Deutsche Bank National Trust Company v. Regions Bank et al

Filing 23

ORDER granting 11 Motion to Dismiss for Failure to State a Claim filed by defendant Century Surety Company. Signed by Judge Ivan L.R. Lemelle on 1/15/2013. (ijg, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DEUTSCHE BANK NATIONAL TRUST
COMPANY

CIVIL ACTION

VERSUS

NO. 12-2436

REGIONS BANK, CENTURY SURETY
COMPANY, AND EMAD ZAYED

SECTION “B”

ORDER
Before

the

Court

is

Defendant

Century

Surety

Company’s

(“Century”) Rule 12(B)(6) Motion to Dismiss (Rec. Doc. No. 11).
Plaintiff Deutsche Bank National Trust Company (“DB”), as Trustee,
for

the

Registered

Holders

of

Impac

Mortgage

Pass-Through

Certificates Series 2006-5, filed a Memorandum in Opposition to
Century’s Rule 12(b)(6) Motion to Dismiss. (Rec. Doc. No. 15).
Century filed a response thereto. (Rec. Doc. No. 16).
For the reasons enumerated below, IT IS ORDERED that Defendant
Century’s Rule 12(B)(6) Motion to Dismiss is GRANTED, reserving all
civil

and

criminal

rights

Plaintiff

may

have

against

other

Defendants, alleged forgers.

Cause of Action and Facts of Case:
The lawsuit arises out of Century’s payment of an insurance
claim for roof damages to property owned by its insured, Diverse

1

Holdings,

LLC

(“Diverse”).

(Rec.

Doc.

No.

11-2,

at

2).

The

insurance contact at issue (“the policy”) lists “Eddie Zayed d/b/a
Diverse Holdings LLC” as the named insured (Rec. Doc. No. 15-1, at
2-3), and lists DB as the sole mortgage holder (Id., at 3). The
claim was made by Zayed, on behalf of diverse. (Rec. Doc. No. 1, at
3). On September 21, 2011, Century issued a check to “EDDIE ZAYED
DBA: DIVERSE HOLDINGS LLC AND DEUTSCHE BANK NATIONAL TRUST COMPANY”
as payment for the damage to Diverse’s property. (Id.).

The check

was issued on Century’s account with Chase bank. (Id.). The check
was delivered to Diverse or an agent thereof. (Id.). It is alleged
that DB, a co-payee on the check, did not endorse the check, did
not authorize Zayed or any other person to endorse the check, and
has not received proceeds of the check. (Id., at 4). DB alleges
that Zayed forged its endorsement on the check and deposited the
proceeds of the check in his personal account at Regions Bank
(“Regions”) on October 6, 2011. (Id.). Regions accepted the check
with the forged endorsement and then transferred the check to
Chase, the payor bank, which paid the check with funds drawn on
Century’s account at Chase. (Id.). DB alleges that none of the
proceeds of the Check have been used for repair of the Property or
to pay down the indebtedness to DB. (Id.). On January 10, 2012, a
demand was sent to Century to reissue the check because DB did not
receive the funds due to an unauthorized, improper, and/or forged
endorsement. (Id.). Century did not respond to the demand. (Id.).

2

Law and Analysis:
I. Motion To Dismiss Standard
When reviewing a motion to dismiss, courts must accept all
well-pleaded

facts

as

true

and

view

them

in

the

light

most

favorable to the non-moving party. Baker v. Putnal, 75 F.3d 190,
196 (5th Cir. 1996).

However, "[f]actual allegations must be

enough to raise a right to relief above the speculative level."
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "'To survive
a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.'" Gonzales v. Kay, 577 F.3d 600, 603 (5th
Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009))
(internal quotation marks omitted).

The Supreme Court in Iqbal

explained that Twombly promulgated a "two-pronged approach" to
determine whether a complaint states a plausible claim for relief.
Iqbal, 129 S.Ct. at 1950.

First, courts must identify those

pleadings that, "because they are no more than conclusions, are not
entitled to the assumption of truth." Id.

