Royal Arcanum Hosp. Assn. of Kings County, Inc. v Herrnkind

[*1] Royal Arcanum Hosp. Assn. of Kings County, Inc. v Herrnkind 2012 NY Slip Op 50562(U) Decided on March 28, 2012 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 28, 2012
Supreme Court, Kings County

Royal Arcanum Hospital Association of Kings County, Inc., Plaintiff,

against

William Herrnkind and Capital One Bank, Defendants.



25561/08



Attorney for Plaintiff:

Robert H. Law, III, Esq.

80 Business Park Drive, Suite 304

Armonk, NY 10504

Attorney for Defendant:

Joseph C. Savino, Esq.

Lazer, Aptheker, Rosella & Yedid, P.C.

225 Old Country Road

Melville, NY 11747

Carolyn E. Demarest, J.

In this action by plaintiff Royal Arcanum Hospital Association of Kings County, Inc. (Royal Arcanum) against defendants William Herrnkind (Herrnkind) and Capital One, N.A., sued herein as Capital One Bank (Capital One) seeking to recover the sum of $185,080.89 plus interest on this amount from July 2002 based on allegedly unauthorized withdrawals of funds from its bank account, Capital One moves, pursuant to CPLR 3212, for summary judgment dismissing the complaint against it.

Royal Arcanum is a New York not-for-profit corporation. According to the minutes of a January 27, 1989 meeting (the 1989 minutes) of Royal Arcanum, at which the topic was the election of a new slate of officers, Frank J. Vassallo (Vassallo) was [*2]elected the president, William Herrnkind was elected the vice-president, and Joseph A. Rugilio (Rugilio) was elected the treasurer of Royal Arcanum. The 1989 minutes stated: "all checks to be signed by two officers," and that Vassallo, Herrnkind, and Rugilio were authorized to sign checks. The 1989 minutes also listed seven trustees on the board of trustees for Royal Arcanum, which included Salvatore Pezzolanti (Pezzolanti), who has submitted his affidavit in opposition to the motion.

In April 1989, Royal Arcanum opened a checking account (Account 2550) and a certificate of deposit (CD) (Account 2744) with Greenpoint Bank (Greenpoint). The signature card accompanying Account 2550 listed Herrnkind, Vassallo, and Rugilio as signatories on the account. There were no additional instructions or paperwork accompanying the signature card for Account 2550. Monthly account statements for Account 2550, which reflected all withdrawals and deposits made on this account, were sent by Greenpoint to Royal Arcanum, c/o Rugilio, at his address at 834 Bay Ridge Avenue in Brooklyn, until September 2003, and Rugilio's name and address were listed on these monthly account statements. Monthly account statements for Account 2550, which have been submitted by Capital One, show that, beginning with the August 25, 2002 to September 24, 2002 statement, through August 23, 2003, the only charges were monthly $3 inactivity fees and a May 21, 2003 charge of $1.22 for an order of checks, and the only additions to this account were interest payments.

On the August 24, 2003 to September 16, 2003 monthly account statement, the name listed on the monthly account statements for Greenpoint Account 2550 was changed to Herrnkind, and was sent to Royal Arcanum, c/o Herrnkind, at his address at 455 97th Street, in Brooklyn. According to Royal Arcanum, Vassallo died in 1996 and Rugilio died in 2003,[FN1] although the bank was never so notified until commencement of this action. This statement reflects that, on September 16, 2003, Account 2550 was closed out and Royal Arcanum opened a new checking account with Greenpoint (Account 2189), and a total of $186,143.36 was transferred from Account 2550 into Account 2189. The signature card for Account 2189 listed Herrnkind as the sole authorized signatory. The signature card provided as follows:

"I/We, the undersigned, secretary/partners [of] Royal Arcanum . . . (hereinafter called the Organization') Do Hereby Certify that at a meeting of the board of directors/partnership, duly called and held on the 16 day of Sept. 2003, the following resolutions were unanimously adopted and are now in full force and effect to wit:

"It is hereby Resolved, That:

"GreenPoint . . . is hereby designated as a depository of this Organization, and any [*3]officer/partner, agent or employee of the Organization is authorized to deposit one of the funds . . .

