Opinion
No. 21–CV–4003 CJW–MAR
2022-05-02
Larry MUFF, Executor of the Estate of Joseph A. Muff, Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.
Gail E. Boliver, Boliver Law Firm, Marshalltown, IA, for Plaintiff. Angela J. Gray, Jesse Linebaugh, Faegre Drinker Biddle & Reath LLP, Des Moines, IA, for Defendant.
Gail E. Boliver, Boliver Law Firm, Marshalltown, IA, for Plaintiff.
Angela J. Gray, Jesse Linebaugh, Faegre Drinker Biddle & Reath LLP, Des Moines, IA, for Defendant.
ORDER
C.J. Williams, United States District Judge
TABLE OF CONTENTS
I. INTRODUCTION...429 II. SUMMARY JUDGMENT STANDARD...429
III. FACTUAL BACKGROUND...430
IV. ANALYSIS...431
A. The Muff Corporation and Farming Account Claim (Count 2)...431
B. The Joyce Paige Muff/Tadd Joshua Paige Account Claim (Count 3)...432
C. The Joseph Muff/Joyce Paige Muff Account Claim (Count 1)...433
1. Failure as a Matter of Law...433
a. Plaintiff's Possessory Right...434
b. Plaintiff's Right to Reimbursement...434
2. Account Agreement...435
3. Statute-of-Limitations...438
a. Other Time Barred Unauthorized Transactions...439
V. CONCLUSION...440
I. INTRODUCTION
This matter is before the Court on defendant's February 3, 2022, Motion for Summary Judgment. (Doc. 51). Defendant moves for summary judgment in its favor on each of plaintiff's three conversion claims. (Id. ). Plaintiff timely filed a resistance. (Doc. 63). Defendant timely filed a response and a reply. (Docs. 66 & 69). On March 24, 2022, the Court heard argument. (Doc. 71). Defendant timely filed a response to supplemental authority raised by plaintiff at oral argument. (Doc. 72). For the following reasons, the Court finds that plaintiff's three conversion claims fail as a matter of law and thus grants defendant's motion.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). When asserting that a fact is undisputed or is genuinely disputed, a party must support the assertion by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials." FED. R. CIV. P. 56(c)(1)(A) ; see Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Alternatively, a party may show that "the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." FED. R. CIV. P. 56(c)(1)(B). More specifically, a "party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence." FED. R. CIV. P. 56(c)(2).
A fact is "material" if it "might affect the outcome of the suit under the governing law[.]" Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citation omitted). "An issue of material fact is genuine if it has a real basis in the record," Hartnagel v. Norman , 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted), or "when a reasonable jury could return a verdict for the nonmoving party on the question," Woods v. DaimlerChrysler Corp. , 409 F.3d 984, 990 (8th Cir. 2005) (internal quotation marks and citation omitted). Evidence that presents only "some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), or evidence that is "merely colorable" or "not significantly probative," Anderson , 477 U.S. at 249–50, 106 S.Ct. 2505, does not make an issue of fact genuine. In sum, a genuine issue of material fact requires "sufficient evidence supporting the claimed factual dispute" that it requires "a jury or judge to resolve the parties’ differing versions of the truth at trial." Id. at 249, 106 S.Ct. 2505 (citation and internal quotation marks omitted).
The party moving for summary judgment bears "the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Hartnagel , 953 F.2d at 395 (citation omitted). Once the moving party has met this burden, the nonmoving party must go beyond the pleadings and by depositions, affidavits, or other evidence designate specific facts showing that there is a genuine issue for trial. See Mosley v. City of Northwoods , 415 F.3d 908, 910 (8th Cir. 2005).
In determining whether a genuine issue of material fact exists, courts must view the evidence in the light most favorable to the nonmoving party, giving that party the benefit of all reasonable inferences that can be drawn from the facts. Tolan v. Cotton , 572 U.S. 650, 651, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014) ; Matsushita , 475 U.S. at 587–88, 106 S.Ct. 1348 (citation omitted); see also Reed v. City of St. Charles , 561 F.3d 788, 790 (8th Cir. 2009) (stating that in ruling on a motion for summary judgment, a court must view the facts "in a light most favorable to the non–moving party—as long as those facts are not so ‘blatantly contradicted by the record ... that no reasonable jury could believe’ them") (alteration in original) (quoting Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) ). A court does "not weigh the evidence or attempt to determine the credibility of the witnesses." Kammueller v. Loomis, Fargo & Co. , 383 F.3d 779, 784 (8th Cir. 2004) (citation omitted). Rather, a "court's function is to determine whether a dispute about a material fact is genuine[.]" Quick v. Donaldson Co. , 90 F.3d 1372, 1376–77 (8th Cir. 1996). When considering a motion for summary judgment, the court "need consider only the cited materials, but it may consider other materials in the record." FED. R. CIV. P. 56(c)(3).
