Chavez v. Mercantil Commercebank, N.A.

Roger Chavez (plaintiff) opened an account with Mercantil Commercebank, N.A. (Mercantil) (defendant). Chavez’s account was subject to a funds-transfer agreement (FTA) that addressed security procedures. Specifically, in FTA Annex 1, Chavez instructed Mercantil that Chavez himself had to sign and deliver any written payment orders. Section 5(iii) of the FTA further provided that Mercantil “may use, in addition to the Security Procedure selected by the Client, any other means to verify any Payment Order or related instruction.” On February 4, 2008, Chavez deposited $329,500 at a Mercantil branch. On February 6, someone claiming to be Chavez presented a written payment order to Mercantil for $329,500. Among other things, Mercantil’s employees compared the presenter’s signature against a specimen of Chavez’s signature before approving the payment. Chavez sued Mercantil, claiming that he did not authorize the transfer and seeking the return of the money. Mercantil responded by asserting as an affirmative defense the safe-harbor provision of Florida Uniform Commercial Code (UCC) § 4A-202(2), which Mercantil claimed made Chavez responsible for the loss because Mercantil in good faith complied with the commercially reasonable security procedure to which the parties agreed in the FTA. In addition, Mercantil argued that FTA § 5(iii) gave Mercntil the option to use any other verification means in addition to the Annex 1 procedure. Chavez countered that FTA § 5(i) (which stated that the parties “shall comply with the security procedure selected on Annex 1 to this Agreement”) and FTA § 5(ii) plainly meant that the Annex 1 procedure was the only acceptable security measure. Chavez further argued that, under UCC § 4A-201, even the Annex 1 procedure did not allow Mercantil to enjoy the § 202(2) safe harbor. The parties cross-moved for summary judgment with respect to the safe harbor. The district court granted summary judgment to Mercantil. Chavez appealed.