Webb Carter Const. Co., Inc. v. Louisiana Cent. Bank

• Citation: 922 F.2d 1197
• Decision Date: 04 February 1991
• Docket Number: No. 90-4152,90-4152
• Parties: 15 UCC Rep.Serv.2d 196 WEBB CARTER CONSTRUCTION COMPANY, INC., Plaintiff-Appellee, v. LOUISIANA CENTRAL BANK, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1197

922 F.2d 1197

15 UCC Rep.Serv.2d 196

WEBB CARTER CONSTRUCTION

COMPANY, INC., Plaintiff-Appellee, v. LOUISIANA CENTRAL BANK, Defendant-Appellant.

No. 90-4152.

United States Court of Appeals, Fifth Circuit.

Feb. 4, 1991.

J. Michael Percy, Percy, Smith, Foote & Honeycutt, Alexandria, La., for defendant-appellant.

Marc S. Whitfield, Harry J. Philips, Jr., Taylor, Porter, Brooks & Phillips, Baton Rouge, La., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before POLITZ, WILLIAMS, and SMITH, Circuit Judges.

POLITZ, Circuit Judge:

The Louisiana Central Bank appeals an adverse partial summary judgment in favor of Webb Carter Construction Company. Concluding that the action, once cast as a breach of contract claim by a customer against its bank, is not prescribed, we affirm.

Background

Webb Carter Construction Company, a small Natchez-based close corporation, opened a checking account at Louisiana Central Bank in October 1985. At that time Carter filed a signature card and corporate resolution authorizing only its president and vice president to transact bank business on its behalf. ¹ From November 1986 until her arrest in February 1988, Phyllis Paul, a Carter secretary and keypunch operator, diverted checks from Carter and cashed them at the Bank, using her own name. On October 16, 1987, after ten checks had been cashed, Paul delivered to the Bank a second Carter corporate resolution, one which authorized her to transact business on Carter's behalf as the Secretary of the Board of Directors. The form used was virtually identical to the earlier resolution and declared, inter alia, "that all transactions by any of the officers or representatives of this Corporation, in its name and for its account with said Bank prior to this meeting, be and the same are hereby approved and ratified."

After discovering Paul's embezzlement Carter sued the Bank, seeking recovery for each of the checks Paul cashed. Carter asserted breach of contract, wrongful negotiation of instruments on unauthorized signatures, and negligence. The Bank moved for summary judgment, claiming that Paul had express authorization to cash the checks, and contending that the claims had prescribed. The court agreed that any La.R.S. 10:3-419(1) negligence claim was time-barred by the one-year liberative prescription article, but expressly took no position on any contract claim arising from the same facts. The court denied summary judgment on the issue of express authorization to cash the checks.

Carter moved for summary judgment on the ten checks cashed prior to delivery of the October 16, 1987 resolution. This motion was granted and judgment was entered in favor of Carter in the amount of $13,898 plus accrued interest. In due course the district court granted Rule 54(b) certification of the finality of this partial summary judgment. We have appellate jurisdiction of that judgment.

Analysis

In reviewing a summary judgment order we apply the same standard as the trial court, viewing the facts in the light most favorable to the nonmoving party. Waltman v. International Paper Co., 875 F.2d 468 (5th Cir.1989). Where the record, including affidavits, interrogatories, admissions, and depositions could not, as a whole, lead a rational trier-of-fact to find for the nonmoving party, there is no genuine issue for trial. Washington v. Armstrong World Indus., 839 F.2d 1121 (5th Cir.1988). Our review of questions of law, including, as here, construction of unambiguous contracts, is de novo. Southern Natural Gas Co. v. Pursue Energy, 781 F.2d 1079 (5th Cir.1986).

On appeal the Bank reasserts its contention that Carter's cause of action on the checks is solely ex delicto rather than ex contractu, and is thus time-barred. Carter counters that while a tort action may exist on these facts it nonetheless sought recovery on a contract theory and must prevail.

