Miller-Rogaska, Inc. v. Bank One, Texas, N.A.

• Decision Date: 06 August 1996
• Docket Number: MILLER-ROGASK,INC,No. 05-95-00767-CV,05-95-00767-CV
• Citation: 931 S.W.2d 655
• Parties: 30 UCC Rep.Serv.2d 1137 , Appellant, v. BANK ONE, TEXAS, N.A. and Citibank Delaware, Appellees.
• Court: Texas Court of Appeals

Page 655

931 S.W.2d 655

30 UCC Rep.Serv.2d 1137

MILLER-ROGASKA, INC., Appellant, v. BANK ONE, TEXAS, N.A. and Citibank Delaware, Appellees.

No. 05-95-00767-CV.

Court of Appeals of Texas Dallas.

Aug. 6, 1996.

Ronald E. Holub, Law Offices of Ronald E. Holub, P.C., Dallas, for Appellant.

Brian S. Book, Cynthia Hollingsworth, Gardere & Wynne, L.L.P., Julie E. Blend, Hughes & Luce, L.L.P., Dallas, for Appellees.

Before LAGARDE, WRIGHT and WHITHAM ¹, JJ.

OPINION

WHITHAM, Justice (Retired).

This summary judgment appeal stems from events surrounding the payment of a check. Appellant Miller-Rogaska, Inc., as payee of the check, sued appellees Bank One, Texas, N.A. and Citibank Delaware, for conversion, negligence and gross negligence, money had and received, and breach of fiduciary duty. The trial court granted the banks' motions for summary judgment on all claims. Miller appeals from the resulting take-nothing summary judgment in favor of the banks. We conclude that the trial court did not err in granting the banks' motions for summary judgment. Accordingly, we affirm.

FACTUAL BACKGROUND

On or about November 23, 1991, Bullock's, Inc. issued a check in the amount of $87,184.26 made payable to Miller in payment of certain invoices rendered for the sale of merchandise. As it was Bullock's practice to mail checks in window envelopes, Miller's corporate office and mailing address, "225 Fifth Ave. # 204, New York City, New York," appeared beneath its name on the face of the check. The Miller check became mixed in with a number of checks mailed to Fossil, Inc. in Dallas, Texas, another company with whom Bullock's did business. A Fossil check appeared in the window of the envelope. Fossil did not notice the Miller check in the group of checks it received from Bullock's and endorsed the check payable to Miller with a stamped "For Deposit" endorsement bearing the name of "Fossil Inc." Fossil did not forge Miller's endorsement. On December 5, 1991, Fossil deposited the check into its account at Bank One, Texas. At the time of the deposit, Miller, as payee, had not endorsed the check nor had it authorized Fossil to do so.

In early January 1992, Miller notified Bullock's that the invoices had not been paid. Bullock's advised Miller that a check had in fact been issued. Bullock's requested that Miller execute an affidavit of forgery since Miller had not received the check. On January 21, 1992, Miller's president went to the accounting department of Bullock's in Los Angeles, California, and saw a copy of the check with the unauthorized endorsement. While there, Miller's president executed an affidavit of forgery.

After the check cleared, Fossil noticed the error and contacted Bullock's for instructions. As per Bullock's instructions, Fossil returned the money to Bullock's. Fossil issued a check to Bullock's on January 21, 1992. Bullock's deposited the monies into its account at Security Pacific National Bank on January 24, 1992.

Miller attempted to recover the funds from Fossil but learned that Fossil had repaid the funds to Bullock's. Miller then made demand upon Bullock's to replace the check. Bullock's refused to do so because a moratorium had been placed on the issuance of vendor checks commencing January 20, 1992. On January 27, 1992, Bullock's filed a petition in bankruptcy.

Between November 23, 1991, the date of the check in controversy, and January 27, 1992, the date Bullock's filed its petition in bankruptcy, Miller received payments totalling $56,579.01 from Bullock's on the following dates and in the following amounts:

November 30, 1991 $13,996.34

December 7, 1991 $ 9,918.92

December 14, 1991 $23,086.72

December 24, 1991 $ 9,047.47

December 30, 1991 $ 529.56

In response to discovery, Bank One admitted that:

Bullock's Inc. mistakenly sent [the check] in the amount of $87,184.26 to [Fossil]. The check, drawn on Bullock's account, was made payable to [Miller], but was deposited with a stack of other checks by [Fossil] into their Bank One account on December 6, 1991. Neither Fossil or Bank One noticed prior to deposit that the check was made payable to [Miller].

