CIVIL ACTION COMPLAINT. Plaintiff Wholesale Relators Supply Co., by and through its attorneys Margolis Edelstein,

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1 MARGOLIS EDELSTEIN By: Jonathan S. Ziss, Esquire Identification No By: Seth L. Laver, Esquire Identification No Curtis Center - Fourth Floor 601 Walnut Street Philadelphia, PA Telephone: (215) jziss@margolisedelstein.com slaver@margolisedelstein.com Attorneys for Plaintiff Wholesale Realtors Supply Company Wholesale Realtors Supply Co. : COURT OF COMMON PLEAS Plaintiff, : PHILADELPHIA COUNTY : v. : FEBRUARY TERM, 2010 : No. Wachovia Bank, N.A. : Defendant. : JURY TRIAL DEMANDED : CIVIL ACTION COMPLAINT Plaintiff Wholesale Relators Supply Co., by and through its attorneys Margolis Edelstein, by way of Complaint against Defendant Wachovia Bank, N.A. alleges as follows: I. PARTIES 1. Plaintiff Wholesale Relators Supply Co., ( Wholesale Realtors or Plaintiff ) seeks to recover damages in excess of $2 million resulting from defendant s tortious conduct in honoring hundreds of invalid, forged checks drawn from Plaintiff s bank account. 2. Wholesale Realtors is a Pennsylvania company engaged in real estate development and financial services/investing with a mailing address of P.O. Box 340, Merion Station, PA

2 3. Defendant Wachovia Bank, NA, a Wells Fargo Company, ( Wachovia or Defendant ) is a banking corporation doing business in the Commonwealth of Pennsylvania with local branches throughout the Commonwealth, with headquarters located at 301 S. College Street, Charlotte, NC II. JURISDICTION AND VENUE 4. Jurisdiction is proper in the Commonwealth of Pennsylvania over Wachovia pursuant to 42 Pa.C.S because Wachovia carried on continuous and systematic business within this Commonwealth. Further, Wachovia has committed various torts described in this Complaint in the Commonwealth. 5. Venue is proper in Philadelphia County pursuant to Pa. R.C.P because Wachovia regularly conducts business within this County. III. FACTUAL BACKGROUND 6. In 2001, or earlier, and continuing until February 2008, Wholesale Realtors opened a commercial checking account maintained by Wachovia, account number (the Bank Account ). 7. The Bank Account was registered to Wholesale Realtors founder and agent, Gabriel Elias. 8. During the relevant time period, the only individuals authorized to issue checks from the Bank Account were Gabriel Elias and his wife, Alma Elias. 9. Non-party Nancy Connelly served as a bookkeeper of Wholesale Realtors. -2-

3 10. Connelly was not authorized to issue checks from the Bank Account. 11. Connelly s duties included payment of Wholesale Realtors authorized business expenses including payroll, maintaining the company s Bank Account, and maintaining the company s books and records. 12. In February 2008, it was discovered that Connelly had misappropriated at least $2,187,635 between January 1, 2005 through February 1, 2008 by forging the signature of Gabriel Elias on hundreds of company checks made payable to various credit card companies. 13. Connelly s forgeries went unnoticed and undetected by Wachovia as evidenced by its improper authorization of each and every one of the forged checks. 14. These unauthorized checks were drawn by Connelly from the Bank Account to pay the balance of her personal credit card statements. 15. Connelly was not authorized to utilize Wholesale Realtors funds toward the payment of any personal expenses. 16. Moreover, it was discovered that Connelly misappropriated at least $32, for her own personal benefit by increasing her payroll check, and other checks drawn from the Bank Account, without approval of Wholesale Realtors. 17. Nearly every payroll check that was issued to Connelly was inappropriately inflated. 18. In order to conceal her theft of Wholesale Realtors funds, Connelly made unauthorized transfers of over $2 million into the Bank Account from additional Wholesale Realtors accounts maintained with Wachovia, among other banks. 19. Further, Connelly concealed her actions by entering legitimate business related expenses in the company check register. -3-

