Court Opinion

ID: 2777414
Source: CourtListenerOpinion
Date Created: 2015-02-06 05:08:04.675519+00
Date Added: 2024-06-11T11:28:04.768612
License: Public Domain

Opinion issued February 5, 2015

                                      In The

                              Court of Appeals
                                     For The

                          First District of Texas
                             ————————————
                              NO. 01-13-01000-CV
                            ———————————
                 CONTRACTORS SOURCE, INC., Appellant
                                        V.
                 AMEGY BANK NATIONAL ASSOCIATION
                 D/B/A AMEGY BANK OF TEXAS, Appellee

                    On Appeal from the 157th District Court
                             Harris County, Texas
                       Trial Court Case No. 2012-53936

                                  OPINION

      Amegy Bank of Texas obtained a summary judgment dismissing Contractors

Source, Inc.’s claims of breach of contract, breach of express warranty, conversion,

and negligent misrepresentation. Contractors Source appeals from the ruling,

which included an award of attorney’s fees. Finding no error, we affirm.
                                    Background

      Contractors Source purchases geosynthetic construction materials at a cost

of approximately $5 million per year, which it then resells to the construction

industry. The co-owners and sole officers of Contractors Source are Merri Brecher,

its president, and her husband, Gary Brecher, its vice president.

      The Brechers met with representatives of Amegy to investigate opening a

bank account for Contractors Source. The Brechers and Amegy’s representatives

discussed the bank’s offerings. According to Merri Brecher, Amegy represented

that it employed state-of-the-art security systems, operations, and protocols to

protect funds on deposit. In February 2006, Contractors Source opened an account

with Amegy, with the Brechers authorized as the only signatories. Amegy sent

Contractors Source a monthly statement of its account, which arrived on or about

the twelfth day of the month following the month covered by the statement.

      In July 2007, Contractors Source hired Maria Straten, also known as Maria

Henry, as its in-house bookkeeper. By January 2008, Straten began

misappropriating money in Contractors Source’s Amegy account, primarily to pay

her personal creditors. Straten’s primary method was to obtain the funds through

third-party websites by using the routing and checking account number for the

account. According to Contractors Source, from January 2008 through at least

September 2010, Straten misappropriated at least $844,358.80. Her activities

                                          2
culminated in a pair of forged checks on which Straten signed Merri Brecher’s

name in September 2010. The first such check was payable to the home-

improvement store Lowe’s for $17,875.43, and the second was payable to “Maria

Henry” for $2,000.00.

      Contractors Source did not discover Straten’s unauthorized activities until

November 7, 2010, when Merri Brecher reviewed the September 2010 Amegy

statement, which listed the forged checks. On that same day, she notified Amegy

that the Lowe’s check was unauthorized. The next day she executed and delivered

to Amegy an “Affidavit of Forgery, Endorsement or Alteration” regarding the

$2,000 check to Maria Henry. On November 10, she did the same regarding the

Lowe’s check. Amegy determined that the signature on the Maria Henry check did

not match the signature on file and credited $2,000 to Contractors Source’s

account. Amegy did not reimburse Contractors Source for any other funds

misappropriated by Straten.

      At all relevant times, Amegy imposed various rules and regulations on

Contractors Source’s account. As pertinent to this case, Amegy specified that

Contractors Source had at most 30 days to report unauthorized signatures,

alterations, or forgeries in its account, and at most 60 days to report errors in its

account statements other than unauthorized signatures, alterations, or forgeries,

such as encoding errors.

                                         3
      Contractors Source sued Amegy for $975,000 plus attorney’s fees on

theories of breach of contract, breach of warranty, and negligence. In the course of

litigation it moved to compel discovery of various Amegy schedules of fees,

disclosures, rules, regulations, and other documents, which the trial court denied.

      Amegy moved for traditional and no-evidence summary judgment. The trial

court granted summary judgment to Amegy, without specifying its reasons for

doing so.

                                      Analysis

      Contractors Source appeals, arguing that the trial court erred by (1) granting

summary judgment as to the Lowe’s check; (2) granting summary judgment as to

automated clearing house transactions; (3) granting summary judgment as to

common-law claims; and (4) denying a motion to compel discovery.

