Session 3 – Case Analysis
Seigel v. Merrill, Lynch, Pierce, Fenner & Smith, Inc.
400 UCC Rep. 2nd 810 (Ct. App. D. C. 2000)
Seigel traveled to Atlantic City, New Jersey to gamble. While there, he wrote several checks to various casinos, and, in exchange, received gambling chips with which to wager. The checks were drawn on Seigel’s cash management account with defendant/appellee, which was established through Merrill Lynch’s District of Columbia offices and where there had been sufficient funds in the account to cover all the checks. Seigel gambled all the chips he had received for the checks. When Seigel returned to Maryland, he talked what happened and about the outstanding checks he had wrote in order to secure gambling checks. After their discussion, Seigel did not want to liquidate his cash management account and took the advice of Merrill Lynch to close his account. Many of the checks that were wrote and tried to clear were dishonored, but on the other hand, Merrill Lynch accidentally paid several checks totaling $143,000 despite the stop-payment on Seigel’s account. Although there was no written contract, but there was a verbal contract.
Seigel later filed a law suit against Merrill Lynch, alleging breach of contract, negligence, and breach of trust, demanding a return of the $143,000 plus interest. Breach of trust is an extremely wide concept and covers many types of conduct. “A breach of trust may consist of embezzlement, or it may consist, all alleged here, of some act or default which amounts only to some irregularity or error of judgment for which, nevertheless, there may be personal liability.”
The Ontario Law Reform Commission said in its Report on the Law of Trusts that:
"As a result of these decisions, the relevant question is whether a trustee has acted with integrity in what he did, seeking to do what the task demanded; the standard of care expected of him is an objective one, external, that is,...