First Nat. Bank of Mercedes v. La Sara Grain Co.

• Decision Date: 07 October 1982
• Docket Number: No. 2209,2209
• Citation: 646 S.W.2d 246
• Parties: 34 UCC Rep.Serv. 1277 FIRST NATIONAL BANK OF MERCEDES, Texas, Appellant, v. LA SARA GRAIN COMPANY, et al., Appellee. cv.
• Court: Texas Court of Appeals

Page 246

646 S.W.2d 246

34 UCC Rep.Serv. 1277

FIRST NATIONAL BANK OF MERCEDES, Texas, Appellant, v. LA SARA GRAIN COMPANY, et al., Appellee.

No. 2209cv.

Court of Appeals of Texas,

Corpus Christi.

Oct. 7, 1982.

Rehearing Denied Nov. 18, 1982.

Ralph L. Alexander, Kelley, Looney, Alexander & Sawyer, Edinburg, for appellant.

Ferriel C. Hamby, Edinburg, William E. York, McAllen, for appellee.

Before UTTER, KENNEDY and GONZALEZ, JJ.

OPINION

GONZALEZ, Justice.

This case primarily involves the question of a Bank's liability, when it pays checks and allows withdrawals on less than the required number of signatures. In April, 1975, Plaintiff-appellee, La Sara Grain Company, opened a checking account at the First National Bank of Mercedes, Texas, Defendant-appellant. La Sara gave the Bank a corporate resolution requiring the signatures of two persons to sign all its checks. Over a three and a half year period, the Bank honored La Sara's checks with only one signature. La Sara brought suit against the Bank alleging negligence, breach of warranty, breach of contract, fraud and under the Deceptive Trade Practices Act.

The Bank alleged that they were not liable under the provisions of Tex.Bus. & Com.Code 4.406(d) because La Sara did not discover and report payment of these checks within one year from the time the statements were made available to them and also that the claims were barred by limitations, waiver, apparent authority and estoppel. La Sara filed special exceptions to the Bank's answer and alleged that the provisions of Tex.Bus. & Com.Code § 4.406 and the defense of "apparent authority" were not applicable as a matter of law. The trial court sustained these exceptions.

After a trial without a jury, the trial court rendered a judgment against the Bank. The Bank appeals from this judgment. We reverse and render a take nothing judgment.

The relevant facts are as follows: La Sara is a Texas Corporation engaged in the business of buying and selling grain. Upon the death of La Sara's General Manager in 1974, La Sara discovered that the General Manager had utilized corporate funds for his personal use. Harold Jones was hired General Manager and in April of 1975, La Sara opened a checking account with the Bank. It provided the Bank with a corporate resolution that specified that any two of four individuals listed in the resolution were authorized to sign checks. Jones was one of the four. (A copy of this resolution is attached to this opinion as an appendix "A".) The Bank was also provided with a signature card. Sometime during the circulation of the signature card between the four individuals, the card was altered or changed to strike out the requirement of two signatures and to require only one signature. (A copy of this card is also attached to this opinion as appendix "B"). The record is not clear whether the corporate resolution or the signature card was furnished to the Bank first or if they were furnished at the same time. The record does show, however, that La Sara's bookkeeper was the last one to sign the signature card and he testified that when the card was presented to him, it provided for only one signature.

During the next three and a half years, (from April 9, 1975 to the Fall of 1978), in contravention of the corporate resolution but in keeping with the signature card, several hundred checks were drawn and paid by the Bank on La Sara's account with only Jones' signature. Also during this time, several checks marked "for deposit only" with La Sara listed as the payee were deposited into Jones' personal account. In some instances the deposits were split with a portion going into La Sara's account and a portion going into Jones' personal account. Without a corporate resolution, Jones also borrowed money from the Bank in the name of La Sara with some of these proceeds also being split between the two accounts. Each month the Bank sent the customary bank statements to La Sara.

In the Fall of 1978, Jones was fired by La Sara because of suspected dishonesty. After an audit it was determined that La Sara had lost approximately Three Hundred Forty-Two Thousand Seven Hundred Ninety Dollars and 69/100 ($342,790.69). ¹ In June, 1979, La Sara sued the Bank, Fidelity and Deposit Company of Maryland, and others. This suit was settled and La Sara assigned a portion of this suit to them. The suit as to other defendants was severed.

