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Landcastle Acquisition Corp. v. First-Citizens Bank & Trust Co.

United States District Court, N.D. Georgia, Atlanta Division

June 28, 2017

LANDCASTLE ACQUISITION CORP., Plaintiff,
v.
FIRST-CITIZENS BANK & TRUST COMPANY, Defendant.

          OPINION AND ORDER

          THOMAS W. THRASH, JR. United States District Judge.

         This is a tort case arising from the misappropriation of client funds by a non-party attorney. It is before the Court on the Defendant First-Citizens Bank & Trust Company's Motion to Dismiss [Doc. 2]. For the following reasons, the Defendant's Motion to Dismiss is GRANTED in part and DENIED in part.

         I. Background

         On June 19, 2012, First-Citizens obtained a judgment in the Superior Court of Cobb County, Georgia against Nathan E. Hardwick, IV in the total amount of $633, 000.00. Hardwick was a lawyer and former partner with a law firm previously known as Morris Hardwick Schneider, LLC, now known as Morris Schneider Wittstadt, LLC (“MSW”). Hardwick satisfied this judgment by sending funds kept in MSW's Georgia Interest on Lawyers' Trust Account (“IOLTA account”) to First-Citizens in ten separate wire payments. First-Citizens accepted the payments, although none of the payments came from an account held in the name of Hardwick.[1]

         Eventually, as a result of Hardwick's payments, MSW realized that its IOLTA accounts were suffering from shortfalls. In order to restore the missing funds and meet its fiduciary obligations, MSW entered into an agreement with Landcastle, whereby Landcastle covered the shortfall in exchange for the assignment of MSW's rights to pursue the improperly transferred funds.[2] Exercising those rights, Landcastle filed a Complaint against First-Citizens in Fulton County, Georgia, alleging counts of conversion, money had and received, and unjust enrichment, as well as seeking attorneys' fees. First-Citizens removed the Complaint to this Court on the basis of diversity jurisdiction.[3] First-Citizens now moves to dismiss the Complaint.

         II. Legal Standard

         A complaint should be dismissed under Rule 12(b)(6) only where it appears that the facts alleged fail to state a “plausible” claim for relief.[4] A complaint may survive a motion to dismiss for failure to state a claim, however, even if it is “improbable” that a plaintiff would be able to prove those facts; even if the possibility of recovery is extremely “remote and unlikely.”[5] In ruling on a motion to dismiss, the court must accept the facts pleaded in the complaint as true and construe them in the light most favorable to the plaintiff.[6] Generally, notice pleading is all that is required for a valid complaint.[7] Under notice pleading, the plaintiff need only give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests.[8]

         III. Discussion

         A. Conversion

         In Georgia, “[c]onversion consists of an unauthorized assumption and exercise of the right of ownership over personal property belonging to another, in hostility to his rights; an act of dominion over the personal property of another inconsistent with his rights; or an unauthorized appropriation.”[9] “Whoever meddles with another's property, whether as principal or agent, does so at his peril, and it makes no difference that in doing so he acts in good faith.”[10] To establish a claim for conversion, the Plaintiff must show: “(1) title to the property or the right of possession, (2) actual possession in the other party, (3) demand for return of the property, and (4) refusal by the other party to return the property.”[11] On the face of the Complaint, the Plaintiff seems to have satisfied these elements. After all, the Defendant did take possession and control over funds that rightfully belonged to MSW and has refused to return them despite a demand to do so by the Plaintiff.

         The Defendant argues, however, that because the property in question is money, a conversion action is inapposite. It is true that money is generally not subject to a claim for conversion.[12] But there is an exception to this rule where the “allegedly converted money is specific and identifiable.”[13] Georgia courts have held that electronically transferred funds, like the funds in this case, can be specific and identifiable, at least in situations where the specific source, amount, and destination of the funds are known.[14]

         The Court finds that the Complaint contains sufficient allegations to show that the funds in this case are specific and identifiable. The Complaint alleges that all of the funds came from the firm's IOLTA account. The Complaint also contains specific allegations of ten different payments that were made to the Defendant, their amounts, and their source. And of course, the Complaint alleges that all of these funds were accepted by the same party, the Defendant, for the same purpose, namely, to pay off Hardwick's debt to the Defendant. At this stage, this is sufficient to show that the funds are sufficiently specific and identifiable, and therefore subject to a conversion claim.

         B. Money Had and Received

         The Plaintiff also seeks recovery of the misappropriated funds under a theory of money had and received. Money had and received “is founded on the equitable principle that no one ought to unjustly enrich himself at the expense of another, and is a substitute for a suit in equity.”[15] To successfully plead a claim for money had and received, a Complaint must allege that “a person has received money of the other that in equity and good conscience he should not be permitted to keep; demand for the repayment has been made; and the demand was refused.”[16]

         Also essential to the claim of money had and received, however, is that the defendant was unjustly enriched.[17] Georgia courts have dismissed similar cases where defendants received money they were legally entitled to obtain. For example, in Eastside Carpet Mills, Inc. v. Dodd, [18] the defendant bank had loaned money to Buyer One for the purpose of purchasing a car. Buyer One eventually sold that car to Buyer Two, and used the proceeds from the sale to pay off the remaining loan. Eventually, it was discovered that the car was stolen, and Buyer Two returned the car to its actual owner. Buyer Two sued the bank to recover the money he paid for the car under a theory of money had and received. The Dodd court affirmed the trial court's dismissal, noting that “the bank was not unjustly enriched, ” because it had “received only those funds to which it was entitled as a result of its loan to [Buyer One], and no relationship of any kind was shown to exist between [Buyer Two] and the bank.”[19]

Likewise, in this case, the Defendant has not been unjustly enriched. It has received only those funds which Hardwick owed on the judgment between Hardwick and the Defendant. There is no allegation of any relationship between the Defendant and the Plaintiff. As such, the claim for money had and received must be dismissed.

         C. Unjust Enrichment

         The Plaintiff's last substantive claim is for unjust enrichment. Unjust enrichment is an equitable doctrine that “applies when as a matter of fact there is no legal contract, but where the party sought to be charged has been conferred a benefit by the party contending an unjust enrichment which the benefitted party equitably ought to return or compensate for.”[20] Thus, in order to state a claim for unjust enrichment, the Plaintiff must show that “(1) a benefit has been ...


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