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Silver v. Wells Fargo Bank, N.A.

United States District Court, D. Maryland

November 29, 2016

WELLS FARGO BANK, N.A., et al. Defendants



         The Court has before it Defendants' Motions to Dismiss [ECF Nos. 17 and 18] and the materials submitted relating thereto. The Court finds a hearing unnecessary. As discussed herein, the Court shall grant the instant motions but permit Plaintiff to file an Amended Complaint.

         I. BACKGROUND

         At times allegedly relevant hereto, [1] Plaintiff, Jeffrey J. Silver (“Silver”) was the victim of a check fraud scheme perpetrated by one of his employees. The scheme involved the preparation of fraudulent checks drawn on Silver's checking account at PNC Bank, National Association (“PNC”) and deposited in the employee's account at Wells Fargo Bank, National Association (“Wells Fargo”).[2]

         In this lawsuit, [3] Silver asserts claims against the Banks in nine Counts.

Count I: Lack of Ordinary Care and Good Faith - Violation of Maryland Code, Commercial Law Article §§ 3-404, 3-405, 3-406
Count II: Breach of Presentment Warranties - Violation of Maryland Code, Commercial Law Article §§ 3-417, 4-208
Count III: Breach of Contract
Count IV: Negligence as to PNC
Count V: Negligence as to Wells Fargo
Count VI: Strict Liability - Violation of Maryland Code, Commercial Law Article §§ 3-403, 4-401
Count VII: Negligent Hiring and/or Retention of Employees
Count VIII: Constructive Fraud
Count IX: Civil Conspiracy.

[ECF No. 2].

         By the instant motions, the Banks seek dismissal of all claims pursuant to Rule[4] 12(b)(6).


         A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. A complaint need only contain “‘a short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (citations omitted). When evaluating a 12(b)(6) motion to dismiss, a plaintiff's well-pleaded allegations are accepted as true and the complaint is viewed in the light most favorable to the plaintiff. However, conclusory statements or “a formulaic recitation of the elements of a cause of action will not [suffice].” Id. A complaint must allege sufficient facts “to cross ‘the line between possibility and plausibility of entitlement to relief.'” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 557).

         Inquiry into whether a complaint states a plausible claim is “‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'” Id. (quoting Twombly, 550 U.S. at 557). Thus, if “the well-pleaded facts [contained within a complaint] do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the pleader is entitled to relief.'” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (alteration in original)).

         Generally, a motion to dismiss filed under Rule 12(b)(6) cannot reach the merits of an affirmative defense. Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007). It is possible to evaluate such a motion, however, if all the facts necessary to the affirmative defense are clearly alleged on the face of the complaint. Id. But if the complaint does not clearly reveal the existence of a meritorious affirmative defense, it is inappropriate for the court to consider it under a Rule 12(b)(6) motion. Richmond, Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993).


         A. Factual Allegations[5]

         At times relevant, Silver, a Baltimore City attorney employed as a legal assistant, Ms. Katherina Cheek[6] (“the Assistant”). For “several years, ” the Assistant stole “hundreds” of Silver's blank checks and made them payable to herself, unidentified fictitious payees, friends, and her creditors. ¶ 8 [ECF No. 2].[7] The Assistant forged Silver's signature as the drawer on the checks, and she forged the payee's indorsement on “the majority” of the checks so that she could cash or deposit them into her personal bank account at Wells Fargo. Id. The checks were often presented two or three at a time, contained no commercial stamp even though some were allegedly made out to commercial businesses, and were payable to non-account holders. Id. At no time did Silver authorize the Assistant to sign Silver's name or indorse any checks.

         Wells Fargo, the “depositary bank, ” accepted the stolen checks and presented them for payment to PNC, the “drawee.” PNC accepted and paid the forged checks.

         Silver first discovered the check fraud scheme on November 24, 2012, several years after the scheme had started. Silver asked PNC verbally and in writing to present warranty claims to Wells Fargo for accepting “highly irregular checks” with forged indorsements. ¶ 12. PNC refused to do so. Neither PNC nor Wells Fargo has paid or credited Silver the amounts charged against his account due to the check fraud scheme.

         B. Uniform Commercial Code Claims (Counts I, II and VI)

         Counts I, II, and VI present statutory claims under Titles 3 and 4 of the Maryland Uniform Commercial Code (“UCC”).[8] The UCC governs negotiable instruments, including checks, and the relationship between banks and customers. Cf. Lema v. Bank of Am., N.A., 375 Md. 625, 633, 826 A.2d 504, 508-09 (Md. 2003)(“It is undisputed that the UCC applies to commercial transactions in Maryland, including the commercial dealings between a bank and its customer.”).

         1. Timeliness Defenses

         a. Statute of Limitations

         Title 3 of the Maryland UCC provides that:

an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this article and not governed by this section must be commenced within 3 years after the cause of action accrues.

Md. Code Ann., Com. Law § 3-118(g)(2013 Repl. Vol.). The limitations period for Article 4 claims is the same. See id. § 4-111. The UCC does not specify when a cause of action accrues.

         The Complaint, filed November 23, 2015, does not allege when the check fraud scheme began, only that Silver discovered it on November 24, 2012. Silver contends that the three-year limitations period commenced upon his discovery of the scheme while PNC contends that limitations commenced as to each check on the date the check was honored.

         In Maryland a discovery rule generally applies to civil causes of action. Hecht v. Resolution Trust Corp., 333 Md. 324, 334, 635 A.2d 394, 399 (Md. 1994). However, there are certain exceptions e.g., Advance Dental Care, Inc. v. Suntrust Bank, 906 F.Supp.2d 442, 445 (D. Md. 2012)(holding the discovery rule does not apply to UCC conversion claims). The Maryland appellate courts have not ...

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