III. FACTUAL BACKGROUND
The following facts are undisputed unless otherwise noted. The Court incorporates additional facts in its analysis as necessary.
From 2014 to 2018 Joseph A. Muff ("Mr. Muff") and his wife Joyce Paige Muff ("Ms. Paige") maintained a bank account with defendant, Wells Fargo Bank, N.A. ("Wells Fargo"). (Docs. 51-1, at 1; 63-2, at 1). On January 2, 2015, Ms. Paige died. (Docs. 51-1, at 2; 63-2, at 2). Prior to her death, Ms. Paige's son Tadd Joshua Paige ("Josh") lived with her and Mr. Muff. (Docs. 63-3, at 1; 66, at 3). Ms. Paige and Josh also held a joint account with Wells Fargo. (Docs. 51-1, at 1; 63-2, at 1).
On January 8, 2018, Mr. Muff reported suspected fraud to Wells Fargo. (Docs. 51-1, at 2, 4; 63-2, at 3). That year, police investigated Josh for theft from Mr. Muff. (Docs. 51-1, at 7; 63-2, at 4).
Plaintiff's denial relates to the date defendant was informed of Ms. Paige's death, not to the date Mr. Muff reported suspected fraud to Wells Fargo. (Doc. 63-3, at 2).
Plaintiff asserts that in January 2016, Josh began withdrawing money from investments Mr. Muff held with Hartford Core Equity Fund ("Hartford") without authorization. (Doc. 63-3, at 2). Plaintiff's complaint concerns only the Hartford checks that Josh fraudulently endorsed as Mr. Muff and deposited into Mr. Muff's account. (Docs. 1-1; 51-1, at 8; 63-2, at 4). The last Hartford check was deposited into Mr. Muff's account on September 8, 2017. (Docs. 51-1, at 8; 63-2, at 5). Josh withdrew money from the Muff Corp. accounts at other banks by fraudulently endorsing checks as Mr. Muff, depositing them in Mr. Muff and Ms. Paige's joint account with Wells Fargo, and then transferring funds electronically to the account Josh controlled using his deceased mother's credentials. (Docs. 51-1, at 8; Docs. 63-2, at 4–5).
Plaintiff attempts to qualify this fact by noting, without citing to anything in the record, that it learned more about "the breadth of the thefts and fraud." (Doc. 63-2, at 4); see LR 56(b) ("A response to an individual statement of material fact that is not expressly admitted must be supported by references ... that support the resisting party's refusal to admit the statement, with citations to the appendix containing that part of the record."). Regardless of what plaintiff learned, the allegations before the Court are only the three counts of conversion involving the Hartford checks. (Doc. 1-1, at 4).
On December 17, 2020, plaintiff filed a complaint against defendant in the Iowa District Court for Crawford County. (Doc. 1-1, at 3). Plaintiff asserts defendant knew or should have known about Josh's scheme given the number of transactions and amount of money involved. (Id. , at 5). As a result, the complaint alleges one count of conversion for funds from the joint account of Mr. Muff and Ms. Paige (Count 1), one count of conversion for funds from the Muff Corporate Checking Account and the Farm Checking Account (Count 2), and one count for conversion of funds from the joint account of Ms. Paige and Josh (Count 3). (Doc. 1-1, at 5–7).
IV. ANALYSIS
Defendant argues that Count 2 and Count 3 of plaintiff's complaint must be dismissed because plaintiff lacks standing. (Doc. 51, at 1). Defendant also argues that it is entitled to summary judgment on Count 1 because: 1) plaintiff fails to present a case for conversion as a matter of law; 2) the conversion claim is time-barred by agreement, and; 3) the conversion claim is time-barred by statute. (Id. , at 1–2). The Court addresses each of defendant's arguments in turn.
A. The Muff Corporation and Farming Account Claim (Count 2)
Defendant argues that plaintiff's conversion claim for the Muff Corp. business accounts fails for lack of standing and should be dismissed. (Doc. 55, at 15). Defendant asserts that plaintiff cannot make claims on behalf of Muff Corp. because Muff Corp. is not a party to this case and never had a bank account with defendant. (Id. ). Plaintiff argues that this claim relates to Josh's scheme. (Doc. 63-1, at 8).
Plaintiff misidentifies this claim as Count 3 in his resistance. (Doc. 63-1, at 8). The Court refers to the counts as numbered in plaintiff's complaint. (Doc. 1-1).
