Casa De Cambi Comdiv v. Fed. Reserve Bank ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 96-3046
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Casa de Cambio Comdiv, S.A. *
De C.V., *
*
Appellant, *
* Appeal from the United States
District
v. * Court for the District of Minnesota.
*
Federal Reserve Bank, of *
Minneapolis, *
*
Appellee. *
---------------------------------------- *
United States of America, *
*
Amicus Curiae. *
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Submitted: March 10, 1997
Filed: June 12, 1997
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Before WOLLMAN, and BEAM, Circuit Judges, and LAUGHREY,1 District Judge.
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BEAM, Circuit Judge.
1
The Honorable Nanette K. Laughrey, United States District Judge for the
Eastern and Western Districts of Missouri, sitting by designation.
Casa de Cambio Comdiv, S.A. De C.V. (Casa) appeals the district
court’s2 order dismissing its action against the Federal Reserve Bank of
Minneapolis (FRBM). We affirm.
I. BACKGROUND
Casa is a Mexican corporation engaged in international currency
transactions. FRBM is one of twelve regional member banks in the Federal
Reserve System, the nation’s central banking system. See 12 U.S.C. § 221-
22. FRBM processes more than one million checks per day, including checks
issued by the United States Treasury.
On October 29, 1993, Genaro Alvarez went to Casa to cash a United
States Treasury check in his name, in the amount of $1,165,000.00. After
confirming that the man was indeed Alvarez, Casa forwarded the check to its
United States bank, Norwest Bank Minnesota, N.A. (Norwest). Norwest then
sent the check to FRBM and received credit for the entire amount. After
it found that FRBM had credited Norwest for the amount of the check, Casa
made payment to Alvarez on November 5, 1993.
Almost three months later, on February 1, 1994, the Treasury
determined the check was forged and reclaimed the money previously credited
to Norwest’s account. Norwest, in turn, debited Casa’s account for the
amount of the check. As a result, several of Casa's own checks were
dishonored for insufficient funds and it lost customers. Not surprisingly,
neither Alvarez nor the proceeds of the check have been located.
On October 27, 1995, Casa filed this action against FRBM. Casa
alleged that FRBM was negligent first in processing and then in reversing
charges on the Alvarez
2
The Honorable James M. Rosenbaum, United States District Judge for the
District of Minnesota.
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check. FRBM moved to dismiss pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure. FRBM argued that, as a matter of law, it was not
negligent in handling the Alvarez check. The district court agreed and
dismissed the action. Casa appeals.
II. DISCUSSION
We review the district court’s dismissal under Rule 12(b)(6) de novo,
taking as true the factual allegations in the complaint. Goss v. City of
Little Rock, 90 F.3d 306, 308 (8th Cir. 1996). To establish FRBM’s
negligence, Casa must show: (1) a duty; (2) a breach of that duty; (3) a
causal connection between the breach and injury; and (4) injury in fact.
Satterlund v. Murphy Bros., Inc., 895 F. Supp. 240, 243 (D. Minn. 1995).
“In this context, a duty is an obligation, to which the law will give
recognition and effect, to conform to a particular standard of conduct
toward another.” Id. (quotations omitted). The existence of a duty is a
question of law for the court to determine. Id. Under these standards,
we hold that, as a matter of law, Casa cannot establish a duty on the part
of FRBM and, thus, cannot show that FRBM was negligent in its handling of
the Alvarez check.
FRBM had no duty to inspect Treasury checks for forgery or other
defects. Federal regulations make clear that upon receiving a Treasury
check for processing, FRBM “shall” give immediate credit for it, subject
to examination and payment by the Treasury. 31 C.F.R. § 240.9(a)(3)(ii).
Casa admits as much but nevertheless argues that FRBM was negligent in
failing to exercise ordinary care in processing the check. Although FRBM
is charged with the exercise of ordinary care in handling checks, see,
e.g., 12 C.F.R. § 210.6(a)(1), there is no authority to support Casa’s
argument that such care includes the detection of forged checks.
Casa’s only support for its position is a series of letters issued
by the Treasury to the Federal Reserve Banks, directing them to inspect
checks bearing specifically
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enumerated indicia of forgery. Even assuming that such letters could
establish FRBM’s duty to inspect millions of circulating checks, a doubtful
proposition, the letters were written more than a year after FRBM processed
the Alvarez check. Additionally, because the enumerated indicia of forgery
were not present on the Alvarez check, the Treasury letters would not have
directed FRBM’s attention to the Alvarez check.
Furthermore, FRBM did not breach any duty in reversing the charges
on the Alvarez check after the Treasury determined it was forged. Federal
regulations provide that when the Treasury refuses payment on a check, the
Treasury may return the check. 31 C.F.R. § 240.9(a)(iv).3 At that time,
the Federal Reserve Banks "shall give immediate credit therefor in the
United States Treasury’s account, thereby reversing the previous charge to
the account for such check." Id. FRBM followed this mandatory procedure
in processing the Alvarez check. In so doing, it did not act negligently.
Finally, we find no abuse of discretion in the district court’s
denial of FRBM’s motion for Rule 11 sanctions. Fed. R. Civ. P. 11; see,
e.g., Pope v. Federal Express Corp., 49 F.3d 1327, 1328 (8th Cir. 1995)
(reviewing district court’s Rule 11 sanction decision for abuse of
discretion). Consequently, we affirm that denial. We have considered the
remainder of Casa’s arguments and find them to be without merit.
III. CONCLUSION
Finding that the district court properly dismissed this action and
denied FRBM’s motion for Rule 11 sanctions, we affirm.
3
Similar regulations give the Treasury up to one year in which to reclaim money
paid on a forged check. 31 C.F.R. § 240.6(d).
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A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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