Charles v. Mcclain Iii, App. v. 1st Security Bank Of Wa, Resp. ( 2016 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
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CHARLES V. MCCLAIN III, NO. 73190-4-1
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Appellant, 26=or
DIVISION ONE
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1ST SECURITY BANK OF 3 1 »i
WASHINGTON, a Washington
Corporation, UNPUBLISHED OPINION
Respondent. FILED: March 7, 2016
Lau, J. — Charles McClain appeals the trial court's summary judgment dismissal
of his claims for conversion, breach of fiduciary duty, and violation of due process
against 1stSecurity Bank. McClain contends 1st Security Bank wrongfully seized funds
in his bank account and transferred those funds to Cox Communications and
Comcast—national cable companies—after those companies erroneously transferred
the funds to McClain. Because McClain's claims have no basis in fact or in law, we
affirm.
No. 73190-4-1/2
FACTS
This appeal involves funds deposited in a joint bank account belonging to
Harrison Hanover and Charles McClain. Hanover opened a bank account at
1st Security Bank of Washington in early 2009 and added McClain to the account in
December 2009. From December 10 through 15, several fraudulent deposits were
credited to the account. The deposits were made to the account through the Automated
Clearinghouse System (ACH). The ACH system shows the sender of each fund
transfer. The deposits were sent by Cox Communications and Comcast, two national
cable companies. The deposits totaled just over $4.6 million.
Cox Communications and Comcast sent the money to Hanover and McClain's
account due to a fraudulent e-mail scheme. Representatives from Cox
Communications and Comcast stated they received e-mails from someone identifying
himself as "Robert Willox." Clerk's Papers (CP) at 590-99. Willox claimed to be the
Vice President of Finance for Arris Solutions, Inc., a vender providing goods and
services to both Cox Communications and Comcast. Willox instructed both Cox
Communications and Comcast that payments of future invoices should be routed to an
account in 1st Security Bank. Unknown to representatives of Cox Communications and
Comcast at the time, the account at 1st Security Bank belonged to Hanover and
McClain—not Arris Solutions, Inc. Comcast and Cox Communications both quickly
discovered that Arris Solutions had not received payment and that the routing
instructions they received in the "Robert Willox" e-mails were fraudulent. On December
14, 1st Security Bank determined some of the deposits were not legitimate, and it froze
the funds in McClain's account while it investigated other deposits. On December 15,
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1st Security Bank honored requests from Cox Communications and Comcast to return
the misdirected funds.
On December 2, 2010, McClain sued 1st Security Bank, alleging conversion,
breach of fiduciary duty, and a violation of his due process rights under the Fifth
Amendment of the U.S. Constitution.1 The trial court dismissed McClain's claims on
summary judgment. McClain appeals.
ANALYSIS2
Standard of Review
We review summary judgment orders de novo, engaging in the same inquiry as
the trial court. Michak v. Transnation Title Ins. Co.. 148 Wn.2d 788, 794-95, 64 P.3d 22(2003). Summary judgment is proper if, viewing the facts and reasonable inferences in
the light most favorable to the nonmoving party, no genuine issues of material fact exist
and the moving party is entitled to judgment as a matter of law. CR 56(c); Michak. 148
Wn.2d at 794-95.
1 Hanover, McClain's business partner, quickly absconded to Miami and then to
Costa Rica. In 2013, he died in a Nicaraguan prison while serving a 24-year sentence
for possession of child pornography and rape of a child. See Ramon Villareal and Lucia
Vargas, Extraniero muere en Penal. La Prensa, April 20, 2013 (available at
http://www.laprensa.com.ni/2013/04/20/departamentales/143266-extranjero-muere-en-
penal).
2 We note at the outset that McClain's brief contains many confusing,
nonsensical arguments containing dubious legal reasoning and citations to inapplicable
law. We will not consider McClain's arguments to the extent that they misconstrue
entirely irrelevant legal authority or lack reasoned analysis. See Palmer v. Jensen. 81
Wn. App. 148,153, 913 P.2d 413 (1996) ("Passing treatment of an issue or lack of
reasoned argument is insufficient to merit judicial consideration."); "We will not consider
an inadequately briefed argument." Norcon Builders. LLC v. GMP Homes VG. LLC. 161
Wn. App. 474, 486, 254 P.3d 835 (2011).
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No. 73190-4-1/4
Conversion
McClain's argues 1st Security Bank committed conversion when it seized the
funds in his account and returned those funds to Cox Communications and Comcast.
We disagree.
"A conversion is the act of willfully interfering with any chattel, without lawful
justification, whereby any person entitled thereto is deprived of the possession of it."
