Aviation Company, LLC (The) v. Bank of America, N.A. et al
ORDER GRANTING MOTION TO DISMISS re 21 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 10/18/13. "BANA's motion to dismiss is granted. The Aviation Company's request for leave to amend is denied. The Clerk of Court is directed to enter judgment in favor of BANA and to close the case." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
THE AVIATION COMPANY LLC,
BANK OF AMERICA, CORPORATION )
and BANK OF AMERICA, N.A.,
CIVIL NO. 13-00162 SOM/BMK
ORDER GRANTING MOTION TO
ORDER GRANTING MOTION TO DISMISS
This is an action for breach of contract and quiet
title brought by Plaintiff The Aviation Company against Defendant
Bank of America, N.A (“BANA”).1
The Aviation Company alleges
that BANA refuses to release its lien on an aircraft purchased by
The Aviation Company, notwithstanding what The Aviation Company
says was payment in full.
Because the Complaint does not include
sufficient factual allegations to make The Aviation Company’s
claims facially plausible, this court grants BANA’s motion to
The motion to dismiss notes that BANA was also
“erroneously sued as ‘Bank of America Corporation.’” Memo in
Support at 1, ECF No. 21-1. The Aviation Company does not appear
to dispute that this was a mistake. Memo in Opp., ECF No. 30.
In June 1997, The Aviation Company obtained a $250,000
loan from MBNA America, N.A, for the purchase of a Navajo Piper
The Aviation Company claims that, through April 2011,
it “made regular and agreed upon payments” to MBNA and its
Complaint at ¶8, ECF No. 4.
11, 2011, The Aviation Company sent BANA a document that appears
to be a check for $144,689.54, which The Aviation Company
describes as an “electronic funds transfer.”
ECF No. 21-2.
front of the document is marked “EFT only.”
The back of the
document contains the following handwritten statements: “EFT
only”; “not for deposit”; and a signature followed by “authorized
representative without recourse.”
BANA notes that “[t]hese
restrictions clearly prevented Bank of America from depositing
the check or obtaining the funds necessary to pay off or pay down
Memo in Support at 3, ECF No. 21-1.
money appears to have been subtracted from The Aviation Company’s
account, or deposited in BANA’s account, as a result of this “EFT
The Aviation Company alleges that on May 16, 2011,
Karin Baker, the wife of Fred Baker, owner of The Aviation
Company, received a telephone call from a BANA representative
named “Chris,” who informed her that there was a remaining
balance of $627.96 on the debt owed to BANA.
Complaint ¶ 10, ECF
Karin Baker then allegedly paid this remaining balance
via “check by phone” and was allegedly told four days later,
again through a phone-call from “Chris,” that her account had
been settled and that BANA would release the lien on the
Id. ¶ 11.
BANA has not to date released the lien.
This court has jurisdiction under 28 U.S.C. § 1332
because the matter in controversy exceeds the sum or value of
$75,000, and the parties are citizens of different States.
RULE 12(b)(6) STANDARD.
Under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, review is generally limited to the contents of a
Sprewell v. Golden State Warriors, 266 F.3d 979, 988
(9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th
If matters outside the pleadings are considered, the
Rule 12(b)(6) motion is treated as one for summary judgment.
Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th Cir.
1997); Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996).
However, courts may “consider certain materials--documents
attached to the complaint, documents incorporated by reference in
the complaint, or matters of judicial notice--without converting
the motion to dismiss into a motion for summary judgment.”
United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
Documents whose contents are alleged in a complaint and whose
authenticity is not questioned by any party may also be
considered in ruling on a Rule 12(b)(6) motion to dismiss.
Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994).
On a Rule 12(b)(6) motion, all allegations of material
fact are taken as true and construed in the light most favorable
to the nonmoving party.
Fed’n of African Am. Contractors v. City
of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996).
conclusory allegations of law, unwarranted deductions of fact,
and unreasonable inferences are insufficient to defeat a motion
Sprewell, 266 F.3d at 988; In re Syntex Corp. Sec.
Litig., 95 F.3d 922, 926 (9th Cir. 1996).
The court need not
accept as true allegations that contradict matters properly
subject to judicial notice or allegations contradicting the
exhibits attached to the complaint.
Sprewell, 266 F.3d at 988.
Dismissal under Rule 12(b)(6) may be based on either:
(1) lack of a cognizable legal theory, or (2) insufficient facts
under a cognizable legal theory.
Balistreri v. Pacifica Police
Dept., 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v.
Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.
