### D ISTRICT 

### C OURT 

### O F 

### A PPEAL 

### O F 

### T HE 

### S TATE 

### O F 

### F LORIDA
F OURTH D ISTRICT

ALAN GILISON and SUSAN GILISON , Appellant s ,

v.

FLAGLER BANK, a Florida Financial Institution

, Appellee

.

No. 4D 19

- 3379

[ August 26, 2020 ]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County ; John S. Kastrenakes , Judge; L.T. Case No.
502017CA012551XXXXMB

.

Jeffrey B. Shalek and Gary S. Phillips of Phillips, Cantor & Shalek, P.A., Hollywood, for appellants.

Ric hard S. Cohen, West Palm Beach, and Marjorie Gadarian Graham, Palm Beach Gardens, for appellee.

M AY , J

.

The p laintiffs appeal an order dismissing two counts of their Fifth Amended Complaint with prejudice for failure to state a cause of action. They arg ue the court erred in this ruling because they sufficiently alleged
claims for : ( 1 ) a iding and a betting f raud; and (2) c onspiracy to c ommit
f raud . We agree and reverse.

The p laintiffs’ claims arose from loans they made to Chariots of Palm Beach, Inc. (“Chariots”), a retail seller and renter of luxury cars. The plaintiffs alleged that w hen Chariots filed for bankruptcy, they became
aware of Chariots’ f raud with regard to the ir loans. 1 T he plaintiffs alleged Flagler Bank (“bank”)

, Chariots’ second largest floor plan lender

, aided and
abetted the fraud and conspired to commit fraud

.

Chariots’ accountants

, Mackail & Sterling CPA’s and Associates, P.A

. , p repared Chariots’ accounting books and records and the necessary tax

1 Chariots is not a party due to the pending bankruptcy.2 documents for Chariots’ lenders. Ron Mackail and Edward Sterling were
both on the bank’s b oard of d irectors. In fact, Sterling served as the bank’s
CEO and President.

Chariots utilized a floor plan fi nancing program, a typical method use d to acquire inventory. Money is borrowed against each car in inventory and
the lender either holds title or secures the loan with a UCC

- 1 financing statement. Over the years, the p laintiffs financed vehicles for Char iots. As security

, Chariots provided the plaintiffs with the original title to each

car. Purportedly, Chariots could not sell a car unless it obtained the title
from the p laintiffs, which occurred when the car’s loan was paid off.

In 2016, Chariots paid the p laintiffs $409,511.81 in interest. However, Chariots’ final balance sheets prepared by the accountants showed a total liability of only $598,000, much smaller than would account for the large interest payment. A staff member o f t he account ing firm flagged this discrepancy and notified Mackail. The lienholder records indicated a
reduced amount owed to the p laintiffs and noted “8/6/14 per Hugh Bate

— never provided documentation

. ”

Meanwhile, Chariots obtain ed duplicate titles f rom the Florida Department of Motor Vehicles for the cars financed by t he p laintiffs . It
would then sell the cars and collect the purchase money, but did not pay the p laintiffs . Instead, Chariots paid the bank’s loan with the p laintiffs’ money. It kept the p laintiffs’ secured cars on the bank’s floor plan inventory list and obtained multiple loans on a single vehicle. Sixty days before Chariots filed for bankruptcy, it paid the bank $2,527,952.03.

In the two counts against the bank, the plaintiffs al leged claims for : (1)

a iding and a betting f raud; and (2) c onspiracy to c ommit f raud. T he y allege d the accountants and the bank maneuvered critical funding to Chariots so that it would appear solvent for as long as possible to attract
investors.

The co mplaint further alleged the accountants failed to engage in generally accepted accounting principles , which allow ed the bank to
receive the funds owed to the p laintiffs. Lastly, the complaint alleged the
accountants and bank knew Chariots’ modus operandi and substantially
assisted Chariots’ owner and Chariots by m aneuver ing critical funding into the scheme while hiding the wrongdoing.

The bank moved to dismi ss the complaint, arguing the p laintiffs failed
to state a cause of action. As to the a iding and a betting f raud claim, the bank argued the p laintiffs failed to allege the bank knew of the fraud

. As3 to the c onspiracy to c ommit f raud claim, the bank argued it did not perform an overt, unlawful, or lawful act by unlawful means.

The trial court granted the motion with prejudice for failure to state a cause of action, finding t he p laintiffs “ failed to allege the bank had actual knowledge of the fraud and th e bank owed no fiduciary duty to the [p] laintiffs .” From this order, the plaintiffs now appeal.

