Opinion
Case No. 19-23217-Civ-COOKE/GOODMAN
2020-07-13
ELITE PREMIUM FINANCE, INC., Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.
Robert Edward Menje, Joel Steven Magolnick, Marko & Magolnick, P.A., Miami, FL, for Plaintiff. David Andrew Greene, Fox Rothschild LLP, West Palm Beach, FL, for Defendant.
Robert Edward Menje, Joel Steven Magolnick, Marko & Magolnick, P.A., Miami, FL, for Plaintiff.
David Andrew Greene, Fox Rothschild LLP, West Palm Beach, FL, for Defendant.
ORDER GRANTING MOTION TO DISMISS
MARCIA G. COOKE, United States District Judge
THIS MATTER is before the Court on Defendant Wells Fargo Bank, N.A.’s ("Wells Fargo") Motion to Dismiss the Amended Complaint, filed on October 25, 2019 (ECF No. 16). Plaintiff, Elite Premium Finance, Inc. ("Elite"), filed a response in opposition on November 14, 2019, ECF No. 19, to which Wells Fargo replied on November 21, 2019. ECF No. 20. Thus, the motion is fully briefed and ripe for adjudication. For the following reasons, the Court will grant the Motion to Dismiss the Amended Complaint.
BACKGROUND
Elite is an insurance premium financing company, providing financing to policyholders to pay their insurance premiums. Id. at ¶ 6. Elite uses drafts as a means of providing financing for policyholders to pay premiums to their insurance carriers, and the arrangements are made through the insurance agents who sell the insurance policies. Id. at ¶ 7. Customarily, the insurance agent, acting on behalf of the policyholder, will sign the drafts supplied by Elite, fill in the amount desired, and insert the name of the insurance company issuing the policy, or the insurance company's authorized managing general agent ("MGA"). Id. at ¶ 8. The drafts from Elite state on their face that "This Draft is in Payment only of a financed insurance premium." Id. at ¶ 9. A copy of the draft, together with a Premium Finance Agreement executed by the policyholder, is then sent to Elite. Id. The original draft is delivered directly to the insurance company or the MGA, which deposits it in its bank. Id. The original draft is then transmitted to Elite's bank, Ocean Bank. Id. at ¶ 10. Elite then reviews the drafts to ascertain whether there is a basis to instruct its Bank to not pay the draft from Elite's account. Id.
KJV Insurance Underwriters Inc., an insurance agency, and its owner Juana M. Vera have been clients of Elite since July 2008, and Elite regularly provided KJV with blank Elite drafts. Id. at ¶¶ 13-14. Between August 19, 2017 and January 17, 2018, Vera and KJV delivered premium finance contracts for more than 200 purported customers, and drafts for the insurance premiums were issued for each of the customers, made payable to the respective insurers and/or MGA (the "Drafts"). Id. at ¶ 15. Elite reviewed the Drafts and believed that the drafts were for the payment of financed insurance premiums because each of the Drafts was made payable to, and endorsed by, the respective insurance company or MGA. Id. at ¶ 16. Elite did not reject any of the Drafts, and thus, Ocean Bank paid the Drafts from Elite's Premium Account. Id. Elite contends that the funds used by Elite to pay the drafts constitute "special" deposits, used solely for the specific purpose of advancing insurance premiums to an insurance company or MGA and that the funds in the account from which the drafts are paid (the "Premium Account") cannot be used by Elite, or anyone else, for any other purpose. Id. at ¶ 11.
Elite further alleges that no insurance policies existed for any of the purported customers, and Ms. Vera deposited, and Wells Fargo allowed Ms. Vera to deposit, the Drafts into a Wells Fargo account in Ms. Vera's name or otherwise controlled by Ms. Vera. Id. at ¶¶ 17-18. Elite has demanded the return of the funds from Wells Fargo, but Wells Fargo refused. Id. at ¶¶ 23-24. Based on these allegations, Plaintiff filed suit against Wells Fargo for conversion pursuant to section 673.4201 of the Florida Statutes and the common law. ECF No. 14 at 4.
MOTION TO DISMISS STANDARD
The Court should dismiss a complaint under Federal Rule 12(b)(6) only where it appears that the facts alleged fail to state a "plausible claim for relief." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Fed. R. Civ. P. 12(b)(6). A plaintiff needs only to provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). To satisfy the Rule 8 pleading requirements, a complaint must provide the defendant fair notice of plaintiff's claim and the grounds upon which it rests. Swierkiewicz v. Sorema N. A. , 534 U. S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quoting Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ).
