Court Opinion

ID: 3084955
Source: CourtListenerOpinion
Date Created: 2015-10-16 02:34:49.434085+00
Date Added: 2024-06-11T11:42:19.430143
License: Public Domain

In The
                Court of Appeals
  Sixth Appellate District of Texas at Texarkana
          ______________________________

                No. 06-11-00104-CV
          ______________________________

    ALL AMERICAN SIDING & WINDOWS, INC.,
    AND EAGLEONE FINANCIAL, INC., Appellants

                            V.

BANK OF AMERICA, NATIONAL ASSOCIATION, Appellee

      On Appeal from the County Court at Law No. 5
                  Dallas County, Texas
            Trial Court No. CC-09-08023-E

       Before Morriss, C.J., Carter and Moseley, JJ.
               Opinion by Justice Carter
                                                  OPINION

         All American Siding & Windows, Inc. (AAS), and its affiliated company EagleOne

Financial, Inc. (EagleOne), appeal a summary judgment entered1 in favor of Bank of America,

N.A. (Bank). AAS and EagleOne argue that the trial court erred in: (1) overruling the objections

to the affidavit of corporate representative Ryan Evans in support of the Bank’s summary

judgment; (2) granting the Bank’s motions for summary judgment; and (3) granting the Bank’s

motion for bench trial. We find no abuse of discretion in the overruling of objections to the

affidavit, determine that traditional summary judgment based upon the Bank’s affirmative defense

was proper, find that the no-evidence summary judgment was properly granted, and overrule the

point of error complaining of the order granting a bench trial as moot.

I.       Factual Background

         Affiliated companies and Bank customers AAS and EagleOne became “a victim of

fraudulent checks drawn on the company’s business bank accounts” in 2006. James R. Keehn,

controller for AAS and EagleOne, and Linda Kirks, AAS and EagleOne’s secretary and treasurer,

conferred with “Brian Tokarz, Plaintiff’s account manager at Bank of America, and other

personnel of Bank of America” regarding fraud prevention options.                          According to Keehn,

“Tokarz and the other Bank of America personnel represented that Bank of America would no

1
 Originally appealed to the Fifth Court of Appeals, this case was transferred to this Court by the Texas Supreme Court
pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (West 2005). We are unaware of
any conflict between precedent of the Fifth Court of Appeals and that of this Court on any relevant issue. See TEX. R.
APP. P. 41.3.

                                                          2
longer be responsible for any losses due to fraudulent checks if All American did not take steps to

reduce the check fraud.”

       To reduce check fraud, the Bank recommended its “On-line Business Suite and Bank of

America Direct modules.” The online suite would allow AAS and EagleOne to view transaction

activity and transfer funds between the company bank accounts on the Internet.            Through

utilization of a product called Positive Pay, AAS could “electronically transmit a daily check

register of all checks issued by All American, and Bank of America would match the checks listed

in the Positive Pay file and pay only those checks with an exact match.” In order to set up and

manage Positive Pay, AAS and EagleOne were required to use the America Direct module, a

function used to monitor and process Positive Pay exceptions and payments due to EagleOne from

its customers.

       Keehn believed this was a “full service, internet based, banking management system.”

Keehn recited that “Tokarz and the other Bank of America personnel explained to us and assured

us of all the secure benefits of . . . Direct module.” Positive Pay was implemented in 2006 after

new software used to implement the program was purchased through an approved provider. AAS

and EagleOne also implemented the automated clearinghouse (ACH), which allowed for

authorized originators to transfer funds to or from accounts by initiating entries sent through the

online system as an alternative to wire transfers. To use the ACH and other online banking

accounts, a party was required to use “the company ID, user ID, and user password.” Evans also

                                                3
explained that the Bank required a digital certificate to be installed on the browser from which the

transactions were conducted to verify the browser as an authorized computer.

       AAS and EagleOne “became victims of electronic banking fraud that began on

September 10, 2008 and continued through September 12, 2008.” On September 12, Keehn

logged on to the business suite module to review bank account activity. AAS and EagleOne’s

second amended petition recited that Keehn found an unauthorized transfer on September 10 from

AAS to EagleOne for $24,763.49, another transfer of $18,322.03 on September 11, and an ACH

disbursement of $24,763.49 on September 11 from EagleOne. Keehn contacted Kirks and the

Bank. Pursuant to the Bank’s instructions, Keehn faxed a written report to the Bank’s fraud

department at 10:05 on September 12, 2008. Keehn was contacted by David Baker of TD North

Bank’s fraud department, who indicated he was investigating an incoming ACH transaction in the

amount of $5,174.92 which was to be credited to the account of a TD North Bank customer who

had placed an order to wire transfer the funds to Russia.

