William Sesing Construction, Inc. v. American Bank

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
December 11, 2019
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2018AP1126 Cir. Ct. No. 2016CV417

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II

WILLIAM SESING CONSTRUCTION, INC.,

PLAINTIFF-APPELLANT,

V.

AMERICAN BANK,

DEFENDANT-RESPONDENT.

APPEAL from a judgment of the circuit court for Fond du Lac
County: PETER L. GRIMM, Judge. Affirmed.

Before Neubauer, C.J., Reilly, P.J., and Gundrum, J.

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
No. 2018AP1126

¶1 PER CURIAM. William Sesing Construction, Inc., (Sesing)1
appeals from a judgment dismissing its breach of contract and negligence claims
brought against American Bank after Sesing’s bookkeeper embezzled funds from
Sesing’s business checking account held by American Bank. Sesing argues that
the circuit court erred in granting summary judgment insofar as it applied the
Uniform Fiduciaries Act (UFA), WIS. STAT. § 112.01 (2017-18),2 to Sesing’s
negligence claim, and by concluding that even without applying the UFA’s stricter
standard, Sesing failed to set forth any materially disputed fact that would entitle it
to relief. For the reasons that follow, we affirm.

BACKGROUND

¶2 Sesing had two business accounts at American Bank. The first was a
checking account. Checks drawn on that account had to be signed by William,
Joyce Sesing (William’s wife), or Patrick Sesing (his brother). Denise Heffner
joined Sesing in September of 2003. Over time, she assumed all bookkeeping
duties, and in 2005, she was granted informational access to the checking account.
Heffner was also responsible for making payments to company vendors and
suppliers and for running payroll. William, Joyce, and Patrick were in the practice
of pre-signing blank checks with the understanding that Heffner would later
complete and distribute them. Heffner was allowed to print checks and did not
provide account reconciliations. In short, Heffner handled the entire bookkeeping
processes for Sesing, with minimal to no oversight from Joyce or William.

1
We refer to Sesing Construction, the business, as “Sesing,” and to William J. Sesing,
the president of the business, by his first name.
2
All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise
noted.

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¶3 The second Sesing business account held at American Bank was a
money market account opened by William in 2010. He funded it with an initial
deposit of $140,000 from the checking account. William and Joyce were the only
authorized signers. Standard bank practices allowed funds to be transferred
between the two accounts, and there was a policy for transfers by phone. When
Sesing’s checking account was close to overdrawn, American Bank President Jim
Chatterton or bank employee Gloria Stenz would call Sesing’s office and speak to
Joyce or William about authorizing a transfer from the money market account to
prevent an overdraft. Sesing could also initiate telephone transfers. According to
American Bank’s policy, if a customer called in with a request to transfer funds,
the bank employee recorded the name and account number and verified the
caller’s identity by asking account-specific questions.

¶4 In 2013, Sesing discovered that Heffner was embezzling funds from
the checking account in at least two ways: (1) by writing blank checks signed by
authorized signatories payable to herself, her family, or her creditors; and (2) by
using her knowledge of the checking account information to initiate preauthorized
withdrawals for the benefit of her creditors. Heffner was convicted of theft,
sentenced to seven years in prison, and ordered to pay restitution.

¶5 Sesing filed suit against American Bank seeking to recoup
“approximately $229,700 in funds” transferred from the money market into the
checking account by Heffner, who was not eligible to authorize the transfers.
According to Sesing, there were about twenty-two times that Heffner authorized a
transfer from the money market to the checking account, and American Bank
“failed to follow proper security protocol or ask any identifiable questions when
transferring the funds.” Sesing alleged breach of contract and negligence.

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¶6 American Bank filed an answer and affirmative defenses and then
moved for summary judgment. As to the negligence claim, American Bank
averred that Heffner acted in a fiduciary capacity for Sesing, and Sesing failed to
show any evidence of bad faith as required by the UFA. See Koss Corp. v. Park
Bank, 2019 WI 7, 385 Wis. 2d 261, 922 N.W.2d 20 (discussing application of
“bad faith” under the UFA). With regard to breach of contract, American Bank
argued that the undisputed facts failed to “establish a breach of the Sesing
depository agreement” or “the causation of any damages,” given that the
transferred funds were not removed from Sesing’s control.

¶7 The circuit court granted summary judgment in favor of American
Bank. With regard to the negligence claim, it concluded that Heffner was a
fiduciary under WIS. STAT. § 112.01(1)(b), and that there were no facts showing
the requisite “high degree of a deliberate failure to investigate suspicious
circumstances” by the bank. The court went on to conclude that even if the UFA
did not apply, summary judgment was warranted because Sesing had failed to
show “proof of causation.” The circuit court also granted summary judgment on
the breach-of-contract claim based on the “terms and conditions” of the parties’
account agreement. Sesing appeals.

