Frost Nat'l Bank v Heafner

• Decision Date: 02 December 1999
• Citation: 12 S.W.3d 104
• Parties: <!--12 S.W.3d 104 (Tex.App.-Houston 1999) FROST NATIONAL BANK F/K/A NATIONAL BANK OF COMMERCE, Appellant v. MARY HEAFNER, Appellee NO. 01-98-01384-CV Court of Appeals Texas, Houston (1st Dist.)
• Court: Texas Court of Appeals

Page 104

12 S.W.3d 104 (Tex.App.-Houston[1st Dist.] 1999)

FROST NATIONAL BANK F/K/A NATIONAL BANK OF COMMERCE, Appellant v MARY HEAFNER, Appellee

NO. 01-98-01384-CV

Court of Appeals Texas Houston (1st Dist.).

Dec. 2, 1999.

Rehearing Overruled Jan. 20, 2000.

On Appeal from the 80th District Court Harris County, Texas

Trial Court Cause No. 96-31940

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Panel consists of Justice O'CONNOR, HEDGES, and PRICE.^*

O P I N I O N

MICHOL O'CONNOR, Justice

Frost National Bank f/k/a National Bank of Commerce (Frost), the defendant below and appellant here, appeals from a jury verdict in favor of Mary Heafner, the plaintiff below and appellee here. We affirm in part and reverse in part.

Factual Background

Heafner is a Houston attorney who maintains several bank accounts in the Houston area. Heafner maintained a personal money market account at Frost¹ and her firm's operating account at Bank United.

In 1991, Heafner represented Duane Lavely in several lawsuits. Because he could not always afford to pay her, she allowed him to run errands, do yard work, and make repairs on her office and rental property. In 1992, Heafner taught Lavely how to serve process and subpoenas, skip trace, and use the computer. Lavely was allowed to use her office equipment in his new business. In return, he occasionally answered her telephones and helped with other errands around her office.

When Heafner later became too sick to go into the office, she would call Lavely at the office, review bills with him, and authorize him to pay certain bills by signing her signature to the Bank United checks. She did not authorize Lavely to sign her name to checks on the Frost account or any other bank account.

When Heafner returned to work, she discovered discrepancies in her Bank United operating account. She asked Lavely to vacate her offices. Heafner met with Bank United to discuss the discrepancies, and she distinguished the checks Lavely was authorized to write for her office expenses from those he wrote for his own use. Heafner signed forgery affidavits on the checks Lavely wrote for himself, but she did not sign forgery affidavits on the checks he wrote for her benefit. Despite the forgeries, Heafner decided not to sue Bank United, because she thought it would be unfair to hold Bank United responsible for determining which checks she had actually given Lavely authority to sign on her behalf.

Heafner also discovered that Lavely forged her signature on two $5,000 checks on her Frost account, which he deposited into Heafner's Bank United account over a forged endorsement. Heafner reported the forgeries to Frost, where she met with Tina Veserra, head of Frost security. Heafner told Veserra that the signature and endorsement on both $5,000 checks were forged. Veserra agreed the signatures were forgeries. Heafner admitted that both $5,000 checks were deposited into her Bank United account.

Heafner sued Frost, alleging the following causes of actions:

1. Breach of contract and violation of the Texas Deceptive Trade Practices Act, alleging Frost breached the deposit account agreement and violated the warranties contained in the agreement.

2. Negligence, alleging Frost breached its duty of care by allowing $10,000 to be withdrawn from her money market account, not comparing the signatures on the checks to her signature on the account signature card, not following its own rules and policies, and not exercising ordinary care to determine whether the checks were authorized transactions.

3. Spoilation of evidence, alleging Frost intentionally or negligently spoiled evidence of the forgeries and interfered with a prospective civil action on Heafner's part against Lavely.

4. Breach of the duty of good faith, alleging, among things, that Frost did not inform her of its investigation into the forgeries and did not cooperate with her in pursuing criminal charges against Lavely.

Heafner asked for actual and punitive damages.

The jury found that Frost knowingly engaged in false, misleading, or deceptive acts or practices, committed fraud against Heafner, and did not comply with the deposit account agreement. Heafner was awarded $18,488, plus interest in actual damages; $400,00 in exemplary damages; and attorney's fees. This appeal by Frost followed.

Damages

In issue one, Frost asserts the evidence is legally and factually insufficient to support the jury's findings on causation under her theories of breach of contract, violation of the DTPA, and fraud.