I.    Summary judgment

      Both traditional and no-evidence summary judgments are reviewed de novo.

Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005) (traditional);

Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 156–57 (Tex. 2004) (no-

evidence). “A no-evidence summary judgment is essentially a pretrial directed

verdict, and we apply the same legal sufficiency standard in reviewing a no-

evidence summary judgment as we apply in reviewing a directed verdict.” King

Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750–51 (Tex. 2003).

                                          4
      To prevail on either type of summary-judgment motion, the movant has the

burden of showing that no genuine issue of material fact exists and that it is

therefore entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co.

Inc., 690 S.W.2d 546, 548 (Tex. 1985). A defendant moving for summary

judgment is required either to negate conclusively at least one essential element of

the plaintiff’s cause of action or to establish conclusively each element of an

affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.

1997). To determine whether there is a disputed issue as to a material fact, we

consider evidence favorable to the nonmovant as true and draw every reasonable

inference in its favor, resolving all doubts in favor of the nonmovant. Nixon, 690
S.W.2d at 548–49.

      When, as in this case, the trial court’s order granting summary judgment

does not specify its grounds, “we may affirm the summary judgment if any of the

theories presented to the trial court and preserved for appellate review are

meritorious.” Browning v. Prostok, 165 S.W.3d 336, 344 (Tex. 2005). We will

only consider as grounds for reversal issues that were “expressly presented to the

trial court by written motion, answer or other response.” TEX. R. CIV. P. 166a(c).

      An affidavit supporting or opposing summary judgment “shall be made on

personal knowledge, shall set forth such facts as would be admissible in evidence,

and shall show affirmatively that the affiant is competent to testify to the matters

                                         5
stated therein.” TEX. R. CIV. P. 166a(f). An affiant’s belief about the facts is legally

insufficient evidence. Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 122 (Tex.

1996); Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984). Likewise,

conclusory affidavits do not raise fact issues because “[t]hey are not credible, nor

susceptible to being readily controverted.” Ryland Grp., 924 S.W.2d at 122; see

Brownlee, 665 S.W.2d at 112. “A conclusory statement is one that does not

provide the underlying facts to support the conclusion.” Rizkallah v. Conner, 952
S.W.2d 580, 587 (Tex. App.—Houston [1st Dist.] 1997, no writ).

       Under Texas law, the Uniform Commercial Code regulates a bank’s

relationship with its Texas customers, as well as its handling of funds transfers. See

generally TEX. BUS. & COM. CODE §§ 3.101–.605 (negotiable instruments); id.

§§ 4.101–.504 (bank deposits and collections), id. §§ 4A.101–.507 (funds

transfers); Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671, 683 (Tex. App.—

Houston [1st Dist.] 2008, pet. denied) (observing that the UCC creates “a discrete

fault scheme, specifically allocating responsibility among parties to a banking

relationship”). The relationship may also be governed in part by agreements

between the bank and its customer, such as an agreement governing the processing

of negotiable instruments presented to the bank. E.g., Bank of Tex., 276 S.W.3d at

677.

                                           6
      A.     Lowe’s check and the “repeat wrongdoer” rule

      In its first issue, Contractors Source argues that it was entitled to recredit of

the check to Lowe’s as a matter of law. Alternatively, it argues that it raised

questions of material fact regarding whether Amegy exercised good faith in paying

the Lowe’s check, thus precluding an adverse summary judgment. Among other

things, Amegy responds that Contractors Source’s failure to exercise ordinary care

and the Section 4.406 “repeat wrongdoer” rule each bar recovery. When a bank

provides periodic statements of an account, the banking customer is required to

examine the statements and report any unauthorized transactions promptly. TEX.

BUS. & COM. CODE § 4.406(c). If the bank proves that the customer has failed to do

so, the customer is precluded from asserting against the bank:

      the customer’s unauthorized signature or alteration by the same
      wrongdoer on any other item paid in good faith by the bank if the
      payment was made before the bank received notice from the customer
      of the unauthorized signature or alteration and after the customer had
      been afforded a reasonable period of time, not exceeding 30 days, in
      which to examine the item or statement of account and notify the
      bank.

