Bank of Abbeville & Trust Co. v. Commonwealth Land Title Insurance

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT October 9, 2006
Charles R. Fulbruge III
Clerk
No. 05-30976
Summary Calendar
BANK OF ABBEVILLE & TRUST CO
Plaintiff - Appellant
v.
COMMONWEALTH LAND TITLE INSURANCE CO
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Louisiana
No. 6:05-CV-899
Before KING, HIGGINBOTHAM, and GARZA, Circuit Judges.
PER CURIAM:*
In this diversity action, plaintiff-appellant Bank of
Abbeville & Trust Co. appeals the district court’s dismissal of
its action for unjust enrichment against defendant-appellee
Commonwealth Land Title Insurance Co. For the reasons stated, we
AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff-appellant Bank of Abbeville & Trust Co. (“Bank”)
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
alleged in its complaint that an account holder at the Bank,
Joseph Kosarek (“Kosarek”), defrauded the Bank of more than
$600,000. According to the complaint, Kosarek was an approved
attorney and issuing agent of defendant-appellee Commonwealth
Land Title Insurance Co. (“Commonwealth”). In connection with
various real estate transactions, Kosarek received from lenders
certain moneys that were to be held in trust in his account at
the Bank and then transferred to other parties. The Bank alleges
that Kosarek fraudulently wrote checks that the Bank honored,
resulting in the account being overdrawn by more than $600,000.
The Bank now seeks to recover the overdrawn amount from
Commonwealth.
The Bank brought an action against Commonwealth for unjust
enrichment under LA. CIV. CODE ANN. art. 2298 (1997). Commonwealth
moved to dismiss under FED. R. CIV. P. 12(b)(6), contending that
the Bank had not alleged that it had no other remedy at law, a
requisite element of an unjust enrichment claim in Louisiana.
The district court dismissed the Bank’s action without prejudice,
and the Bank now appeals.
II. DISCUSSION
A. Standard of Review
This court reviews de novo the grant of a motion to dismiss
under Rule 12(b)(6). Martin K. Eby Constr. Co. v. Dallas Area
Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (citing Gregson
-2-
v. Zurich Am. Ins. Co., 322 F.3d 883, 885 (5th Cir. 2003)). We
“accept all well-pleaded facts as true, viewing them in the light
most favorable to the plaintiff.” Jones v. Greninger, 188 F.3d
322, 324 (5th Cir. 1999) (per curiam) (citing Doe v. Hillsboro
Indep. Sch. Dist., 81 F.3d 1395, 1401 (5th Cir. 1996)). “[T]he
court should not dismiss the claim unless the plaintiff would not
be entitled to relief under any set of facts or any possible
theory that [it] could prove consistent with the allegations in
the complaint.” Id. (citing Vander Zee v. Reno, 73 F.3d 1365,
1368 (5th Cir. 1996)). “Dismissal is proper if the complaint
lacks an allegation regarding a required element necessary to
obtain relief . . . .” Rios v. City of Del Rio, 444 F.3d 417,
421 (5th Cir. 2006) (omission in original) (quoting Campbell v.
City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995)).
B. Analysis
The Bank first contends that the district court’s dismissal
of its unjust enrichment claim was improper because the complaint
complied with FED. R. CIV. P. 8(a), (e). The Bank correctly
states Rule 8(a)’s pleading requirement for a claim: the
complaint must set forth “a short and plain statement of the
claim showing that the pleader is entitled to relief.” FED. R.
CIV. P. 8(a)(2). The Bank also accurately recites its obligation
under Rule 8(e) to make the complaint’s averments “simple,
concise, and direct.” FED. R. CIV. P. 8(e)(1). But the Bank
-3-
incorrectly posits that its compliance with Rule 8 precludes
dismissal under Rule 12(b)(6).
The Bank’s reliance on its conformance with Rule 8 is
misplaced. On the one hand, a Rule 12(b)(6) motion to dismiss
for failure to state a claim may be a proper vehicle to challenge
the sufficiency of a pleading under Rule 8. See 5 CHARLES ALAN
WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1203 (3d ed.
2004) (“[T]he form and sufficiency of a statement of a claim for
relief under Rule 8(a)(2) may be tested by a motion to dismiss
for failure to state a claim upon which relief can be granted,
Rule 12(b)(6) . . . .”). But mere compliance with Rule 8 does
not itself immunize the complaint against a motion to dismiss.
See Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041
(7th Cir. 1999). The Bank “confuses form with substance. Rule
8(a)(2) specifies the conditions of the formal adequacy of a
pleading. It does not specify the conditions of its substantive
adequacy, that is, its legal merit.” Id. (emphases added).
Thus, notwithstanding the Bank’s compliance with Rule 8's formal
requirements by pleading a short and plain statement of its
purported claim, dismissal is nevertheless proper if the Bank
would not be entitled to relief under any set of facts or any
possible theory that it could prove consistent with the
complaint’s allegations. See Jones, 188 F.3d at 324 (citing
Vander Zee, 73 F.3d at 1368).
Accepting the allegations in the complaint as true and
-4-
viewing them in the light most favorable to the Bank, the Bank
would not be entitled to relief against Commonwealth under the
theory of unjust enrichment1 because it cannot prove the fifth
element of an unjust enrichment claim——a lack of other remedy at
law. Under Louisiana law, a bank may honor a check written by
its customer and charge the amount of the check against the
customer’s account even if doing so would result in the account
being overdrawn. LA. REV. STAT. ANN. § 10:4-401(a) (2003) (“A bank
may charge against the account of a customer an item that is
properly payable from that account even though the charge creates
an overdraft.”); see also McGuire v. Bank One, La., N.A., 744 So.
2d 714, 716-17 (La. Ct. App. 1999). Once a bank honors a check
that results in an overdraft, the customer is liable to the bank
for the amount of the overdraft. See Chrysler Credit Corp. v.
Whitney Nat’l Bank, 798 F. Supp. 1234, 1237 (E.D. La. 1992)
(“Whitney [National Bank] had covered TOJ’s overdrafts, which,
legally, functions as a loan from Whitney to TOJ.”); McGuire, 744
1
An action for unjust enrichment under LA. CIV. CODE ANN.
art. 2298 contains five elements: (1) enrichment on the part of
the defendant, (2) impoverishment on the part of the plaintiff,
(3) a causal connection between the defendant’s enrichment and
the plaintiff’s impoverishment, (4) an absence of justification
or cause for the enrichment and impoverishment, and (5) a lack of
other remedy at law. See Indus. Cos. v. Durbin, 837 So. 2d 1207,
1213-14 (La. 2003) (citing Hartmann v. Bank of La., 702 So. 2d
648, 658 (La. 1996)).
In the present case, the parties do not dispute that the
complaint contains sufficient allegations regarding the first
four elements; rather, this appeal is focused on the fifth
element——a lack of other remedy at law.
-5-
So. 2d at 717 (citing with approval City Bank of Honolulu v.
Tenn, 469 P.2d 816 (Haw. 1970), which “based its reasoning on
cases holding that payment of the check creating an overdraft
constitutes a loan for which the bank customer is liable for
repayment”); see also 9 C.J.S. Banks and Banking § 349 (1996).
Thus, the Bank has another remedy at law: it may pursue an action
against its customer, Kosarek, to recover the amount of the
overdraft. Moreover, at the district court, the Bank conceded
that it had a remedy against Kosarek: “The Bank does not dispute
that another remedy was available under the law for its
impoverishment. It has pursued available rights and remedies
against . . . Kosarek . . . and his wife.” 1 Rawle 58. Because,
based on the complaint’s allegations, the Bank has another remedy
at law, dismissal of its unjust enrichment claim was proper.
In the same vein as its argument regarding Rule 8, the Bank
next asserts that dismissal was improper because it complied with
Rule 9(c), which provides: “In pleading the performance or
occurrence of conditions precedent, it is sufficient to aver
generally that all conditions precedent have been performed or
have occurred.” FED. R. CIV. P. 9(c). The Bank contends that the
existence of another remedy is actually a defense that
Commonwealth must plead with particularity under Rule 9(c). The
Bank’s argument is without merit for two reasons. First, lack of
another remedy is an element of an unjust enrichment action, not
a condition precedent or a defense. See Indus. Cos. v. Durbin,
-6-
837 So. 2d 1207, 1213-14 (La. 2003) (citing Hartmann v. Bank of
La., 702 So. 2d 648, 658 (La. 1996)). Second, even if lack of
another remedy were a condition precedent, meaning that Rule 9(c)
would apply, the Bank has not complied with the Rule because at
no point in the complaint does the Bank allege——not even
generally——that it has no other remedy at law or that all
conditions precedent to its claim have been satisfied. Cf. EEOC
v. Klingler Electric Corp., 636 F.2d 104, 106 (5th Cir. Unit A
Feb. 1981) (per curiam) (“A general averment that ‘all conditions
precedent to the institution of this lawsuit have been fulfilled’
is quite adequate for pleading purposes.” (citing FED. R. CIV. P.