Federal courts are courts of limited subject matter jurisdiction and a plaintiff "must demonstrate standing to sue by showing that she has suffered an injury in fact that is fairly traceable to the defendant's conduct and that is likely to be redressed by the relief she seeks." In re SuperValu, Inc. , 870 F.3d 763, 767–68 (8th Cir. 2017) (citing Spokeo, Inc. v. Robins , 578 U.S. 330, 337–38, 136 S.Ct. 1540, 194 L.Ed.2d 635 (2016) ). If a plaintiff cannot demonstrate standing on a defendant's motion for summary judgment, then the court must grant the defendant's motion. See Lujan v. Defenders of Wildlife , 504 U.S. 555, 562–63, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Here, plaintiff is unable to show his alleged injury relating to this bank account is fairly traceable to defendant's conduct. In his complaint, plaintiff alleged that Mr. Muff maintained a "Muff Corporate Checking Account" and a "Farm Checking Account" with Wells Fargo. (Doc. 1-1, at 6). But neither of these bank accounts exist at Wells Fargo. (Doc. 51-1, at 3; Doc. 63–2, at 2). Defendant had no control over the money in those accounts when Josh allegedly removed funds from them. Thus, plaintiff cannot show that his injury is fairly traceable to defendant's conduct. Also, Muff Corp. is not a party to this suit and plaintiff cannot assert claims for any injury it suffered on its behalf. See In re SuperValu , 870 F.3d at 767–68 (requiring that plaintiff herself suffer the alleged injury). For these reasons, plaintiff's claim fails as a matter of law for lack of standing.
As such, defendant is entitled to summary judgment on Count 2. See Lujan , 504 U.S. at 562–63, 112 S.Ct. 2130.
B. The Joyce Paige Muff/Tadd Joshua Paige Account Claim (Count 3)
Defendant also argues that plaintiff's conversion claim for the Joyce Paige Muff/Tadd Joshua Paige account based on Mr. Muff's interest in the property as the surviving spouse fails for lack of standing and should be dismissed. (Doc. 55, at 15). Plaintiff argues that Mr. Muff was entitled to one-half of Ms. Paige's account with Josh because Mr. Muff was her spouse. (Doc. 63–1, at 11). Plaintiff also implies that the joint tenancy between Ms. Paige and Josh was not a joint tenancy but a constructive trust. (Id. , at 10).
Parties holding property in joint tenancy have equal rights to the enjoyment of that entire property and "a right of survivorship which allows the surviving party to enjoy the entire estate." Kettler v. Security Nat. Bank of Sioux City , 805 N.W.2d 817, 821 (Iowa Ct. App. 2011) (quoting In re Est. of Thomann , 649 N.W.2d 1, 5-6 (Iowa 2002) ); see also, e.g., Brown v. Vonnahme , 343 N.W.2d 445, 451 (Iowa 1984) ; In re Winkler's Est. , 232 Iowa 930, 5 N.W.2d 153, 155 (1942). An agreement between joint tenants governs the terms of the joint tenancy:
The rights of the individual joint tenants must be determined from their agreement. Generally, the respective rights of the parties to a joint bank account are determined by the rules of contract law, and the intent of the parties with respect to the joint [bank] account is controlling. Each joint tenant is presumed to own an equal share in the joint bank account; however, this presumption is rebuttable.
Anderson v. Iowa Dep't of Human Servs. , 368 N.W.2d 104, 109 (Iowa 1985) (internal citations omitted). Death extinguishes a joint tenant's interest in the property. In re Lamoureux , 412 N.W.2d 628, 630–631 (Iowa 1987). As a result, the survivor's interest is not enlarged; rather, he enjoys the whole property as before, but without it being subject to another interest. Id.
Here, once Ms. Paige died, her son Josh's interest was subject to no other interest. Ms. Paige died on January 2, 2015. (Docs. 51-1, at 2; 63-2, at 2). Under Iowa law, her surviving spouse was entitled to one–half of her personal property. IOWA CODE § 633.212. Ms. Paige, however, died in possession of a joint checking account she shared with Josh. They held that account as joint tenants with a right of survivorship. (Docs. 51-1, at 1; 51-2, at 10; 63-2, at 1). Ms. Paige's death extinguished her interest in the property; thus, after she died, Josh, as survivor, was left to enjoy the whole property free from Ms. Paige's interest. See Lamoureux , 412 N.W.2d at 630–31. Thus, Mr. Muff has no interest in or claim to Ms. Paige and Josh's joint account at Wells Fargo.
Plaintiff implies that the shared account was a constructive trust and that Josh's alleged fraud beginning after his mother's death violated his fiduciary duty to her making her the sole owner of the account. (Doc. 63-1, at 10–11). Plaintiff's argument is meritless and his reliance on First National v. Curran , 206 N.W.2d 317 (Iowa 1973) and Anderson , 368 N.W.2d at 109 to make that argument is unavailing. Neither case plaintiff cites supports any theory that would prevent the passing of the accretive interest at the death of one joint tenant to the other on this record. See generally First National , 206 N.W.2d 317 (finding that a nurse violated a confidential relationship when the nurse changed a patient's bank deposits to the nurse's name); Anderson , 368 N.W.2d 104 (finding that it was error as a matter of law when the Department of Human Services failed to account for the intent of the parties creating a joint tenancy account); see also Lamoureux , 412 N.W.2d at 632. Indeed, the record does not support plaintiff's assertion that Josh had a constructive trust with his mother. Even if it did, no evidence supports that Josh breached a fiduciary duty to his mother. There is no evidence that a fiduciary duty existed between Josh and Ms. Paige, or that he breached that duty before or after Ms. Paige's death. The evidence only shows that Ms. Paige and Josh shared a joint bank account as joint tenants. Mr. Muff had no interest in that account and is unable to establish one.
