Mid-American Supply Corp. v. Truist Bank

• Decision Date: 08 March 2023
• Docket Number: Civil Action 4:21-CV-00841
• Court: U.S. District Court — Eastern District of Texas
• Parties: MID-AMERICAN SUPPLY CORPORATION, Plaintiff, v. TRUIST BANK d/b/a BB&T, Defendant.

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MID-AMERICAN SUPPLY CORPORATION, Plaintiff,
v.
TRUIST BANK d/b/a BB&T, Defendant.

Civil Action No. 4:21-CV-00841

United States District Court, E.D. Texas, Sherman Division

March 8, 2023

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE.

Pending before the Court are Defendant Truist Bank d/b/a BB&T's Motion for Summary Judgment (Dkt. #20) and Plaintiff Mid-American Supply Corporation's Motion for Partial Summary Judgment (Dkt. #23). Having considered the motions and the relevant pleadings, the Court finds that Defendant's Motion for Summary Judgment (Dkt. #20) should be GRANTED and that Plaintiff's Motion for Partial Summary Judgment (Dkt. #23) should be DENIED.

BACKGROUND

This case stems from a dispute regarding the control and ownership of Mid-American Supply Corporation's (“Mid-American”) bank account at Truist Bank d/b/a BB&T (“Truist”).

I. Mid-American

Mid-American is in the business of distributing industrial materials to companies in China (Dkt. #7 ¶ 6). It is currently headed by Xiaosha “Tom” Tian, its president and majority shareholder (Dkt #23 ¶ 20). Although Mid-American was initially founded in Kansas in 1996, it filed its certificate of formation as a Texas corporation on December 28, 2011 (Dkt. #20, Exhibit 11 at p. 15). In its certificate of formation, Mid-American indicated that its governing authority was a

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two-person board of directors consisting of Mr. Tian and Wei Shao Heironimus, who, at that point, had served as Mid-American's corporate secretary for nearly fifteen years (Dkt. #20, Exhibit 11 at p. 15). Along with its certificate of formation, Mid-American also filed a unanimous written consent, signed by Mr. Tian, as required by the Texas Business Organization Code (Dkt. #20, Exhibit 11 at p. 25). In its unanimous written consent, Mid-American identified Mr. Tian and Ms. Heironimus as the company's officers (Dkt. #20, Exhibit 11 at p. 26). As such, both Mr. Tian and Ms. Heironimus had the power to “to open one or more bank accounts in [Mid-American's] name” (Dkt. #20, Exhibit 11 at p. 26). Further, both Mr. Tian and Ms. Heironimus had express authority to “execute any form of required resolution necessary to open such bank accounts” (Dkt. #20, Exhibit 11 at p. 26).

II. The Account

On February 22, 2016, Ms. Heironimus opened a business checking account at Truist on behalf of Mid-American (the “Account”) (Dkt. #26 ¶ 2). Ms. Heironimus signed a resolution affirming that she was authorized to open the Account and to transact business on Mid-American's behalf (Dkt. #20, Exhibit 2). Ms. Heironimus signed the resolution as Mid-American's secretary and identified herself as Mid-American's designated representative with respect to the Account (Dkt. #20, Exhibit 2). Ms. Heironimus also signed a signature card, which identified her as MidAmerican's president and indicated that she was the company's sole designated representative (Dkt. #20, Exhibit 3).

Under the Commercial Bank Services Agreement (“CBSA”), which governs the Account, Truist agreed to provide Mid-American with regular account statements (Dkt. #20, Exhibit 7 at pp. 7-8). After the creation of the Account, Truist made account statements available online and regularly sent them to an address designated by Ms. Heironimus (Dkt. #20, Exhibit 4). Ms.

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Heironimus sent copies of those statements to Mr. Tian on at least one occasion (Dkt. #20, Exhibit 10).

In relevant part, the CBSA also provides that, upon notification of a dispute concerning the Account, Truist had discretion to:

(i) continue to rely on the signature cards, resolutions, and other account documents in our possession; (ii) freeze all or any portion of the funds we deem appropriate until the dispute is resolved; (iii) pay the funds into an appropriate court of law or equity for resolution; (iv) honor the competing claim upon receipt of evidence we deem satisfactory to justify such claim; or (v) close the account and pay any proceeds to: (a) all who have or claim an interest in the account; or (b) the account owner(s) as indicated in our records. In addition, we may, at our option, commence a lawsuit to determine the ownership of your account

(Dkt. #20, Exhibit 7 at p. 12).