A ruling on a motion to dismiss for failure to state a cause of action is
reviewed de novo

. Regis Ins. Co. v. Miami Mg m t. , 902 So. 2d 966, 968 (Fla
4th DCA 2 005).

• The Aiding and Abetting Fraud Claim

The p laintiffs argue the trial court erred in finding the complaint failed to allege the bank’s knowledge of the fraud. They contend the complaint sufficiently alleged the bank’s CEO and president and a member of its
b oard of d irectors

, who were also Chariots’ accountants , knew of the fraud. The bank responds the p laintiffs failed to pl ead t he bank had actual knowledge. We agree with the plaintiffs.

To successfully plead the claim of aiding and abetting fraud, the plaintiffs must allege the : (1) existence of the underlying fraud; (2) knowledge of the fraud; and (3) the defendant provided substantial
assistance to the commission of the fraud. ZP No. 54 Ltd. P’ship v. Fidelity & Deposit Co

. of Maryland , 917 So. 2d 368 , 372 (Fla. 5th DCA 2005).

1) The Complaint Alleged an Underlying Fraud

.

An underlying fraud exists when the defendant makes a false statement concerning a material fact. Ramel v. Chasebrook Constr. Co. , 135 So. 2d 876, 881 (Fla. 2d DCA 1962). The defendant must know the statement to be false, have the intention to induce the plaintiff to rely upon the representation, and in reliance on that representation the plaintiff will suffer an injury. Id . “[A] statement of a party having exclusive or s uperior knowledge may be regarded as a statement of fact.

. . . ” Id. at 879.

Here, the bank had superior knowledge th r ough the accountants that Chariots’ books contained fraudulent misrepresentations. The accountants, one of whom also served as the ba nk’s President and CEO
and another as a board member, prepared Chariots’ balance sheets. The plaintiffs alleged through them the bank knew the books contained
inaccurate and fraudulent information.4 Since 2011, the accountants r eport ed 1099

- INT income t o the p laintiffs in excess of $300,000 per year. But Chariots’ books reflected a significantly smaller debt than would support those interest payments . An employee of the account ing firm flagged the discrepancy and notified
Mackail , a principal of the ac countants and CEO of the bank

. T h e discrepancy remained o n Chariots’ books without proper documentation

.

T he complaint alleged th e p laintiffs relied on Chariots’ representation
that it could sell the cars it financed only after Chariots paid off the ir loan.

It alleged the bank knew through the accountants that Chariots obtained duplicate titles for those cars. The p laintiffs’ reliance on this representation caused them injury when Chariots paid the bank money
owed t o them.

In short, t he p laintiffs alleged a n underlying fraud.

1) The Complaint Alleged the Bank’s Knowledge of the Underlying
Fraud.

A defendant has knowledge of an underlying fraud if it has a general awareness that its role was part of an overall improp er activity. Woods v. Barnett Bank of Fort Lauderdale , 765 F.2d 1004, 1009 (11th Cir. 1985)

. Knowledge can be imputed on a corporation when the plaintiff demonstrates, “without dispute, that a corporate officer’s fraud intended
to and did benefit the corporation, to the detriment of” the plaintiff.
Seidman & Seidman v. Gee , 625 So. 2d 1, 3 (Fla. 3d DCA 1992) (imputing knowledge onto corporation where its managing officer knew about the ongoing fraud and the corporation obtained a benefit f rom the managing
officer’s fraudulent conduct ).

Here, the complaint alleged the bank had general knowledge of Chariots’ scheme because the bank was the only lender that had direct
access to Chariots’ financial records and the discrepanc ies with in them

. The accountants prepared Chariots’ final balance sheets, which reflected
Chariots ’ debt to the plaintiffs of $598,000 i n 2016 . However, the 2016
1099

- INT

, prepared by the accountants

, reflected C hariot s’ payment to the

p laintiffs of $409,511.18 in interest. Simply put , the numbers did not add

up.

T he complaint alleged the accountants were on the bank’s b oard of
d irectors; one served as the bank’s CEO and President w hile another was a board member. They had control over the bank. The bank advanced funds to Chariots, giving it the appearance of a stronger financial condition than existed. This allowed Chariots to prolong the life of its scheme. The5 bank benefited when Chariots made substantial interest payments to the
bank while the plaintiffs’ loans remained unpaid

.

T he p laintiffs sufficiently alleged the bank had knowledge of the underlying fraud.

3) The Complaint Alleged the Bank Provided Substantial Assistance.

