Song Chuan Technology Co Ltd v. Bank of America NA et al

Filing 30

ORDER granting 11 Bank of America's Motion to Dismiss; granting in part and denying in part 21 Song Chuan's Motion to Amend the complaint; dismissing Bank of America from this action. Claims against remaining Defendant John Doe are DISMISSED WITHOUT PREJUDICE. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 3/10/2017.(sshe, )

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH CAROLINA

CHARLESTON DIVISION

Civil Action No. 2: 16-3269-RMG

Song Chuan Technology (Fujian) Co., Ltd., )
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Plaintiff,

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v.

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ORDER AND OPINION

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Bank of America, NA, and John Doe,

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Defendants.

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This matter is before the Court on Defendant Bank of America's motion to dismiss Plaintiff
Song Chuan Technology's claim against Bank of America for conversion, and Song Chuan's
motion to amend the complaint to remove its claim for injunctive relief, to add a claim under South
Carolina Code § 36-4A-101, and to add a claim for constructive trust. For the reasons set forth
below, the Court grants the motion to dismiss, and grants in part and denies in part the motion to
amend the complaint. The motion to amend is granted insofar as Song Chuan seeks to dismiss its
first cause of action seeking injunctive relief and seeks to allege personal jurisdiction over the
parties. The motion to amend is otherwise denied. Bank of America is dismissed from this action,
and all other claims are dismissed without prejudice.

I.

Background
On September 30, 2016, Song Chuan filed a complaint alleging Song Chuan and a business

partner (whom Song Chuan declines to identify, but who apparently is the Kansas-based "Meridian
Chemicals Sales" identified in the wire transfer documentation attached to the complaint, see Dkt.
No.1-I) negotiated a sale of goods (which Song Chuan declines to identify) for $880,000. (See
Dkt. No. 1

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9-14.) According to the complaint, an "advisor" located in Charleston, South

Carolina (whom Song Chuan declines to identify) served as an intermediary for negotiations

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between Song Chuan and the business partner for the sale of the unidentified goods. (Id

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10.)

"At some point during the course of th[ese] negotiations," an unknown person allegedly hacked
into Song Chuan's email account, and, posing as the business partner, transmitted his own Bank
ofAmerica account details to Song Chuan to obtain fraudulently the sale proceeds due the business
partner. (Id

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1L) On or about September 14,2016, Song Chuan wired $880,000 to John Doe's

Bank of America account, believing the funds were being sent to its business partner. (/d

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15.)

Song Chuan seeks to recover those funds from Bank of America, and damages, including treble
damages, from John Doe.
On November 10, 2016, Bank of America moved to dismiss Song Chuan's conversion
claim. (Dkt. No. II.) On February 1,2017, Song Chuan moved to amend the complaint to add an
allegation of personal jurisdiction over the parties, to remove a claim for injunctive relief against
Bank of America, and to add statutory and constructive trust claims against Bank of America.

II.

Legal Standard

A.

Motion to Dismiss
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the dismissal of an action if

the complaint fails "to state a claim upon which relief can be granted." Such a motion tests the
legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits
of the claim, or the applicability of defenses. . .. Our inquiry then is limited to whether the
allegations constitute 'a short and plain statement of the claim showing that the pleader is entitled
to relief.'" Republican Party o/N.c. v. Martin, 980 F.2d 943,952 (4th Cir. 1992) (quotation marks
and citation omitted). In a Rule 12(b)(6) motion, the Court is obligated to "assume the truth of all
facts alleged in the complaint and the existence of any fact that can be proved, consistent with the
complaint's allegations." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th
Cir. 2000). However, while the Court must accept the facts in a light most favorable to the non­
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moving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or
arguments." Id.
To survive a motion to dismiss, the complaint must state "enough facts to state a claim to
reliefthat is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although
the requirement of plausibility does not impose a probability requirement at this stage, the
complaint must show more than a "sheer possibility that a defendant has acted unlawfully."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the

pleading "allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged." Id.

B.

Motion to Amend
Under Rule 15{a){2) of the Federal Rules of Civil Procedure, after the time has passed to

amend a pleading as a matter of course, "a party may amend its pleading only with the opposing
party's written consent or the court's leave. The court should freely give leave when justice so
requires." Rule 15{a) is a "liberal rule [that] gives effect to the federal policy in favor of resolving
cases on their merits instead of disposing of them on technicalities." Laber v. Harvey, 438 F.3d
404,426 (4th Cir. 2006) (en banc). However, "[m]otions to amend are committed to the discretion
ofthe trial court." Keller v. Prince George's County, 923 F.2d 30, 33 (4th Cir. 1991). Thus, "[a]
district court may deny a motion to amend when the amendment would be prejudicial to the
opposing party, the moving party has acted in bad faith, or the amendrpent would be futile." Equal
Rights Ctr. v. Niles Bolton Assocs., 602 F.3d 597,602-03 (4th Cir. 2010).