"Any (Maximum of Two) 1 . . . of the above named authorized signers of this Organization are hereby authorized to draw checks against, or make in branch withdrawals from, this account and any one (1) of the above named authorized signers is authorized to act in all other matters relating to this account including but not limited to ATM, telephone transfer, on-line banking transactions and all matters specified on the reverse side of this card (which are incorporated into and made a part of this resolution). This authority shall continue in force until written notice of its revocation shall be given to the Bank."

Directly below the resolution appears the signature of Herrnkind as the secretary/partner of Royal Arcanum and dated September 16, 2003.

Monthly account statements for Account 2189, reflecting all withdrawals and deposits made on that account, were sent by Greenpoint to Royal Arcanum, c/o Herrnkind, at 455 97th Street in Brooklyn, and Herrnkind's name and address were listed on them. These statements, beginning with the statement period September 16, 2003 to September 30, 2003, show that no deposits were made except for the initial $186,143.36 deposit of the proceeds of Account 2550, plus monthly interest, and that all withdrawals were made by ATM. The ATM withdrawals reduced the amount in Account 2189 to $176,651.70 as of November 30, 2005.

In December 2005, Royal Arcanum opened a CD (Account 7912) with North Fork Bank, which had acquired Greenpoint, Account 2189 was closed, and the funds totaling $176,651.70 were transferred from Account 2189 into Account 7912. The signature card for Account 7912, which set forth the business title of Royal Arcanum and its address as 455 97th Street in Brooklyn, listed Herrnkind as the sole signatory for this account. Since Account 7912 was a CD, there were no monthly account statements.

On November 7, 2006, Royal Arcanum opened Account 1838 at North Fork Bank, closed Account 7912, and transferred the balance of $182,965.37 from Account 7912 into Account 1838. The signature card for Account 1838 set forth the business title of Royal Arcanum, listed its address as 455 97th Street, and showed Herrnkind as the sole signatory on that account. Specifically, the signature card stated that "[t]he Bank may recognize any 1 signature(s) written below in payment of funds of the transaction of any business for this account." The only signature listed below was that of Herrnkind, as "president." Monthly account statements for Account 1838 were sent to Royal Arcanum, c/o Herrnkind at 455 97th Street. These monthly account statements reflected numerous withdrawals by Herrnkind, all made by ATM, between November 2006 and August 2007. Effective August 1, 2007, North Fork Bank was merged into Capital One. According to the August 31, 2007 monthly statement, all of the funds in Account 1838 had been [*4]depleted and there was a negative balance of -$3.16 as of August 31, 2007. Account 1838 thereafter continued to incur service charges and had only a growing negative balance.

Annexed to plaintiff's complaint is a certification dated May 15, 2008 signed by Salvatore Pezzolanti, as secretary and treasurer of Royal Arcanum, that a meeting of Royal Arcanum was held on February 13, 2008, at which officers and trustees were elected and two resolutions were adopted. The certification stated that Pezzolanti was elected as secretary and treasurer of Royal Arcanum, that a new president, Theresa Pezzolanti, and a vice-president, Lawrence Vassallo, were elected, and five trustees were elected. The certification further stated that the first resolution adopted was that Pezzolanti and the newly elected president and vice-president were authorized to sign checks, with only one signature required, and that the second resolution authorized the Pezzolantis and Vice President Vassallo to obtain bank account information.

By letter dated May 28, 2008 addressed to Greenpoint, Royal Arcanum's attorney requested information as to whether Account 2550 was open or closed and its current balance, and, if Account 2550 were closed, he sought information as to the date the withdrawal was made from the account, the amount of the withdrawal, whether it was done by a check, and the signatures on the check for the withdrawal. He also asked, in that letter, to be furnished with a copy of the check or other withdrawal instrument. By fax dated July 10, 2008 addressed to Capital One, Royal Arcanum's attorney stated that he had sent a letter to Capital One requesting certain information about Account 2550 on June 2, 2008, but that Capital One had refused to provide the information on this account. In this July 10, 2008 fax, plaintiff's attorney further stated that "[t]his letter is to serve as notice that there may have been inappropriate activity on this account," and that Royal Arcanum would "be holding Capital One and any person who fraudulently withdrew funds accountable for any and all inappropriate activity on this account." This July 10, 2008 fax did not specify the claimed fraudulent withdrawals made, their amounts, or on what dates they occurred.