Public Util. Dist. No. 1 of Lewis County v. Washington Public Power Supply Svs.. 104
Wn.2d 353, 378, 705 P.2d 1195 (1985). First, McClain has failed to show a genuine
issue of material fact regarding whether he had a legitimate property interest in those
funds. Second, 1st Security Bank had a lawful justification to seize and return the funds
in dispute under its contract with McClain and the incorporated ACH rules. Finally,
money in a bank account does not constitute "chattel" for purposes of conversion under
these circumstances.
McClain failed to produce any evidence demonstrating he was legally entitled to
the funds in the account. The ACH deposits unambiguously demonstrate the funds
came from Cox Communications and Comcast, and McClain produced no evidence
showing he was entitled to payment from either Cox Communications or Comcast.
McClain's arguments to the contrary are groundless. First, McClain claimed the funds
were the proceeds of a contract Hanover brokered involving the sale of diesel fuel
overseas. McClain claimed the details of the contract were confidential and that only
Hanover knew those details. McClain claimed he spoke to Hanover on a regular basis
but refused to give counsel any contact information for Hanover. McClain did eventually
provide a declaration in support of the diesel fuel story, but it was stricken by the trial
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court as inadmissible and is therefore not part of our record. Regardless, nothing in that
declaration demonstrates that the funds at issue originated from anywhere other than
Cox Communications and Comcast. The trial court therefore had overwhelming and
undisputed evidence that the funds came directly from Cox Communications and
Comcast.
McClain next argues he was entitled to the funds regardless of their origin simply
because they ended up in his bank account. This is not the law. See, e.g.. Powderlv v.
Schweiker. 704 F.2d 1092, 1097 (9th Cir. 1983) ("Appellant's attempt to claim a
property interest by reason of her own bank account is groundless. In reality, she is
attempting to claim a property interest in the funds erroneously sent to her deceased
husband, but cannot escape the fact that she has no entitlement to these funds.").
McClain cites no legal authority supporting his assertion that the presence of the funds
in his account is sufficient on its own to confer a valid property interest for purposes of a
conversion claim. He only presents nonsensical arguments containing little legal
analysis and relies on cherry-picked dicta from unrelated cases. For example, McClain
cites United States v. Redcorn. 528 F.3d 727 (10th Cir. 2008) to support his argument
that one has a property interest in the funds contained in a bank account even if those
funds are stolen. In Redcorn. a criminal case involving an embezzlement scheme, the
court noted that "[ojnce the defendants deposited the funds into their personal bank
accounts, they had accomplished their crime and the funds were available for their
personal use." Redcorn. 528 F.3d at 739. But the court's language does not mean that
the defendants in that case suddenly had a legally valid property interest in the stolen
funds once they were deposited in their personal bank accounts. Rather, the court
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simply stated that once the funds were in the defendants' bank accounts, the fraud was
complete; future transfers were not "essential" parts of the scheme, and the defendants
could not be charged based on those future transfers. Redcorn. 528 F.3d at 739. But
nothing in Redcorn or any other authority McClain cites suggests that an individual
gains legal entitlement to stolen funds simply by virtue of the fact that those funds show
up in his or her bank account. McClain has failed to show that he had a legitimate
property interest in the allegedly converted funds.
Despite McClain's lack of any property interest, we note that 1st Security Bank
had the legal justification under its contract with McClain to seize and return the funds.
The account agreement, which McClain signed when he joined the account,
unambiguously states that "if any of the deposited funds or fund transfers are suspected
to be in violation of state or federal law they may not be available for immediate
withdrawal." CP at 525. Further, the agreement states that fund transfers are governed
by the ACH rules. Those rules, incorporated into the agreement, expressly allow
1st Security Bank to return erroneous fund transfers at the request of the party
originating the deposit. Therefore, 1st Security Bank had a legal justification to return
the funds to Cox Communications and Comcast, and McClain's conversion claim fails.
See Public Util. Dist.. 104 Wn.2d at 378 (Defendant must have acted without legal
justification to be liable for conversion).
McClain's reliance on the Uniform Commercial Code (UCC) is unavailing. The
UCC expressly provides that "the rights and obligations of a party to a funds transfer
may be varied by agreement of the affected party." RCW 62A.4A-501 (a). It also
provides that "a funds-transfer system rule governing rights and obligations between the
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participating banks using the system may be effective even if the rule conflicts with this
Article and indirectly affects another party to the funds transfer who does not consent to
the rule." RCW 62A.4A-501 (b). Therefore, McClain has failed to show that the account
agreement requiring that fund transfers be governed by the ACH rules is inconsistent
with any Washington law.
Funds in a bank account typically cannot be "chattel" for purposes of conversion
except under certain circumstances. Indeed, "bank accounts generally cannot be the
subject of conversion, because they are not specific money, but only an
acknowledgement by the bank of a debt to its depositor." Reliance Ins. Co. v. U.S.