“[T]o survive a Rule 12(b)(6) motion to dismiss,
factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the
allegations in the complaint are true even if doubtful in fact.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal
quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“the pleading standard Rule 8 announces does not
require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation”).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
Twombly, 550 U.S. at 555.
The complaint must “state a
claim to relief that is plausible on its face.”
Id. at 570.
claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”
556 U.S. at 677.
The Aviation Company’s claims are premised entirely on
the validity of the check it sent to BANA on May 11, 2011.
Aviation Company in its Complaint contends that it “fully
complied with the terms of the contract” when it sent this check,
and that BANA breached its contract when it did not “timely
return” the check or give “proper notice of dishonor.”
Complaint ¶ 14, ECF No. 4.
However, the document sent to BANA is
not an actual negotiable instrument that BANA could have
It is not a proper instrument because it states that
it is “not for deposit.”2
Nor is it an actual electronic fund transfer.
electronic fund transfer typically means “any transfer of funds,
other than a transaction originated by check, draft, or similar
paper instrument, which is initiated through an electronic
terminal, telephonic instrument, or computer or magnetic tape so
as to order, instruct, or authorize a financial institution to
debit or credit an account.”
15 U.S.C. § 1693a (emphasis added).
The Aviation Company does not allege that any financial
institution was “instruct[ed] or authorize[d]” to automatically
While the phrase “EFT only” was written on the front of
the check, a photocopy of which was attached by The Aviation
Company with the Complaint, the phrase “not for deposit” was on
the back of the check, which was not attached to the Complaint,
but instead submitted by BANA as an exhibit to its motion to
dismiss. The Aviation Company does not dispute the validity of
BANA’s exhibit, and the court therefore treats the back of the
check as uncontradicted evidence that it may consider under the
“incorporation by reference” doctrine. Knievel v. ESPN, 393 F.3d
1068, 1076 (9th Cir. 2005) (“We have extended the ‘incorporation
by reference’ doctrine to situations in which the plaintiff's
claim depends on the contents of a document, the defendant
attaches the document to its motion to dismiss, and the parties
do not dispute the authenticity of the document, even though the
plaintiff does not explicitly allege the contents of that
document in the complaint.”). “A court may treat such a document
as part of the complaint, and thus may assume that its contents
are true for purposes of a motion to dismiss under Rule
12(b)(6).” Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160
(9th Cir. 2012)(internal quotation omitted).
debit The Aviation Company’s account as a result of the “EFT
Instead, the “check” was clearly a paper instrument
with a restrictive endorsement that specifically prohibited it
from being deposited.
See, e.g, Wideman v. Bank of Am., N.A.,
1:12-CV-532, 2012 WL 2872850 (E.D. Cal. July 11, 2012) (holding,
in a case involving identical restrictive endorsements on a
purported “EFT only” check, that “[g]iven the restrictive
endorsements on the back of the check, it is not clear how the
check can be deposited . . . [and therefore] it does not appear
to the [c]ourt that Plaintiff is genuinely attempting to pay off
A federal court sitting in diversity must apply the
substantive law of the forum state.
See Jacobs v. CBS Broad.,
Inc., 291 F.3d 1173, 1177 (9th Cir. 2002).
Under Hawaii law, a
failure by The Aviation Company to actually render payment is
dispositive of its breach of contract claim.
“One of the basic
elements in proving a breach of a contract . . . is a showing by
the plaintiff either that he has performed the contract or that
during the term of the contract he was ready, willing and able to
Low v. Honolulu Rapid Transit Co., 50 Haw. 582, 585,
445 P.2d 372, 376 (1968).
“[A] party cannot recover for a breach
of contract if he fails to comply with the contract himself.”
Stanford Carr Dev. Corp. v. Unity House, Inc., 111 Haw. 286, 300,
141 P.3d 459, 473 (2006) (quotation omitted).
Company’s conclusory assertion that it has performed the contract
is unavailing, even at the motion to dismiss stage, because it is
refuted by uncontradicted evidence and by the evidence it has
Steckman v. Hart Brewing, Inc., 143 F.3d 1293,
1295-96 (9th Cir. 1998) (“[W]e are not required to accept as true
conclusory allegations which are contradicted by documents
referred to in the complaint.”).
The absence of a plausible allegation that payment has
been rendered to BANA is similarly fatal to The Aviation
Company’s quiet title claim.
A plaintiff who has not rendered
payment to a creditor for a property has not met its burden of
showing title to the property.
See Maui Land & Pineapple Co.,
Inc. v. Infiesto, 76 Haw. 402, 407-08, 879 P.2d 507, 512-13
(1994) (“In an action to quiet title, the burden is on the
plaintiff to . . . prove that he has a substantial interest in
the property and that his title is superior to that of the
In any event, as The Aviation Company appears to
concede in its opposition brief, a quiet title claim is
applicable only to real property.