One difficulty we confront is that both parties rely heavily on negotiable-instrument cases involving forgeries. The record before us contains no evidence of forgery. Paul's actions were illegal, and, if proven, subject her to civil and criminal liability, but her actions were not acts of forgery. She signed her own name for each of the checks cashed and never claimed to be anyone other than Phyllis Paul. As such her offense, and the relevant term involved for purposes of the Uniform Commercial Code, is unauthorized indorsement, not forgery. ² One Louisiana appellate court has explicitly held that forgery under R.S. 10:3-419 encompasses an unauthorized indorsement, Confederate Welding and Safety Supply v. Bank of the Mid-South, 458 So.2d 1370 (La.App.1984), and another has done so implicitly, Pargas, Inc. v. Estate of Taylor, 416 So.2d 1358 (La.App.1982). Being aware of no conclusive precedent to the contrary, we thus apply 10:3-419(1).

A second difficulty we face is that Carter has not spelled out its grounds for recovery. The clearest indication of the nature of Carter's claim, as stated in its brief, is that it "was not basing its motion for summary judgment against [the Bank] upon the grounds of negligence or upon the provisions set forth under Louisiana's commercial laws-commercial paper." We perforce assume that the signature card and corporate resolution, both form documents submitted to Carter by the Bank, comprise the basis of its claim.

A case to which the Bank invites our attention, which was discussed at length by the trial court, Daube v. Bruno, 493 So.2d 606 (La.1986), offers some guidance. Daube posits the typical forgery claim by the true owner of a check against a drawee bank which wrongfully honored a check containing a forged signature. The bank in Daube was not the bank in which the corporate account was maintained. Honoring the check could be construed as a violation of the drawee bank's contract with its depositor, but the Daube court undertook an expansive view of the legislative history of 10:3-419(1) and held that an action on a check "is similar in nature to an action by one who has been dispossessed of a movable as a result of an offense or quasi-offense which is an action under the law of delictual obligations." 493 So.2d at 609 (citing 2 A.N. Yiannopoulas, Louisiana Civil Law Treatise Sec. 243 (1980)). The court also took pains to distinguish the delictual action based on wrongful honoring of the instrument from an action on the instrument itself. Only the latter is an action ex contractu. Daube, 493 So.2d at 610.

Daube is a clear and well-reasoned statement of the law by the Louisiana Supreme Court, but it is not a dispositive precedent in the case before us. The Bank before us is a depositary bank, not a drawee bank. ³ The distinction is significant in that the remedies under the Uniform Commercial Code do not necessarily envision a direct suit, as here, by a true owner against a depositary bank. ⁴

Carter invites our attention to Pargas, a case relied on by the trial court in its second summary judgment order. In Pargas a corporate district manager embezzled checks from his employer, rubber-stamped the corporate indorsement on the checks, added his personal signature below the stamp, and deposited the checks to his personal account. The court held that the bank completely abrogated its duty of reasonable care by cashing the checks because it had no corporate resolution from Pargas authorizing the employee to act on behalf of the corporation. The court implicitly construed this case as one in contract. See id. at 1360 (applying "three-year statute of limitations set forth in R.S. 10:4-406(4)"). We cannot fathom from the opinion whether the depositary bank was also the bank at which Pargas maintained its checking account. Pargas is, in some respects, more analogous to the facts at bar, but it both predates Daube and emanates from an inferior court.

Another Louisiana case, which neither party cited in brief or oral argument, factors into our resolution today. In Confederate Welding a corporation sued a bank which had allowed the corporation's president to indorse corporate checks for deposit to his personal account, even though the corporate resolution on file clearly stated that such was beyond the president's authorized powers. The court found that payment of a check over an unauthorized indorsement is actionable by the true owner against the depositary bank under 10:3-419(1) and affirmed a judgment against the bank, holding that it had failed to meet reasonable business standards. We are cognizant that Confederate Welding, which makes no comment as to whether an R.S. 10:3-419(1) action is contractual or delictual, also is antecedent to Daube and likewise is the product of an intermediate appellate court.

We are thus possessed of these three precedents, three candles which light our way as an Erie court. ⁵ None is on all fours with the case at bar. Each offers some assistance in our trek through relatively new legal woods for Louisiana. We must determine whether Carter's action is ex delicto or ex contractu and whether the partial summary judgment appropriately was granted. If we accept the premise that a case involving an unauthorized indorsement is actionable under...