United States District Court, D. Arizona
HONORABLE SUSAN M. BRNOVICH UNITED STATES DISTRICT JUDGE.
to Fed.R.Civ.P. 56, Plaintiff Wells Fargo Bank, N.A.
(“Wells Fargo”) filed a Motion For Summary
Judgment as to Defendant Ferruggio Insurance Services of L.A.
doing business as PenbenLA (“Ferruggio”) as to
Count One only. Oral argument was held on January 11, 2019.
The Court has now considered the Motion (Doc. 54, Mot.),
Response (Doc. 60, Resp.), and Reply (Doc. 65, Reply) along
with arguments of counsel and relevant case law.
following undisputed facts providing relevant background are
drawn from the parties' statements of fact and other
parts of the record.
Equa Gaming, an Arizona general partnership, opened a
business account ending in 4583 at Wells Fargo (the
“Account”) on or about August 28, 2009.
Defendants Victor Carillo and Dana M. Brannan signed the
application for the Account. On March 12, 2016, Defendant
Ferruggio, under the name PenbenLA, issued a check drawn upon
Pacific Western Bank made payable to Equa Gaming in the
Amount of $100, 000 (the “Check”). An employee of
Ferruggio deposited the Check directly into the Account at a
Wells Fargo branch on March 12, 2016, a Saturday. The Check
bore no apparent evidence of forgery or alteration. On March
14, 2016, the Check was posted to the Account and the funds
became available for withdrawal. Between March 14 and 16,
various debits and withdrawals were made from the Account.
After the Check was deposited, Ferruggio directed Pacific
Western Bank to stop payment on the Check, and the Check was
returned unpaid to Wells Fargo on March 16, 2016. Wells Fargo
reversed the $100, 000 credit, which caused the Account to
addition to the undisputed facts above, Ferruggio asserts the
following facts. During the period of March 11-12, 2016,
Michael Hand, President of Ferruggio, communicated with
Carrillo regarding the payment of $100, 000 to be made to
Equa Gaming, and that the payment was initially to be made by
check. After arranging for the deposit of the Check to the
Account, Carillo informed Hand that the funds would not be
available immediately, and because time was of the essence,
Hand agreed to wire the funds to the Account, which he
subsequently did. Ferruggio further contends that during the
discussions, Carillo and Hand agreed that a stop payment
would be put on the Check.
Fargo initiated this action on July 26, 2017 (Doc. 1), filed
a first amended complaint on August 14, 2017 (Doc. 17), and a
second amended complaint on September 17, 2018 (Doc. 68,
SAC), bringing claims against Ferruggio Insurance Services of
L.A., Inc. doing business as PenbenLA
(“Ferruggio”), Equa Gaming, Victor Carillo, Dana
M. Brannan, and Does I-X. Of the various claims brought by
Wells Fargo, one was brought against Ferruggio for
enforcement of the Check (“Count One”) pursuant
to A.R.S. Title 47 (codifying the Uniform Commercial
Code). Ferruggio filed an answer on November 2,
2018 (Doc. 75, Ans.), and Wells Fargo now moves for summary
judgment against Ferruggio on Count One.
LEGAL STANDARD FOR SUMMARY JUDGMENT
judgment is appropriate when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a). A
material fact is any factual issue that might affect the
outcome of the case under the governing substantive law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A dispute about a fact is “genuine” if
the evidence is such that a reasonable jury could return a
verdict for the nonmoving party. Id.
party asserting that a fact cannot be or is genuinely
disputed must support the assertion by . . . citing to
particular parts of materials in the record” or by
“showing that materials cited do not establish the
absence or presence of a genuine dispute, or that an adverse
party cannot produce admissible evidence to support the
fact.” Fed.R.Civ.P. 56(c)(1)(A), (B). The court need
only consider the cited materials, but it may also consider
any other materials in the record. Id. 56(c)(3).
Summary judgment may also be entered “against a party
who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
the movant bears the burden of demonstrating to the Court the
basis for the motion and “identifying those portions of
[the record] which it believes demonstrate the absence of a
genuine issue of material fact.” Id. at 323.