On September 8, 2008, Royal Arcanum filed this action against Herrnkind and Capital One. Royal Arcanum, in its complaint, alleges that at some time prior to July 25, 2002, it had opened a bank account at Greenpoint, a predecessor bank of Capital One, and that its July 2002 bank statement showed an account balance of $185,080.89.[FN2] Royal Arcanum further alleges that pursuant to the 1989 minutes, two signatures of its officers were required for withdrawal of funds, and that the only officers who maintained the authority to sign banking transactions, including checks, were Vassallo, Herrnkind, and [*5]Rugilio. Royal Arcanum claims that its withdrawal requirements were made known to Greenpoint at the time its account was opened through a copy of the 1989 minutes. Plaintiff acknowledges that Vassallo died in 1996 and Rugilio died in 2003, and only Herrnkind is still alive. Royal Arcanum asserts that no other officers were authorized to sign checks prior to the meeting held on February 13, 2008. Royal Arcanum seeks to recover the sum of $185,080.89, which it alleges was the account balance in July 2002, and to hold Herrnkind and Capital One responsible for any and all allegedly inappropriate and unauthorized withdrawals of funds from its bank account.

Capital One has interposed an answer, which contains denials and asserts various affirmative defenses. Herrnkind has not appeared in this action and apparently has never been served. There has been an exchange of documents, and Capital One asserts that it has provided Royal Arcanum with all of the documentary evidence in its possession that Royal Arcanum has demanded.

In support of its motion, Capital One has submitted the sworn affidavit of Regina Scire, an associate for Capital One, in which she asserts that she has reviewed Capital One's records, which include the records of its predecessors, North Fork Bank and Greenpoint, pertaining to Royal Arcanum's accounts. Ms. Scire attests that Capital One does not have a copy of the 1989 minutes and that there is no record of Royal Arcanum providing the 1989 minutes to Capital One or any of its predecessors. Ms. Scire further attests that her review of Capital One's records do not reveal any correspondence either to or from Royal Arcanum regarding the 1989 minutes, and that it was neither the custom, nor the practice, of Greenpoint in 1989 to request internal corporate minutes in connection with the opening of accounts. Ms. Scire also states that there is no record of any notification by Royal Arcanum that Vassallo or Rugilio was deceased until this action was commenced. Ms. Scire specifically attests that, to the best of her knowledge, Capital One was first notified in or about June 2008 of Royal Arcanum's allegations that unauthorized transactions were conducted on Royal Arcanum's accounts between 2003 to 2008, that prior to June 2008, Capital One had no knowledge that any allegedly unauthorized transactions had occurred on Royal Arcanum's accounts and Capital One had never received any sort of complaint from Royal Arcanum regarding unauthorized actions with respect to its accounts.

Capital One, in its motion, argues that Royal Arcanum's claims against it must fail because Herrnkind had actual authority to withdraw and transfer funds, and failing actual authority, he, at the very least, had apparent authority to withdraw and transfer funds, and, in any event, Royal Arcanum ratified Herrnkind's actions. Capital One further contends that it is entitled to summary judgment dismissing Royal Arcanum's claims as a matter of law, relying upon case law, the Uniform Commercial Code (the UCC), and the federal Electronic Fund Transfer Act (15 USC § 1693 et seq.) (the EFTA).

