United States District Court, D. Nevada
DUNHAM TRUST CO., a Nevada corporation, as Trustee of the Darrell N. Garmann Testamentary Trust 2012, Plaintiff,
WELLS FARGO BANK, N.A., an international holding company, et al., Defendants.
R. HICKS UNITED STATES DISTRICT JUDGE
(collectively “Wells Fargo”) have filed a motion
to dismiss the first amended complaint of plaintiff Dunham
Trust Co. (“Dunham Trust”). (ECF No. 21). Dunham
Trust responded (ECF No. 24), and Wells Fargo timely replied
(ECF No. 29). For the reasons stated below, the Court grants
Wells Fargo's motion to dismiss and dismisses Dunham
Trust's amended complaint with prejudice.
Factual Background and Procedural History
the second motion to dismiss filed by Wells Fargo in this
case. The Court granted Wells Fargo's first motion to
dismiss on February 7, 2019, dismissing several of Dunham
Trust's causes of action with prejudice. (ECF No. 19).
The Court, however, allowed Dunham Trust to amend its
compliant and cure the factual deficiencies as to some of its
claims. Dunham Trust filed a first amended complaint on March
8, 2019, asserting two causes of action against Wells Fargo:
(1) violation of the Uniform Fiduciaries Act, NRS 162.010
et seq. (“UFA”) and (2) conversion under
Nevada common law. (ECF No. 20). Wells Fargo now moves to
dismiss both causes of action.
Court has already related the background of this case in
detail in its previous order (see ECF No. 19 at 1-2), the
Court will only briefly summarize the relevant facts here.
Pursuant to a settlement order from Nevada state court,
Rickey Garmann Sr. (“Rickey Sr.”) was appointed
as trustee for a testamentary trust that was created for the
benefit of his son, Rickey Garmann Jr. (“Rickey
Jr.”). (Id.) The court's settlement order
mandated that the financial account Rickey Sr. was to create
had to be a blocked account, meaning that Rickey Sr. would
need permission from the court to make trust fund
disbursements in support of his son. (Id. at 2).
Without the court's permission, Rickey Sr. was only
supposed to be able to make withdrawals to pay the property
and income taxes that the trust incurred. (Id.)
Rickey Sr., however, did not set up a blocked account, and
over the course of several years, misappropriated
approximately $347, 000 from the trust account to pay for
various personal expenses. (Id.) Once his misconduct
was discovered, the state court suspended Rickey Sr. as
trustee and appointed Dunham Trust in his stead. Rickey Sr.
was ultimately found personally liable for the entire
misappropriated amount and ordered to pay restitution.
(Id.) Dunham Trust eventually sued Wells Fargo in
Nevada state court, and its lawsuit was properly removed here
to federal court.
Fargo seeks dismissal pursuant to Federal Rule of Civil
Procedure 12(b)(6) for failure to state a claim upon which
relief can be granted. To survive a motion to dismiss for
failure to state a claim, a complaint must satisfy Federal
Rule of Civil Procedure 8(a)(2)'s notice pleading
standard. See Mendiondo v. Centinela Hosp. Med.
Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). That is, a
complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). The Rule 8(a)(2)
pleading standard does not require detailed factual
allegations; a pleading, however, that offers “
‘labels and conclusions' or ‘a formulaic
recitation of the elements of a cause of action' ”
will not suffice. Ashcroft v. Iqbal, 556 U.S. 662,
677 (2009) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 (2007)).
Rule 8(a)(2) requires a complaint to “contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.' ”
Iqbal, 556 U.S. at 667 (quoting Twombly,
550 U.S. at 570). A claim has facial plausibility when the
pleaded factual content allows the court to draw the
reasonable inference, based on the court's judicial
experience and common sense, that the defendant is liable for
the misconduct alleged. Id. “The plausibility
standard is not akin to a probability requirement, but it
asks for more than a sheer possibility that a defendant has
acted unlawfully. Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops
short of the line between possibility and plausibility of
entitlement to relief. Id.
reviewing a motion to dismiss, the court accepts the facts
alleged in the complaint as true. Iqbal, 556 U.S. at
667. Even so, “bare assertions. . .amount[ing]
to nothing more than a formulaic recitation of the elements
of a. . .claim. . .are not entitled to an assumption of
truth.” Moss v. U.S. Secret Serv., 572 F.3d
962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at
681) (brackets in original) (internal quotation marks
omitted). The court discounts these allegations because
“they do nothing more than state a legal
conclusion-even if that conclusion is cast in the form of a
factual allegation.” Id. (citing
Iqbal, 556 U.S. at 681.) “In sum, for a
complaint to survive a motion to dismiss, the non-conclusory
‘factual content,' and reasonable inferences from
that content, must be plausibly suggestive of a claim
entitling the plaintiff to relief.” Id.
Fargo moves to dismiss both causes of action (UFA and
conversion claims) asserted against it. As it did in its
previous motion to dismiss, Wells Fargo argues that absent
actual knowledge of trustee fraud or bad faith on its part,
it did not have any duty under the UFA to investigate Rickey
Sr.'s transactions to ensure that they were conducted in
compliance with the terms of the trust. (ECF No. 21 at 7).
And because Dunham Trust has failed to allege any facts that
raise an inference of actual knowledge or bad faith, the
cause of action should be dismissed. (Id.) As to the
conversion claim, Wells Fargo argues that Dunham Trust has
failed to identify any specific money that was converted or
that it is entitled to the return of the converted money,
warranting dismissal of that claim. (Id.) The Court
will address these arguments in turn.
states like Nevada that have adopted the UFA, the scope of a
bank's liability to a trust is governed under the
UFA's provisions, not common law principles. Guild v.
First Nat. Bank of Nevada, 553 P.2d 955, 957 (Nev.
1976). A bank will only be held liable if “if it
receives the deposit or pays the check by the fiduciary with
 actual knowledge that the fiduciary is committing a
breach of his obligation in making such deposit or in drawing
such check or  with knowledge of such facts that the
Bank's action in receiving the deposit or paying the
check amounts to bad faith.” Id. This means
that to survive a motion to dismiss, the plaintiff must show
that the bank had actual knowledge that the trustee was
violating a fiduciary duty or that there were facts known to
the bank such that it would be bad faith for the bank not to
investigate the trustee's conduct. While the UFA does not
define “bad faith, ” it does define “good
faith, ” which is an act “done honestly, whether
it be done negligently or not.” NRS 162.020(2). In
Guild, the Nevada Supreme Court interpreted
“bad faith” as requiring “purposeful or
motivated conduct” rather than a “lack of due
care [or] negligence.” Guild, 553 P.2d at 958.
Simply alleging facts indicating that a bank behaved
negligently or carelessly when conducting business with a
trustee is insufficient to advance a claim under the UFA.
Trust argues that its amended complaint pleads fact
sufficient to raise the inference that Wells Fargo acted in
bad faith. It asserts that Wells Fargo “disregarded and
refused to learn any material facts regarding Rickey
Sr.'s authority to transact business on the Trust's
behalf.” (ECF No. 24 at 8). Instead of requesting trust
documentation or court records “[establishing] the
trust or [defining] Rickey Sr.'s authority, ” Wells
Fargo “stuck its head in the sand” and relied
solely on a pre-filled, bank form document to verify Rickey
Sr.'s authority. (Id.) Wells Fargo's ...