Id. § 4.406(d)(2) (emphasis supplied). But if the bank failed to exercise “ordinary

care” in paying an item and that failure contributed to a loss, then the loss must be

allocated between the bank and the customer in proportion to their contributions to

the loss. Id. § 4.406(e). Even if the bank failed to exercise care, however, the

customer must report its loss within one year after a statement of the item in

                                          7
question is made available to the customer; after that time, the customer may not

claim a loss for that item against the bank. Id. § 4.406(f). The applicability of

Section 4.406 is a question of law which we review de novo. Am. Airlines Emp.’s

Fed. Credit Union v. Martin, 29 S.W.3d 86, 91 (Tex. 2000).

      The undisputed evidence shows that Straten began making unauthorized

payments using the Contractors Source account by early 2008, more than two years

before any unauthorized transactions were first reported to Amegy. The parties

also agree that Amegy delivered monthly statements to Contractors Source

showing the unauthorized transactions, arriving the month after the transactions

listed occurred. Thus, Amegy has demonstrated that it sent statements, that those

statements reflected unauthorized transactions by Straten, and that Contractors

Source failed to notify Amegy of any unauthorized transactions within 30 days.

Amegy has thus satisfied the requirements of the UCC. See TEX. BUS. & COM.

CODE § 4.406(a), (c), (d)(2). After Amegy has made this showing, Contractors

Source may not recover for “any other item paid in good faith by the bank” due to

Straten’s acts. Id. § 4.406(d)(2) (emphasis supplied).

      1.     “Items” vs. “payment orders”

      The parties dispute whether the non-check transactions by Straten were

“items” that triggered the application of Section 4.406 and the repeat wrongdoer

rule as argued by Amegy. Contractors Source argues that, instead, the transactions

                                          8
were “payment orders” governed by Chapter 4A, which lacks a similar repeat-

wrongdoer provision.

      The UCC defines several types of banking transactions. An “item” is “an

instrument or a promise or order to pay money handled by a bank for collection or

payment.” Id. § 4.104(a)(9). An “item” does not include “a payment order

governed by Chapter 4A or a credit or debit card slip.” Id. Relatedly, a “remotely-

created item” is:

      an item that is created by a third party, other than the payor bank,
      under the purported authority of the drawer of the item for the purpose
      of charging the drawer’s account with a bank and that does not bear a
      handwritten signature purporting to be the signature of the drawer.

Id. § 3.103(a)(16) (defining term); see also id. § 4.104(c) (Chapter 3’s definition of

“remotely-created item” applies to Chapter 4).

      A “payment order” is defined under Chapter 4A as:

      . . . an instruction of a sender to a receiving bank, transmitted orally,
      electronically, or in writing, to pay, or to cause another bank to pay, a
      fixed or determinable amount of money to a beneficiary if:

          (A)   the instruction does not state a condition of payment to the
                beneficiary other than the time of payment;

          (B)   the receiving bank is to be reimbursed by debiting an
                account of, or otherwise receiving payment from, the sender;
                and

          (C)   the instruction is transmitted by the sender directly to the
                receiving bank or to an agent, funds transfer system, or
                communication system for transmittal to the receiving bank.

Id. § 4A.103(a)(1).

                                          9
      Applying these definitions, the non-check transactions at issue were not

payment orders. Straten did not transmit her instructions directly to the receiving

bank or an agent, funds transfer system, or communication system for transmittal

to Amegy. Id. § 4A.103(a)(1)(C). Rather, she submitted them to third parties,

which then submitted instructions to Amegy.

      These transactions more closely fit the definition of a remotely-created item

under Section 3.103(a)(16) in that the instructions to Amegy came from third

parties, under the purported authority of Contractors Source, for the purpose of

charging Contractors Source’s account, and they did not bear a signature. Id.

§ 3.103(a)(16). The term “item” is to be read broadly under Texas law. Am.

Airlines Emps., 29 S.W.3d at 92–93. We hold that Straten’s non-check transactions

were not payment orders, but instead were items within the meaning of Chapter 4

and thus not excluded from the scope of Section 4.406(d)(2) on that basis.

      2.    Bank’s good faith

      Contractors Source also argues that it has raised a question of material fact

as to whether the bank acted in good faith by paying the Lowe’s check, which is a

prerequisite to the application of the repeat wrongdoer rule. TEX. BUS. & COM.

