account in 2002. A bank officer had written below a copy of the passport the name “Roger Antonio Chavez” for filing purposes. When the documents came back from the Dominican Republic, the same copy with the same banker’s notation was on it. The only addition was the dead notary’s stamp.
Romero noted: “If the surveillance tape was working and getting everybody coming in that day, then the camera would have recorded that person, and this case would not be here today.”
The bank, whose spokesman did not return a call for comment by deadline, argued on appeal that its agreement with Chavez allowed it to use “any other means” to verify payment instructions.
The bank’s greeter used an identification document and checked the authenticity of the signature on the payment order, and two supervisors signed off on the transaction, the bank said.
Chavez had picked a security option when he opened the account allowing a separate written payment order signed by him to initiate a transfer, but the appellate court said this was an inadequate “commercially reasonable” security procedure.
Circuit Judges Rosemary Barkett and William Pryor and U.S. District Judge Timothy C. Batten Sr. in Atlanta heard the appeal.
Batten joined Barkett in siding with Chavez. He wrote that Chavez never agreed “the bank could choose whatever security procedures it wanted.”
Pryor dissented, finding the bank acted in good faith.
“Under Florida law, Chavez bears the risk of loss for the allegedly fraudulent payment order if he agreed to a commercially reasonable security procedure and the bank relied on that procedure in good faith when it accepted the payment order,” Pryor wrote in dissent.
He said the bank met all the requirements to gain safe harbor under Florida law.
Now the question is whether the case resonates in similar lawsuits where customers sue their banks for fraudulent transfers.
Sexton said the state Legislature may take notice and “tighten up” Florida’s UCC law. Even though the appellate decision is case specific, he said it is similar to other claims against banks by customers seeking reimbursement for fraudulent transfers.
“It’s rare in my experience that a court, let alone an appellate court, looks carefully at what happened in a case like this,” he said.