Futility is apparent if the proposed amended complaint fails to state a claim under the
applicable rules and accompanying standards: "[A] district court may deny leave if amending the
complaint would be futile-that is, if the proposed amended complaint fails to satisfy the
requirements of the federal rules." United States ex rei. Wilson v. Kellogg Brown & Root, Inc.,
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525 F.3d 370, 376 (4th Cir.2008) (internal quotation marks omitted). "If an amendment would
fail to withstand a motion to dismiss, it is futile." Woods v. Boeing Co., 841 F. Supp. 2d 925,930
(D.S.C. 2012). "Therefore, if any new well-pleaded facts are asserted in the new proposed
complaint, but they fail to show that the plaintiff is entitled to relief, the court should deny the
motion for leave to amend." In re: Bldg. Materials Corp. ofAm. Asphalt Roofing Shingle Prod.
Liab. Litig., No. 8-11-2000-JMC, 2013 WL 12152414, at *2 (D.S.C. June 17,2013).

III.

Discussion

A.

Motion to Dismiss
Song Chuan seeks to recover from Bank of America funds it voluntarily wired to John

Doe's account at Bank of America on a theory of conversion. "Conversion is the unauthorized
exercise of ownership over the personal property of another." Richardson's Rests., Inc. v. Nat'l
Bank ofS. c., 403 S.E.2d 669, 672 (S.C. Ct. App. 1991). Conversion applies to money only when

"there is an obligation on the defendant to deliver a specific, identifiable fund to the plaintiff." Id.
Song Chuan alleges John Doe's fraud induced it to wire money to Bank of America. But
simply alleging fraud by a bank customer does not create an immediate, established right to that
customer's funds on deposit with the bank, enforceable against the bank in conversion. See Owens
v. Andrews Bank & Trust Co., 220 S.E.2d 116 (S.C. 1975) (holding a claim for conversion did not

exist where an employee "had only a disputed claim for her wages, not an immediate right to
payment"); see also Terry v. Bank ofAm., N.A., 350 F. Supp. 2d 727, 729-30 (W.D. Va. 2004)
("Plaintiffs cannot bring a claim for conversion unless they have a property interest in and are
entitled to immediate possession ofthe converted item. In the present case, the plaintiffs' amended
complaint fails to allege that the plaintiffs or the receivership entities were entitled to immediate
possession of the funds in the [customer] account at the time those funds allegedly were
converted. As the bank points out, the general rule is that once funds are deposited in a bank
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account, the funds become the property of the bank."). In Eisenberg v. Wachovia Bank, N.A., the
Fourth Circuit discussed the facts of a Massachusetts fraud case where a Mr. "Rizzo, the chief fund
raiser for the Tsongas Committee, opened a bank account at Andover Bank bearing the
committee's name and listed himself as sole signatory" and "Rizzo used the bank account to
convert the proceeds of contributions and loans to the Tsongas Committee to his own use." 301
F.3d 220, 225 (4th Cir. 2002) (internal quotation marks and citation omitted). It noted the funds
Mr. Rizzo fraudulently obtained "were converted by Rizzo," not the bank. ld. In other words,
fraudulently obtained funds are converted by the fraudster, not his bank. Proceeding to discuss an
attempt to recover Mr. Rizzo's fraud from the bank on a negligence theory, the Fourth Circuit
stated, "The mere fact that a bank account can be used in the course of perpetrating a fraud does
not mean that banks have a duty to persons other than their own customers. To the contrary, the
duty is owed exclusively to the customer, not to the persons with whom the customer has dealings."

ld. at 225-26 (quoting McCallum v. Rizzo, 1995 WL 1146812 (Mass. Super. Ct. Oct. 13, 1995)).
The Court therefore grants Bank of America's motion to dismiss Song Chuan's conversion
claim against Bank of America.

B.

Motion to Amend
Plaintiffs proposed amended complaint asserts a claim under Article 4A of the VCC,

enacted in South Carolina at S.C. Code Ann., § 36-4A, et seq. Article 4A, § 207(a) provides that
"if, in a payment order received by the beneficiary's bank, the name, bank account number, or
other identification of the beneficiary refers to a nonexistent or unidentifiable person or account,
no person has rights as a beneficiary of the order and acceptance of the order cannot occur."
Plaintiff, however, alleges its payment to John Doe was directed to his existing and identifiable
account at Bank of America. (See Dkt. No. 1-1 (full identification of transfer beneficiary).)
Section 207 applies only where it is not possible to complete the transfer because the beneficiary
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cannot be identified-preventing banks from simply keeping funds where it is not possible to
complete the transfer.

See, e.g., Tzaras v. Evergreen Int'! Spot Trading, Inc., No. 01 Civ.

