First National Bank of Palmerton v. Donaldson, Lufkin & Jenrette Securities Corp.

First National Bank of Palmerton (plaintiff) made two loans to Alka Patel, secured by marketable securities held at Donaldson, Lufkin & Jenrette Securities Corp. (DLJ) (defendant). For the first loan, the Bank notified DLJ of its security interest and requested the stock certificates or an agreement to hold the securities until the Bank said otherwise; DLJ sent the certificates, later returned them to DLJ at Patel's request so he could trade, and the Bank sent them back with a letter stating its understanding that Patel would keep the loan's principal balance in his DLJ account. For a second loan, the Bank asked DLJ to sign and return an acknowledgment giving the Bank sole withdrawal rights over the collateral; DLJ never signed or returned it. Patel defaulted and had already liquidated the securities without the Bank's permission before the Bank tried to seize them. The Bank sued DLJ for negligence, breach of fiduciary duty, and fraud, and DLJ moved to dismiss.