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King v. Wells Fargo Bank N.A.

United States District Court, D. Massachusetts

August 7, 2019

ALICE KING and JAMES C. KING, Plaintiffs,
v.
WELLS FARGO BANK, N.A., Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.

         Plaintiffs Alice and James C. King (together, “the Kings”) were victims of a fraud in which a third-party hacker compromised wire instructions during a real estate closing and diverted the payoff funds. See [ECF No. 1-1 at 5-15]. Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) was the intended recipient of the payoff funds and the location of the fraudulent account into which the funds were diverted. [Id. at 6-7, 11-12]. The Kings “are simply seeking a discharge of mortgage” and, to that end, have asserted several claims against Wells Fargo including for declaratory relief, injunctive relief, quiet title, unjust enrichment, violation of Massachusetts General Laws ch. 93A (“Chapter 93A”), and violation of Massachusetts General Laws ch. 183, § 55. See [id. at 8-14; ECF No. 15 at 4]. Currently pending before the Court is Wells Fargo's motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 10]. Although the Court sympathizes with the Kings, for the following reasons, Wells Fargo's motion to dismiss [ECF No. 10] is GRANTED.

         I. BACKGROUND

         The following facts are drawn from the complaint, the well-pleaded allegations of which are taken as true for the purposes of evaluating the motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014). The Court also draws facts from documents attached to and incorporated by reference into the complaint. A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013).

         The Kings are the current owners of real estate located at 160 Burkhall Street, Unit 409, Weymouth, MA (the “Property”). [ECF No. 1-1 at 5]. They purchased the Property from the estate of George A. Gilboy, Jr. (“Gilboy Estate”) for $216, 200. [Id. at 5-6]. Prior to his passing, Mr. Gilboy had granted a mortgage on the Property to Mortgage Electronic Registration Systems, Inc., which it later assigned to Wells Fargo. [Id.]. As part of the closing on the Property, the Gilboy Estate sought to obtain a written payoff statement from Wells Fargo for the underlying promissory note secured by the mortgage. [Id. at 6].

         On August 13, 2018, a payoff statement was faxed to the facsimile number provided by the Gilboy Estate's attorney, Pamela Linskey (“Attorney Linskey”). [Id. at 7]. The payoff statement appeared to be on Wells Fargo's letterhead and indicated that $91, 667.06 was the amount outstanding on the mortgage. [Id. at 7, 64-65]. The payoff statement provided wiring information and listed the beneficiary account name as “WF Payoff Ifile.” [Id. at 67]. Attorney Linskey provided the payoff statement to the Kings' counsel, who, pursuant to the wiring instructions provided, then initiated a wire transfer of $91, 762.55 from South Shore Bank to the beneficiary account located at Wells Fargo that was listed on the payoff statement.[1] [Id. at 7, 71]. The wire went through on August 15, 2018, but Wells Fargo did not issue a discharge of the mortgage. [Id. at 7].

         On September 26, 2018, the Kings made a formal demand on Wells Fargo pursuant to Chapter 93A seeking a discharge of the mortgage. [Id. at 7, 71-73]. The demand letter explained the circumstances of the wire transfer. [Id. at 71-72]. It also explained that South Shore Bank had been contacted by Wells Fargo regarding potential fraud and that the Kings' attorney had spoken with a representative from Wells Fargo on September 19, 2018, “who confirmed that the 8/13/2018 Payoff Statement we relied upon had been compromised.” [Id. at 72]. By comparing the August 13 payoff statement with a new payoff statement from Wells Fargo, the Kings' attorney identified that “the compromise of the 8/13/2018 Payoff Statement related to the beneficiary account number and name” and that “[t]he beneficiary account in the 8/13/2018 Payoff Statement was not an account in [Wells Fargo's] name.” [Id.]. The demand letter challenged Wells Fargo's procedures for wire transfers and alleged that Wells Fargo “simply deposit[ed] its funds into an account at [Wells Fargo] that did not belong to [Wells Fargo] nor was titled in the name of “Wells Fargo Bank, N.A ..... ” [Id.].

