Constrafor v. Federal Deposit Insurance Corporation

Background

Constrafor alleged that funds belonging to it were held in an account at Signature Bank. Under an agreement with StructureTech New York, Inc. (STNY), Constrafor purchased invoices and STNY acted as its collection agent. A $523,012.71 payment from Leeding Builders Group LLC was deposited into STNY’s Signature Bank account but was not remitted to Constrafor. Separately, Constrafor wired STNY two payments of $880,660.72 related to an invoice purchase that was canceled. The attempted returns were unsuccessful, and Constrafor alleged that Signature Bank retained the resulting $1,761,321.44 in funds.

After Signature Bank entered Federal Deposit Insurance Corporation (FDIC) receivership, Constrafor sought the return of the funds from the FDIC. The FDIC disallowed Constrafor’s claim, characterizing it as a general unsecured claim. Constrafor sued the FDIC, as receiver for Signature Bank, asserting claims for money had and received and conversion. Constrafor later sought permission to amend its complaint to add Flagstar Bank, N.A., which had purchased or assumed substantially all of Signature Bank’s assets and deposits.

Motion to Dismiss

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests whether the complaint alleges enough facts to state a legally plausible claim. The court accepted the complaint’s factual allegations as true for purposes of the motion.

The court held that both claims concerning the Leeding Deposit failed. The Subcontractor Receivables Purchase Agreement governed the payment and therefore precluded a claim for money had and received concerning the same subject matter. The court also found that Constrafor alleged only a right to receive the deposit under the agreement, not ownership, possession, or control of the money before the alleged conversion. The court therefore dismissed both the money had and received claim and the conversion claim concerning the Leeding Deposit.

The court reached a different result for the Lions Group Funds. It held that Constrafor plausibly alleged a conversion claim because the two wire transfers were specific and identifiable, Constrafor had an ownership or possessory interest in the funds, and the FDIC allegedly refused to return them after Constrafor made demands. The court therefore denied the FDIC’s motion to dismiss that conversion claim.

The court dismissed the money had and received claim concerning the Lions Group Funds. It found that Constrafor did not plausibly allege that Signature Bank or the FDIC benefited from receiving or holding the funds. The complaint’s statements that the FDIC benefited were conclusory and did not allege facts showing enrichment or that holding the funds saved the defendant from an expense or loss.

Security-Interest Arguments

The FDIC argued that Signature Bank had a right to set off amounts owed against funds in STNY’s account and had a perfected lien with priority over other creditors. The court declined to decide those arguments on the motion to dismiss because they depended on documents outside the pleadings that Constrafor had not relied on in drafting its complaint. The court stated that it would consider the FDIC’s position, to the extent relevant to the remaining claim, at summary judgment.

Motion to Amend

Constrafor sought to add Flagstar as a defendant. The court denied that request as futile, meaning the proposed amendment could not survive a motion to dismiss. The proposed amended complaint did not add new claims and did not adequately allege that Flagstar participated in the conversion, knew it possessed Constrafor’s property wrongfully, or received a demand to return the money. The court also considered the Purchase and Assumption Agreement incorporated into the proposed complaint and found that Constrafor had not identified a provision showing that Flagstar assumed liability for this action.

Disposition

The court granted in part and denied in part the FDIC’s motion to dismiss. It dismissed both claims concerning the Leeding Deposit, granted dismissal of the money had and received claim concerning the Lions Group Funds, and denied dismissal of the conversion claim concerning those funds. The court denied Constrafor’s motion for leave to amend to add Flagstar. The surviving conversion claim remained for further proceedings.