       Keehn was initially told that the fraudulent transactions would be reimbursed. He claimed

“[i]n a conference call with various Bank of America representatives and myself and Linda Kirks

on September 24, 2008, Carrie O’Brien of Bank of America stated that she ‘had seen the Trojan’

malware that was responsible for the fraudulent transactions.”           The reimbursement was

conditioned upon the Bank recovering the fraudulently taken funds from the receiving bank,

although Keehn swore he was not aware of this condition.

                                                 4
       Evans, vice president and treasury service manager in the global fraud prevention

department, testified in a deposition that “[t]ypically Bank of America will not cover loss for

commercial accounts” because “there’s no governmental requirement to do so.” Evans stated,

       [U]pon notification, Brian Tokarz contacted our ACH corporate returns who
       requested the client present in writing their statement that this was indeed
       fraudulent activity according to the client, and based on receipt of that, reverse
       those transactions. And that reversal is requesting those funds be returned to us
       from the receiving banks.

Evans stated, “As soon as those funds had been withdrawn, the chance for recovery was slim.”

After the results of a corporate investigation revealed that no funds were available, the initial

reimbursements to AAS and EagleOne were reversed.

       In their second amended petition, AAS and EagleOne claimed they had lost a total of

$26,783.07. They sued the Bank for breach of “Contract/Deposit Agreement/On-Line Banking

Agreement/Guaranty/Warranty,” in failing to protect their accounts from the fraudulent bank

transfers and in failing to reimburse them for the lost funds. AAS and EagleOne also alleged that

the Bank “and Plaintiffs had an express agreement whereby [the Bank] agreed to reimburse

Plaintiffs.” DTPA, fraud, fraudulent inducement, negligence, and negligent misrepresentation

claims were also lodged. AAS and EagleOne complained that the Bank promised its services

were secure and that it made a host of promises on its website to that effect.

       Based upon its Treasury Services Terms and Conditions and Deposit Agreement and

Disclosures, the Bank moved for no-evidence and traditional summary judgments on its

                                                 5
affirmative defense under the Texas Business and Commerce Code. It also alleged AAS and

EagleOne had waived its right to a trial by jury in these documents. The trial court granted the

Bank’s motion for bench trial, as well as its motions for summary judgment.

II.    The Trial Court Did Not Abuse Its Discretion in Overruling Objections to Evans’
       Affidavit

       Evans’ affidavit stated:

       Plaintiffs agreed to the Security Procedures after refusing additional security
       options offered by Bank of America. . . . Plaintiffs expressly refuse[d] to sign up for
       Dual Administration.      Plaintiffs also had the ability to add the Dual
       Authorization/Approval options to their account through their online access, which
       Plaintiffs never did.

       . . . . Bank of America had no knowledge that the transactions were allegedly
       conducted by anyone other than Plaintiffs. At the time the alleged transactions
       occurred, Bank of America had no way to verify whether Plaintiffs’ Security
       Procedures had been compromised. I explained this to Plaintiffs.

       We review the trial court’s evidentiary rulings for an abuse of discretion. Horizon/CMS

Healthcare Corp. v. Auld, 34 S.W.3d 887, 906 (Tex. 2000). “A trial court ‘abuses its discretion

when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial

error of law.’” BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 800 (Tex. 2002).

       AAS and EagleOne objected to the affidavit of Evans as a whole because “[h]e was not

designated as an expert,” “admitted that he was not a computer expert,” and stated he was not

“familiar with other bank’s security policies” in his deposition. Thus, it appears that they believe

his affidavit should not have been allowed due to a lack of designation and qualification.