With no interest in the account, Mr. Muff's alleged injury is not fairly traceable to any of defendant's conduct. In re SuperValu , 870 F.3d at 767–68. Thus, neither Mr. Muff nor his estate can sustain a claim for funds in the Joyce Paige Muff/Tadd Joshua Paige account based on Mr. Muff's status as the surviving spouse.
As such, defendant is entitled to summary judgment on Count 3. See Lujan , 504 U.S. at 562–63, 112 S.Ct. 2130.
C. The Joseph Muff/Joyce Paige Muff Account Claim (Count 1)
Defendant argues that plaintiff has failed to present a case for conversion under Count 1 as a matter of law, that the account agreement bars this claim, and that the statute-of-limitations also bars this claim. Thus, defendant argues, this claim fails as a matter of law. (Doc. 55, at 14). The Court addresses each argument in turn.
1. Failure as a Matter of Law
Defendant argues that plaintiff has neither identified money on which to base a conversion claim nor an obligation to pay plaintiff, and thus Count 1 fails as a matter of law. (Id. , at 16). Defendant also notes that plaintiff concedes that this case is limited to conversion claims regarding the Hartford checks. (Doc. 69, at 8; see also Docs. 51-1, at 8; 63-2, at 4). Plaintiff argues the money is somehow traceable from Hartford and Muff Corp. to Mr. Muff's account with Wells Fargo. (Doc. 63-1, at 11–12). Plaintiff also cites caselaw to show defendant had an obligation to reimburse him. (Doc. 63-1, at 13–14) (citing Cmty. Voice Line, L.L.C. v. Great Lakes Commc'n Corp. , 18 F. Supp. 3d 966, 980 (2014) ).
Plaintiff titles this section "Obligation to Reimburse – Defendant is Responsible Under the Law" but otherwise makes no argument related to the caselaw he cites in that section. (Doc. 63-1, at 13–14).
Under Iowa law, "[c]onversion is ‘the wrongful control or dominion over another's property contrary to that person's possessory right to the property. The wrongful control must amount to a serious interference with the other person's right to control the property.’ " Lewis v. Jaeger , 818 N.W.2d 165, 188 (Iowa 2012) (quoting Condon Auto Sales & Serv., Inc. v. Crick , 604 N.W.2d 587, 593 (Iowa 1999) ); see also Cmty. Voice Line , 18 F. Supp. 3d at 980 (noting same). To prevail on a conversion claim, a plaintiff must show: "1) ownership by the plaintiff or other possessory right in the plaintiff greater than that of the defendant; 2) exercise of dominion or control over chattels by defendant inconsistent with, and in derogation of, plaintiff's possessory rights thereto; and 3) damage to plaintiff." In re Est. of Bearbower , 426 N.W.2d 392, 394 n.1 (Iowa 1988).
Here, defendant meets its initial burden by identifying those portions of the record which show a lack of a genuine issue for trial. See Hartnagel , 953 F.2d at 395. Mr. Muff never requested defendant investigate the unauthorized transactions or that defendant reimburse Mr. Muff for them. (Docs. 51-1, at 6; 63-2, at 3). Defendant shows evidence that plaintiff cannot support a conversion claim because he cannot show that Wells Fargo exercised dominion or control over Mr. Muff's account inconsistent with, or in derogation of, his rights, or that Mr. Muff's possessory right was greater than that of Wells Fargo. (Docs. 51-1, at 6; 63-2, at 3). Thus, the burden shifts to plaintiff to show a genuine dispute of material fact regarding these elements. See Mosley , 415 F.3d at 910.
a. Plaintiff's Possessory Right
Plaintiff fails to show a genuine dispute of material fact. Plaintiff fails to address and thus concedes defendant's argument that there is no conversion claim when the intended recipient has funds deposited into his account. (See Doc. 55, at 19–20). He also fails to identify how the money is traceable or what money defendant owes him. (See Doc. 63-1, at 11–12). Instead, he merely asserts that a bank knows what happens to every penny in its possession. (Id. , at 12). Thus, plaintiff fundamentally misunderstands the issue at hand. Plaintiff is charged with being able to identify money in defendant's possession in which plaintiff has a possessory right greater than that of the defendant. See Saladin v. McGraw-Hill Glob. Educ. Holdings, LLC , No. 17-CV-1028 LRR, 2019 WL 5417148, *7–11 (N.D. Iowa May,6 2019). Ordinarily, that money would be the money held in Mr. Muff's account. But on March 9, 2018, Mr. Muff closed his account with Wells Fargo. (Docs. 51-1, at 63-2, at 3). And plaintiff does not identify any money in defendant's possession to which he has a greater possessory interest than defendant. Thus, plaintiff fails to show evidence supporting the kind of possessory interest necessary to prevail on his conversion claim. See Bearbower , 426 N.W.2d at 394 n.1.
