funds transfer because of the added cost, difficulty, and unknown liability attendant upon it." [Def's expert rpt. (Byrnes), FNB mot., exh. 40, PP 25, 26]. Byrne carefully stops short of stating that a funds transfer cannot be conditional.
The disputed funds transfer as contemplated by Piedmont was conditional, and would fall outside the purview of the U.C.C. Article 4A because the instruction was to "state a condition to payment to the beneficiary other than time of payment", which is prohibited by U.C.C. Article 4A-103(a)(1)(i); accord Sheerbonnet, Ltd. v. American Express Bank, LTD., 951 F. Supp. 403, 406 (S.D.N.Y. 1995) as amended (May 01, 1996)(The funds transfer "must not state a condition for payment to the beneficiary other than time".); see also Official Comment following 4A-104, P 3 ("The function of banks in a funds transfer under Article 4A is comparable to the role of banks in the collection and payment of checks in that it is essentially mechanical in nature.")
Another FNB expert, Raymond F. Barry
, claims that "simply stated, there is no such thing as a 'conditional' S.W.I.F.T. of the type apparently envisioned by [Piedmont], nor does the reference to 'MT-100 Field 72' in any way connote a conditional transfer." [FNB expert rpt (Barry). FNB mot., exh. 8, P A]. Barry claims that "an MT-100 is a basic 'message type' (thus the 'MT'), and 'Field 72' is simply a field in the basic MT-100 format in which certain very limited information, restricted to six lines of thirty-five characters each, may be inserted." [Id. ]. One of Piedmont's experts, Hyman Silkes
, agrees that, generally speaking, "the MT-100 S.W.I.F.T. wire is not the appropriate procedure to wire funds on a conditional basis as, on its face, it is not a conditional wire." [Pl's expert (Silkes), FNB mot, exh. 9, at 2]. Silkes pointed out, however, that "it is possible to format a S.W.I.F.T. MT-100 payment order using Field 72 in such a manner that the receiving bank would not make payment except as set forth in the Field 72 instruction. This Field is provided for bank-to-bank information ('BBI'). Additionally, code words are provided specifying for which bank the information is intended." [Id. ].
Defense expert Byrne suggests that the fact that "Mr. Silkes in his expertise was able to structure a transaction which afforded some protection to the target is, however, irrelevant to what actually occurred. It only suggest that Mr. Rivlin should have consulted Mr. Silkes before sending the funds transfer." [FNB expert rpt. (Byrnes), FNB mot., exh. 40, P 39]. The Court disagrees. Although all experts agree that S.W.I.F.T. was not the most appropriate means of conditionally transferring the $ 3M, the record before the Court demonstrates that S.W.I.F.T. was a means of completing a conditional funds transfer. As illustrated by the differing Rivlin, Lee and Holt versions of the funds transfer, there remains a question of material fact as to whether FNB, either through Lee or Holt, represented to Rivlin that the wire room would properly structure a conditional transaction via S.W.I.F.T. The "Application and Agreement" that Rivlin signed provided for the wire room to designate the codes. For that reason, the Court concludes that, for the purposes of the summary judgment motion, the disputed transaction - an unconditional funds transfers -- falls outside the purview of U.C.C. Article 4A. With that in mind, the Court turns to the common law breach of contract and negligence counts.
B. BREACH OF CONTRACT
FNB argues that it had no knowledge of Piedmont, the third party beneficiary of the disputed contract between Rivlin and FNB, thus the plaintiff has no standing to bring the breach of contract action. The Court disagrees.
"The right of the party to a contract to sue when damaged by the other party's violation of it does not depend upon the grant of such right by the terms of the contract itself... The question is, does the [plaintiff] fall within any exception to the general rule that a stranger to a contract may not sue to enforce its terms or to recover damages for a violation thereof?" Marranzano v. Riggs Nat'l Bank of Washington, D.C., 87 U.S. App. D.C. 195, 184 F.2d 349, 350 (D.C. Cir. 1950). "One who is not a party to a contract nonetheless may sue to enforce its provisions if the contracting parties intend the third party to benefit directly thereunder." Western Union Tel. Co. v. Massman Constr. Co., 402 A.2d 1275, 1277 (D.C. 1979). Reading the contract as a whole, the Court must determine whether Piedmont's benefit under the "Application and Agreement for Foreign Transfer" was "intended or incidental." Id. The absence of Piedmont's name on the Agreement is "not fatal to [its] claim, especially when the surrounding circumstances tend to identify the third-party beneficiary." Id.