In the trial below, the Bank answered that during the period in question, it sent La Sara monthly statements accompanied by the checks it had paid in good faith but that La Sara had failed to exercise reasonable care and promptness to examine the statements and to discover any unauthorized signatures or alterations and to promptly notify the Bank of any defects. The Bank contended that they were not liable under the provisions of 4.406 of the Tex.Com. & Bus.Code. The Bank further contended that since La Sara allowed this conduct to continue for all of this time, the Bank relied on accepting Jones' signature alone on all of the transactions and this caused the Bank to believe that such transactions were proper and, therefore, La Sara is now barred from any recovery under the doctrine of waiver, apparent authority, estoppel, and the two and four year statute of limitations.

This was primarily a "documents" case. The other evidence was brief. It can be summarized as follows:

Harold Lee Jones, the general manager, was called to testify and he asserted his Fifth Amendment right to self-incrimination. The other three persons who were authorized to sign the checks in question testified regarding the circumstances surrounding the signing of the corporate resolution and the signature card. The president of the Bank testified that the Bank filed the corporate resolution in the bookkeeping department and filed the signature card in the check file where it was kept for comparison of signatures on the checks. From the beginning, the Bank acted as if only one signature was required on all transactions. It allowed Jones to split deposits, make withdrawals and make loans at the Bank in La Sara's name solely on his signature.

An accountant testified that he performed an audit of La Sara's and Jones' personal accounts and after allowance for deductions for which La Sara received benefit, Jones had misapplied Three Hundred Forty-Two Thousand Seven Hundred Ninety Dollars and 69/100 ($342,790.69). He further testified that Jones was not the only La Sara employee to have access to the monthly statements from the Bank. Other employees reconciled these monthly statements and during the time in question, accountants prepared financial statements and federal income tax returns. The documents to the relevant transactions were admitted into evidence. Other than the testimony for attorney's fees, this was the sum of the evidence.

Ninety-one findings of fact and nineteen conclusions of law were filed by the trial court. No purpose is served by reciting them. Suffice it to say that the findings of fact cover every conceivable "fact" necessary for plaintiff to recover. Often times they contradict one another.

Based on these findings, the court entered a judgment against the Bank in the total amount of Nine Hundred Eleven Thousand Three Hundred Twenty-Nine Dollars and 66/100 ($911,329.66), this sum representing actual damages, interest, attorney's fees and the trebling of certain portions of the judgment. Appellant brings twenty-one points of error wherein they challenge over half of the findings of fact contending that there is no evidence to support them or in the alternative they are based on insufficient evidence. Appellant also contends that the trial court committed error in sustaining the special exceptions and in holding that a lack of a required signature where more than one signature is required is not an unauthorized signature under 4.406 of Tex.Bus. & Com.Code.

In reviewing a judge tried case in which findings of facts and conclusions of law are filed and challenged on appeal, this Court is bound by such findings if they are supported by probative evidence. Tenneco, Inc. v. Polk County, 560 S.W.2d 416 (Tex.Civ.App.--Beaumont 1977, no writ). However, such findings are not conclusive where the reviewing court has a complete record before it. Swanson v. Swanson, 148 Tex. 600, 228 S.W.2d 156 (1950); Frost v. Molina, 595 S.W.2d 184 (Tex.Civ.App.--Corpus Christi 1980, writ dism'd). In determining the merit of the Bank's no evidence points we consider only the evidence and inferences tending to support the trial court's findings and disregard any contrary evidence and inferences. Garza v. Alviar, 395 S.W.2d 821, (Tex.1965); Bodine v. Welders Equipment Co., 520 S.W.2d 407, (Tex.Civ.App.--Corpus Christi 1975, writ ref'd n.r.e.). In the present case, we do have a complete record before us.

Relationship of Bank and La Sara

"The relationship between a bank and its depositor is that of debtor and creditor with title to the deposited funds passing to the bank.... The bank is under the duty of disbursing the funds on deposit in accordance with the directions of the depositor.... In suits against a bank to recover deposits, the burden of proving payment under authority from the depositor is on the bank." Mesquite State Bank v. Professional Invest. Corp., 488 S.W.2d 73, 75 (Tex.1977). Also, 9 Tex.Jur.3rd Banks § 149, p. 122 (1980) states: "The relationship between banker and depositor is a voluntary one of contractual nature...." Therefore, there can be no question but that the corporate resolution established the terms of this contractual relationship.

Generally, the signature card is merely a vehicle or a tool utilized by a Bank to ensure that the signatures on the checks correspond to those of the signature card. If a corporate resolution and a signature card on the same account are in variance with one another regarding the requisite number of signatures, the resolution prevails. Therefore, at the...