CODE § 4.406(d)(2). For purposes of the UCC, “good faith” means “honesty in fact

and the observance of reasonable commercial standards of fair dealing.” Id.

§ 1.201(b)(20). It is well-settled in Texas that “[t]he law presumes, in the absence

                                        10
of proof to the contrary, that the business transactions of every man are done in

good faith, and for an honest purpose; and any one who alleges that such acts are

done in bad faith, or for a dishonest and fraudulent purpose, takes upon himself the

business of showing the same.” Compton, Ault & Co. v. Marshall, 29 S.W. 1059,

1059 (Tex. 1895); see also Canfield v. Bank One, Tex., N.A., 51 S.W.3d 828, 837

(Tex. App.—Texarkana 2001, pet. denied). “The test for good faith is the actual

belief of the party in question, not the reasonableness of that belief.” La Sara

Grain Co. v. First Nat’l Bank of Mercedes, Tex., 673 S.W.2d 558, 563 (Tex. 1984);

Canfield, 51 S.W.3d at 837.

      As evidence of Amegy’s alleged failure to act in good faith, Contractors

Source first points to an alteration to the front of the Lowe’s check: Straten wrote

her home telephone number in pen above Contractors Source’s printed name and

address. According to Contractors Source, this raises a fact issue whether the bank

acted in good faith by honoring the check. While the copy of the check in the

record does bear a phone number above the printed information, it also bears many

other unidentified markings in the same general area, which Contractors Source

does not allege to be indicators that the check was unauthorized or that Merri

Brecher’s signature was forged. We cannot tell from the record who added these

markings—Contractors Source, Straten, Lowe’s, Amegy, or someone else—much

                                        11
less why the presence of a handwritten phone number would be likely to alert

Amegy to the fact that the check was a forgery.

      Moreover, Contractors Source does not articulate any argument as to why

the presence of the handwritten phone number raises any question of fact regarding

Amegy’s good faith, ordinary care, or any other issue. It does not identify—and we

cannot find—any legal authority for the proposition that stray markings on a check,

even alterations of the depositor’s contact information, are indicators of forgery or

an unauthorized check. Nor does Contractors Source provide any authority for the

proposition that somehow Amegy should have recognized the phone number as

belonging to Straten. Accordingly, we reject Contractors Source’s contention that

the presence of Straten’s phone number on the Lowe’s check raised any question

of material fact as to whether Amegy acted in good faith in honoring that check.

      Contractors Source also contends, without explanation, that Amegy’s

decision to recredit the $2,000 Maria Henry check is some evidence that it acted

without good faith in honoring the Lowe’s check. Merri Brecher contends in her

affidavit testimony that the signature on the Lowe’s check is “clearly a forgery and

appears to me to be traced.” But the test for good faith is whether Amegy’s

employees held a belief that the signature was legitimate when they processed it,

not whether that belief was reasonable. La Sara Grain, 673 S.W.2d at 563;

Canfield, 51 S.W.3d at 837. Amegy introduced as summary-judgment evidence an

                                         12
affidavit of Laura Poshard, an Amegy vice president, that Amegy’s employees

reviewed both checks and, while the signature on the $2,000 check did not match

Merri Brecher’s signature, the signature on the Lowe’s check did.

      Contractors Source does not identify any other evidence that would tend to

show that Amegy did not act in good faith. We hold that Amegy has demonstrated

that the Lowe’s check was paid in good faith, satisfying the requirements of

Section 4.406(d)(2).

      3.     Bank’s ordinary care

      Contractors Source also argues that it raised a question of fact as to whether

Amegy exercised ordinary care in paying the Lowe’s check, as required by

Section 4.406(e). See TEX. BUS. & COM. CODE § 4.406(e). The UCC defines

“ordinary care” as follows:

      “Ordinary care” in the case of a person engaged in business means
      observance of reasonable commercial standards, prevailing in the area
      in which the person is located, with respect to the business in which
      the person is engaged. In the case of a bank that takes an instrument
      for processing for collection or payment by automated means,
      reasonable commercial standards do not require the bank to examine
      the instrument if the failure to examine does not violate the bank’s
      prescribed procedures and the bank’s procedures do not vary
      unreasonably from general banking usage not disapproved by this
      chapter or Chapter 4.