b. Plaintiff's Right to Reimbursement
Plaintiff also fails to identify a right to reimbursement from defendant for the alleged theft by Josh. (See Doc. 55, at 17–18). Plaintiff does, however, recite caselaw defining conversion in response to defendant's argument. (Doc. 63-1, at 13–14 (citing Cmty. Voice Line , 18 F. Supp. 3d at 980 )). Although that recitation is an accurate statement of conversion law in Iowa, it still fails to respond to defendant's argument. (Id. ). Plaintiff's cited authority, presented without application to the facts here, makes no showing that the bank was obligated to pay him those funds. Thus, plaintiff fails to show evidence that defendant's failure to reimburse plaintiff is inconsistent with, or in derogation of, plaintiff's possessory rights. See Bearbower , 426 N.W.2d at 394 n.1. For these reasons, plaintiff fails to show a genuine dispute of material fact as to the nature of Wells Fargo's dominion or control, or the nature of Mr. Muff's possessory right. Thus, plaintiff's conversion claim fails as a matter of law and defendant is entitled to summary judgment on Count 1.
2. Account Agreement
Defendant also argues it is entitled to summary judgment on Count 1 because plaintiff's conversion claim is time barred by agreement or, alternatively, by the UCC. (Doc. 55, at 17, 20). Plaintiff argues that no time bars apply in this case. (Doc. 63-1, at 9). Plaintiff asserts the action did not accrue because defendant allegedly knew about Josh's fraud and failed to disclose it. (Id. ). Plaintiff's argument is baseless.
Plaintiff also asserts that the account agreement fails to address the issues involved in this case. (Doc. 63-1, at 12–13). Plaintiff offers no authority to support that assertion. (Id. ). Thus, the Court rejects that assertion. Additionally, the Court rejects plaintiff's unsupported qualification that Mr. Muff never signed or was never given an account agreement. (Doc. 63-2, at 1). Plaintiff cites to a page of his own deposition that has nothing to do with the account agreement. Thus, plaintiff's qualification is unsupported and his argument surrounding it rejected.
A bank's relationship with its customers "is based on contract." Clinton Nat'l Bank v. Saucier , 580 N.W.2d 717, 719 (Iowa 1998). Absent an agreement to the contrary, the provisions of Article 4 of the Uniform Commercial Code ("UCC") are "express provisions of the depositor's contract with the bank." Id. (citing IOWA CODE § 554.4103(1) ). And under those provisions, bank account holders are unable to relieve themselves of their duty to examine bank statements by delegating that task to an agent. Dow City Cemetery Ass'n v. Defiance State Bank , 596 N.W.2d 77, 82 (Iowa 1999) (collecting cases). Bank account holders must also "notify the bank of any unauthorized signatures or alterations." Id. Under Section 554.4406, bank account holders have not only a duty to examine their account statements but are also "charged with knowledge of information contained in those statements" even in the event of fraud. Id.
In Dow , the Iowa Supreme Court, discussing only the duty to review account statements, held that the plaintiff "is precluded under section 554.4406(4) from asserting against the bank plaintiff's claims concerning unauthorized (or no) signatures or alterations (forgeries) in the checks or accounts." Dow , 596 N.W.2d at 83. Here, plaintiff is not similarly precluded from asserting a claim because defendant has not argued that subsection 4 applies or shown evidence supporting its application. Iowa Code § 554.4406(4).
Mr. Muff failed to timely review and notify the bank of fraudulent transactions in accordance with his agreement with defendant. (Docs. 51-2, at 22, 93; 63-2, at 3). The last Hartford check that plaintiff identifies as fraudulent was deposited on September 8, 2017. (Docs. 51-1, at 8; 63-2, at 5). Plaintiff first notified the bank of suspected fraud on January 8, 2018. (Docs. 51-1, at 2, 4; 63-2, at 3). Thus, 122 days passed before defendant was notified of any issue with Mr. Muff's account. The terms and conditions of the bank account clearly state the obligation Mr. Muff had to review his bank statements for errors or unauthorized transactions and the time frame he had to address them. (Doc. 51-2, at 22, 93). The agreement informed Mr. Muff that he was required to "[w]ithin 30 days after the Bank mails, sends electronically, or otherwise makes account related information available to you, you must notify the Bank of any claim for credit or refund due to an unauthorized transaction. " (Id. , at 22). It also provided Mr. Muff must, within six months after account information was made available, "notify the Bank of any claim for credit or refund resulting from a forged, unauthorized, or missing endorsement." (Id. ); see generally Douglass v. Am. Family Mut. Ins. Co. , 508 N.W.2d 665, 666 (Iowa 1993), abrogated on other grounds by, Hamm v. Allied Mut. Ins. Co. , 612 N.W.2d 775, 779 (Iowa 2000) ("Under general contract law, it is clear that the parties may agree to a modification of statutory time limitations."); Davis Mobile Homes, L.L.C. v. U.S. Bank Nat'l Ass'n , No. 12-0178, 2012 WL 5356132 (Iowa Ct. App. 2012) (enforcing time limitation made by agreement between bank and customer). Mr. Muff never notified the bank within that time frame or requested reimbursement. His estate raised the issue of reimbursement by filing this lawsuit in December 2020. (See Doc. 51-1, at 7; Doc. 63-2, at 4).