9(c); EEOC v. Standard Forge & Axle Co., 496 F.2d 1392 (5th Cir.
1974))). And even had the Bank complied with Rule 9(c), its
argument is without merit for the same reason that its argument
with respect to Rule 8 is without merit: Rule 9(c) addresses
merely the form of the complaint, not the claim’s substance.
The Bank additionally contends that the district court
should have converted Commonwealth’s motion to dismiss into a
motion for summary judgment and should have permitted discovery
because, in deciding the motion, it considered information
outside the scope of the complaint. At the hearing before the
district court, Commonwealth advised the court that the Bank was
pursuing claims against Kosarek to recover its loss. In making
its decision, the court did not exclude this information even
though it is not set forth in the complaint. But in deciding a
-7-
Rule 12(b)(6) motion, the court is permitted to go beyond the
four corners of the complaint and consider matters of public
record without converting the motion into one for summary
judgment.2 Cinel v. Connick, 15 F.3d 1338, 1343 n.6 (5th Cir.
1994) (citing Louisiana ex rel. Guste v. United States, 656 F.
Supp. 1310, 1314 n.6 (W.D. La. 1986), aff’d, 832 F.2d 935 (5th
Cir. 1987)); see also 5B CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE AND PROCEDURE § 1356 (3d ed. 2004). The district court
therefore did not commit error by failing to exclude from its
consideration the existence of the Bank’s actions against
Kosarek.
Finally, the Bank opines that the issue of whether another
remedy exists is a fact question that is more appropriate for
summary judgment because at this point it is not clear that it
has an adequate remedy for its impoverishment. But Kosarek’s
ability to pay any judgment the Bank may obtain against him is
not a factor for the court to consider. See Hartmann v. Bank of
La., 702 So. 2d 648, 672 (La. 1996). “The existence of a
‘remedy’ which precludes application of unjust enrichment does
not connote the ability to recoup [the] impoverishment by
bringing an action against a solvent person. It merely connotes
2
In deciding this appeal, we do not rely on the existence
of the pending action against Kosarek by the Bank. Even if the
Bank were not seeking to recover its losses from Kosarek in a
separate lawsuit, this remedy would nonetheless be available to
the Bank, and dismissal would still be proper.
-8-
the ability to bring the action or seek the remedy.” Id.
Moreover, “unjust enrichment principles are only applicable to
fill a gap in the law where no express remedy is provided,”
Coastal Environmental Specialists, Inc. v. Chem-Lig International
Industries, Inc., 818 So. 2d 12, 19 (La. Ct. App. 2001), not to
shift responsibility to another party more able to pay.3 As it
conceded before the district court, the Bank has the ability to
bring an action against Kosarek. Dismissal of the Bank’s unjust
enrichment claim against Commonwealth was therefore proper
regardless of whether it will successfully recover its
impoverishment from Kosarek.
III. CONCLUSION
For the foregoing reasons, the judgment of the district
court is AFFIRMED.
3
The Bank’s reliance on Carter v. Flanagan, 455 So. 2d 689
(La. Ct. App. 1984), is misplaced. The Carter court held that
the element of lack of other remedy at law had been satisfied
because the responsible party’s whereabouts were unknown, even
though she was being actively sought by law enforcement. Carter,
455 So. 2d at 692-93. The court concluded that the plaintiff’s
remedy against the fugitive party was impractical and that
therefore the fifth element was fulfilled. Id. Carter is
distinguishable because in this case there is no allegation in
the complaint that Kosarek’s whereabouts are unknown. And as the
Bank conceded before the district court, it is already pursuing
claims against Kosarek.
-9-