Id. § 3.103(a)(9); see also id. § 4.104(c) (Chapter 3’s definition of “ordinary care”

applies to Chapter 4).

                                         13
      As support for its argument, Contractors Source’s response to the motion for

summary judgment referred to nearly all of its attached evidence, some 168 pages

of documents consisting mostly of “Collection Entry Reports” detailing individual

transactions produced by Amegy. The response failed to explain the significance of

any particular document or facts contained therein. Moreover, the response did not

provide citations to any legal authority regarding a bank’s duty of ordinary care.

Contractors Source’s appellate brief displays the same defects.

      We interpret Contractors Source’s arguments as relying on the affidavits of

Don Coker and John Fricke, who apparently, but not explicitly, were offered as

expert witnesses on banking practices. The Coker and Fricke affidavits are

verbatim duplicates, with the exception of the affiants’ names and work histories,

even including the same grammatical errors. In each one, the affiant opines as to

what constitutes ordinary care and good faith in the banking industry, concluding

that Amegy did not follow best practices and therefore did not act with ordinary

care or in good faith. What the affidavits lack, however, is any recitation of facts

demonstrating that Amegy did not follow such practices. That is, the affidavits

demonstrate an absence of personal knowledge of the facts of this case. See TEX.

R. CIV. P. 166a(f). They instead recite in conclusory fashion the affiants’ beliefs

regarding the facts, and thus are no evidence of a question of fact regarding

                                        14
Amegy’s exercise of reasonable care. Ryland Grp., 924 S.W.2d at 122; see

Brownlee, 665 S.W.2d at 112; Rizkallah, 952 S.W.2d at 587.

      Both the Coker and Fricke affidavits, as well as Merri Brecher’s affidavit,

identify the Collection Entry Reports as evidence that Amegy acted without

ordinary care. Many of the reports contain the name “Maria Straten” or “Maria

Henry,” but Contractors Source identifies no evidence as to the significance of

those names on the reports. There also is no evidence in the record that those

Collection Entry Reports indicate a lack of ordinary care with respect to the

Lowe’s check.

      Section 3.103’s definition of ordinary care provides that a bank is not

required to examine an instrument “if the failure to examine does not violate the

bank’s prescribed procedures and the bank’s procedures do not vary unreasonably

from general banking usage.” TEX. BUS. & COM. CODE § 3.103(a)(9). We hold that

Contractors Source has failed to raise a fact issue regarding Amegy’s exercise of

ordinary care. Amegy was therefore entitled to summary judgment regarding the

Lowe’s check under the protections afforded by Section 4.406 of the Business and

Commerce Code, and we overrule Contractors Source’s first issue.

      B.    Unauthorized automated clearing house transactions

      In its second issue, Contractors Source argues that Amegy was not entitled

to summary judgment regarding the various payments submitted by Straten

                                       15
through third-party bill-payment websites, which it characterizes as automated

clearing house transactions. Specifically, it argues that it raised a fact issue

regarding whether Amegy established various defenses under Chapter 4A of the

Business and Commerce Code, which governs funds transfers. Contractors Source

concedes that Section 4A.505 of the Business and Commerce Code precludes it

from asserting claims based on unauthorized transactions that Straten made more

than one year before Contractors Source first reported any unauthorized activity to

Amegy. Thus, only the transactions after November 7, 2009 are at issue in this

appeal.

      Amegy argues that these claims are barred by the repeat-wrongdoer rule and

that Contractors Source did not produce evidence that it ever notified the bank of

any specific transactions that were unauthorized other than the two forged checks.

We agree. For the reasons discussed above, the repeat wrongdoer rule of

Section 4.406(d)(2) bars recovery on these transactions because Contractors

Source failed to report the initial unauthorized transactions by Straten and has not

raised a fact issue regarding Amegy’s good faith or ordinary care. Amegy therefore

was entitled to summary judgment as to Straten’s non-check transactions, and we

need not address Contractors Source’s issues raised concerning Amegy’s other

defenses.