In opposition to Capital One's motion for summary judgment, Royal Arcanum has submitted an affidavit by Salvatore Pezzolanti, in which he states that he was a trustee of [*6]Royal Arcanum prior to being elected its secretary-treasurer at the election on February 13, 2008, having been elected a trustee on January 27, 1989, the same day as the resolution to require two signatures on all checks. Referencing the signature card for Account 2189, opened on September 16, 2003 solely by Herrnkind, Pezzolanti asserts that, since this signature card refers to a meeting of Royal Arcanum's board of directors held on September 16, 2003 in which it was resolved that Greenpoint was designated the depository of Royal Arcanum, corporate minutes must have been routinely requested in connection with the opening of all accounts, and that the bank therefore must have been supplied with the 1989 minutes. Pezzolanti points to the fact that the date listed for this alleged meeting of Royal Arcanum's board of directors was the same date that the signature card was signed, but he attests that no board of directors meeting was held on that date, maintaining that the only meeting of Royal Arcanum's board of directors prior to February 13, 2008 was the January 27, 1989 meeting. Pezzolanti insists that the 1989 minutes were in Greenpoint's possession on September 16, 2003, as evidenced by a copy of the 1989 minutes submitted by Capital One on this summary judgment motion, bearing a handwritten notation of 9/16/03.

Royal Arcanum maintains that Greenpoint and its successors, including Capital One, failed to follow, abide by, and apply the two-signature requirement, making all banking transactions starting in 2003, and up to 2008, unauthorized. Royal Arcanum argues that since Capital One and its predecessors were unaware that Vassallo and Rugilio were deceased, but had actual knowledge of the requirement of two signatures, any banking transactions by Herrnkind alone after 2003 were unauthorized. Royal Arcanum contends that Capital One should be held liable for the $190,000 withdrawn from its accounts from 2003 to 2008 without the required two signatures. Responding to Capital One's argument, Royal Arcanum asserts that Herrnkind had no actual or apparent authority to alone withdraw and transfer funds, since the 1989 minutes stated that all checks were required to be signed by two officers, and argues that the court should search the record, pursuant to CPLR 3212 (b), and grant summary judgment to plaintiff based upon the money withdrawn in these allegedly unauthorized banking transactions.

In reply, Capital One notes that in 2003, when the signature card for Account 2189 was signed, and at which time Royal Arcanum claims Herrnkind supplied Greenpoint with the 1989 minutes, both Rugilio and Vassallo were already deceased, although this was not made known to the bank. Capital One also points out that the signature card for Royal Arcanum's original account, Account 2550, does not contain any notation or record regarding a requirement that two signatures were needed in order to effect transactions on that account. In addition, the later signature cards executed by Herrnkind, on behalf of Royal Arcanum, for Account 2189, Account 7912, and Account 1838 likewise do not indicate that two signatures were required in order to conduct banking transactions.

While Royal Arcanum points to the boilerplate statement on the signature card for Account 2189 requesting a certification that a board of directors meeting had been held [*7]by an account holder, the language does not evidence a request for the submission of internal meeting minutes, nor does it indicate that such minutes had been supplied. Moreover, this signature card, as set forth above, explicitly stated that only one named authorized signer for Royal Arcanum (i.e., Herrnkind) was authorized to draw checks against, or make withdrawals from, that account, including ATM withdrawals, and to act in all other matters, and that such authority would continue in force until written notice of its revocation was given to the bank. Therefore, the express language of this signature card negates Royal Arcanum's assertion that Greenpoint was informed and agreed that two signatures were required for banking transactions. Moreover, since the funds at issue were removed solely through ATM withdrawals, the requirement that all checks were to be signed by two officers, pursuant to the 1989 minutes, does not address the issue of the allegedly unauthorized withdrawals. Although plaintiff's arguments suggest that an issue of fact exists regarding whether the banks were made aware of the two-signature requirement set forth in the 1989 minutes, this issue is of no consequence in light of the undisputed fact that plaintiff failed to comply with statutory obligations to give actual timely notice of any disputed transactions.