Memo in Opp. at 12, ECF No. 30
(“Action may be brought by any person who claims . . . an estate
or interest in real property” (quoting Haw. Rev. Stat. § 6691(a) (emphasis in original)) .
The Aviation Company appears to argue that BANA is
liable simply because it did not “timely dishonor” even an
arguably worthless check by its “midnight deadline.”
Opp. at ¶¶ 7-11, ECF No. 30.
The Aviation Company confuses a
bank acting as a depository or payor bank with a bank acting as a
When a bank acts as a secured creditor, “a
security agreement is effective according to its terms between
Haw. Rev. Stat. § 490:9-201.
The Aviation Company
asserts that it had a contract involving what appears to have
been a secured obligation.
The Aviation Company cannot
extinguish a lien on the property providing security until that
obligation is paid.
The Aviation Company’s references to “timely dishonor”
and “midnight deadlines” are derived from provisions of the
Uniform Commercial Code (“UCC”), and related case-law, governing
checks given to depository and payor banks.
See, e.g., Chrysler
Credit Corp. v. First Nat. Bank & Trust Co. of Washington, 746
F.2d 200, 203 (3d Cir. 1984) (noting that “a payor bank must pay,
return or dishonor a check within the midnight deadline following
presentment to or receipt by the bank”) (emphasis added);
Rev. Stat. § 490:3 (addressing “negotiable instruments”); Haw.
Rev. Stat. § 490:4 (addressing “bank deposits and collections”).
Even if The Aviation Company’s “EFT only” check were a
“negotiable instrument,” reliance on these authorities is
inapplicable because BANA is a secured creditor in the
transaction with The Aviation Company, not a depository or payor
bank. See generally
Stat. § 490:4-105.
Haw. Rev. Stat. § 490:4-104;
The applicable law for the transaction is,
principally, UCC Articles 2 and 9, as codified in Haw. Rev. Stat.
§§ 490:2 and 490:9.
Nothing in those statutes places a “midnight
deadline” on BANA to dishonor the check.
Hence, BANA bore no
obligation, contractual or otherwise, to inform The Aviation
Company that it could not deposit the worthless tender, and its
alleged failure to do so does not discharge The Aviation
Company’s contractual obligation to pay BANA the balance of its
Finally, The Aviation Company places great significance
on alleged conversations between Karin Baker and BANA’s alleged
The Aviation Company claims that the
check was “accepted by [BANA] and Plaintiff was given a credit.”
Memo in Opp. at ¶ 12, ECF No. 30.
The Aviation Company alleges
that there was “final payment . . . and [The Aviation Company]
relied on it.”
However, even if the court assumes that the
conversation occurred, The Aviation Company neither alleges that
any money was actually taken from its account nor points to any
specific instance of detrimental reliance on the conversation.
Ravelo by Ravelo v. Hawaii Cnty., 66 Haw. 194, 200, 658 P.2d 883,
887 (1983) (noting that a promise will only be enforced if it
actually “induce[d] action or forbearance” on the part of the
Any reliance or promissory estoppel argument that The
Aviation Company may be making is therefore without merit.
Based on the facts alleged and the exhibits that are
not in dispute, the court concludes that The Aviation Company has
not provided sufficient plausible factual content for the court
to “draw the reasonable inference that [BANA] is liable for the
Iqbal, 556 U.S. at 677.
BANA’s motion to
dismiss is therefore granted.
The Aviation Company has already amended its complaint
on one prior occasion.
ECF No. 4.
Moreover, the evidence that
The Aviation Company has itself submitted and BANA’s
uncontradicted evidence squarely contradict the notion that The
Aviation Company has paid BANA, which is the allegation that is
the gravamen of the Complaint.
amendment would be futile.
In such a situation, further
Flowers v. First Hawaiian Bank, 295
F.3d 966, 976 (9th Cir.2002) (“A district court . . . does not
abuse its discretion in denying leave to amend where amendment
would be futile.”).
The Aviation Company’s request for leave to
amend is denied.
BANA’s motion to dismiss is granted.
Company’s request for leave to amend is denied.
The Clerk of
Court is directed to enter judgment in favor of BANA and to close
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, October 18, 2013.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
The Aviation Company LLC v. Bank of America, Corporation and Bank
of America, N.A.; Civ. No. 13-00162 SOM/BMK; ORDER GRANTING
MOTION TO DISMISS
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