Church’s Claim Against Bank for Funds Embezzled by Church’s Employee Dismissed on Procedural Grounds

Stockwell Sievert Law Firm

Employee embezzlement of any kind reeks of moral bankruptcy.  But when that employer is a church, our heads shake with disapproval and our opinions of the perpetrators drop to a whole new level.  Despite the stigma associated with this crime, religious institutions are not immune from this threat and are often victimized by the employees they trust the most. From 2004 to 2007, a local church experienced this first hand when one of its employees and her husband embezzled over $380,000 before moving out of state.  

Seeking reimbursement and damages for its losses, the church filed suit against the employee and her husband alleging that they used church funds by various means, including check forgery and unauthorized use of credit cards.  The suit was filed in the 14th Judicial District Court in Lake Charles, Louisiana.  When the defendants failed to answer the allegations of the church’s petition, the church confirmed a default judgment against these defendants finding them 100% at fault.       

On the same day as the confirmation of default, the church amended its original petition naming two banks as defendants and contending that the banks’ alleged negligent conduct enabled the misappropriation of funds.  The fact that the banks were added to this lawsuit was not surprising, given that a judgment against the original defendants would be virtually worthless and not result in any actual recovery for the church.  What was surprising, not to mention procedurally improper, was the church’s attempt to add banks after the default judgment had been entered. 

In response to this tactic, both banks filed motions for summary judgments seeking dismissal of the church’s claims.  The banks pointed out to the trial court the procedural deficiencies of the church’s filings as well as its obvious attempt to get a second bite at the apple against defendants with deeper pockets.  After a hearing, Judge Kent Savoie granted the banks’ motions, dismissing the plaintiff’s suit against the banks.  The church appealed.

In a well-reasoned opinion written by Judge Marc T. Amy, the 3rd Circuit Court of Appeal held that summary judgment was proper dismissing the claims against the banks.  This decision withstood subsequent attacks by the church seeking a rehearing by the 3rd Circuit as well as an application for Writ of Certiorari to the Louisiana Supreme Court.

While the church can hardly be blamed for looking to additional parties for relief considering the amount of the loss and the way it was sustained, the courts were clearly correct in denying its claims against the banks.  Although the banks are generally at risk in lawsuits involving embezzlement, this case proves that the courts will not allow improper procedural tactics by an employer-plaintiff which could give it an undue advantage and deny a bank-defendant a fair opportunity to defend itself.

The Stockwell Sievert attorneys involved in obtaining this decision from the Third Circuit were Stephen C. Polito, H. Alan McCall, and Stephen D. Polito. See First Baptist Church of Westlake v. Leppo, 26 So.3d 917 (La.App. 3 Cir. 12/9/09) for the court’s opinion.

by: Stephen D. Polito

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