UCC 1-201 (43) defines an "[u]nauthorized" signature" as "one made without actual, implied or apparent authority." Here, Royal Arcanum cloaked Herrnkind with such actual, implied, or apparent authority and bestowed upon him the power to act as its agent since he was a duly authorized signatory on its accounts and received the monthly account statements. Presumptively aware that the only additional authorized signatories, Vassallo and Rugilio, were deceased, plaintiff took no action to provide the names of additional authorized signatories to the bank, leaving Herrnkind with sole authority to act. The board of directors is charged with the duty to oversee the business of plaintiff and to make appropriate inquiry regarding the status of plaintiff's finances, at least annually (see N-PCL 717 (a); Manheim Dairy Co. v Little Falls Natl. Bank, 54 NYS2d 345, 365 [Sup Ct, Herkimer County 1945]). Significantly, no objection to Herrnkind's transactions was made by Royal Arcanum for at least five years. Royal Arcanum must bear its loss, as it was in the best position to prevent such loss through the exercise of reasonable care in the supervision of its officer, Herrnkind, and its bank accounts (cf. Getty Petroleum Corp. v Am. Express Travel Related Servs. Co., 90 NY2d 322, 327-28 [1997]; Kersner v First Fed. Sav. & Loan Assn. of Rochester, 264 AD2d 711, 713-714 [2008]). Royal Arcanum substantially contributed to Herrnkind's alleged "unauthorized" withdrawals by apparently failing to monitor its own accounts and Herrnkind's actions (see Carmine Rest. v Citibank, 300 AD2d 149, 149 [2002]; Allen A. Funt Prods. v Chemical Bank, 63 AD2d 629, 629-630 [1978], affd 47 NY2d 741 [1979]).

Furthermore, under the common law, Royal Arcanum clothed Herrnkind with apparent authority by permitting him to act as a solitary authorized signatory from 2003 to 2008 (see Hallock v State of New York, 64 NY2d 224, 231 [1984]) and ratified Herrnkind's actions by its lack of timely objection to Herrnkind's withdrawals made solely [*8]by him (see generally C.E. Towers Co. v Trinidad and Tobago [BWIA Intern.] Airways Corp., 903 F Supp 515, 523 [SD NY 1995]). It is undisputed that Herrnkind was a designated signatory on all of the accounts and neither Capital One nor its predecessors were ever advised that any improper withdrawals were made by him. The fact that Herrnkind may have unilaterally exercised control over Royal Arcanum's accounts did not relieve Royal Arcanum's board of directors of its duty to monitor Royal Arcanum's accounts for any activity by Herrnkind which it did not authorize. Royal Arcanum cannot impose this duty upon Capital One, when its own board of directors failed to inform Capital One of Herrnkind's allegedly unauthorized activity in a timely manner.

Significantly, Royal Arcanum received monthly statements with respect to its accounts. A bank cannot be held responsible for losses caused by a customer's failure to timely examine statements with respect to ATM withdrawals (see Kramer v Chase Manhattan Bank, 235 AD2d 371, 371 [1997]). UCC 4-406 (1) provides as follows:

"When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its customer or otherwise in a reasonable manner makes the statement and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover [its] unauthorized signature or any alteration on an item and must notify the bank promptly after discovery thereof."

Capital One has submitted copies of Royal Arcanum's bank statements, dating back to 2002, which show that they were mailed to Royal Arcanum and made available for its inspection. It is undisputed that Capital One or its predecessors sent Royal Arcanum these statements of accounts and that they were sent to the person and address designated on the signatory card as the authorized representative of Royal Arcanum. Despite the fact that Royal Arcanum was aware that Vassallo and Rugilio were deceased, leaving only Herrnkind to oversee its accounts, there is no evidence that Royal Arcanum, prior to the July 10, 2008 fax from Royal Arcanum's attorney and the September 8, 2008 commencement of this action, made any effort whatsoever to notify Capital One that an unauthorized person was controlling its accounts, or to challenge any transaction as unauthorized.