“ Substantial assistance occurs when a defendant affirmatively assists, helps conceal

, or fails to act when required to do so, thereby enabling the
breach to occur. ” Chang v. JP Morgan Chase Bank, N .A

. , 845 F. 3d 1087, 1098 (11th Cir. 2017) (quoting Lerner v. Fleet Bank, N.A. , 459 F.3d 273, 295 (2d Cir. 2006) ). “ Substantial assistance requires the plaintiff to allege
that the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated. ” Cromer Finance Ltd. v. Berger

, 137 F. Supp. 2d 452, 470 (S.D.N.Y. 2001)

, accord Neilson v. Union Bank of Cal., N.A. , 290 F. Supp. 2d 1101, 1129 (C.D. Cal. 2003).

Here, the complaint alleged the bank assisted Chariots by leading the plaintiffs to believe their loans were properly documented on Chariots’
books and records. T he complaint alleged the bank concealed that Chariots obtained duplicate titles for cars financed by the plaintiffs. This allowed Chariots to collect the purchase money for the cars and pay the
bank without paying the p laintiffs.

In Neilson , the banks g ave the primary party of the scheme access to large sums of money that kept a scheme afloat for a significant time. Id

. at 11 08

– 09 . Without the bank ’ s assistance, the Ponzi scheme could not
have succeeded. Id . at 1110 . The court held that the bank’s participation was a substantial factor in bringing about the p laintiffs’ alleged injury. Id

. at 1129

. The same is true here.

The complaint sufficient ly a lleged an underlying fraud, the bank ’s knowledge of it , and its substantial assist ance in its commission , the requisite elements of a claim for aiding and abetting fraud

. Taken as true, these allegations withst oo d the bank’s motion to dismiss.

• The Co nspiracy to Commit Fraud Claim

The p laintiffs next argue the trial court erred in finding the complaint failed to allege a cause of action for conspiracy because it alleged the bank agreed to and participated in the underlying fraud . The bank responds
that the allegations are conclusory and fail to allege what overt acts the6 bank performed in furtherance of , and how the bank assisted in, the fraud

. We once again agree with the plaintiffs.

T o state a claim for civil conspiracy, a plaintiff must allege: (1) an agreement between two or more parties, (2) to do an unlawful act or to do lawful act by unlawful means, (3) an overt act in furtherance of the conspiracy, and (4) damage to the plaintiff as a result of the act performed
in furtherance of it. Walters v. Blankenship, 931 So. 2d 137, 140 (Fla 5th DCA 2006)

.

An agreement between two or more parties occurs when there is an express or implied agreement of two or more persons to engage in a
criminal or unlawful act. Charles v. Fla. Foreclosure Placement Ctr., LLC.

, 988 So. 2d 1157, 1160 (F la. 3rd DCA 2008) (quoting Witmer v. Dep’t of Bus. & Prof’l Regulation Div. of Pari

- Mutuel Wagering , 631 So. 2d 338, 342 (Fla. 4th DCA 1994) )

.

Here, the complaint allege d the bank had an implied agreement with
Chariots to deceive the p laintiffs . The accountants prepared in accurate books for Chariots; the bank knew that Chariots ’ books were inaccurate
because Chariots’ accountants were on the bank’s Board of Directors.
Th is allowed Chariots to secure additional loans from the p laintiffs

.

A conspirator only needs to know of the scheme and assist in it in some way to be held responsible for all the acts of his conspirators. Charles

, 988 So. 2d at 1160 ; MP

, LLC v. Sterling Holding, LLC , 231 So. 3d 517 (Fla. 3d DCA 2017) (when pleading an overt act in furtherance of a conspiracy, there is no requirement that each co

- conspirator commit acts in furtherance of the scheme)

.

The complaint alleged the bank assiste d Chariots in the fraud because the bank’s underwriters approved additional funds to Chariots. The additional funds gave Chariots the appearance of a strong financial
condition. Th at appearance allowed Chariots to prolong the existence of
its scheme. Th is ultimately allowed the bank to recover a large share of its debt from Chariots by receiving payments due the p laintiffs.

Those allegations were sufficient for the conspiracy claim to survive the
bank’s motion to dismiss. See Charles , 998 So. 2d at 11 60

.

We need not address the issue of whether the dismissal should have been with prejudice in light of our holding . We reverse and remand the case to the trial court for further proceedings consistent with this opinion.7 Reversed and Remanded

.

W ARNER , J., and H ILAL , J ENNIFER , Associate Judge, concur.

* * *

Not final until disposition of timely filed motion for rehearing.