Song Chuan Technology Co Ltd v. Bank of America NA et al
ORDER AND OPINION granting in part and denying in part 32 Plaintiff's Motion to Alter or Amend. The Court's order of March 10, 2017 (Dkt. No. 30) is altered to deny Plaintiff's motion for leave to amend the c omplaint WITHOUT PREJUDICE to Plaintiff's ability to file a complaint asserting a constructive trust claim against Bank of America alleging failure to return funds transferred from Song Chuan to a Bank of America account holder under a transfer order effectively cancelled under § S.C. Code 36-4A-211. The motion is otherwise DENIED. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 5/8/2017.(sshe, )
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
Song Chuan Technology (Fujian) Co., Ltd., )
Civil Action No. 2:16-3269-RMG
Bank of America, NA, and John Doe,
ORDER AND OPINION
This matter is before the Court on Plaintiff Song Chuan's motion to alter the Court's order
dismissing claims against Defendant Bank of America with prejudice and claims against
Defendant John Doe without prejudice. For the reasons set forth below, the Court grants in part
and denies in part the motion.
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. 1-1) negotiated a sale of goods (which Song Chuan declines to identifY) for $880,000. (See
Dkt. No. 1 ~~ 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
between Song Chuan and the business partner for the sale of the unidentified goods. (Id
"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
of America account details to Song Chuan to obtain fraudulently the sale proceeds due the business
partner. (ld ~ 11.) 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. (Id.
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. 11.) 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. On
March 10,2017, the Court granted Bank of America's motion to dismiss Song Chuan's conversion
claim and denied Song Chuan's motion for leave to add statutory and constructive trust claims
against Bank on America. The Court also sua sponte dismissed without prejudice claims against
John Doe. The basis for the dismissal of the conversion claim against Bank of America and for
the denial of leave to add statutory and constructive trust claims against Bank of America was
failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The basis for
the dismissal of claims against John Doe was the impropriety of proceeding only against and
unserved, unnamed defendant and Song Chuan's failure plausibly to allege facts suggesting
personal jurisdiction over John Doe. On April 6, 2017, Song Chuan timely filed a motion to alter
judgment under Rule 59 of the Federal Rules of Civil Procedure.
Rule 59(e) of the Federal Rules of Civil Procedure governs motions to alter or amend a
judgment; however, the rule does not provide a legal standard for such motions. The Fourth Circuit
has articulated "three grounds for amending an earlier judgment: (1) to accommodate an
intervening change in controlling law; (2) to account for new evidence not available at trial; or (3)
to correct a clear error of law or prevent manifest injustice." Pac. Ins. Co. v. Am. Nat '/ Fire Ins.
Co., 148 F.3d 396, 403 (4th Cir. 1998)(citing EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112
(4th Cir. 1997); Hutchinson v. Staton, 994 F.2d 1076, 1081 (4th Cir. 1993». "Rule 59(e) motions
may not be used, however, to raise arguments which could have been raised prior to the issuance
of the judgment, nor may they be used to argue a case under a novel legal theory that the party had
the ability to address in the first instance." [d. at 403 (internal citations omitted). Rule 59(e)
provides an "extraordinary remedy that should be used sparingly." [d. (internal citation omitted).
The decision to alter or amend a judgment is reviewed for an abuse of discretion. [d. at 402.
Song Chuan does not allege any intervening change in law or newly discovered evidence.
The basis for Song Chuan' s motion, therefore, is correction of clear error of law or prevention of
manifest injustice. The proposed amended complaint asserted three causes of action against Bank
of America: a claim under "D.C.C. Article 4A, S.C. Code Ann. § 36-4A-lOl, et seq." asserting
that Song Chuan "is entitled to return or reimbursement of the $880,000 [that Song Chuan wired
to Bank of America], plus any consequential and incidental damages" because the wire transfer
order "contained a misdescription known to [Bank of America]," a claim for conversion, and a
claim for constructive trust. (Dkt. No. 21-2 at 4-5.) Song Chuan's motion to alter concerns the
Court's denial of leave to amend the complaint to assert a claim under the D.C.C. Specifically,
Song Chuan argues the Court committed a clear error of law when it addressed only proposed
claims under S.C. Code § 36-4A-207(a) and failed to address proposed claims under S.C. Code §
36-4A-207(b) ("§ 207(b)") or S.C. Code § 36-4A-21I ("§ 211 "). Song Chuan also argues against
the Court's determination that no plausible allegations suggested personal jurisdiction over the
John Doe defendant.