UCC 4-406 (4) bars claims to recover amounts paid on an unauthorized signature where the customer fails to give notice of the unauthorized signature within one year of the time the account statement was made available (see Woods v MONY Legacy Life Ins. Co., 84 NY2d 280, 284 [1994]; Vantrel Enters. v Citibank, 272 AD2d 609, 610 [2000]; Matter of Hill, 32 Misc 3d 1243[A], 2011 NY Slip Op 51693[U], *6 [Sur Ct, Queens County 2011]). This section codifies the common law duty of a depositor to examine bank drafts and statements furnished by the bank and to report an unauthorized signature within a reasonable time (see Woods, 84 NY2d at 284). UCC 4-406 (4), in pertinent part, [*9]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 [its] unauthorized signature . . . is precluded from asserting against the bank such unauthorized signature or indorsement . . ."

Here, many of the disputed withdrawals alleged to be unauthorized were reflected on the monthly account statements which were sent to Royal Arcanum (c/o Herrnkind) more than one year prior to the date notice of the lack of authorization was given to Capital One [FN3] (see UCC 4-406 [4]; Monreal v Fleet Bank, 95 NY2d 204, 206 [2000]; Garage Mgt. Corp. v Chase Manhattan Bank, 22 AD3d 432, 432-433 [2005]; New Gold Equities Corp. v Chemical Bank, 251 AD2d 91, 91 [1998]). The statement dated May 31, 2007, the last provided more than one year prior to the notice given July 10, 2008, shows numerous ATM withdrawals, leaving a balance, on May 31, 2007, of $54,595.13. Thus, applying the principles of UCC 4-406 to the ATM withdrawals at issue, since Royal Arcanum never advised Capital One or its predecessors of improper unauthorized withdrawals as required by this section until (at the earliest) July 10, 2008, nor did it clearly identify the items claimed to have been improperly paid, it would be precluded from making a claim against defendant Capital One for any unauthorized payments made by Capital One or its predecessors in good faith more than a year before receiving notice of the allegedly unauthorized activity (see Monreal v Fleet Bank, 95 NY2d at 208-09; New Gold Equities Corp., 251 AD2d at 91).

In this case, however, even claims for withdrawals made within the year prior to notice are precluded. UCC 4-406 (2), in pertinent part, provides:

"(2) If the bank establishes that the customer failed with respect to an item to comply with the duties imposed on the customer by subsection (1) the customer is precluded from asserting against the bank

(a) [its] unauthorized signature . . . on the item if the bank also establishes that it suffered a loss by reason of such failure; and

(b) an unauthorized signature . . . by the same wrongdoer on any other item paid in good faith by the bank after the first item and statement was available to the customer for a reasonable period not exceeding fourteen calendar days and before the bank receives notification from the customer of any such unauthorized signature . . ." [*10]

Here, Capital One suffered a loss by reason of Royal Arcanum's failure to notify it of the allegedly unauthorized withdrawals since it made payments from the accounts. And, numerous substantial allegedly unauthorized withdrawals by Herrnkind (the same wrongdoer) were paid in good faith by Capital One after the statement reflecting the first unauthorized withdrawals was made available to Royal Arcanum, going back to September 24, 2003, when Herrnkind withdrew $200 from Account 2189 at Greenpoint, as reflected in the statement dated September 30, 2003. Thus, before Capital One received notification of any unauthorized withdrawal, Capital One reasonably relied upon the history of unchallenged activity by Herrnkind over a period of four years, resulting in preclusion of Royal Arcanum's claims under UCC 4-406 (2). Consequently, due to Royal Arcanum's failure to examine its bank statements and to timely notify Capital One of the alleged unauthorized withdrawals by Herrnkind in accordance with the duty imposed upon it by the UCC, its claims fail as a matter of law.

All of the post-2003 withdrawals from Royal Arcanum's accounts, however, were made by the use of an ATM card. Although UCC Article 4 is clearly applicable to the accounts at issue, Capital One argues that ATM withdrawals at issue are subject to the EFTA (15 USC § 1693 et seq.) and its implementing regulation, designated as "Regulation E" (12 CFR Part 205). While it is true that the term "consumer" is defined in the EFTA as "a natural person" (15 USC § 1693a [6]), and the EFTA governs ATM withdrawals to and from bank accounts "established primarily for personal, family, or household purposes" (15 USC § 1693a [2]; see also 12 CFR 205.2 [b] [1]) and is thus inapplicable to business entities like plaintiff (see Ironforge.com v Paychex, Inc., 747 F Supp 2d 384, 402 [WDNY 2010]; Regatos v North Fork Bank, 257 F Supp 2d 632, 638 n 10 [SDNY 2003], affd 431 F3d 394 [2d Cir 2005]), the EFTA and Regulation E are nevertheless instructive and persuasive in this commercial context.