Although the FNB/Rivlin Application and Agreement for Foreign Transfer-- itself does not mention the plaintiff, Piedmont, by name, it appears undisputed that the wire transfer instructions that allegedly were to be "glued" to the wire transfer contained the name Piedmont. Produced in Piedmont's opposition to FNB's motion for summary judgment is a copy of the "MT-100 Field 72 Cash Backed Conditional S.W.I.F.T. Wire Transfer Procedures" that were given to Holt, and which contains a handwritten notation on the first page identifying Deerfield/Piedmont as the "Transaction Name:" [Piedmont opp., exh. D; Rivlin opp. at 3, n.2]. Moreover, it is undeniable that Rivlin opened a trust account, which by definition is for the benefit of named or unnamed third parties. Accordingly, the Court concludes that the Bank was on sufficient notice that the transfer of funds from an attorney trust account was for the benefit of a third party beneficiary to the Agreement, Piedmont Resolution. Thus, Piedmont has standing to bring this action.
Piedmont also has standing to bring this action as the principal that contracted with FNB through its attorney/agent, Rivlin. "An undisclosed principal may sue and be sued on a contract made by his agent..Even the fact that the agent denies that there is a principal, or represents himself to be the principal, is not sufficient to preclude suit by the undisclosed principal". Cooper v. Epstein, 308 A.2d 781, 783 (D.C. 1973)(citations omitted). Had the "Application and Agreement", by its express terms, provided that it was to "be effective only between the agent and the third party, the undisclosed principal may not enforce the contract" or if it were the intention of the parties (an issue to be determined by the fact finder), then the principal could not sue. Id. (citing, e.g., RESTATEMENT (SECOND) OF AGENCY P 303 (1958)). Here, no express terms precluding suit by Piedmont, the FNB-asserted undisclosed principal, are found in the disputed Agreement; and no Rule 56 evidence has been presented to create a genuine issue of material as to FNB's and Rivlin's lack of intention to preclude a suit by the third-party beneficiary to the trust account and Agreement.
Accordingly, the Court finds that Piedmont has standing both as a third-party beneficiary and as an undisclosed principal to bring the breach of contract action against FNB. Defendant FNB's abandonment of this argument in its reply leads the Court to conclude that FNB concurs with this analysis.
2. Integrated Agreement / Parol Evidence Rule
FNB's second and third arguments in support of its motion for summary judgment on the breach of contract count are: 1.) that the written "Application and Agreement for Foreign Transfer" supercedes prior understanding Rivlin may have had with Lee, or verbal representations made by Lee or Rempe; and, 2.) even if the Court were to consider evidence of FNB's alleged oral agreement to transfer the funds conditionally, the terms of any such agreement are too vague and indefinite to constitute an enforceable contract.
A completely integrated agreement is one "'adopted by the parties as the complete and exclusive statement of the terms of the agreement.'" Howard Univ. v. Good Food Serv., Inc., 608 A.2d 116, 126 (D.C. 1992)(quoting Ozerol v. Howard Univ., 545 A.2d 638, 641 (D.C. 1988) reh'g granted, 555 A.2d 1033 (D.C. 1989)(remanding for reconsideration of complete integration finding to include consideration of a factual stipulation previously overlooked by trial court), and citing RESTATEMENT (SECOND) OF CONTRACTS § 210). The Court's first step in determining whether the "Application and Agreement for Foreign Transfer" exclusively establishes the rights and duties of the parties is to address whether that was what Rivlin and FNB intended of the Agreement. Good Food Serv., Inc., 608 A.2d at 126. If so, the contract is completely integrated, and no additional terms may be considered; if not, the agreement is partially integrated and "'consistent additional terms may be shown.'" Id. (quoting RESTATEMENT (SECOND) OF CONTRACTS § 210 comment a).
This preliminary question of fact, that courts have long called a question of law for the trial court, 1010 Potomac Assoc. v. Grocery Mfr. of Am., Inc., 485 A.2d 199, 205 n.6 (D.C. 1984), "focuses on the intent of the parties at the time they entered into the agreement. 'This intent must be sought where always intent must be sought, namely, in the conduct and language of the parties and the surrounding circumstances. The document alone will not suffice.'" Good Food Serv., 608 A.2d at 126-127 (quoting Ozerol, 545 A.2d 638 at 641, and citing Stamenich v. Markovic, 462 A.2d 452, 456 (D.C. 1983)). In addition to the written Agreement, the Court reviews "'agreements or negotiations prior to or contemporaneous with the adoption of a writing'" to determine whether the contract is completely or only partially integrated. Good Food Serv., 608 A.2d at 127 (quoting RESTATEMENT (SECOND) OF CONTRACTS § 214 & § 210, illustration 1). A merger clause -- the presence or absence thereof, is only a factor in discerning the parties' intent. Good Food Serv., 608 A.2d at 127.