Legal conclusions "must

be supported by factual allegations." Id.

"Threadbare recitals of

the elements of a cause of action, supported by mere conclusory
statements, do not suffice."

Id. at 1949.

Upon identifying the well-pleaded factual allegations, courts
3

then

"assume

their

veracity

and

then

determine

whether

they

plausibly give rise to an entitlement to relief." Id. at 1950.

"A

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." Id. at 1949.
This is a "context-specific task that requires the reviewing court
to draw on its judicial experience and common sense." Id.
plaintiffs

must

"nudge[]

conceivable to plausible."

their

claims

across

the

line

The
from

Twombly, 550 U.S. at 570.

II. Century’s Liability
The named insured on the insurance policy issued by Century
Surety is “EDDIE ZAYED DBA DIVERSE HOLDINGS LLC.” (See Rec. Doc.
No. 15-1, at 2-3). Both plaintiff and defendant stipulate that
Century issued a check to “EDDIE ZAYED DBA: DIVERSE HOLDINGS LLC
AND DEUTSCHE BANK NATIONAL TRUST COMPANY.” (See Rec. Doc. Nos. 112, at 2; 1, at 3). Thus, as Century issued the check to the named
insured as listed on the policy,1 Plaintiff’s argument that Century
did not issue a check to a valid payee fails. Furthermore, under
LSA-R.S. 10:3-420, cmt.1 (1992), “[i]f a check is payable to more
than one payee, delivery to one of the payees is deemed to be
delivery to all of the payees.” See also, Northeast Bank v. Wells
1

Additionally, it appears that Eddie Zayed made the
insurance claim on behalf of Diverse Holdings. (Rec. Doc. No. 1,
at 3).
4

Fargo Bank, N.A., Civ. No. 11-3233(JNE/JJG), 2012 WL 2721635, at *2
(D. Minn. July 9, 2012);

Graves v. Johnson, 862 N.E.2d 716, 721

(Ind. Ct. App. 2007). Thus, when the check was delivered to Eddie
Zayed, the named agent of Diverse Holdings LLC, the check was
delivered to all of the payees.
Once an uncertified check is delivered to a valid payee and
cashed, the obligation is discharged. LSA-R.S. 10:3-310(b).2 Thus,
under the general rule, when Century issued an uncertified check
and it was cashed, its obligation was discharged.3
The question before the Court is whether once a payor has
issued a check jointly to two valid payees and one of the payees
fraudulently signs the other payee’s name as an endorsement on the
check and then cashes said check, the payor’s obligations are
discharged. Although our courts have not issued a decision directly
on point, courts in other states have held that the payor is
discharged of his obligations when he delivers a check to one of
the valid payees even where a jointly payable check is sent to one
2

“[I]f a note or an uncertified check is taken for an
obligation, the obligation is suspended to the same extent the
obligation would be discharged if an amount of money equal to the
amount of instrument were taken...(2)Payment of the note results
in discharge of the obligation to the extent of the payment.”
3

Other states have followed this rule. See Graves, 862
N.E.2d at 721 (“once a check is paid, it extinguishes the debt
for which it is presented”); Benchmark Bank v. State Farm Lloyds,
893 S.W.2d 649, 651 (Tex. Ct. App. 1994) (holding that a drawer’s
obligation is discharged as a matter of law where a draft,
properly issued to joint payees, is delivered, honored and paid).
5

co-payee and that co-payee embezzles the funds. See Benchmark, 893
S.W.2d at 649 (when payment of drafts is made out jointly to two
payees and one allegedly forged the other payee’s endorsement and
presented the drafts for payment, the drawer’s obligation is
discharged as a matter of law).
In the case at bar, the Defendant issued a joint check to
valid payees, delivered the check to one of the payees and that
check was cashed. The obligation was discharged once the check was
honored. Therefore, under the asserted facts, there is no legal
cause of action against the defendant Century, but certainly one in
civil and criminal law against alleged forgers.

New Orleans, Louisiana, this 15th day of January, 2013.

______________________________
UNITED STATES DISTRICT JUDGE

6