4 20. As a direct and proximate cause of Wachovia s conduct as set forth herein, Wholesale Realtors suffered damages in excess of $2, COUNT I BREACH OF CONTRACT Wholesale Realtors Supply Co. v. Wachovia Bank, N.A. 21. Wholesale Realtors incorporates, by reference, each of the foregoing paragraphs as if the same were set forth herein at length. 22. The parties entered into a binding and enforceable contract in which Wachovia would maintain the Bank Account on behalf of Wholesale Realtors. 23. Pursuant to that contract, Wachovia was obligated to honor checks from the Bank Account that contain the authorized signatures of Gabriel Elias or Alma Elias, the only two authorized signators. 24. Wachovia breached that contract by permitting unauthorized, fraudulent checks to be paid by the Bank Account. 25. As a direct and proximate result of Wachovia s breach of contract, Wholesale Realtors suffered damages in excess of $2, WHEREFORE, Plaintiff Wholesale Realtors Supply Co. demands judgment in its favor and against defendant, Wachovia Bank, N.A. together with attorney's fees, interest, costs of suit and such other relief as this Honorable Court deems appropriate. -4-

5 COUNT II NEGLIGENCE Wholesale Realtors Supply Co. v. Wachovia Bank, N.A. 26. Wholesale Realtors incorporates, by reference, each of the foregoing paragraphs as if the same were set forth herein at length. 27. Wachovia held itself out as a banking institution capable of properly monitoring and distributing the funds of its customer, Wholesale Realtors. 28. Wachovia had a duty to safeguard the funds deposited by Wholesale Realtors into the Bank Account and only to deduct properly payable funds. 29. Wachovia breached its duty to Wholesale Realtors by deducting over $2, from the Bank Account as a result of fraudulent, forged checks. 30. The Bank Account was held with Wachovia. 31. Wachovia was aware that the Bank Account required the signature of Gabriel Elias or Alma Elias on all checks issued on the said account. 32. Connelly was not, and was never made, an authorized signatory for the Bank Account nor was she authorized to sign checks on behalf of other agents of Wholesale Relators. 33. Wachovia allowed the transaction of checks of the Bank Account that bore the forged signature of Gabriel Elias, an authorized signatory. 34. Wachovia was in the position of being the depository bank through which the fraudulent checks were negotiated. invalid. 35. Wachovia was in the best position to identify that Connelly s forged signature was -5-

6 36. Wachovia was negligent in that it failed to exercise ordinary care by repeatedly allowing the transaction of hundreds of checks from the Bank Account bearing the forged signature of Gabriel Elias. 37. As a direct and proximate result of Wachovia s negligence, Wholesale Realtors suffered damages in excess of $2, WHEREFORE, Plaintiff Wholesale Realtors Supply Co. demands judgment in its favor and against defendant, Wachovia Bank, N.A. together with attorney's fees, interest, costs of suit and such other relief as this Honorable Court deems appropriate. Count III Strict Liability Violation of Uniform Commercial Code Wholesale Realtors Supply Co. v. Wachovia Bank, N.A. 38. Under the Uniform Commercial Code ( UCC ), a bank may charge against the account of a customer an item that is properly payable from that account. 13 Pa.C.S (1). customer. 39. Under the UCC, an item is properly payable only if it is authorized by the 40. Pursuant to the UCC, a bank may not charge against a customer s account an item that is not properly payable. 41. Pursuant to the UCC, 13 Pa.C.S. 3405(b): If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss. -6-

7 42. In Pennsylvania, a bank that honors a forged check is deemed to have used its own money, not the depositor s and is liable on the contract of deposit to re-credit its customer s account. 43. Regardless of how skillfully the forgery is completed, the bank is strictly liable under the UCC. 44. Wachovia was aware that the Bank Account required the signature of Gabriel Elias or Alma Elias on all checks issued on the said account. 45. Connelly was not, and was never made, an authorized signatory for the Bank Account nor was she authorized to sign checks on behalf of other agents of Wholesale Relators. 46. Wachovia allowed the transaction of checks of the Bank Account that bore the forged signature of Gabriel Elias, an authorized signatory. 47. Wachovia was in the position of being the depository bank through which the fraudulent checks were negotiated. 48. Wachovia was in the best position to identify that Connelly s forged signature was invalid. 49. Wachovia was negligent in that it failed to exercise ordinary care by repeatedly allowing the transaction of hundreds of checks from the Bank Account bearing the forged signature of Gabriel Elias. 50. As a direct and proximate result of Wachovia s breach of the UCC, Wholesale Realtors suffered damages in excess of $2,

8 WHEREFORE, Plaintiff Wholesale Realtors Supply Co. requests this Court to grant judgment against Defendant Wachovia Bank, N.A. in the amount of $2, , plus interest, costs, attorneys fees and additional relief as permitted by law. MARGOLIS EDELSTEIN By: /s/ Seth L. Laver JONATHAN S. ZISS, ESQUIRE Identification No SETH L. LAVER, ESQUIRE Identification No Attorneys for Plaintiff Wholesale Realtors Supply Co. Dated: February 4,