In this preliminary assessment, the parol evidence rule does not apply; it will only "come into play" after (and if) the Court determines that the Agreement is completely integrated. Id. (citing RESTATEMENT (SECOND) OF CONTRACTS § 214 comment a, and Ozerol, 545 A.2d at 641-642). Thus, the inquiry into whether the contract is completely integrated includes a review of extrinsic - parol - evidence that will have to be excluded at trial if the court concludes the contract indeed is completely integrated. Good Food Serv., 608 A.2d at 128 (citing RESTATEMENT (SECOND) OF CONTRACTS § 213).
Of foremost consideration in the construction of the contract is the parties' intentions. Lamphier v. Washington Hosp. Ctr., 524 A.2d 729, 732 (D.C. 1987)(quoting Bolling Fed. Credit Union v. Cumis Ins. Society, Inc., 475 A.2d 382, 385 (D.C. 1984)). If the parties' intent is ambiguous, summary judgment is inappropriate. Good Food Serv., 608 A.2d at 127 n.7 (citing International Bhd. of Painters and Allied Trades v. Hartford Accident and Indem. Co., 388 A.2d 36 (1978)). Generally speaking, if contracting parties have "reduced their entire agreement to writing, the court will disregard and treat as legally inoperative parol evidence of the prior negotiations and oral agreements,'" Stamenich, 462 A.2d at 455 (quoting Giotis v. Lampkin, 145 A.2d 779, 781 (D.C. 1958)), and construe the written contract in such a way to "'give meaning to all of the express terms.'" Construction Interior Sys., Inc. v. Donohoe Co., Inc., 813 F. Supp. 29, 33 (D.D.C. 1992)(quoting Bolling Fed. Credit Union, 475 A.2d at 385). If the "provisions in question are reasonably susceptible of different constructions or interpretations", however, the contract is ambiguous. 1901 Wyoming Ave. Coop. Assoc. v. Lee, 345 A.2d 456, 461 n.7 (D.C. 1975)(citation omitted); accord United States Dep't of Labor v. Insurance Co. of North America, 327 U.S. App. D.C. 383, 131 F.3d 1037, 1042 (D.C. Cir. 1997) (citing Bennett Enters., Inc. v. Domino's Pizza, Inc., 310 U.S. App. D.C. 192, 45 F.3d 493, 497 (D.C. Cir. 1995)).
The contract in dispute in the instant action, the "Application and Agreement for Foreign Transfer", is set out in pertinent part supra at 13. Of the seven numbered paragraphs to the Agreement, the most pertinent to this discussion of ambiguity is no. 5 which provides: "[FNB] may send any message relative to this transfer in explicit language, code or cipher, and it shall not be responsible for errors, delays or defaults in the transmission or delivery of messages in execution of this order by telegraph, cable, wireless, foreign governmental telegraphic services, or by letter, postal remittance by the post office of this or any foreign country, or by any express company, nor shall it be responsible for any loss or damage in consequences of any cause beyond its control, all of which risks are assumed by the purchaser." [FNB mot., exh, 27 (emphasis added)].
This paragraph completely leaves open the exact code language that is to be used in sending the funds transfer. The code language goes to the very heart of the transaction; thus, the contract cannot be said to be completely integrated.
Even if the Court were to consider the written contract completely integrated, based on ambiguous paragraph no. 5, it would still have to permit the jury to look at parol evidence because the contract does not specify the language or code FNB will use to transfer the funds -- conditionally or unconditionally. King v. Industrial Bank of Washington, 474 A.2d 151, 155 (D.C. 1984)(parol evidence is admissible if the court finds that the contract is ambiguous, which is a question of law); see also Good Food Serv., Inc., 608 A.2d at 127 n.8 (quoting II FARNSWORTH ON CONTRACTS § 7.3, at 207)("'Even the finding of a completely integrated agreement does not preclude a showing of a 'collateral agreement,' as long as it does not contradict the main agreement.'"); accord Stamenich, 462 A.2d at 455. The parol evidence that Piedmont asks the Court to consider is consistent with the terms and conditions of the "Application and Agreement"; it simply clarifies those terms, i.e., "message relative to this transfer in explicit language, code or cipher", referenced but not identified in paragraph no. 5 of the Agreement. It does not "'contradict, vary, add to, or subtract from'" the Agreement. Stamenich, 462 A.2d at 455 (quoting Fistere, Inc. v. Helz, 226 A.2d 578, 580 (D.C. 1963)).