III. Ongoing Disputes Over Control of Mid-American's Accounts

In the fall of 2019, Ms. Heironimus initiated a series of individual and derivative actions against Mr. Tian, alleging that Mr. Tian was improperly seizing control of Mid-American's accounts to abscond to China with company funds. Ms. Heironimus filed the first of these cases on October 11, 2019, in which she asserted causes of action against Mr. Tian for breach of fiduciary duty, conversion, violations of the Texas Theft Liability Act, and money had and received. See generally Wei Shao Heironimus, derivatively on behalf of Mid-American Supply Corp., and individually v. Xiaosha Tian, No. 19-16583 (162nd Dist. Ct., Dallas County, Tex. Oct. 11, 2019).^[1]The trial court initially granted a plea to the jurisdiction and dismissed the case. On August 1, 2022, the Court of Appeals for the Fifth District of Texas reversed the trial court's order granting Mr. Tian's plea to the jurisdiction and remanded the case to the trial court for further proceedings. Heironimus on Behalf of Mid-Am. Supply Corp. v. Tian, No. 05-21-00174-CV, 2022 WL 3030735,

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at *5 (Tex. App.-Dallas Aug. 1, 2022, no pet.) (mem. op.). That case remains ongoing.

Two years later, on October 11, 2021, Ms. Heironimus filed an additional action against Mr. Tian, both individually and derivatively, alleging that he was improperly attempting to seize control over $2 million in Mid-American funds held in another bank account. See generally Wei Shao Heironimus, derivatively on behalf of Mid-American Supply Corp., and individually v. Xiaosha Tian and Intrust Bank, N.A., No. 21-14920 (162nd Dist. Ct., Dallas County, Tex. Oct. 11, 2021). That case also remains ongoing.

Amid these disputes, on June 26, 2020, Mid-American sent a letter to Truist stating that “unless specifically approved by [Mr. Tian] in writing,” Ms. Heironimus was not authorized to make payments or transfer funds from the Account (Dkt. #26, Exhibit 2 at pp. 4-7). Truist responded to this letter by directing Mid-American to provide a notarized client authorization (Dkt. #26, Exhibit 2 at pp. 14-15). Mid-American returned a notarized form on July 28, 2020 (Dkt. #26, Exhibit 2 at pp. 16-18).

Over one year later, on July 7, 2021, Mid-American held a special meeting to remove Ms. Heironimus as a director and appointed Mr. Tian as the company's sole director (Dkt. #26, Exhibit 1 at pp. 5-8). As the sole director of Mid-American, Mr. Tian immediately signed a new written consent removing Ms. Heironimus as an officer of the company (Dkt. #26, Exhibit 1 at pp. 1025). On July 23, 2021, Mid-American terminated Ms. Heironimus's employment and sent her a notice of termination, which directed her to refrain from acting on behalf of the company and to return all company property (Dkt. #26, Exhibit 1 at pp. 27-28).

On August 23, 2021, Mid-American notified Truist of Ms. Heironimus's termination and directed Truist to freeze the account and to recognize that Mr. Tian is the sole person authorized by Mid-American to make or approve payments from the Account (Dkt. #26, Exhibit 3 at pp. 4-

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5). Truist elected to freeze the account pursuant to the CBSA (Dkt. #20, Exhibit 1 ¶ 11). No transactions occurred in the Account after Mid-American removed Ms. Heironimus as an officer in July 2021 (Dkt. #20, Exhibit 5 at pp. 78-87).

IV. Procedural History

On September 13, 2021, Mid-American sued Truist in the 380th Judicial District Court in Collin County, Texas. Mid-American Supply Corp. v. Truist Bank d/b/a BB&T, No. 380-051702021 (380th Dist. Ct., Collin County, Tex. Sep. 13, 2021). On October 19, 2021, Truist removed the case to this Court based on diversity jurisdiction (Dkt. #1). On November 19, 2021, MidAmerican filed an amended complaint (Dkt. #7). In its amended complaint, Mid-American alleges a claim under § 4.401 of the Texas Business and Commerce Code and seeks a declaratory judgment stating that it is a customer under the CBSA and that Mr. Tian is the only agent authorized to act on behalf of Mid-American with respect to the Account (Dkt. #7 ¶¶ 26-36).

On May 11, 2022, Truist filed its motion for summary judgment (Dkt. #20). MidAmerican filed its response on June 16, 2022 (Dkt. #26). On May 13, 2022, Mid-American filed its motion for partial summary judgment (Dkt. #23). Truist filed its response on June 20, 2022 (Dkt. #27). Mid-American replied on June 27, 2022 (Dkt. #30).

LEGAL STANDARD

The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper under Rule 56(a) of the Federal Rules of Civil Procedure “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute about a...