Nothing in the proposed amended complaint or Song Chuan's motion for leave to amend
mentions anything regarding §§ 207(b) or 211. Song Chuan, however, did make arguments about
those sections in its reply to Bank of America's opposition to the motion for leave to amend (Dkt.
No. 29.) The Court therefore considers it proper to examine whether arguments about §§ 207(b)
and 211 were overlooked and whether they have merit. The Court also considers Defendant's
argument regarding personal jurisdiction over John Doe.
Claims Under S.C. Code § 36-4A-207(b)
Song Chuan argues the Court's order erred by considering its proposed D.C.C. cause of
action under § 207(a) and but under § 207(b). Section 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." Section 207(b) provides,
Ifa payment order received by the beneficiary's bank identifies the beneficiary both
by name and by an identifying or bank account number and the name and number
identify different persons, the following rules apply:
(1) Except as otherwise provided in subsection (c), if the beneficiary's bank does
not know that the name and number refer to different persons, it may rely on the
number as the proper identification of the beneficiary of the order. The
beneficiary's bank need not determine whether the name and number refer to the
(2) If the beneficiary's bank pays the person identified by name or knows that the
name and number identify different persons, no person has rights as beneficiary
except the person paid by the beneficiary's bank if that person was entitled to
receive payment from the originator of the funds transfer. If no person has rights
as beneficiary, acceptance of the order cannot occur.
Song Chuan's argument that the Court failed to consider a proposed § 207(b) claim is
without merit. The proposed amended complaint does not allege that the account number on the
wire transfer order refers to a party with a name different from that identified on the wire transfer
order. Song Chuan's reply brief supporting its motion for leave to amend never argued that either.
To the contrary, Song Chuan argued, "the named beneficiary does not exist and is not tied to the
BoA account in question" so that "the extent that the Order contained a bank account number,
there was a conflict between the name on the Order and account number." (Dkt. No. 29 at 3.) That
is a claim under § 207(a), not § 207(b). Section 207(a) applies when "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 ...." S.C. Code § 36-4A-207(a)
(emphasis added). Section 207(b) applies either (1) where the receiving bank knows the name and
account number on the transfer order identify different persons, or (2) where the receiving bank
does not know the name and account number on the transfer order identify different persons and
the receiving bank pays the person identified by name rather than the person identified by account
number. The proposed amended complaint alleges nothing suggesting a claim under § 207(b), and
the Court therefore did not construe Song Chuan's first cause of action as attempting to assert a
claim under § 207(b).
Song Chuan's reply to Bank of America's opposition to the motion to alter argues that the
name on the wire transfer (apparently Meridian Chemical) did not resemble John Doe's name
(presumably not similar to Meridian Chemical).l (Dkt. No. 36 at 5.) Under § 207(b), Bank of
America is entitled to rely on the account number and is under no obligation to not determine
whether the name and number refer to the same person, but if Bank of America knew the name
and account number did not match then it must return the transmitted funds if the account holder
was not entitled to receive payment from the originator of the funds transfer. Song Chuan argues
the proposed amended complaint alleges, "The Order contained a misdescription known to BoA"
I Song Chuan's refusal to name the parties to the intended transaction makes Song Chuan's
argument at times difficult to follow. (E.g., Dkt. No. 36 at 2-3 ("Song Chuan issues a wire, which
bears the name of a beneficiary that closely resembles the intended beneficiary; BUT the
beneficiary's actual name, as tied to the BoA account, is different from the name on the wire
order.").) The Court assumes "closely resembles the intended beneficiary" refers to the fact that
the beneficiary name on the wire transfer is "Meridian Chemicals Sales" but the company at the
address listed on the wire transfer is "Meridian Chemicals LLC."