As one of FNB's experts (Byrne) points out, the Application and Agreement for Foreign Transfer contains "no provision for a conditional transmission in the form and none is indicated in it as it is filled out." [FNB expert rpt. (Byrne), FNB mot., exh. 40, P 35]. And as Byrne further pointed out: "In taking customer requests for funds transfers, retail banking personnel are trained to assist customers in filling out pre-designed forms and in identifying needed codes. They are not trained nor they provide advice regarding the underlying transaction." [Id. at P 34]. Neither Piedmont (through its agent Reigel) nor Rivlin claim to have sought advice about the underlying transactions, which does appear to have been a scam. The only concern allegedly brought to FNB's attention was the conditional nature of the funds transfer. And although FNB argues that "none of these alleged [oral] representations [by Holt and/or Lee] sets forth any 'specific terms' of an agreement 'to transfer [the funds]...by S.W.I.F.T. wire on a conditional basis'" [FNB mot. at 27 quoting 1st amend compl. P 70 and citing Stansel v. American Sec. Bank, 547 A.2d 990, 993 (D.C. 1988)], the written contract neither provides any "specific terms". Thus, parol evidence of an alleged contemporaneous verbal agreement regarding conditions of the transfer creates no greater ambiguity than that already existing in the written contract. Thus, whether and to what extent a contemporaneous oral agreement existed setting forth the type of funds transfer according to which the codes would be selected by the wire room, which is consistent with the written contract, must be a question for the jury. From the extrinsic -- parol -- evidence (which includes the contemporaneous letters by Rivlin generated in the ordinary course of the transaction), the jury will determine "the circumstances surrounding the making of the contract" and decide what a reasonable lawyer and banker (based on expert testimony) would have done and understood. 1010 Potomac Assoc., 485 A.2d at 205-206 (citations omitted); id at 207 n.11 ("Extrinsic circumstances surrounding the execution of a contract may be considered only to aid in determining the meaning of the contract, not to alter its terms."); accord 1901 Wyoming Ave., 345 A.2d 456 at 461-462; Lamphier, 524 A.2d at 732 (D.C. 1987)(citing 1010 Potomac Assoc., 485 A.2d 199 at 205-206). Rivlin, as a lawyer, and Lee and Holt, as bank employees, are bound by all usages which the parties knew or had reason to know. Sagalyn v. Foundation for Preservation for Historic Georgetown, 691 A.2d 107, 111 (D.C. 1997)(citations omitted).
FNB elected to place this burden on itself - its wire room, by drafting and using the pre-designed "Application and Agreement for Foreign Transfer" which vaguely obligates itself to "send any message relative to this transfer in explicit language, code or cipher...". "Relative to this transfer" by its very terms denotes concern to the individual client needs, notwithstanding which FNB dismisses the idea that paragraph no. 5 "somehow incorporates additional and unidentified 'terms and conditions' concerning 'individual clients' needs'", arguing that it merely "states the obvious: that the electronic wire transfer identified in the Agreement will in fact be transmitted in appropriate language." [FNB reply. at 7 n.7]. The Court cannot conceive of how the wire room will determine the appropriate language if it is unaware of the client's needs. Again, FNB's expert stated the bank personnel are trained to assist clients in "filling out pre-designed forms and in identifying needed codes". [FNB mot., exh. 40, P 34]. It is those needed codes that are at the heart of this contract dispute. Moreover, despite the contract placing the onus on FNB to determine the appropriate codes, Lee, the FNB employee who undertook to authorize and send the funds transfer to the wire room and who allegedly made promises to Rivlin regarding the conditional nature of the funds transfer, admitted that the all-important transmittal codes "don't mean anything to [him]." [Lee depo., 84:18-85:14].
In sum, it remains a question of fact where FNB, a bank with a small presence in the District of Columbia and wanting of Rivlin's business, contracted with Rivlin to send the funds unconditionally. This question remains irrespective of whether Rivlin's two-page instructions themselves would have achieved that goal, as it is FNB that selects the codes "relative to" the transfer.
The Court is mindful that all the experts, including Piedmont's, agree that Rivlin did not have the proper instructions when he entered FNB on the 19th of December. But, the Court cannot reconcile for the purposes of summary judgment the experts' reports that any legitimate bank would have turned Rivlin away if it had seen the instructions and known of Piedmont's intentions, and yet a hotly disputed issue of material fact is whether FNB was fully apprized of Rivlin's expectations of FNB, and whether FNB represented to Rivlin that conditional funds transfer was no problem.