If the movant fails to carry its initial burden, the
nonmovant need not produce anything. Nissan Fire &
Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03
(9th Cir. 2000). If the movant meets its initial
responsibility, the burden then shifts to the nonmovant to
establish the existence of a genuine issue of material fact.
Id. at 1103. The nonmovant need not establish a
material issue of fact conclusively in its favor, but it
“must do more than simply show that there is some
metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986). The nonmovant's bare
assertions, standing alone, are insufficient to create a
material issue of fact and defeat a motion for summary
judgment. Liberty Lobby, 477 U.S. at 247-48.
“If the evidence is merely colorable, or is not
significantly probative, summary judgment may be
granted.” Id. at 249-50 (citations omitted).
However, in the summary judgment context, the Court believes
the nonmovant's evidence, id. at 255, and
construes all disputed facts in the light most favorable to
the non-moving party. Ellison v. Robertson, 357 F.3d
1072, 1075 (9th Cir. 2004). If “the evidence yields
conflicting inferences [regarding material facts], summary
judgment is improper, and the action must proceed to
trial.” O'Connor v. Boeing N. Am., Inc.,
311 F.3d 1139, 1150 (9th Cir. 2002).
Fargo asserts that it has proved a prima facie case
against Ferruggio, needing “only to prove that the
signatures on the Check were authorized and that it is a
holder in possession of the instrument.” (Mot. at 3).
In support of this, Wells Fargo further asserts that
Ferruggio “admits that the signatures are
authorized.” (Mot. at 4) (citing Ans. at ¶¶
14, 15, 35, 39, 42, 43).
does not argue that the signatures were not authorized or
that Wells Fargo is not a holder in possession of the
instrument. Rather, Ferruggio argues that it is not liable to
make payment on the check because of a defense-an agreement
between Ferruggio and Carillo that the check “was not
to be deposited and another method of payment would be
pursued.” (Resp. at 3-4).
Fargo also asserts that even if Ferruggio has a valid
defense, Wells Fargo is a holder in due course who took the
Check without notice of any defenses or claims, which would
limit any defenses proved by Ferruggio. (Mot. at 5-8).
Ferruggio contends that Wells Fargo “is not a holder in
due course” because Wells Fargo “did not exercise
reasonable commercial standards of fair dealing.”
(Resp. at 4).
also argues that “[a]ny existing security interest
claimed by [Wells Fargo] is limited to the amount of Check,
less any rightful set-offs and deductions, ” and that
Wells Fargo's security interest cannot exceed $75,
278.39, the amount that the account was overdrawn. (Reply at
“an unaccepted draft is dishonored, the drawer is
obliged to pay the draft . . . according to its terms at the
time it was issued . . . to a person entitled to enforce the
draft .” U.C.C. § 3-414(b). A “person
entitled to enforce” an instrument includes “the
holder of an instrument.” U.C.C. § 3-301.
“If a customer delivers an item to a depositary bank
for collection . . . the depositary bank becomes a holder of
the item . . . if the customer at the time of delivery was a
holder of the item, whether or not the customer indorses the
item .” U.C.C. § 4-205. “Depositary banks
can be holders in due course of unendorsed checks if the
payee is its customer.” Conder v. Union Planters
Bank, N.A., 384 F.3d 397, 400 (7th Cir. 2004).
action brought with respect to an instrument where the
validity of signatures is admitted or proved, “a
plaintiff producing the instrument is entitled to payment if
the plaintiff proves entitlement to enforce the instrument
under Section 3-301, unless the defendant proves a defense or
claim in recoupment.” U.C.C. § 3-308. One such
defense a party may raise is that their obligation to pay the
instrument was “modified, supplemented, or nullified by
a separate agreement of the obligor and a person entitled to
enforce the instrument, if the instrument is issued or the
obligation is incurred in reliance on the agreement or as
part of the same transaction giving rise to the
agreement.” U.C.C. § 3-117; see also
§ 3-305(a)(2) (“[T]he right to enforce the
obligation of a party to pay an instrument is subject to . .
. a defense of the obligor stated in another section of this
“[t]he right of a holder in due course to
enforce the obligation of a party to pay the
instrument” is subject only to a limited list of
defenses. U.C.C. § 3-305(b) (emphasis added). The rights
of a holder in ...