10726(LAP), 2003 WL470611, at *5 (S.D.N.Y. Feb. 25, 2003); New S. Fed. Sav. Bankv. Flatbush

Fed. Sav. & Loan Ass'n of Brooklyn, No. 01 Civ. 9024(DFE), 2002 WL 31413680, at *1-2
(S.D.N.Y. Oct. 25,2001); Donmar Enters., Inc. v. S. Nat 'I BankofNC., 828 F. Supp. 1230, 1239
(W.D.N.C. 1993). Section 207 is inapplicable to the situation alleged here, where a funds transfer
is completed to the identified recipient and the sender of funds subsequently realizes that the
identified recipient was not who he said he was.
Song Chuan's proposed amended complaint also seeks to add a claim for constructive trust.
Constructive trust is an equitable doctrine that applies when the circumstances "under which
property was acquired make it inequitable that it should be retained by the one holding legal title."

Lollis v. Lollis, 354 S.E.2d 559, 561 (S.C. 1987). A constructive trust claim can only be asserted
against a party alleged to have committed wrongdoing, the fruits of which "he ought not in equity
and good conscience hold and enjoy." Doe v. Roe, 475 S.E.2d 783, 787 (S.C. Ct. App. 1996).
Song Chuan's proposed amended complaint fails to state a claim for constructive trust
because Bank of America is not alleged to be a participant in John Doe's fraud. When Song Chuan
transferred funds to Bank of America with instructions to deposit in John Doe's account, Bank of
America had-according to Song Chuan's proposed complaint-no reason not to execute that
transfer. The only "wrongdoing" Song Chuan alleges is the fact that Bank of America did not
immediately give Song Chuan money from a depositor's account based on notice of unproven
allegations of fraud against the depositor. (Dkt. No. 21-2 '1[18.) That is insufficient to state a claim
for constructive trust.

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Because the two causes of action Song Chuan seeks to add in its proposed amended
complaint fail to state a claim against Bank of America, the Court denies Song Chuan's motion to
amend the complaint insofar as it seeks to add those claims. See Woods, 841 F. Supp. 2d at 930
("If an amendment would fail to withstand a motion to dismiss, it is futile."). Song Chuan's motion
to amend the complaint to allege personal jurisdiction over the parties (see Dkt. No. 21-2 ~ 6) and
to remove its cause of action against Bank of America for injunctive relief is granted.

C.

Dismissal of All Other Claims
Because no claims remain against Bank of America, the Court dismisses Bank ofAmerica

from this action. With the dismissal of all claims against Bank of America, the complaint must be
dismissed in its entirety because only remaining claims are claims asserted against the alleged
fraudster, John Doe. "[A] complaint may not stand against only unnamed, unserved defendants."
Whiteheadv. Viacom, 233 F. Supp. 2d 715, 725 (D. Md. 2002); see also W Capital Design, LLC

v. N.Y. Mercantile Exch., 180 F.Supp.2d 438, 443 (S.D.N.Y. 2001). The period for service of the
complaint provided in Rule 4(m) of the Federal Rules ofCivil Procedure expired 70 days ago, yet
with the dismissal of Bank of America there is no served defendant.
Further, the Court finds Song Chuan's allegation that "[t]his court has personal jurisdiction
over the parties"! is not plausible given (1) that this action was filed 160 days ago, on September
30,2016, yet Song Chuan still has not identified John Doe, much less alleged any fact suggesting
John Doe is within the personal jurisdiction of this Court, (2) that Song Chuan is a Chinese
corporation not authorized to do business in this District (see S.C. Sec'y State,
http://businessfilings.sc.gov/), (3) that the "business partner" Song Chuan thought it was

1 The

proposed amended complaint adds the allegation, "This court has personal jurisdiction over
the parties," (Dkt. No. 21-2 ~ 6), and the Court grants Song Chuan's motion to amend thecomp1aint
to add that allegation.

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purchasing from is, apparently, a Kansas-based company not authorized to do business in this
District (see id; Dkt. No. 1-1); (4) that the disputed wire transfer Song Chuan seeks to recover has
no apparent nexus with this District, having been sent from China to a North Carolina bank for a
Kansas beneficiary (see Dkt. No.1-I), and (5) that Song Chuan has declined to identify the
Charleston-based "advisor" who would be the only nexus with this district. Because Song Chuan
has not plausibly pleaded this Court's personal jurisdiction over the parties, the Court must dismiss
the complaint.

IV.

Conclusion
For the foregoing reasons, the Court GRANTS Bank of America's motion to dismiss (Dkt.

No. 11), GRANTS IN PART AND DENIES IN PART Song Chuan's motion to amend the
complaint, and DISMISSES Bank of America from this action.

Claims against remaining

Defendant John Doe are DISMISSED WITHOUT PREJUDICE.
AND IT IS SO ORDERED.

Richard Mark {jeI~1
United States District
March IV, 2017
Charleston, South Carolina

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