Waiver of complaint

Heafner asserts that Frost has waived its argument about causation because Frost's complaint focuses on whether its breach of the deposit account agreement was the "cause-in-fact" of Heafner's injuries. Heafner contends her injuries "resulted from" Frost's breach.²

On appeal, Frost contends there is no evidence that its breach of the deposit account agreement was the cause-in-fact of Heafner's injury. Frost's issue on appeal is sufficient to challenge all causation findings. See Tex. R. App. P. 38.1(e); see also Bransom v. Standard Hardware, Inc., 874 S.W.2d 919, 923 (Tex. App.-Fort Worth 1994, writ denied) (holding that complaints of legal and factual insufficiency to support a particular finding, and challenges directed against any legal conclusions based upon the finding, may be combined under a single point of error raising both contentions). Therefore, Frost did not waive its complaint on appeal.

Proof of causation

When both legal sufficiency and factual sufficiency points of error are raised on appeal, we address the legal sufficiency point first. Glover v. Texas Gen. Indem. Co., 619 S.W.2d 400, 401 (Tex. 1981); Neese v. Dietz, 845 S.W.2d 311, 312 (Tex. App.-Houston [1st Dist.] 1992, writ denied). In reviewing a legal insufficiency point, we consider only the evidence and inferences, when viewed in their most favorable light, that tend to support the finding, and disregard all evidence and inferences to the contrary. Havner v. E-Z Mart Stores, Inc., 825 S.W.2d 456, 458 (Tex. 1992); Sherman v. First Nat'l Bank, 760 S.W.2d 240, 242 (Tex. 1988); Neese, 845 S.W.2d at 312. If there is any evidence of probative force to support the finding, we overrule the point and uphold the finding. Sherman, 760 S.W.2d at 242; Neese, 845 S.W.2d at 312. That is, if there is more than a scintilla of evidence, we will not overturn the jury's findings. Sherman, 760 S.W.2d at 242.

In reviewing a factual insufficiency point, we consider and weigh all of the evidence; we will set aside the verdict only if the evidence is so weak or the finding so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Neese, 845 S.W.2d at 313. We will not substitute our opinion for that of the trier of fact. Neese, 845 S.W.2d at 813.

Frost does not challenge the jury finding on breach of contract. Instead, Frost contends its breach merely created a condition that made any injury suffered by Heafner possible. Frost argues there is no evidence its actions caused Heafner's injuries because the $10,000 went into Heafner's business account at Bank United. Frost relies on Davis Aircraft Prods. Co. v. Bankers Trust Co., 319 N.Y.S.2d 379 (1971), for the proposition that, when a person's money is taken from their account at one bank and deposited into their account at another bank, that person does not suffer any legal injury.³ We disagree.

It is clear that Frost is liable for damages caused to Heafner resulting from the forgeries. Section 4.401 of the Texas Business and Commerce Code sets forth the general rule that a bank may only charge against a customer's account an item properly payable from that account. See Tex. Bus. & Com. Code 4.401; see also Ray v. Farmers' State Bank, 576 S.W.2d 607, 608 (Tex. 1979). Section 3.404 provides that a person is not liable on an instrument until she has signed the instrument, and any unauthorized signature is wholly inoperative as that of the person whose name is signed. See Tex. Bus. & Com. Code 3.404(a); see also McDowell v. Dallas Teachers Credit Union, 772 S.W.2d 183, 187 (Tex. App.-Dallas 1989, no writ). Therefore, under the Business and Commerce Code, a bank is conclusively presumed to know the signature of a depositor and may not charge the depositor's account with amounts of any checks not signed by the depositor, no matter how artistic the forgery and regardless of whether the bank was negligent. See McDowell, 772 S.W.2d at 188; see also Ames v. Great Southern Bank, 672 S.W.2d 447, 450 (Tex. 1984) (holding that a bank that pays funds in breach of a contract on a missing endorsement is liable for the face amount of the instrument).

Heafner opened her money market account at Frost as a retirement account. When she opened the account, she was given several temporary checks that did not have her name or address pre-printed on them. She never ordered any checks for the account. The two forged $5,000 checks were the temporary checks. When the checks were presented to Frost (in June and July respectively), Frost did not verify that the signature on the checks was Heafner's. Heafner testified that, if she had known about the first forged $5,000 check in June, she would have acted immediately to limit her damages. Instead, she did not discover the two forgeries until August 1994. By that time, Lavely had written several thousand dollars in unauthorized checks from the Bank United account during June, July, and August of 1994.

Frost attempts to escape liability by asserting Heafner's injuries were caused by Heafner herself, Bank United, and Lavely. Frost presented evidence that some of the checks written on the Bank United account after the deposit of the two $5,000 checks were authorized by Heafner and were for her benefit. Heafner testified that checks were written for what she believed to be her business expenses, but that she...