## Facts

- Walter Seigel maintained a cash-management account (and a margin account) with Merrill Lynch, opened through its District of Columbia offices.
- In January–February 1997, Seigel traveled to Atlantic City, New Jersey, wrote multiple checks to casinos on the cash-management account, received chips in exchange, gambled, and lost.
- After returning home, Seigel told Merrill Lynch the checks were gambling-related and sought to avoid payment.
- Merrill Lynch advised Seigel it might be possible to stop payment and liquidate the account; Seigel instructed Merrill Lynch to close and liquidate the account and not to honor checks drawn on it, and Merrill Lynch agreed.
- Despite these instructions, Merrill Lynch mistakenly paid casino checks totaling $143,000 and covered the payments by charging Seigel’s margin account.
- Seigel sued to recover the $143,000 (plus interest), asserting, among other theories, that gambling-law doctrines made the checks unenforceable.
- The parties stipulated to the core facts; the trial court granted summary judgment for Merrill Lynch, and Seigel appealed.

## Issues

1. Under D.C.’s UCC provisions on stop-payment orders, when a financial institution pays checks in violation of a valid stop-payment order, is the customer entitled to recover the amount paid, or is recovery barred to the extent the institution is subrogated to the payees’ rights?
2. Do asserted gambling-law defenses (a New Jersey “compulsive gambler” theory and D.C.’s Statute of Anne, D.C. Code § 16-1701) render the casino checks unenforceable so as to defeat the institution’s UCC subrogation and permit the customer to recover?

## Decision

- The District of Columbia Court of Appeals affirmed summary judgment for Merrill Lynch.
- The court applied the UCC stop-payment and subrogation framework (D.C. Code §§ 28:4-403 and 28:4-407) as controlling.
- Merrill Lynch’s erroneous payment did not entitle Seigel to recover because Merrill Lynch was subrogated to the casinos’ rights and Seigel showed no legally cognizable net loss under the UCC.
- Seigel’s gambling-law arguments did not invalidate the checks for purposes of the UCC loss-allocation analysis and did not bar Merrill Lynch’s subrogation.

## Legal Principles

- A customer’s remedy for payment over a stop-payment order is limited to the customer’s actual loss under the UCC.
- When a bank (or similar account intermediary) pays a check over a stop-payment order, it may be subrogated to the rights of the payee/holder to prevent the customer’s unjustified recovery.
- Subrogation can preclude customer recovery where the payment merely discharges an obligation the customer otherwise owed, shifting enforcement rights from the original payee to the paying institution.
- Gambling-related defenses do not automatically override the UCC’s allocation of loss in a dispute between a customer and a financial institution, particularly where the asserted defenses do not negate enforceability in a manner that defeats UCC subrogation.

## Conclusion

The court held that, despite Merrill Lynch’s mistaken payment of gambling-related checks after a stop-payment instruction, UCC subrogation principles controlled and prevented Seigel from recovering because the payment satisfied his obligation on the checks and left him without a compensable net loss; asserted gambling-law defenses did not change that result.


Seigel v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 745 A.2d 301 (D.C. 2000)