Plaintiff qualifies the date the fraud was reported claiming "Wells Fargo knew since 2016 that there was a ‘spike’ in both accounts." (Doc. 63-2, at 3). That qualification serves no purpose and is nonresponsive to defendant's statement of fact. First, plaintiff cites to an investigation defendant made after Mr. Muff reported the fraud which does not support its qualification. (Doc. 51-2, at 214). Second, plaintiff cites to its expert's report which details account activity but states nothing about when the fraud was reported. (Doc. 63-4, at 92). Regardless, plaintiff's "qualification" fails because account holders are charged with knowledge of their account statements and reporting unauthorized transactions, not their bank. See Dow , 596 N.W.2d at 82.
The agreement also alerted Mr. Muff that if he failed to timely inform defendant of any such issue, "the Bank will be released from all liability." (Doc. 51-2, at 22). As to when the fraud was discovered, the Iowa Supreme Court held that the discovery rule—which protects an injured party "unaware of his injury and the cause of it"—does not apply to "a conversion action based on a forged endorsement under Section 554.3419 of the Iowa Uniform Commercial Code." Husker News Co. v. Mahaska State Bank , 460 N.W.2d 476, 476–77 (Iowa 1990). Although the conversion claim here is not brought under Section 554.3419, the Court finds that it would be anomalous to apply the discovery rule now in a case that is also based on a forged endorsement. See id. The reasons for not applying the discovery rule there are the same here: "the considerations of finality and predictability ... are substantial and outweigh the countervailing equities." Id. at 478.
Plaintiff asserts that Mr. Muff never received any account statements. (Doc. 63-1, at 12–13). Alternatively, plaintiff also contends that defendant breached its duties to detect and prevent elder abuse and criminal activity when Josh prevented Mr. Muff from receiving information about his bank account and thus the action did not accrue until discovered. (Id. ). Plaintiff is mistaken on both assertions.
Account holders are charged with knowledge of their account statements. Dow , 596 N.W.2d at 82. Nothing plaintiff argues, asserts, or implies relieves Mr. Muff of his duty to review his account statements. Here, although Mr. Muff was required to notify the bank of unauthorized transactions within 30 days (see Doc. 51-2, at 22), 122 days passed before Mr. Muff notified Wells Fargo of any issue. (Docs. 51-1, at 4, 8; 63-2, at 3–4, 63-3, at 5). Thus, plaintiff's conversion claims are barred by the terms of the account agreement.
Also, Iowa law places a duty on bank account holders to review their bank statements. IOWA CODE § 554.4406(3). Banks make such statements accessible to the account holder pursuant to their agreement. See § 554.4406(3). They assume no duty to make sure it is accessed or that when it is accessed it is reviewed as carefully as it should be. See Dow , 596 N.W.2d at 82–83. It is undisputed that Mr. Muff's account was governed by an agreement and that defendant provided him with account statements. (Docs. 51-1, at 6; 51-2, at 22, 93, 178–79; 63-2, at 3). Plaintiff's attempts to qualify otherwise are frivolous.
Plaintiff attempts to qualify that although defendant mailed monthly statements to Mr. Muff there is no evidence Mr. Muff ever received any statements or documents from the defendant. (Docs. 63-2, at 2; 63-3, at 5). This qualification is irrelevant. First, it fails to relieve Mr. Muff of his duty to examine his account and inform the bank of errors. See Dow , 596 N.W.2d at 82. Also, a trusted agent's fraud does not provide an excuse that relieves the aggrieved party of this duty. See id. Second, plaintiff attempts to support this qualification by citing to a summary of online transfers that has nothing to do with whether defendant made account statements available. (Doc. 63-4, at 102). That summary is nonresponsive and thus irrelevant to determining whether Mr. Muff ever received an account statement. Plaintiff also alleges account statements were never provided to Mr. Muff, (Doc. 63-4, at 6), but admits he has no evidence that defendant failed to provide account statements. (Doc. 51-2, at 178–79). There is also evidence that defendant regularly sent Mr. Muff mail because Thomas Muff, Mr. Muff's brother, found mail addressed to Mr. Muff from Wells Fargo but not the contents. (Doc. 63-4, at 6).