Pursuant to 15 USC § 1693a (7):

"the term "electronic fund transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account. Such term includes, but is not limited to, point-of-sale transfers, automated teller machine transactions, direct deposits or withdrawals of funds, and transfers initiated by telephone."

Thus, the EFTA "was designed to specifically cover withdrawals made from an ATM" (Hospicomm, Inc. v Fleet Bank, N.A., 338 F Supp 2d 578, 586 [ED Pa 2004]).

15 USC § 1693f establishes the procedures for error resolution. Pursuant to 15 USC § 1693f (f) (1), "an error consists of . . . an unauthorized electronic fund transfer." 12 CFR 205.11(a) (1) (i) similarly defines an error as an "unauthorized electronic fund transfer." The EFTA, in 15 USC § 1693a (12), defines "unauthorized electronic fund transfer" as follows: [*11]

"the term "unauthorized electronic fund transfer" means an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate such transfer and from which the consumer receives no benefit, but the term does not include any electronic fund transfer (A) initiated by a person other than the consumer who was furnished with the card, code, or other means of access to such consumer's account by such consumer, unless the consumer has notified the financial institution involved that transfers by such other person are no longer authorized, (B) initiated with fraudulent intent by the consumer or any person acting in concert with the consumer, or (C) which constitutes an error committed by a financial institution."

15 USC §1693f (a) requires a customer to give notice of alleged errors to the financial institution within 60 days after the institution has transmitted documentation of the transfers to the customer. Specifically, this section mandates that when a consumer believes an unauthorized electronic fund transfer or other error has occurred, the consumer must provide, within 60 days of receiving documentation such as an account statement, oral or written notice to a financial institution setting forth the identifying account number, the amount of the error, and the basis for the consumer's belief that the account contains an error (15 USC § 1693f [a]). 15 USC § 1693g (a) provides that reimbursement need not be made to a customer for losses the institution establishes would not have occurred absent the customer's failure to report an unauthorized transfer within 60 days, "or in extenuating circumstances such as extended travel or hospitalization, within a reasonable time under the circumstances" (15 USC § 1693g [a]; see also Rallis v First Gulf Bank, N.A., 2008 WL 4724745, *3 [ND Fla 2008]).

With respect to electronic fund transfers, 12 CFR 205.6 (b) (3) similarly "requires that a consumer report an unauthorized electronic fund transfer that appears on a periodic statement within 60 days after transmittal of the account statement" (Matter of Hill, 32 Misc 3d 1243[A], 2011 NY Slip Op 51693[U], *6 [Sur Ct, Queens County 2011]). 12 CFR 205.6 (b) (3) expressly states as follows:

"(b) Limitations on amount of liability. A consumer's liability for an unauthorized electronic fund transfer or a series of related unauthorized transfers shall be determined as follows:

. . .

(3) Periodic statement; timely notice not given. A consumer must report an unauthorized electronic fund transfer that appears on a periodic statement within 60 days of the financial institution's transmittal of the statement to avoid liability for subsequent transfers. If the consumer fails to do so, the consumer's liability shall not exceed the amount of the unauthorized transfers that occur after the close of the 60 days and before notice to the institution, and that the institution establishes would not have occurred had the consumer notified the institution within the 60—day period . . ." [*12]