In response to discovery, Citibank answered as follows: "Bank One presented the check through the Federal Reserve System to [Citibank] for payment to Fossil's Bank One account. In paying over the funds to Bank One, through the Federal Reserve, [Citibank] was entitled to rely and did rely on Bank One's presentment."

In response to discovery, Bank One admitted:

That on November 23, 1991, Bullock's issued [the check] in the amount of $87,184.26 made payable to the order of [Miller].

That [Fossil] deposited the check into its bank account at Bank One.

That at the time Fossil deposited the check, Miller, as [p]ayee, had not endorsed the check.

That Bank One accepted the check from Fossil for deposit into Fossil's account on December 5, 1991.

That Citibank forwarded the funds evidenced by the check to Bank One who then credited the amount of said funds to the bank account of Fossil.

That Miller has made demand upon [Bank One] for payment of the funds and [Bank One] has refused to pay the same.

That Miller was the only named payee on the check.

In response to discovery, Citibank admitted:

That Bullock's wrote [the check], dated November 23, 1991, in the amount of $87,184.26 payable to [Miller].

That [Fossil] obtained possession of the check.

That the check was deposited at Bank One.

That Bank One accepted the check for deposit.

That Bank One presented the check through the Federal Reserve System and that the funds were transferred to Bank One through the system.

That Citibank did not contact [Miller] before Bank One received the funds through the Federal Reserve settlement process.

That Citibank did not contact Fossil before the funds were paid to Bank One through the Federal Reserve settlement process.

That [Miller] was the only named [p]ayee on the check.

At the time the trial court granted the banks' motions for summary judgment, Miller had received a distribution in the amount of $14,525.55 from Bullock's bankruptcy estate. Miller is uncertain whether it will receive any further distribution, and, if so, in what amount. ²

THE POSTURE OF THE PARTIES IN THE TRIAL COURT

Miller sued both Bank One and Citibank for conversion under section 3.419 of the Texas Business and Commerce Code (Texas UCC), conversion at common law, negligence and gross negligence, money had and received, and breach of fiduciary duty. Miller also alleged that Bank One failed to act in good faith and in accordance with reasonable commercial standards applicable to the banking industry. Both banks filed motions for summary judgment and maintained that Miller had no cause of action under any theory. On summary judgment, the banks contended that Miller did not receive delivery of the check and was, therefore, not a "holder" as required by the code. The banks asserted that Miller had no rights or ownership interest in the check which would allow it to maintain its causes of action. The banks further asserted that Miller could not maintain causes of action for breach of fiduciary duty or negligence against them because neither bank owed Miller these respective duties. The trial court agreed with the banks, granted their motions for summary judgment, and entered a take-nothing judgment against Miller on all its claims. Miller seeks a reversal of the trial court's summary judgment.

SUMMARY JUDGMENT STANDARD OF REVIEW

The function of a summary judgment is not to deprive a litigant of his right to a full hearing on the merits of any real issue of fact, but to eliminate patently unmeritorious claims and untenable defenses. Gulbenkian v. Penn, 151 Tex. 412, 416, 252 S.W.2d 929, 931 (1952). The standards for reviewing a motion for summary judgment are well established. As mandated by the Supreme Court of Texas, they are as follows:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548-49 (Tex.1985). It is not the purpose of the summary judgment rule to provide either a trial by deposition or a trial by affidavit, but rather to provide a method of summarily terminating a case when it clearly appears that only a question of law is involved and that there is no genuine issue of fact. Gaines v. Hamman, 163 Tex. 618, 626, 358 S.W.2d 557, 563 (1962). Moreover, when the defendant is the movant, as in the present case, we must be alert to additional rules controlling the summary judgment practice. The question on appeal, as well as in the trial court, is not whether the summary judgment proof raises fact issues with reference to the essential elements of a plaintiff's claim or cause of action, but is whether the summary judgment proof establishes as a matter of law that there is no genuine issue of fact as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970). A defendant is entitled to a summary judgment if he establishes, as a matter of law, that at least one element of plaintiff's cause of action does not exist. See Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975).

CONVERSION AND THE TEXAS UCC

In its first three points of error, ³ Miller contends that the trial court erred in granting the banks' motions for summary judgment for these reasons:

(1) Miller had an ownership interest in the check because Bullock's issued the check by placing the check in the United States mail and because Miller is the named payee and owner (2) Miller is not required to have...