Bank of Washington. N.A.. 143 F.3d 502, 506 (9th Cir. 1998). "[TJhere can be no
conversion of money unless it was wrongfully received by the party charged with
conversion, or unless such party was under obligation to return the specific money to
the party claiming it." Public Util. Dist. No.1.104 Wn.2d at 378. Neither of these
circumstances are present here. Though arguably wrongfully received, as discussed
above, McClain has failed to show any legal entitlement to the funds. For the same
reason, 1st Security Bank was under no obligation to give those funds to McClain.
Breach of Fiduciary Duty
McClain seems to have abandoned his claim for breach of fiduciary duty.
Regardless, the trial court properly dismissed this claim because 1st Security Bank
owed McClain no fiduciary duty. "As a general rule, the relationship between a bank
and a depositor or customer does not ordinarily impose a fiduciary duty of disclosure
upon the bank. They deal at arm's length." Tokarz v. Frontier Federal Savings & Loan
Ass'n. 33 Wn. App. 456, 458-59, 656 P.2d 1089 (1982). There may be limited
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No. 73190-4-1/8
circumstances where a bank owes a depositor a quasi-fiduciary duty, such as where the
bank provides an "extra service" or there is a unique relationship of trust and confidence
between the bank and the customer. Annechino v. Worthy. 162 Wn. App. 138, 143-44,
252 P.3d 415 (2011). No special circumstances exist here.
Due Process
McClain argues that 1st Security Bank violated his constitutional right to due
process when it seized the funds in his account and returned them to Cox
Communications and Comcast. He seems to have abandoned this claim on appeal.
Regardless, the trial court properly dismissed this claim.
The U.S. Constitution provides that "No person shall... be deprived of life,
liberty, or property, without due process of law ...." U.S. Const, amend. V; U.S. Const,
amend. XIV. Generally, the Fifth and Fourteenth Amendments only protect persons
against infringement by governments, not private entities. See Flaoo Bros. Inc. v.
Brooks. 436 U.S. 149, 156, 98 S. Ct. 1729, 56 L Ed. 2d 185 (1978). In order to prevail,
McClain must show some "direct and substantial" government involvement. Nat'I Bd. of
YMCA v. United States. 395 U.S. 85, 93, 89 S. Ct. 1511, 23 L Ed. 2d 117 (1969).
McClain has failed to show any facts demonstrating any government involvement in
1st Security Bank's allegedly unlawful conduct. McClain only alleges that 1st Security
Bank's conduct was "not possible without conspiracy and government support." Br. of
Appellant at 4. This is insufficient to sustain his due process claim.
Appellate Attorney Fees
1st Security Bank requests an award of attorney fees under CR 11, claiming
McClain's appeal is frivolous. We agree and grant attorney fees to 1st Security Bank.
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CR 11 provides:
The signature of a party ... constitutes a certificate by the party ... that
the party... has read the pleading, motion, or legal memorandum, and
that to the best of the party's ... knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances:
(1) it is well grounded in fact;
(2) is warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law or the establishment of
new law.
CR 11(a). If a party violates this rule by pursuing frivolous litigation, the court may
impose an appropriate sanction, including reasonable attorney fees. See Eller v. East
Spraoue Motors & R.V.'s. Inc.. 159 Wn. App. 180, 191, 244 P.3d 447 (2010). An action
is frivolous if it "cannot be supported by any rational argument on the law or facts."
Clarke v. Eouinox Holdings. Ltd.. 56 Wn. App. 125, 132, 783 P.2d 82 (1989). CR 11
does not require the court to find that the action was brought in bad faith or for purposes
of delay or harassment; "[i]t is enough that the action is not supported by any rational
argument and is advanced without reasonable cause." Eller. 159 Wn. App. at 192.
1st Security Bank's CR 11 counterclaim provided notice to McClain of its intent to seek
sanctions based on his frivolous claims.
We conclude that McClain's appeal is frivolous under this standard. McClain's
lengthy brief lacks any reasonable legal argument. His claims are grounded neither in
fact nor the law. He selectively quotes dicta from entirely unrelated legal authority that,
upon close examination, does not support any of the assertions he makes. He
essentially abandoned on appeal his due process and breach of fiduciary duty claims.
Because we find that McClain's appeal has no basis in fact or in law, we grant
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1st Security Bank's request for reasonable attorney fees and costs under RAP 18.9 and
subject to compliance with the requirements of RAP 18.1.
CONCLUSION
For the foregoing reasons, we affirm and award 1st Security Bank reasonable
attorney fees and costs for having to respond to McClain's frivolous appeal.
WE CONCUR:
^/V^Vv"yJ „ &X.J.
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