(Dkt. No. 21-2 ~ 22), and therefore alleges Bank of America accepted the payment despite knowing
that the name and account number did not match.
The Court rejects Song Chuan's argument because it is an assertion Bank of America
engaged in "fraud or mistake" when setting up the beneficiary customer account or when accepting
the wire transfer.
"In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "[C]ontained a misdescription
known to BoA" does not state anything with particularity. Cf Gen. Elec. Capital Corp. v. Lease
Resolution Corp., 128 F.3d 1074, 1078 (7th Cir. 1997) (Rule (9) particularity "means the who,
what, when, where, and how" of the mistake (internal quotation marks omitted)).
The Court, however, does clarify that the proposed amended complaint never alleged
asserted claims under § 207(b), and so the Court's order is not preclusive to a future claim that
Bank of America knew the name and account number on the wire transfer identified different
persons, or that Bank of America did not know that but paid the person identified by name rather
than by account number. It is preclusive to the extent attempts to allege a § 207(b) claim based on
the nonexistence of the beneficiary.
Claims Under S.c. Code § 36-4A-211
Song Chuan also argues the Court's order erred by not considering its proposed V.C.C.
cause of action under § 211, which provides, "[i]f the payment order is canceled or amended, the
beneficiary's bank is entitled to recover from the beneficiary any amount paid to the beneficiary
to the extent allowed by the law governing mistake and restitution." S.C. Code § 36-4A-211(c)(2).
Bank of America is the John Doe beneficiary'S bank. Cancellation of the payment order entitles
Bank of America to recover the paid funds from John Doe's account. As Bank of America
correctly argues, it provides no cause of action to the party sending funds. (Dkt. No. 35 at 4.) The
Court therefore did not construe Song Chuan's first cause of action as attempting to assert a claim
under § 211. But Song Chuan's reply to Bank of America's opposition to the motion to alter
correctly argues that if Bank of America kept transferred funds despite a legally effective
cancellation of the transfer, it might be liable for those funds. The Court therefore considers
whether Song Chuan's proposed amended complaint alleges cancellation of the payment order
effective under § 211.
Section 211 provides, inter alia, that "[a]fter a payment order has been accepted,
cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds
transfer system rule allows cancellation or amendment without agreement ofthe bank." "An order
issued to the beneficiary's bank is normally accepted on the payment date or the day after." V.C.C.
Art. 4A § 211 official cmt. 8. Song Chuan's proposed amended complaint does not allege that the
payment order was cancelled before it was accepted.
(el Dkt. No. 21-2 ~ 24 ("To the extent that
the Order was appropriately accepted by BOA, which is denied, Song Chuan and its bank
effectively cancelled the Order").) Nor does it allege that a funds-transfer system rule allowed
cancellation without Bank of America's agreement.
The proposed amended complaint, however, does allege that Song Chuan and its bank
(Bank of China) "expressly notified BoA that the Order should not be accepted or should otherwise
be cancelled, based on the misdescription of the beneficiary and the fraud of John Doe" and that
"BoA acknowledged receipt of and agreed to this cancellation request." (Id
18-19.) If Bank
of America did cancel the funds transfer, Song Chuan has a plausible constructive trust claim to
recover the transferred funds.
But the Court finds the allegation that the payment order at issue was actually cancelled
with Bank of America's agreement to be implausible, given the refusal to return the funds. See
Ashcroft v. Iqbal, 556 V.S. 662, 678 (2009). To the extent Song Chuan means to allege fraud or
mistake by Bank of America (i.e., to allege Bank of America has recovered the cancelled transfer
from John Doe's account yet refuses to it), it has failed to allege facts with the particularity required
by Rule 9(b) of the Federal Rules of Civil Procedure. Moreover, the allegation is also belied by
the fact that Song Chuan initially sought a temporary restraining order or preliminary injunction
"enjoining Bank of America, N.A ('BoA') from releasing any of the $880,000 that were wired to
BoA on or about September 14, 2016." (See Dkt. No.5.) Liberally construing the proposed
complaint allegation in favor of the plaintiff, the only plausible reading is someone with Bank of
America said Bank of America would agree to cancel the transfer but Bank of America did not
honor that and did not agree to the cancellation. Song Chuan has not explained or proposed a
complaint alleging any facts suggesting how Bank of America deciding not to accept a request to
cancel under § 211 an already-accepted wire transfer after someone at Bank of America initially
indicated that the request would be accepted would entitle Song Chuan to relief. The Court
therefore declines to vacate the dismissal of claims against Bank of America.