There is no genuine issue of material fact as to whether defendant provided Mr. Muff with account statements as set forth in their agreement. Defendant did. Plaintiff's qualification that "no evidence exists that [Mr. Muff] ever received any statements or documents from the defendant" is futile. (Doc. 63-3, at 5). Again, plaintiff's answer is nonresponsive. The question is whether Wells Fargo sent monthly account statements as required. (Docs. 51-1, at 4; 63-2, at 2; 63-3, at 5). Not whether Mr. Muff received them. Thus, plaintiff fails to create a genuine dispute of material fact that defendant mailed account statements to Mr. Muff.
Plaintiff also implies—without citing to anything in the record—that defendant breached the account agreement by "not acting in accordance with commercially reasonable standards." (Doc. 63-1, at 13) (citing Waukon Auto Supply v. Farmers & Merchants Sav. Bank , 440 N.W.2d 844, 850 (1989) ; Phariss v. Eddy , 478 N.W.2d 848, 851 (Iowa Ct. App. 1991) ). Even though plaintiff did not further elaborate on this argument beyond citing to the cases, the Court finds neither case is relevant here. Those cases are distinguishable because, unlike here, both of those cases involved managers of businesses cashing checks. Here, Josh deposited checks. Thus, as noted above, plaintiff fails to address defendant's argument that there is no conversion claim when the intended recipient has funds deposited into his account. (See Doc. 55, at 19–20).
Regardless, as a matter of law, the account agreement controls here. The record shows that Mr. Muff did not comply with the terms and conditions of the account agreement because he failed to monitor his account for years before informing defendant of suspected fraud and only brought an action against defendant in December 2020. (See Docs. 51-1, at 8; 63-2, at 4; 63-3, at 2 (alleging that the fraud underlying Count 1 began in January 2016 and showing it was reported January 2018)); (Doc. 1-1, at 3 (filing complaint on December 17, 2020)). No matter the reason, Mr. Muff's failure to review his account statements and timely notify the bank of any issue released the bank from any liability. See Dow , 596 N.W.2d at 82. As such, defendant is also entitled to summary judgment on Count 1 because the account agreement bars plaintiff's claim.
3. Statute-of-Limitations
Even if plaintiff were not barred from making this claim by the period set forth in the account agreement, he would, as defendant argues, still be barred under the applicable statute-of-limitations. (Doc. 55, at 20). The parties agree that the statute-of-limitations under Article 4 provides that "[a]n action to enforce an obligation, duty, or right arising under the Article must be commenced within three years after the cause of action accrues. " IOWA CODE § 554.4111 (emphasis added); (Docs. 55, at 20; 63-1, at 16).
The last Hartford Check that plaintiff identifies as fraudulent was deposited on September 8, 2017. (Doc. 51-1, at 8; Doc. 63-2, at 5). This action was not commenced until more than three years later in December 2020. (Doc. 1-1, at 3). Thus, plaintiff's claim is barred by the statute-of-limitations.
Plaintiff argues Mr. Muff could not defend himself against fraud because he lacked capacity to manage his financial affairs. (Doc. 63-1, at 12). But plaintiff admits facts contrary to his argument. It is undisputed that Mr. Muff was able to not only take care of his own financial affairs but also attended to those of Muff Corp. between January 2016 and September 8, 2017, when the relevant fraud occurred. (Doc. 51-1, at 10; 63-2, at 5). Yet, during that period Mr. Muff failed to monitor his account or notify the bank as required and then failed to seek reimbursement after notifying the bank of an issue. (Doc. 51-1, at 4–5; Doc. 63-2, at 2–3).
Plaintiff qualifies this statement, stating that "Plaintiff testified about Joseph Muff requesting assistance with his financial affairs and creating a voluntary guardianship and conservatorship." (Doc. 63-2, at 5 (citing Doc. 63-3, at 3)). Plaintiff points to Mr. Muff's appointment of his brothers as Guardian and Conservator. (See Doc. 63-3, at 3 (citing Doc. 63-4, at 50, 72–73, 75–76)). These pages show that these appointments did not occur until July 26, 2018, and April 17, 2018, respectively. (See Doc. 63-4, at 50, 72–73, 75–76).
