C O U R T O F A P P E A LS EI GHTH D I STRI CT OF TEXAS ELPASO, TEXAS
NEW W AVE TECHNO L OGI ES, I NC., Ap pe lla nt,
v.
L EG AC Y B AN K O F TE XA S, Appellee
. § § § § § § No . 0 8- 07 -0 00 46 -C V

Appea l from the 40 1s t D istri c t Co ur

t of Col lin County , T e xas (TC# 401-03509-04)

O P I N I O N Ne w Wa ve Te c hn olo g ie s, Inc . (Ne w Wave ) a pp e a ls f ro m a summa ry jud g me nt o rd e ri ngit take- nothing in a suit ag ainst L eg acy Ba nk of Texas (L eg acy

) for conver sion of two chec ks issued by United Service s Automobile Association (USAA). N ew Wave r aises thre e issues on appea l, whether

the trial cour

t erre d in gr anting the summary judgme nt that L eg acy

did not
conver t the chec ks, under the T exas Business and Commerc e Code § 3.420, (1) based upon a repe aled statutory

limit ation of liability

or af firmative de fense , (2) whe n there was no
e nd or se me nt b y

Ne w Wa ve on e ith e r c he c k, and

(3 ) whe n n e ith e r p ay e e signe d it s n ame e xac tly
a s d ra wn , a s r e qu ir e d b y

the ins tr uc tio n o n th e c he c ks
. Maxim Sol uti on s G ro up , Inc . ( Maxim) and Ne w Wave e nte re d into a joi nt p ur c ha se ag ree ment wher e Ne w Wave would sell to Maxim , and Maxim would sell t o USAA. On Jul y 7, 2004, USAA orde red sc anner s and computer equipment from Max im/New Wave. The two purcha se orde rs wer e supposed to be pa id directly to New Wave. H oweve r, USAA mailed the
c he c ks to M a xim.-2-

The c hecks w ere made pa y able to “Max im Sol utions Group/New Wave T echn” for $1 34 ,6 56 .1 6 a

nd $5 2, 55 8. 73 re sp e c tiv e ly . T he ba c k o f e a c h c he c k s tate d “ Ea c h Pa y e e Mu st En do rs e Exa c tly

As Dr awn .” Th e c he c ks we re re c e ive d b y B re tt Autr e y , p re sid e nt o f M a xim, afte r Maxim had gone out of business, and we re subse quently deposited in Maxim ’s bank
acc ount on Aug ust 23, 2004. The che cks we re a cce pted for de posit by L aura Padilla, a teller f

or L eg acy , using a

pre- printed deposit slip of Maxi m’s. The ba nk teller c hecke d with her supervisor, Cindy

Thomas, about whe ther or not to plac e a hold on the f unds due to the size of the deposit. Ms. Thomas ca lled Maxi m’s acc ount office r, Christine J ones, to deter mine the same. The re w as no hold place d on the funds. Ea ch che ck had only Maxi m’s acc ount number as an endor sement written on the ba ck. The chec k was not endor sed by the other pa

y ee, “New Wave Tec hn.” Ms. Autre y , on advice of counse l, used all or almost all of the f unds to pay

the I RS w ithho ldi ngta xes M a xim ow e d o n it s e mpl oy e e s. L eg acy moved for summar

y judgme nt ag ainst New Wave asser ting that ( 1) it did not
c onve rt the c he c ks a s a

matte r o f l aw s inc e Maxim and Ne w Wave we re a lte rn a te pa y e e s a s a matter of la

w, and ( 2) L eg acy

acte d in good f

aith and in ac corda

nce w ith commercia l standards. L eg acy abandone d the sec ond g round at the he aringfor summary judgme nt since it was not applicable . The trial c ourt g rante d the summary judgme nt, and orde red that New Wave take
n o th i n g. The standa

rds for r eviewingsummary judgme nt rulings a

re w ell-established. The standard of

revie w on appe al is whether the succ essful movant at the tria l level ca rried the burden of showingthat there is no ge nuine issue of mate rial fa ct and that judg ment should be g rante d as a matter of law. SeeT EX .R.C IV .P. 16 6a (c ); Lear Siegler, Inc . v. Pe rez , 819 S.W .2d 470, 471-3-