         On October 25, 2018, Wells Fargo responded to the Chapter 93A demand letter, denied sending the August 13 payoff statement that contained information about the “WF Payoff Ifile” account, and refused to issue a discharge. [Id. at 8, 87-88]. Wells Fargo informed the Kings that it believed they had been a victim of a business electronic mail compromise scheme that “was likely conceived and executed by three or more persons, none of whom are agents or employees of Wells Fargo.” [Id. at 88]. Wells Fargo further detailed its efforts in conducting an investigation of the incident, including placing a hold on the bank account used by the suspected perpetrators that resulted in recovering $11, 217.55 of the funds. [Id. at 87-88]. Wells Fargo also confirmed that the beneficiary bank account number that had been provided to Attorney Linskey was erroneous and was not provided to her by Wells Fargo or its authorized agents. [Id.]. Finally, Wells Fargo categorically denied receiving the funds wired by Attorney Linskey and further denied having “any actual or constructive notice of the perpetrator's fraudulent activity prior to the thefts.” [Id.].

         II. STANDARD OF REVIEW

         On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiff's theory, and draw all reasonable inferences from those facts in favor of the plaintiff. United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). While detailed factual allegations are not required, the complaint must set forth “more than labels and conclusions, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), and it must contain “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory, ” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (internal quotations and citations omitted). The facts alleged must be sufficient to “state a claim to relief that is plausible on its face.” Maddox, 732 F.3d at 80 (quoting Twombly, 550 U.S. at 570).

         When assessing the sufficiency of a complaint, the Court first “separate[s] the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next, the Court “determine[s] whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224). “[T]he court may not disregard properly pled factual allegations, ‘even if it strikes a savvy judge that actual proof of those facts is improbable.'” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Twombly, 550 U.S. at 556).

         III. DISCUSSION

         The foundation of the Kings' claims is their assertion that “[on] or about August 15, 2018, [Wells Fargo] received the Ninety One Thousand Seven Hundred Sixty Two Thousand and 55/100 ($91, 762.55) Dollars from the [Kings'] attorneys' bank, South Shore Bank.” See [ECF No. 1-1 at 7]. In Count I, the Kings seek a declaratory judgment that the mortgage on the Property is discharged and allege that Wells Fargo “received the funds required to payoff the underlying Note that secured the Mortgage . . . .” [Id. at 8]. In Count II, the Kings seek to quiet the title to the Property and a decree that the mortgage has been discharged based on “receipt by [Wells Fargo] of the required funds . . . .” [Id. at 9]. Count III alleges that Wells Fargo would be unjustly enriched if it is permitted to claim that the mortgage has not been discharged “since they already received [the funds] to payoff the underlying Note . . . .” [Id.]. Count V claims that Wells Fargo has violated Massachusetts General Laws ch. 183, § 55 by failing to issue a discharge of mortgage after receiving funds to pay off the note secured by the mortgage. [Id. at 13]. Finally, Count VI requests that the Court issue a declaration ordering Wells Fargo to show that a preliminary injunction should not be issued prohibiting it from foreclosing on the mortgage until the merits of this action have been adjudicated because the Kings have demonstrated that Wells Fargo “received the necessary funds to pay off and discharge [the] Mortgage” on the Property. [Id. at 13-14].[2]

         Each of these claims fails because the foundational allegation that Wells Fargo received the funds from the Kings' attorney is belied by other allegations in the complaint as well as by documents incorporated by reference into the complaint. First, the complaint recognizes that the funds were wired to a beneficiary account named “WF Payoff Ifile, ” with account number 6352262031, pursuant to “a purported payoff statement, ” and attaches and incorporates by reference the fraudulent payoff statement and the record of the wire transfer into account number 6352262031. See [id. at 10-11, 64-69]. The complaint further alleges that the WF Payoff Ifile account was a “Fraudulent Account” opened at Wells Fargo and that Wells Fargo “allowed the holder of the Fraudulent Account to infiltrate its payoff system so that the payoff statement generated by [Wells Fargo] . . . was altered so as to change the Beneficiary Bank Account and Beneficiary Account Name to that of the Fraudulent ...


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