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Seigel v. Merrill Lynch

February 03, 2000


Before Wagner, Chief Judge, Steadman, Associate Judge, and Newman, Senior Judge.

The opinion of the court was delivered by: Steadman, Associate Judge

Appeal from the Superior Court of the District of Columbia (Hon. Ann O'Regan Keary, Trial Judge)

Argued September 8, 1999

Two New Jersey casinos cashed checks totaling $143,000 drawn by plaintiff Walter Seigel, one of its patrons, on his cash management account at defendant Merrill Lynch, Pierce, Fenner, & Smith, Inc. ("Merrill Lynch"). On returning home to Maryland, Seigel placed a stop payment order on the checks, but Merrill Lynch nonetheless paid them by mistake. Seigel then brought this suit against Merrill Lynch seeking to recover the amount of the checks. The trial court granted summary judgment for Merrill Lynch.

Among other issues, Seigel on appeal invokes a "compulsive gambler" defense under New Jersey law, arguing that the checks were unenforceable where made. Alternatively, he claims that the District's version of the Statute of Anne, D.C. Code § 16-1701, which voids certain gambling debts, establishes that the checks were unenforceable in this jurisdiction. Merrill Lynch refers us to the provisions of the Uniform Commercial Code dealing with stop payment orders, D.C. Code §§ 28:4-403, 407 as determinative of the dispute here. We agree with Merrill Lynch's approach and affirm the summary judgment in its favor.


The events giving rise to this lawsuit arose in January and February of 1997 and have been stipulated to as follows. During that time period, plaintiff/appellant Seigel, a Maryland resident, traveled to Atlantic City, New Jersey to gamble. While there, he wrote a number of checks to various casinos, and, in exchange, received gambling chips with which to wager. The checks were drawn on Seigel's cash management account with defendant/appellee, which was established through Merrill Lynch's District of Columbia offices. There were sufficient funds in the account to cover all the checks.

Seigel eventually gambled away all of the chips he had received for the checks. Upon returning to Maryland, Seigel discussed the status of the outstanding checks with Merrill Lynch, informing his broker of the gambling nature of the transactions, and his desire to avoid realizing the apparent losses. Merrill Lynch informed Seigel that it was possible to escape paying the checks by placing a stop payment order and liquidating his cash management account. Seigel took this advice and instructed Merrill Lynch to close his account, liquidate the assets, and not to honor any checks drawn on the account. Merrill Lynch agreed, and confirmed Seigel's instructions.

Many of the checks were subsequently dishonored, and are not now at issue. However, Merrill Lynch accidently paid several of the checks totaling $143,000, despite the stop payment order and account closure. Merrill Lynch then debited Seigel's margin account to cover the payments.

Seigel brought suit in the District of Columbia against Merrill Lynch, alleging breach of contract, negligence, and breach of trust, demanding a return of the $143,000 plus interest. After filing a joint statement of stipulated facts, Seigel filed a motion for summary judgment, along with an attached affidavit. He argued that D.C. Code § 16-1701 precluded enforcement of the checks as a void gambling debt, or in the alternative that New Jersey law prohibited the enforcement of the checks, and that therefore Merrill Lynch had no rights by way of subrogation as a defense to its payment over the stop payment order. Merrill Lynch made a cross-motion for summary judgment, denying the applicability of the D.C. statute or any relevant New Jersey law. It contended that it stood in the shoes of the casinos to whom valid and enforceable checks were given, and therefore the plaintiff had not suffered any actual loss as a result of the payment of the checks. On June 24, 1998, the trial court issued an order granting defendant's motion, and dismissing the complaint. This appeal followed

We apply here the familiar standard for review of grants of summary judgment. Summary judgment is only appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Fuller v. Chemical Specialties Mfg. Corp., 702 A.2d 1239, 1241 (D.C. 1997). Review of a grant of summary judgment is de novo. Zhou v. Jennifer Mall Restaurant, Inc., 699 A.2d 348, 350 (D.C. 1997). On appeal, the reviewing court must view the record in the light most favorable to the non-movant, and any doubt as to the existence of a factual dispute must be resolved against the movant. Fuller, supra, 702 A.2d at 1240. However, "[m]ere conclusory allegations on the part of the non-moving party are insufficient to stave off the entry of summary judgment." D'Ambrosio v. Colonnade Council of Unit Owners, 717 A.2d 356, 358 (D.C. 1998) (quoting Musa v. Continental Ins. Co., 644 A.2d 999, 1001-02 (D.C. 1994)). Furthermore, once the movant has made a prima facie showing, the opposing party, to prevail, must rebut with specific evidence. Wood v. Barwood Cab Co., 648 A.2d 670, 671 n.5 (D.C. 1994) (citing Wyman v. Roesner, 439 A.2d 516 (D.C. 1981)).


We begin with an examination of the statutory scheme relating to stop payment orders, because we believe these provisions are determinative of this appeal. The relevant sections are found in the Uniform Commercial Code as enacted in the District of Columbia, and in particular D.C. Code §§ 28:4-403 and 28:4-407 (1996 Repl.). *fn1

The basic right of the depositor to stop payment on any item drawn on the depositor's account is set forth in section 28:4-403(a). However, liability on the bank for payment over a stop payment order is far from automatic. On the contrary, section 28:4-403(c) provides: "The burden of establishing the fact and amount of loss resulting from the payment of ...

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