                                        16
      C.     Common-law claims

      In its third issue, Contractors Source argues that summary judgment was

improper on its claims for breach of contract, breach of warranty, and negligence.

Amegy responds that the UCC displaces these common-law remedies and thus bars

recovery by Contractors Source. We agree.

      Contractors Source’s claims for breach of contract and negligence arise from

the common law. Breach of contract is a common-law remedy unless the contract

is for the sale or lease of goods, situations not applicable to this case. Selectouch

Corp. v. Perfect Starch, Inc., 111 S.W.3d 830, 834 (Tex. App.—Dallas 2003, no

pet.); see also TEX. BUS. & COM. CODE §§ 2.102, 2A.102. Similarly, negligence is

a common-law doctrine. See, e.g., Rocha v. Faltys, 69 S.W.3d 315, 320 (Tex.

App.—Austin 2002, no pet.).

      A claim for breach of warranty derives from either the common law or from

statute. Sw. Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 576 (Tex. 1991). Here,

however, Contractors Source does not identify in its pleadings, in its response to

the motion for summary judgment, or in its brief on appeal any specific warranty

that Amegy has breached, except a general reference in its petition to

“warranties . . . concerning [Amegy’s] security systems and protocols.” This is a

claim for breach of warranty for services. A cause of action for breach of a

warranty for services, whether express or implied, arises from the common law.

                                         17
See Parkway Co. v. Woodruff, 901 S.W.2d 434, 438 (Tex. 1995) (implied

warranties); Bell Tel., 811 S.W.2d at 574–75 (express warranties as creation of

common law); see also Rocky Mountain Helicopters, Inc. v. Lubbock Cnty. Hosp.

Dist., 987 S.W.2d 50, 52–53 (Tex. 1998) (Texas has recognized “implied warranty

for services only when the services relate to the repair or modification of existing

tangible goods or property”).

      When the UCC applies, common-law claims that conflict with the UCC are

precluded. Plano Lincoln Mercury, Inc. v. Roberts, 167 S.W.3d 616, 624 (Tex.

App.—Dallas 2005, no pet.); see also Moody Nat’l Bank v. Tex. City Dev. Ltd. Co.,

46 S.W.3d 373, 378 (Tex. App.—Houston [1st Dist.] 2001, pet. denied) (Chapter

4A precludes common-law remedies); Aquila Sw. Pipeline, Inc. v. Harmony

Exploration, Inc., 48 S.W.3d 225, 235 (Tex. App.—San Antonio 2001, pet.

denied). “To the extent they do not conflict with the Uniform Commercial Code’s

provisions, common law principles complement the Uniform Commercial Code.”

Plano Lincoln Mercury, 167 S.W.3d at 624; see also TEX. BUS. & COM. CODE

§ 1.103(b) (“Unless displaced by the particular provisions of this title, the

principles of law and equity . . . shall supplement its provisions.”); Moody Nat’l

Bank, 46 S.W.3d at 378. In this case, Contractors Source seeks to obtain the same

relief at common law that the Legislature has barred under the UCC. We therefore

hold that Contractors Source’s common-law claims are precluded.

                                        18
II.   Motion to compel discovery

      Finally, Contractors Source argues that the trial court abused its discretion in

denying its motion to compel discovery. We review the trial court’s denial of a

motion to compel for abuse of discretion. Macy v. Waste Mgmt., Inc., 294 S.W.3d
638, 651 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). An appellate court

should reverse a trial court’s ruling on a motion to compel only when the trial court

acts in an arbitrary and unreasonable manner, without reference to any guiding

principles. Id.

      Amegy argues that Contractors Source failed to make clear exactly what

information it sought. Amegy further contends that it produced all relevant

information. Thus, according to Amegy, the trial court did not abuse its discretion.