The Court, however, does not wish to preclude a constructive trust action if Song Chuan
can properly allege that the transfer from Song Chuan to John Doe was in fact cancelled. The
Court therefore amends its order to provide that constructive claim against Bank of America is
dismissed without prejudice to Song Chuan's ability to file a complaint asserting a constructive
trust claim against Bank of America alleging failure to return funds transferred from Song Chuan
to a Bank of America account holder under a transfer order effectively cancelled under § 211. But
any claim of fraud or mistake regarding Bank of America must be pleaded with particularity. Fed.
R Civ. P. 9(b).
Song Chuan objects to the Court's finding that Song Chuan failed to plausibly allege
personal jurisdiction regarding the John Doe defendant. The basis of Song Chuan's objection is
unclear. Song Chuan correctly argues that personal jurisdiction was not an issue regarding Bank
of America. Bank of America appeared, did not contest personal jurisdiction, and claims against
it were dismissed with prejudice on the merits. That dismissal left only the unserved John Doe as
a defendant. Claims against John Doe were dismissed without prejudice because "a complaint
may not stand against only unnamed, unserved defendants." Whitehead v. Viacom, 233 F. Supp.
2d 715, 725 (D. Md. 2002). As an additional ground for not allowing claims to proceed only
against John Doe, the Court found Song Chuan failed plausibly to allege any facts suggesting the
Court's personal jurisdiction over John Doe. In its motion to reconsider, Song Chuan admits John
Doe's "residences, principal places of business, or connections with this District are unknown,"
arguing those facts somehow prevent dismissal for lack of personal jurisdiction. (Dkt. No. 32 at
6.) The only alleged nexus between the transaction at issue and South Carolina is that the China
based buyer of chemicals purportedly "conducted negotiations" regarding a purchase from a
Kansas-based supplier through a Charleston-based "Advisor"-whatever that means-whom
Song Chuan steadfastly declines to identify. Song Chuan declines even to say what it was buying
or from whom it was buying-the Court infers it was buying chemicals from Meridian Chemicals
Sales in Kansas from bank wire instructions attached to the complaint. (See Dkt. No.1-I.)
The Court understands that, generally, personal jurisdiction is considered only when a
defendant contests jurisdiction. But complete ignorance about the identity, location, and activities
of the sole defendant cannot entitle a plaintiff to file a John Doe action in whichever of the 94
judicial districts he may be pleased to select. Putting aside the rule against proceeding against only
an unserved John Doe, there must be some plausible allegation that the transaction at issue has
some nexus with the selected forum. The Court therefore declines to reconsider its order of March
10, 2017 regarding personal jurisdiction. The Court, however, does note nothing in its order
prevents John Doe from being named as a co-defendant with Bank of America or any other named
party in a viable complaint regarding the wire transfer at issue.
For the foregoing reasons, Plaintiffs motion to alter or amend (Dkt. No. 32) is GRANTED
IN PART AND DENIED IN PART. The Court's order of March 10,2017 (Dkt. No. 30) is
altered to deny Plaintiffs motion for leave to amend the complaint WITHOUT PREJUDICE to
Plaintiffs ability to file a complaint asserting a constructive trust claim against Bank of America
alleging failure to return funds transferred from Song Chuan to a Bank of America account holder
under a transfer order effectively cancelled under § S.C. Code 36-4A-211. The motion is otherwise
AND IT IS SO ORDERED.
United States District Court Judge
Charleston, South Carolina
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