"Whether a contract is integrated or not, its meaning must be determined 'in the light of the circumstances' at the time the contract was made." 1010 Potomac Assoc., 485 A.2d at 206 n.7 (citing RESTATEMENT (SECOND) OF CONTRACTS §§ 202(1), 212(1) (1981)). All the information that has come to light (including the unrelated criminal charges) since the funds transfer does not overshadow the ambiguities of the Agreement and the disputed, conflicting testimony before the Court of the circumstances and discussions between FNB and Rivlin when FNB, pursuant to the Agreement, undertook to transfer the $ 3 million to England. Accordingly, the Court cannot find that, as a matter of law, the Agreement is a complete and exclusive statement of the terms of the parties agreement.
3. Proximate Cause
FNB's final argument with respect to the breach of contract claim is that the alleged breach of contract was not the proximate cause of Piedmont's damages. The Court, having concluded that, as a matter of law the contract is not completely integrated, the Court cannot reach the issue of whether the breach of contract is the proximate cause of the injury. As Piedmont quotes in its opposition [Pl's opp. at 39], the District of Columbia Court of Appeals has said:
It is basic law that the proximate cause of an injury is ordinarily a question of fact for the jury. Only if there were absolutely no facts or circumstances from which a jury could reasonably [find that FNB breached a contract to send the funds conditionally], would the question have been one for the court. But if, as here, the facts are such as to cause reasonable men to differ, then the question is clearly one for the determination of the jury.
McCoy v. Quadrangle Dev. Corp., 470 A.2d 1256, 1259 (D.C. 1983)(citation omitted). If the jury concludes that the money would not have been accessible to the so-called fraudsters in England had FNB not failed to send the funds conditionally as it is argued it was contracted to do (if it was contracted to do), or had not orally represented that it could send the funds conditionally, then the jury could find that FNB's actions were the proximate cause of the Piedmont's injuries, and Piedmont's actions thereafter were only an effort to mitigate its damages. Or, a jury could conclude that Piedmont's (and its agents) actions after the funds were transferred to England unconditionally broke the causal chain. Regardless, proximate cause is a question of fact for the jury.
C. Negligence & Gross Negligence
1. Standard of Care
Having determined that Piedmont was the third-party beneficiary and the principal to the wire transfer, and thus entitled to a reasonable standard of care by FNB in conducting the funds transfer, and that this dispute falls outside of Article 4 of the U.C.C., the Court will consider the negligence counts against defendant FNB. See supra at 24-25 (discussion of standing); see also Aleo Int'l, Ltd. v. Citibank, NA, 160 Misc. 2d 950, 951, 612 N.Y.S.2d 540, 541 (1994)(U.C.C. Article 4A does not provide for a cause of action in negligence). In order for Piedmont to establish that FNB was negligent, it "must prove that the defendant deviated from the applicable standard of care" in performing the S.W.I.F.T. funds transfer. District of Columbia v. Peters, 527 A.2d 1269, 1273 (D.C. 1987)(citing District of Columbia v. White, 442 A.2d 159, 164-165 (D.C. 1982).
As the parties have recognized, expert testimony is required to establish the standard of care for employees of FNB and of Piedmont's attorneys. Id. "Evidence of compliance with a statutory or administrative norm neither establishes due care nor prevents a finding of negligence." Scoggins v. Jude, 419 A.2d 999, 1002 (D.C. 1980). The Court has seen a sampling of what the parties' numerous experts will testify to at trial, and it is FNB's own experts' reports that belie FNB's entitlement to summary judgment as a matter of law. For example, FNB expert Barry states:
Field 72 in an MT-100 S.W.I.F.T. would have been a wholly inappropriate mechanism by which to communicate a condition of the type apparently contemplated by the plaintiff. In my professional opinion, FNB, had it been apprised [sic] of plaintiff's wishes, would have immediately rejected the request. Moreover, even if, hypothetically, FNB had attempted through some means to fashion a Field 72 that set up the sort of condition contemplated by plaintiff, the receiving bank in England would not have accepted it.
[FNB expert rpt (Barry), FNB mot., exh. 8, P B (emphasis added)]. At the very least, there is a material dispute about whether FNB was on notice (through Rivlin) of Piedmont's wishes and whether FNB then responded with the appropriate standard of care. Moreover, as Barry pointed out,
Ms. Holt of FNB has testified that she was experienced in sending wires; anyone with this experience would know that there is no such thing as an 'attachment' to a S.W.I.F.T. or any form of wire, or a procedure for 'gluing' a piece of paper to an electronic S.W.I.F.T. message.