      In its motion to compel production, Contractors Source complained that

Amegy had not produced “the schedule of fees and charges, or funds availability

disclosures, or electronic transfer disclosures or any documents responsive to

[Requests for Production Numbers] 2–7, or even all of [Amegy’s] rules and

regulations governing accounts . . . having omitted all of Sections 10K – Section

35 of the Rules . . . .” Contractors Source also complained that Amegy failed to

produce recordings of phone calls related to verbal instructions on its account,

despite the absence of any allegation that any such phone calls took place. It

argued that these documents and recordings were relevant to “the issues of

                                         19
improper transfers and forged checks from [Contractors Source’s] account, the

contract terms under which [Amegy] held [Contractors Source’s] funds, whether

[Amegy] was acting in good faith in making the transfers and payments,

[Amegy’s] exercise of ordinary care in making the transfers and payments and the

bank’s failure to exercise care and/or good faith as a contributing factor and/or the

proximate cause of [Contractors Source’s] losses.” It concluded by arguing that it

was entitled to “all missing financial information.” In a separate brief in support of

the motion, Contractors Source focused almost entirely on documents relating to

security procedures and authentication protocols.

      We cannot determine what several of Contractors Source’s requests mean,

nor can we determine how any of them are relevant to its claims in this suit. With

the exceptions of Amegy’s account rules and regulations and documents related to

security procedures, Contractors Source did not explain the relevance of any of the

information requested. With respect to the rules and regulations, the undisputed

evidence shows that Contractors Source failed to give timely notice under the

relevant statutes, and the parties agree that Amegy’s rules and regulations

shortened the timeframes involved, rather than lengthening them. Thus, the rules

and regulations could not have helped Contractors Source survive summary

judgment.

                                         20
      Moreover, Amegy responded to the motion to compel by arguing that it had

produced copies of all account rules and regulations applicable to the Contractors

Source account at any time. Amegy’s Carrie Cogburn testified that the bank

provided all relevant rules and regulations to Contractors Source when they

became effective. Indeed, Amegy filed the rules in effect in November 2010 with

its response to the motion to compel. Merri Brecher contends in her affidavit, filed

months after the trial court denied the motion to compel, that Amegy never

produced any such rules or regulations before filing its motion for summary

judgment. But this was not before the trial court when it ruled on the motion to

compel. We also note that the Brechers agreed to be bound by Amegy’s Rules and

Regulations Governing Accounts when they opened the Contractors Source

account. In the absence of fraud, a party to a written agreement is presumed to

have read and understood the agreement, and thus necessarily must have seen it.

NETCO, Inc. v. Montemayor, 352 S.W.3d 733, 739 (Tex. App.—Houston [1st

Dist.] 2011, no pet.).

      Contractors Source did not rebut this argument or identify any missing

versions of portions of the rules. Further, we are unable to identify any copy of

those rules and regulations in the record from which sections 10K through 35 are

missing; indeed, not all versions of the rules and regulations in the record have

numbered sections.

                                        21
      Similarly, security procedures are irrelevant to Chapter 4 claims, as the

statutes related to security procedures apply only to Chapter 4A claims. See TEX.

BUS. & COM. CODE §§ 4A.202(b)–(c). Because Chapter 4 governs Contractors

Source’s claims, Amegy’s use of security procedures had no relevance.

      The requests for production identified in the motion to compel do not

identify any information requested with sufficient particularity that we can

conclude that the trial court abused its discretion in denying discovery. Requests

for production numbers 2 through 6 all asked for documents related to fraud

detection, anomaly detection, authentication of orders, and other security-related

measures. Contractors Source did not explain in its motion to compel why these

documents are relevant to its claims in the absence of an agreed security procedure

under Chapter 4A governing at least some of the transactions in question. Request

for Production number 7 asked for “all documents identifying [Amegy’s] online

banking practices in 2007, 2008, 2009, 2010, 2011 and 2012.” These documents

have no relevance to this suit, as Contractors Source does not allege that any of the

unauthorized transactions took place through Amegy’s online banking services. On

the contrary, the parties agree that Contractors Source never completed setup of

online access to its Amegy account.

      In light of Contractors Source’s failure to identify with specificity the

documents requested or the relevance of those documents to any claim or defense,

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we hold that the trial court did not abuse its discretion in denying the motion to

compel. See Macy, 294 S.W.3d at 651. We overrule Contractors Source’s fourth

issue.

                                     Conclusion

         Because we have overruled all of Contractors Source’s issues on appeal, we

affirm the trial court’s judgment.

                                              Michael Massengale
                                              Justice

Panel consists of Justices Massengale, Brown, and Huddle.

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