Nevertheless, relying on Iowa Code Section 614.4, plaintiff asserts that the statute-of-limitations is five years and thus the action did not accrue until the fraud was discovered. (Doc. 63-1, at 16). But plaintiff misapprehends the applicability of that statute. The cause of action against the bank arises from plaintiff's contractual relationship with defendant which Article 4 of the UCC governs. See Saucier , 580 N.W.2d at 719. Thus, the provisions of the UCC govern except to the extent the agreement states otherwise. See id. Plaintiff also fails to address caselaw contrary to his position. In Iowa, conversion claims by account holders that involve the UCC are subject to the statute-of-limitations therein and the agreement between the parties. Davis , 2012 WL 5356132 at *4. Again, the discovery rule does not apply to forged endorsements. Mahaska , 460 N.W.2d at 476 ; see also MidWestOne Bank v. Heartland Co-op , 941 N.W.2d 876, 884 (2020) (noting that "the UCC favor[s] a strict application of the limitation period for negotiable instruments" and that the "[Iowa Supreme Court] [has] refrained from applying the discovery rule when it would undermine the purpose of the statute."). Accordingly, Section 554.4111 controls and the statute-of-limitations is three years from when "the instrument is negotiated." Bucci v. Wachovia Bank, N.A. , 591 F. Supp.2d 773, 787 (E.D. Pa. 2008) (holding that in "conversion of negotiable instruments, the cause of action accrues and the statute begins to run at the moment in time when the instrument is negotiated."); Advance Dental Care, Inc. v. SunTrust Bank , 906 F. Supp. 2d 442, 447 (D. Md. 2012) (holding that a conversion action accrues when the forger deposits the check). Here, the last Hartford check was deposited September 8, 2017—thus, plaintiff had until September 8, 2020, to bring his claim. But Mr. Muff's complaint was not filed until December 2020.
Plaintiff also asserts that no time bars apply because defendant "covered-up the activity" after it was informed of the activity. (Doc. 63-1, at 9). That assertion fails because plaintiff does not show a genuine dispute of material fact. Defendant froze the account when plaintiff notified it of the fraud and plaintiff never followed up except to close the account. (Docs. 51-1, at 5–6; 63-2, at 3). Plaintiff presents no evidence of a cover up. Thus, its assertion fails.
Plaintiff comments that defendant breached a duty to prevent elder abuse in violation of law and defendant's "responsibility as a national bank." (Docs. 51-1, at 5; 53-2, at 3; 63-3, at 8). Plaintiff cites no law and to nothing in the record that supports his reasoning. (Id. ). Thus, the Court rejects plaintiff's comment.
As such, defendant is also entitled to summary judgment on Count 1 because the statute-of-limitations bars plaintiff's claim.
a. Other Time Barred Unauthorized Transactions
Plaintiff also discusses unauthorized transactions related to transfers made electronically between accounts and transactions made by credit card. (Doc. 63-1, at 12, 18). These allegedly unauthorized transactions, however, are separate from plaintiff's conversion claims for the Hartford checks although plaintiff does allege Josh's scheme involved depositing those checks and then moving the funds to other accounts. (See Docs. 1-1, at 4; 63-1). Thus, the Court addresses each category of unauthorized transaction in turn.
Plaintiff argues that the Electronic Funds Transfer Act ("EFTA") excludes transactions originated by checks. (Doc. 63-1, at 14–15 (discussing 15 U.S.C. § 1693, et seq. )). But the online transfers Josh allegedly made from Mr. Muff's account to his account are not at issue here because the transactions at issue in plaintiff's complaint are those made with the Hartford checks. Plaintiff also asserts that because Josh kept the bank statements from Mr. Muff there is a question whether the bank "made available" the statements. (Doc. 63-1, at 17) (citing Robinson Motor Xpress, Inc. v. HSBC Bank, USA , 37 A.D.3d 117, 121, 826 N.Y.S.2d 350 (2006) ). Even though this argument is meritless as described previously, the Court also notes that it fails because in March 2018, defendant produced the bank statements as part of the criminal investigation. (Docs. 51-1, at 7; 63-2, at 4). The statute-of-limitations under the Act is one year and thus, plaintiff is barred from asserting a cause of action based on those electronic transfers. 15 U.S.C. § 1693m(g).
Plaintiff also asserts that in certain unauthorized transactions Josh used a credit card issued by defendant in Mr. Muff's name. (Doc. 63-1, at 18). But plaintiff knew about those transactions in March 2018. (Doc. 51-1, at 7). As with EFTA, such unauthorized transactions with a credit card are also subject to a one-year statute-of-limitations under the Fair Credit Billing Act. 15 U.S.C. § 1640(e) (including several exceptions, none of which are applicable here). Accordingly, plaintiff would also be barred from asserting a cause of action based on those transactions. Thus, plaintiff's arguments based on other unauthorized transactions are unavailing and cannot prevent summary judgment on Count 1. As such, defendant is entitled to summary judgment on Count 1.
In sum, the Court grants Wells Fargo's motion for summary judgment on Count 1, Count 2, and Count 3.
V. CONCLUSION
For these reasons, the Court grants defendant's motion for summary judgment, (Doc. 51), and this case is dismissed.
IT IS SO ORDERED this 2nd day of May, 2022.