American Legion John Ratliff Post 164 v. BB&T Corporation
Filing
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OPINION AND ORDER granting 5 Motion to Dismiss. Signed by Judge James P. Jones on 6/14/13. (eps)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
AMERICAN LEGION JOHN RATLIFF )
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POST 164,
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Plaintiff,
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v.
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BB&T CORPORATION,
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Defendant.
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Case No. 1:13CV00041
OPINION AND ORDER
By: James P. Jones
United States District Judge
Carl E. McAfee and Joseph R. Carrico, Carl E. McAfee, P.C., Norton,
Virginia, for Plaintiff; Kevin P. Oddo, LeClair Ryan, A Professional Corporation,
Roanoke, Virginia, for Defendant.
In this civil action, the plaintiff alleges that the defendant bank improperly
disbursed the plaintiff’s deposited funds to two persons who then embezzled the
money from the plaintiff.
The defendant has moved to dismiss claims for
negligence and breach of fiduciary duties, arguing that these claims are barred by
Virginia’s source of the duty rule because the claims sound in contract rather than
tort. The defendant has also moved to dismiss an undefined statutory claim,
contending that it fails to specifically identify a basis for the claim, as well as a
demand for punitive damages, asserting that punitive damages are not available for
breach of contractual duties. For the reasons set forth below, I will grant the
defendant’s motion.
I
The plaintiff, American Legion John Ratliff Post 164 (“Post 164”),
commenced this suit in the Circuit Court of Buchanan County, Virginia. The
defendant, BB&T Corporation (“BB&T”), a banking corporation, timely removed
the action to this court and filed a Motion to Dismiss seeking to dismiss certain of
the counts of the Complaint for failure to state a claim pursuant to Federal Rule of
Civil Procedure 12(b)(6). The motion has been fully briefed by the parties and is
ripe for decision.
Jurisdiction of this court exists pursuant to diversity of
citizenship and amount in controversy. 28 U.S.C.A. § 1332 (West 2006).
The following facts are taken from the Complaint, which I must accept as
true for the purpose of deciding the present motion.
Debra Kay Horn was president of the American Legion Ladies Auxiliary
Unit 164, an organization related to the plaintiff organization. Her husband, Mack
Earnest Horn, was a member of Post 164. It is alleged that the Horns embezzled a
substantial amount of money belonging to Post 164. In particular, from July of
2011 through February of 2012, the Horns made several transactions that were not
authorized by Post 164.
These transactions included writing checks, making
expenditures, making withdrawals, and closing accounts that belonged to Post 164.
In August of 2001, Post 164 “entered into a Certificate of Deposit (the ‘CD’)
agreement, account #XXXXXX8871, with BB&T.” (Compl. ¶ 10.)
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The CD
automatically renewed upon reaching its maturity date. In July of 2011, BB&T
allowed Mack Horn to withdraw $15,447.15 from the CD. On November 17,
2011, BB&T allowed Debra Horn to withdraw $29,975 from the CD. On February
7, 2012, BB&T allowed Debra Horn to close the CD by withdrawing $49,975. On
February 13, 2012, BB&T processed a deposit of $49,975 to a checking account
that had been opened in Post 164’s name. BB&T then processed a check in the
amount of $35,000 from Post 164’s checking account into an account controlled by
the Horns.
Post 164 was unaware of these transactions, and the Horns converted the
withdrawn funds for their own use. Post 164 alleges that BB&T also processed
other checks signed by the Horns from Post 164’s account at a time when the
Horns did not have authorization to withdraw funds.
The Complaint asserts four separate claims — for breach of contract,
negligence, breach of fiduciary duties, and a final claim, styled “Statutory Claim.”