(T e x. 19 91 ); W

y att v . Lo ngor ia , 33 S.W .3d 26, 31 (Tex.App.--El Paso 2000, no pet.) . The question on appea l is not whether the summary judgme nt proof ra ises fac t issues as to require d
e le me nts of

the mov ant’ s c a

us e or c la im, but w he the r t

he summa

ry jud g me nt p ro of

e sta bli sh e s,
as a matter of law , that there is no ge nuine issue of mate rial fa ct as to one or more e lements of the ca use or c laim. Gibbs v. Ge neral Motors Corp. , 4 50 S.W. 2d 82 7, 82 8 ( Te x. 19 70 ); W

y att , 33 S.W. 3d a t 31 . A ll e vid e nc e fa

vo ra ble to t he no nmo va

nt m us t be take n a s tr

ue and a ll r e a so na

ble infere nces, inc luding a

ny doubts, must be resolved in the nonmovant’s f avor. Nix on v . M

r. Property Mgm t. Co., Inc. , 690 S.W .2d 546, 548-49 (Te x . 1985). We revie w the g rantingof
summa ry jud g me nt de novo
. Blake v . Dorado , 211 S.W .3d 429, 433 (Tex.App.--El Paso 2006, no pet.). In I ssue One, it is argued that the summary judgme nt was g rante d in error based upon a repe aled statute. A

ppellee a bandoned this ar g ument at the hea ringon the motion for summary judgme nt, and ag ain in its brief, so we do not a ddress this issue. In I ssue Two, Ne w Wave conte nds that L eg acy conver ted the che cks, under

Section 3.420 of the Te xas B us ine ss a

nd Comme rc e Cod e , b y

takin g the m by

tr ans fe r f ro m on e pa

y e e , M a xim, without any

endorse ment by

the other pa

y ee, N ew Wave. A

ppellant ar g ues that the c hecks w ere not made payable a lternatively , as a matter of law , but rather wer e made pay able jointly . The initial determination of whom an instrument is payable to is deter mined by the intent of the issuer of the instrument. T EX .B US .&C OM .C ODE ANN . § 3.110(a) . When there a re multiple pay ees lis te d, the Cod e pr ov ide s:

I f a n in str ume nt i s p ay a

ble to t wo or mor e pe rs on s a lte rn a tiv e ly , it is pay able to any

of them and ma

y be neg otiated, dischar g ed, or e nforc ed by any or all of them in possession of the instrument. I f an instrument is payable to two or-4-

more pe rson not alternatively , it is pay able to all of the m and may be neg otiated, discharg ed, or e nforc ed only by all of them. I f an instrument pa y able to two or m o r e p e r s o n s i s amb i g u o u s a s t o w h e th e r i ti s p aya b l e t o th e p e r s o n s a l t e r

n a t i v e l y, th e i n s tr u m e n ti s p aya

b l e t o th e p e r s o n s a l t e r

n a t i v e l y. T EX .B US .&C OM .C ODE ANN . § 3.110(d)( Ver non 2002). The c omments to S ection 3.110 state: An instrument payable to X or Y is g overne d by

the first sentenc e of subse ction (d). An instrument pa

y able to X a

nd Y is g overne d by

the sec ond sentenc e of su bs e c tio n ( d) . I f a

n in str ume nt i s p ay a

ble to Xor

Y, e ith e r i s th e pa

y e e and if either is in possession that person is the holder and the pe rson entitled to enfor ce the instrument. Section 3-301. I f an instrument is payable to X a nd Y, neither

