King v. Bank of New York Mellon Corp.
957 F. Supp. 2d 680
E.D. Va.2013Background
- Five Bearer CDs, dated July 27, 1976, each for $1,000,000, issued by FNBC and payable to Bearer, matured July 28, 1977 with $5,329,513.90 paid to ITC.
- Morgan Guaranty Trust Company of New York, as FNBC's agent, paid the $5.3M to ITC and stamps were placed on the CDs' back.
- ITC's Money Market Safekeeping Department stamp on the CDs, plus a Morgan Guaranty credit ticket, evidence the 1977 payment and safekeeping arrangement.
- Plaintiffs, successors of the father, seek $5.3M plus accruing interest from BNYM, asserting rights as current holders of the Bearer CDs.
- BNYM moved for summary judgment contending the 1977 payment discharged all obligations and ITC’s stamp does not confer rights to receive funds; plaintiffs cross-moved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did ITC’s stamp create Bearer Receipts entitling payment to plaintiffs? | King family entitled to funds via CD Receipts. | No CD Receipts; no legal basis for revival or transfer. | No; no statutory or case law supports Bearer Receipts theory. |
| Does ITC’s stamp constitute a payment guaranty under U.C.C.? | Stamp guarantees prior endorsements and payment. | Stamp only confirms prior endorsements; not a guaranty. | No; stamp not a payment guaranty under U.C.C. |
| Are plaintiffs third-party beneficiaries to a contract between FNBC and ITC requiring payment to holders? | ITC and FNBC formed contract for ITC to pay holders; plaintiffs are beneficiaries. | No evidence of such contract; no beneficiary status. | No; insufficient evidence of contract or beneficiary rights. |
| Do quantum meruit or unjust enrichment claims survive when funds were paid and discharged long ago? | Equitable relief due for improper retention of funds. | No enrichment at plaintiffs’ expense; no link to plaintiffs’ funds. | No; unsupported by record; claims fail. |
| Did the 1977 payment discharge FNBC and ITC from further liability under U.C.C.? | Discharge occurred only if surrender occurred or if not properly discharged. | Payment discharged liability; proper under U.C.C. §§ 3-603, 3-601. | Yes; the 1977 payment discharged both issuers and ITC/BNYM. |
Key Cases Cited
- United States v. Guar. Trust Co. of N.Y., 293 U.S. 340 (U.S. 1934) (guaranty of prior indorsements means no more than validity of endorsements)
- Sec.-First Nat. Bank of Los Angeles v. United States, 103 F.2d 188 (9th Cir. 1939) (express guaranty of prior endorsements adds nothing to liability)