In ruling on a motion to dismiss, the court must accept factual allegations as true and construe them in the light most favorable to the plaintiff. Duty Free Ams., Inc. v. Estee Lauder Cos. , 797 F.3d 1248, 1262 (11th Cir. 2015) (quoting Murphy v. F.D.I.C. , 208 F.3d 959, 962 (11th Cir. 2000) ). However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. The plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
DISCUSSION
I. ELITE FAILS TO STATE A CLAIM FOR CONVERSION UNDER SECTION 673.4201, FLORIDA STATUTES.
Count I of Elite's Amended Complaint is for statutory conversion of the drafts under Fla. Stat. § 673.4201, which states:
(1) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by: (a) The issuer or acceptor of the instrument.
Fla. Stat. § 673.4201(1) (emphasis added). Elite does not contest its status as the issuer of the drafts. Wells Fargo contends that the UCC § 3-420, upon which the Florida Statute is based, prohibits the issuer of the negotiable instrument to bring an action in conversion against the bank that accepted the instrument.
The official Florida Statute comment, which the Florida Statute adopted from the official UCC comment to the 1990 revision on claims of conversion, explains the conversion policy reasoning for the revision as follows:
Under former Article 3, the cases were divided on the issue of whether the drawer of a check with a forged indorsement can assert rights against a depositary bank that took the check. The last sentence of Section 3-420(a) resolves the conflict by following the rule stated in Stone & Webster Engineering Corp. v. First National Bank & Trust Co., 345 Mass. 1, 184 N.E.2d 358 (1962). There is no reason why a drawer should have an action in conversion. The check represents an obligation of the drawer rather than property of the drawer. The drawer has an adequate remedy against the payor bank for recredit of the drawer's account for unauthorized payment of the check.
Fla. Stat. § 673.4201, comment 1. The UCC has adopted the reasoning in Stone & Webster Eng'g Corp. v. First Nat'l Bank & Tr. Co. that a negotiable instrument is the obligation of a drawer and not an entitlement. Stone & Webster Eng'g Corp. v. First Nat'l Bank & Tr. Co. , 345 Mass. 1, 184 N.E.2d 358, 362 (1962). Even though it was contemplated that the limitation of the UCC provision would be limited to cases factually similar to Stone, 2 J. White & R. Summers, Uniform Commercial Code (4th Ed. 1995) § 18-4, p. 220, the Statute is clear on its face that an action for conversion of an instrument may not be brought by the issuer of the instrument.
Elite accepts this plain language reading of the statute. However, it argues the rule only applies to "general" deposits and not to "special" deposits such as theirs. ECF No. 19 at 3. Deposits are presumed to be "general" unless they are proven to be "special." Carl v. Republic Sec. Bank , 282 F. Supp. 2d 1358, 1366 (S.D. Fla. 2003). "Because earmarking and setting aside cash or credit involve delay and additional expense, clear proof should be required to prove that a bank undertook a trust rather than merely a contract obligation." Pereira v. United Jersey Bank, N.A. , 201 B.R. 644, 672 (S.D.N.Y. 1996) (quoting Kronisch v. Howard Sav. Inst. , 161 N.J.Super. 592, 392 A.2d 178, 181 (App. Div. 1978) ). The policy for the presumption of the general deposit is clear: to allow the bank to use the funds for its own purposes and thereafter pay the debt from its general funds. Id. at 673.
Elite argues that the funds Elite used to pay the drafts constituted special deposit because the funds in the account from which the drafts are paid can not be used by Elite, or anyone else, for any other purpose than the specific purpose of advancing insurance premiums. ECF No. 14 at ¶ 11. However, a deposit for a special purpose is a subset of a general deposit and does not create a "trust". Pereira , 201 B.R. at 673 (quoting Kronisch , 161 N.J.Super. 592, 392 A.2d at 181 ). Finally, "a deposit does not become ‘special’ simply because the depositor wishes to have the bank devote the deposited funds to a special purpose." Id.
Even assuming arguendo , that Elite's deposits were special deposits, there is not a special deposit exception to the Florida Statute § 673.4201. Elite contends that Indus. Park Dev. Corp. v. Am. Express Bank recognizes that conversion claims may be appropriate where the funds at issue are deposits for some specific purpose. ECF No. 19 at 4; Indus. Park Dev. Corp. v. Am. Express Bank, FSB , 960 F. Supp. 2d 1363, 1366 (M.D. Fla. 2013). In Industrial Park , the court explained that under Florida law, in addition to alleging facts that the other party wrongfully asserted dominion over that property, one must allege facts sufficient to show ownership of the subject property in order to state a claim of conversion. Industrial Park , 960 F. Supp. 2d at 1366 (citing Edwards v. Landsman , 51 So. 3d 1208, 1213 (Fla. 4th DCA 2011) ). And in order for money to be an appropriate subject for a conversion claim, there must be an obligation for the receiver to keep intact or deliver the specific money at issue. Industrial Park , 960 F. Supp. 2d at 1366 (citing Intabill, Inc. v. Elie , 2009 U.S. Dist. LEXIS 89550, 2009 WL 3232520, *2 (M.D. Fla. 2009) ) (emphasis added). The court concluded that the plaintiff had not alleged any facts suggesting the requirement that the transactions at issue involved a specific deposit. Industrial Park, 960 F. Supp. 2d at 1366. However, the court in Industrial Park was examining the Plaintiff's "sole claim of common law conversion," and therefore, the case does not stand for the proposition that there is a special deposit exception to the Florida Statute § 673.4201.