(Compl. ¶¶ 28-31.) In its motion, BB&T argues that this action is, at its core, an
action for breach of contract, and the only duties BB&T allegedly breached are
duties arising from the contractual relationship between the parties. Therefore,
BB&T contends that all of the claims other than the breach of contract claim
should be dismissed pursuant to Virginia’s source of the duty doctrine. BB&T also
contends that Post 164’s demand for punitive damages should be stricken because
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the allegations in the Complaint do not provide a basis for an award of punitive
damages.
II
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint
to determine whether the plaintiff has properly stated a cognizable claim. See
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).
Federal
pleading standards require that a complaint contain a “short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). In
order to survive a motion to dismiss, the plaintiff must “state[] a plausible claim for
relief” that “permit[s] the court to infer more than the mere possibility of
misconduct” based upon its “judicial experience and common sense.” Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009). In evaluating a pleading, the court accepts as true
all well-pled facts and construes those facts in the light most favorable to the
pleader. Id. at 678.
Under Virginia law, allegations of negligent performance of contractual
duties generally are not actionable in tort. See, e.g., Abi-Najm v. Concord Condo.,
LLC, 699 S.E.2d 483, 488-89 (Va. 2010); Dunn Constr. Co. v. Cloney, 682 S.E.2d
943, 946-47 (Va. 2009); Yuzefovsky v. St. John’s Wood Apartments, 540 S.E.2d
134, 142 (Va. 2001). In certain circumstances, a party can show both breach of
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contract and a tortious breach of duty, but the duty tortuously breached must be a
common law duty that arises separate from the contractual duty. See Richmond
Metro. Auth. v. McDevitt Street Bovis, Inc., 507 S.E.2d 344, 347 (Va. 1998) (“In
determining whether a cause of action sounds in contract or tort, the source of the
duty violated must be ascertained. . . . A tort action cannot be based solely on a
negligent breach of contract.”).
In this case, the source of the duty allegedly breached is the agreement
entered into between Post 164 and BB&T when Post 164 purchased the CD. The
plaintiff’s negligence claim, which is based solely on BB&T’s alleged negligent
performance of its duties under that agreement, sounds in contract and must be
dismissed. The plaintiff has cited no authority that supports its contention that
BB&T owed a separate common law fiduciary duty to Post 164. If any fiduciary
duty were owed, it would arise out of the contractual relationship between the
parties. Thus, the plaintiff’s claim for breach of fiduciary duties also must be
dismissed.
The plaintiff’s “Statutory Claim” refers to “Section 8.4A.101 et seq and
Section 8.4-101 et seq [of the Code of Virginia]” and avers that BB&T’s actions
and omissions breached the duties set forth in those statutory provisions. (Compl.
¶¶ 29-30.)
The plaintiff identifies no particular statutory language and no
particular duty that it alleges BB&T has breached; rather, it simply references the
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two lengthy titles of the Virginia Uniform Commercial Code covering bank
deposits and collections and funds transfers. See Va. Code Ann. §§ 8.4-101
through 504; §§ 8.4A-101 through 507 (2001 & Supp. 2012). These vague
allegations are insufficient to state a plausible claim. Therefore, I will dismiss the
plaintiff’s “Statutory Claim.”
Finally, BB&T asks me to dismiss Post 164’s claim for punitive damages.
As a general rule, punitive damages are not available for breach of contract. Dunn
Constr., 682 S.E.2d at 946; Wright v. Everett, 90 S.E.2d 855, 860 (Va. 1956).
Following dismissal of the negligence, breach of fiduciary duty, and statutory
claims, the only remaining cause of action will be breach of contract. Because
Post 164 has not alleged facts that would entitle it to recover punitive damages, I
will grant BB&T’s Motion to Dismiss with respect to the punitive damages
demand.
III
For the reasons stated, it is ORDERED that the defendant’s Motion to
Dismiss (ECF No. 5) is GRANTED and the plaintiff’s claims described in the
Complaint as “Negligence,” “Breach of Fiduciary Duties,” and “Statutory Claim”
are DISMISSED.
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ENTER: June 14, 2013
/s/ James P. Jones
United States District Judge
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