X nor Y a cting alone is the pe rson to whom the instrument is pay able. Ne ither pe rs on , a c tin g a lon e , c an b e the ho lde r o f t he ins tr ume nt. Th e ins tr

ume nt i s ‘payable to an ide ntified person.’ The ‘ide ntified person’ is X and Y a cting jointly . Section 3-109(b) and Section 1-102( 5)(a ). Thus, under Section 1-201(20) X or Y, a cting alone c annot be the holde r or the pe rson entitled to enfor ce or neg otiate the instrument bec ause ne ither, ac ting a lone, is the identified per son state d in the ins tr ume nt. The third sente nce of

subsection (d) is dire cted to ca ses in which it is not clea r whe ther a

n instrument is pay able to multiple pay ees a lternatively . In the case of ambiguity

persons de aling with the instrument should be able to re ly on the indorsement of

a sing le payee. F or example, an instrument payable to X and/or Y is tre ated like a

n instrument pay able to X or Y. T EX .B US .&C OM .C ODE ANN . § 3.110(d) c mt. 2. The c hecks in this case wer e made pay able to “Max im Sol utions Group/New Wave Tec hn.” The chec ks also had “E ach Payee Must Endorse Ex actly As Dra wn” pr inted on the ba c k. Ne w Wa

ve argue s th at th e wo rd ingon the ba c k o f t

he c he c k s ho ws USA A’ s inte nt t o
m ak e th e c h e c k s j o i n t l y p aya b l e . H o w e v e r , th e f

r o n to f th e c h e c k

h a s th e p aye e s s e p ar a t e d

b y a virg ule, “/”. While no Texas court ha s addre ssed the use of virg ule in betwee n pay ees on
ne g oti a ble ins tr ume nts , c ourt s aro un d th e natio n h ave be e n unif or m in the ir ho ldi ng s. Th e c ourt s have use d the common meaningof a virgule, looking a t previously

decide d case s in other-5-

jurisdictions and dictionary definitions, and have held unanimously that it means “or,” allowing for pa y ment in the alternative. E.g. , Dynalec tron Corp. v. Equitable Tr ust Co. , 704 F.2d 737, 73 9 ( 4th Cir . 1 98 3) ; J.R. Simplot, Inc. v . Knight , 9 88 P.2 d 9 55 , 9 58 n. 2 ( Was h. 19 99 ); Danco, Inc. v . CommerceBank/Shore, N.A. , 6 75 A. 2d 66 3, 66 6 (N. J.Sup e r. Ct. Ap p. Di v. 19 96 ); Purina Mi lls , I nc . v . S e c ur ity Ba nk &Tru st , 5 47 N. W.2 d 3 36 , 3 37 -3 8 ( Mic h. Ct. Ap p. 19 96 ). Th e F if th Circuit Court of Appea ls has also used the c ommon meaning of a virgule, which the c ourt found to be FO R separating a lternatives. Heritage Bank v. Re dcom Labs., Inc. , 2 50 F .3 d 3 19 , 3 26 (5 th Cir. 2001). In Heritage , a virgule was use d to separate “invoice ” and “ bill of lading” in a letter of cr edit. The c ourt ruled Redc om L aboratories could have prese nted an invoice or a bill of lading for pa

y ment under the terms of the le tter of c redit. Id . We hold that a virgule’s common
us a g e me ans “ or ” in a lig nme nt w iththe pr e vio us de c isi on s o f t he c ourt s o f t

he many state s. Th is d o es n o tre s o l v e t h e i s s u e, h o we v er , s i n ce th e c h ec k s p re s en t edt o L ega cy i n cl u d e o th er

l an gu age
a s w e ll. The stateme nt on the back of the che cks “Ea ch Pay ee Must Endorse Ex actly As Dra wn”
un e qu ivo c a lly

state s th at e a c h p ay e e sh ou ld e nd or se the c he c k. Ne w Wave argue s th a t th is shows that the che cks ar e payable jointly . Obviously , the front a nd back of