Therefore, as Elite is prohibited from bringing a conversion claim as the issuer of the drafts, the Court grants Wells Fargo's Motion to Dismiss Count I and dismisses Elite's conversion claim under the Florida Statute § 673.4201 with prejudice.
II. ELITE FAILS TO STATE A CLAIM FOR COMMON LAW CONVERSION
Count II of Elite's Amended Complaint is for common law conversion of the drafts. Florida common law allows for a cause of action for conversion of funds if a plaintiff can demonstrate, by a preponderance of the evidence: (1) specific and identifiable money; (2) possession or an immediate right to possess that money; (3) an unauthorized act which deprives plaintiff of that money; and (4) a demand for return of the money and a refusal to do so. Breig v. Wells Fargo Bank, N.A., No. 13-80215-CIV, 2014 WL 806854, at *4 (S.D. Fla. Feb. 28, 2014) (quoting IberiaBank v. Coconut 41, LLC, 984 F.Supp.2d 1283 (M.D. Fla. 2013) ).
The Court cannot permit Elite to proceed with its common law claim for conversion where it is prohibited from bringing such a claim under the U.C.C. and the Florida Statutes. Section 671.103 of the Florida Statutes states that "[u]nless displaced by the particular provisions of this code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions." Fla. Stat. Ann. § 671.103. The official comment explains that "this section indicates the continued applicability to commercial contracts of all supplemental bodies of law except insofar as they are explicitly displaced by this Act ..." Thus, the common law is envisioned to supplement the Florida Statute, unless it is inconsistent with the provisions, purposes and policies of the Statute.
Section 673.4201 of the Florida Statutes explicitly prohibits an action for conversion of an instrument brought by the issuer or acceptor of the instrument. Fla. Stat. § 673.4201(1). Therefore, even if the Court were to presume that Elite adequately pled sufficient interest in specific and identifiable funds, the allowance of a common-law claim would sacrifice the certainty and consistency of the remedies afforded by the UCC and thwart the goal of uniformity. Halla v. Norwest Bank Minnesota, N.A. , 601 N.W.2d 449, 451 (Minn. Ct. App. 1999) ("[F]or the U.C.C. to be effective, parties in commercial transactions must be able to rely on the remedies provided by the Code."); Prudential-Bache Secur., Inc. v. Citibank, N.A. , 73 N.Y.2d 263, 539 N.Y.S.2d 699, 536 N.E.2d 1118, 1123 (1989) (permitting the common law conversion claim when "the Code unmistakably precludes recovery would be to contradict and effectively nullify" the relevant UCC provision).
Accordingly, as the common law claim for conversion of drafts has been displaced by Section 673.4201 of the Florida Statutes, the Court grants Wells Fargo's Motion to Dismiss Count II and dismisses Elite's common law conversion claim with prejudice.
CONCLUSION
For the foregoing reasons, Wells Fargo's Motion to Dismiss (ECF No. 16) is GRANTED . The Amended Complaint (ECF No. 14) is DISMISSED with prejudice . In Elite's response in opposition to the Motion to Dismiss, it states it "reserves the right to seek leave to also assert additional claims against Wells Fargo for negligence and/or aiding and abetting conversion." ECF No. 19 at 7. As Elite has not filed a motion for leave to amend, this request is improper and therefore denied. See Newton v. Duke Energy Fla., LLC , 895 F.3d 1270, 1277 (11th Cir. 2018) (holding a request for leave to amend a complaint imbedded in a memorandum opposing a motion to dismiss "possessed no legal effect."); Long v. Satz , 181 F.3d 1275, 1279 (11th Cir. 1999) ("A motion for leave to amend should either set forth the substance of the proposed amendment or attach a copy of the proposed amendment."). Thus, the Court thus dismisses this action without leave to file an amended complaint. The Clerk shall CLOSE this case. All pending motions, if any, are DENIED as moot .
DONE and ORDERED in chambers, Miami, Florida, this 13th day of July 2020.