DISCUSSION

¶8 We review summary judgment decisions de novo, applying the same
methodology as the circuit court. Palisades Collection LLC v. Kalal, 2010 WI
App 38, ¶9, 324 Wis. 2d 180, 781 N.W.2d 503. Summary judgment “shall be
rendered if the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as
to any material facts and that the moving party is entitled to judgment as a matter

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No. 2018AP1126

of law.” WIS. STAT. § 802.08(2). Whether Heffner was a fiduciary under WIS.
STAT. § 112.01(1)(b) is a question of statutory interpretation and application which
we review without deference to the circuit court. O’Connell v. O’Connell, 2005
WI App 51, ¶6, 279 Wis. 2d 406, 694 N.W.2d 429.

¶9 We quickly dispose of Sesing’s breach-of-contract claim, which
appears to be that American Bank failed to abide by the terms of its depository
agreement by allowing Heffner, an unauthorized person, to transfer funds from the
money market into the checking account.3 To the contrary, the undisputed facts
show that American Bank followed the agreement’s procedures by permitting
account transfers only after the requesting party provided identity and account
information. There is no suggestion in the record that American Bank employees
knew that Heffner was impersonating Joyce Sesing. American Bank maintained
records of such transfers for one year. Gloria Stenz could not recall any instance
where a bank employee violated American Bank’s transfer policy.

¶10 Turning to Sesing’s negligence claim, the parties disagree about the
applicable standard. American Bank asserts that the UFA “bars bank customers
from suing their banks in negligence” and instead predicates liability on a bad
faith standard. According to American Bank, the stricter showing applies here
because Heffner fits the statutory definition of a “fiduciary” under WIS. STAT.
§ 112.01(1)(b). Sesing disagrees, arguing that Heffner was not authorized to take

3
Sesing neglects to address this claim in its opening brief. Because the breach-of-
contract claim was decided in the circuit court and argued in American Bank’s respondent’s brief,
we will briefly discuss and reject it. Further, Sesing’s two claims overlap in that both require a
prima facie showing that American Bank’s breach caused Sesing to suffer an actual loss. We will
discuss Sesing’s failure to show causation when we address its negligence claim.

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No. 2018AP1126

any action on the money market account and “[b]y definition, she was not a
fiduciary … [or] an officer on that account[.]”

¶11 It is unnecessary for this court to determine the UFA’s applicability
to the instant case because we conclude that American Bank is entitled to
summary judgment even if Heffner is not a fiduciary. That is, even if the UFA
does not apply, Sesing’s negligence claim still fails.

¶12 The elements of a negligence claim are (1) a duty of care on the part
of American Bank, (2) a breach of that duty, (3) a causal connection between
American Bank’s breach and Sesing’s injury, and (4) an actual loss or damage as a
result of the injury. See Lambrecht v. Estate of Kaczmarczyk, 241 Wis. 2d 804,
817, 623 N.W.2d 751 (2001). Sesing fails to set forth any evidence that American
Bank breached a duty of care in permitting the transfers from the money market to
the checking account. As for duty, American Bank acted in accordance with its
depository agreement, and there is nothing in the record to indicate it knew or
should have known that Heffner was impersonating Joyce. It is undisputed that
American Bank provided Sesing with printed monthly bank statements for both
the money market and the checking accounts. Sesing never alerted the bank to
any irregularity and cannot identify any suspicious activity that should have come
to the bank’s attention. In March 2013, after William alerted American Bank to
Heffner’s possible embezzlement, the bank cooperated with all investigations.

¶13 Similarly, Sesing has not shown that the transfer of funds from one
Sesing account into another was the proximate cause of Sesing’s loss. Heffner did
not write checks or directly withdraw funds from the money market account.
Upon transfer into the checking account, the funds remained in Sesing’s control.
Heffner’s embezzlement occurred vis a vis the checking account.

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No. 2018AP1126

¶14 Finally, Heffner engaged in an intentional scheme to steal from
Sesing. She was able to manipulate the books and conceal her theft. If “account
information” was requested, Heffner showed William and Joyce information on
her computer without reference to the underlying bank statements. Sesing never
requested a reconciliation, review, or audit by anyone, including Sesing’s outside
accountant. Heffner’s criminal actions were the true cause of Sesing’s losses and
her actions sever American Bank’s connection to any alleged damages.

By the Court.—Judgment affirmed.

This opinion will not be published. See WIS. STAT. RULE
809.23(1)(b)5.

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