the che cks ar e
c on fl ic tin g in t

he ir ins tr uc tio ns . T he us e of

the vir g ule ind ic a te s e ith e r p ay e e c an e nd or se wh ile the bac ks of the che cks re quire a ll pay ees to e ndorse. The printed instructions on the bac k of the chec k only

incre ase the ambig uity

of how the c heck is pa

y able. The Dallas Court of Appe als has
c on c lud e d th at “ [b]e c a

us e the c he c k d oe s n ot u se the wo rd ‘o r’ or ‘a nd ’ b e tw e e n th e mul tip le pay ees,” the che ck wa s ambig uous and payable to either of the pa y ees, individually
. Mazon Associates, Inc . v. Comerica B ank, 1 95 S.W. 3d 80 0, 80 5 ( Te x.Ap p. -- Da lla s 2 00 6, no pe t.) ; Allied-6-

Capital Partners, L.P. v. Bank One , Texas, N.A. , 68 S.W .3d 51, 53 (Tex.App.--Da llas 2001, no pet.). In both Allied and Mazon , th e p ay ee s o nth e c h ec k s we re l i s t edv ert i ca l l y wi thn o l an gu age or sy mbols between the m. Allied , 6 8 S. W.3 d at 52 ; Mazon , 195 S.W .3d at 805. In this case, the w ords “or ” or “ and” a re a lso not used, but the virg ule and instructions pr int e d o n th e ba c k o f t

he c he c k p oint to bo th b e inga pp lic a ble . We fi nd

that th e c he c k, on

its fac e, is ambiguous as to whether it is pay able to per sons alternatively or jointly , and as suc h, the instruments are pa

y able a lternatively . T EX .B US .&C OM .C ODE ANN . § 3.110(d). In the ca se of ambig uity , persons de aling with the instrument should be able to re ly on the endor sement of a single pay ee. Allied , 68 S.W .3d at 53. No endor sement by New Wave was re quired for L eg acy to deposit the chec ks since the c hecks w ere proper ly pay able to either

pay ee individually
. Appellant’s I ssue Two is over uled. In I ssue Thre e, Ne w Wave ar g ues that the c ourt improperly g rante d summary

judgme nt that L eg acy

did not convert unde r Section 3.420 of the T exas Business and Commerc e Code by taking the che cks conta ining instructions that “Ea ch Payee Must Endorse Ex actly as Dra wn” by transfe r fr om one payee, Max im, without either pay ees ha ving sig ned its name a s an
e nd or se me nt. Se c tio n 3 .4 20 of

the Te xas B us ine ss a

nd Comme rc e Cod e pr ov ide s, in r e le va nt p art : Th e law a pp lic a ble to c onve rs ion

of pe rs on a l pr op e rt

y a pp lie s to instruments. An instrument is also converted if it is t aken by

transfe r, other tha

n a neg otiation, from a per son not entitled to enforc e the instrument or a bank make s or ob ta ins pa

y me nt w ithre sp e c t to the ins tr ume nt f or a pe rs on no t e nti tle d to e nf or c e the ins tr

ume nt o r r e c e ive pa

y me nt. T EX .B US .&C OM .C ODE ANN . § 3.420(a)
. Havingfound the c hecks to be pay able to either Maxi m or NewWave, Maxim was-7-

entitled to enforc e the instruments. L eg acy did not take the instruments from a person not entitled to enforc e the instrument, nor did L eg acy make pa y ment on an instrument for a person not entitled to enforc e the instrument or r ece ive pay ment. L eg acy

did not convert the c hecks under Sec tion 3.420 of the Texas Business a nd Commerce Code . I ssue Thre e is overr uled. Ha v i n g o v erru l edal l o f A p p el l an t ’s i s s u es , we af fi rm th e t ri al co urt ’s ru l i n g.

J une 26, 2008 DAVI D WEL L I NGTONCHEW, C hief Just ice B e f o r e C h e w , C
. J. , M c C l ur e , a n d C ar r , JJ.