Thus, under the EFTA and Regulation E, a bank customer has the duty to notify his or her bank that an account error exists within 60 days of receiving a bank statement or other notification (see Rusthoven v TCF Nat. Bank, 2009 WL 2171105, *3 [D Minn 2009]; Gale v Hyde Park Bank, 2007 WL 541946, *2 [ND Ill 2007]; Overby v Chase Manhattan Bank & J.P. Morgan Chase, 351 F Supp 2d 219, 225 [SD NY 2005]; McCray v Susquehanna Bank, 2004 WL 3661390, *3-4 [D Md 2004], affd 122 Fed Appx 642, 2005 WL 518268 [4th Cir 2005]). Upon receiving such 60-day notice, the financial institution is then obliged to investigate and respond to such notice within 10 business days (see McCray, 2004 WL 3661390, *3). Any action brought under the EFTA must be brought "within one year from the date of the occurrence of the violation" (15 USC § 1693m [g]). "In light of the ten-day statutory period within which a financial institution must provide a written response," the one-year Statute of Limitations begins to run ten days after the consumer provides the 60-day oral or written notice of the alleged error to the financial institution (Berenson v Natl. Fin. Servs., LLC, 403 F Supp 2d 133, 145 [D Mass 2005]; see also Golden-Koether v JPMorgan Chase Bank, N.A., 2011 WL 6002979, *2 [D NJ 2011]). Consequently, even if a plaintiff satisfies the prerequisite of providing notice within 60 days of receiving the bank statement showing the allegedly unauthorized transactions, a court, under 15 USC § 1693m (g), would only have jurisdiction over such claims if the action is brought "within one year [plus ten days] from the date of the occurrence of the violation" (see Overby, 351 F Supp 2d at 225).

Although the EFTA was enacted to protect the individual consumer, the burdens placed upon such bank customer by the statute should be equally applied to the commercial cumstomer, which is presumably more sophisticated and better able to comply with the notice obligations of the law. Applying the EFTA and Regulation E to the case at bar, Royal Arcanum had a duty to notify Capital One of any errors or unauthorized ATM transactions within 60 days after receiving documentation of the electronic transfer. It is undisputed that although the bank statements reflecting the allegedly unauthorized transactions were sent to Royal Arcanum's designated signatory, Herrnkind, no later than August 31, 2007, Royal Arcanum failed to notify Capital One of any unauthorized transactions until July of 2008, well beyond 60 days after receiving these statements. Thus, under the EFTA and Regulation E, Capital One is not legally liable to reimburse Royal Arcanum for the allegedly unauthorized transfers, all of which occurred well after plaintiff had been provided with the statements evidencing such transfers and to which plaintiff failed to respond within the 60 days (see Rusthoven, 2009 WL 2171105, *3).

Furthermore, Royal Arcanum is unable to show that an "unauthorized transaction" occurred (see 15 USC § 1693a [12]; Rusthoven, 2009 WL 2171105, *3; Moore v Southtrust Corp., 2005 WL 4663636, *8-9 [ED Va 2005], affd 172 Fed Appx 533 [4th Cir Va]). Herrnkind, as the designated signatory, was given actual authority to open the account and, as a consequence, to initiate the ATM transfers. He was possessed of the [*13]ATM card providing access to Royal Arcanum's funds. At no time prior to Herrnkind's withdrawals did Royal Arcanum notify Capital One or its predecessors that transfers by Herrnkind were no longer authorized (see 15 USC § 1693a [12]). Since the ATM withdrawals at issue in this case do not qualify as unauthorized transactions, Royal Arcanum cannot show that an error occurred within the meaning of the EFTA. Thus, Royal Arcanum's claim must fail as a matter of law.

Accordingly, Capital One's motion for summary judgment dismissing Royal Arcanum's complaint as against it is granted.

This constitutes the decision, order, and judgment of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: Capital One asserts that, according to an internet Social Security death index website, Rugilio actually died in 2002.

Footnote 2: This bank statement for Account 2550, referred to in the complaint, for the period of July 25, 2002 to August 24, 2002, which was sent to Royal Arcanum c/o Rugilio, actually shows an account balance of $185,080.99. There were no withdrawals on this statement other than an inactivity fee.

Footnote 3: The last ATM withdrawals that effectively depleted plaintiff's Account 1838 occurred on August 18 and 21, 2007, as reflected in the statement dated August 31, 2007.