                                                 6
         However, Evans was designated as the Bank’s corporate representative. He held the

position of “Treasury Services Manager in the fraud monitoring team,” was assigned to this case,

was familiar with the Bank’s security policies, and swore that the facts contained within the

affidavit were within his personal knowledge as a result of his position with the Bank. Moreover,

this objection to Evans’ affidavit was contained within a response to the Bank’s motion for

summary judgment, which did not seek relief from the court relating to the affidavit and failed to

specify what portions of the affidavit required expert testimony. We cannot say the trial court

abused its discretion in overruling this objection to Evans’ affidavit.

         Next, AAS and EagleOne argued that paragraph three of the affidavit of this “interested

witness” contained “conclusory statements regarding the security procedures that were in place

and that the fraudulent transactions complained of by [AAS and EagleOne] were verified by [the

Bank] using the security procedures.”2 That paragraph stated:

         The Security Procedures in place for the . . . online banking accounts at Bank of
         America required a party be logged in using the company ID, user ID, and user
         password before conducting any transactions. Additionally, Bank of America
         required a digital certificate, specific to that user, be installed on the browser from

2
  AAS and EagleOne claim that the affidavit referenced a missing exhibit and that it “only contains an
acknowledgement and not a ‘jurist.’” They also question Evans’ personal knowledge of the facts contained in the
affidavit since he “only comes onto the scene after the September 2009 fraudulent ACH transactions were reported,”
“does not authenticate or identify any of the purported signatures for AAS or EagleOne,” the Treasury Services
agreement is unsigned, “there is no evidence that the Treasury Services document attached Exhibit A3” “was the one
that was in effect at the time of the . . . fraudulent ACH transactions,” or “was the one that was actually delivered to
AAS and EagleOne,” and Exhibits A4, A5, and A6 were not attached to the affidavits. Our review of the record
reveals these challenges were raised for the first time on appeal. Consequently, we decline to address these
complaints, which were defects of form or were clarified further in the record through the affidavit of Dana Lee and
inclusion of the exhibits. See TEX. R. APP. P. 33.1; Brown v. Brown, 145 S.W.3d 745, 751 (Tex. App.––Dallas 2004,
pet. denied) (citing Thompson v. Curtis, 127 S.W.3d 446, 450 (Tex. App.—Dallas 2004, no pet.)).

                                                           7
        which the transactions were conducted to verify the browser as an authorized
        computer (collectively the “Security Procedures”). The transactions Plaintiff
        reported as fraudulent were all verified by Bank of America using the Security
        Procedures, as shown on the Audit Log attached as Exhibit A5.

        A conclusory statement is one that is not susceptible to being readily controverted and does

not provide the underlying facts to support the conclusion. See Eberstein v. Hunter, 260 S.W.3d
626, 630 (Tex. App.—Dallas 2008, no pet.). Conclusory statements are not proper summary

judgment proof. Grotjohn Precise Connexiones Int’l, S.A. v. JEM Fin., Inc., 12 S.W.3d 859, 867

(Tex. App.—Texarkana 2000, no pet.). The record reveals that the assertions in paragraph three

of Evans’ affidavit, which are factual recitations, were supported by the referenced audit log. The

audit log, depicting activity on the dates of the fraudulent transactions, demonstrates that Keehn

was assigned a user ID and password and that the digital certificate was being recorded by the

bank.

        We find the trial court properly overruled AAS and EagleOne’s objections to this

paragraph of the affidavit. We overrule AAS and EagleOne’s first point of error.

III.    The Bank Was Entitled to Traditional Summary Judgment

        A.     Standard of Review

        Whether summary judgment is proper is a question of law that we review de novo. FM

Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). “The standard for

reviewing a traditional motion for summary judgment is well established.” City of Clarksville v.

Drilltech, Inc., 353 S.W.3d 183, 187 (Tex. App.—Texarkana 2011, no pet.) (citing Sysco Food

                                                 8
Servs., Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994); Nixon v. Mr. Prop. Mgmt. Co., 690
S.W.2d 546, 548–49 (Tex. 1985)). Traditional summary judgment is proper if (1) there are no

genuine issues of material fact, and (2) the movant is entitled to judgment as a matter of law. TEX.

R. CIV. P. 166a(c). “If the movant establishes the right to judgment, the burden shifts to the

nonmovant to raise a fact issue that would preclude summary judgment.” Virginia Indonesia Co.

v. Harris County Appraisal Dist., 910 S.W.2d 905, 907 (Tex. 1995).

           “When reviewing a summary judgment, we take as true all evidence favorable to the

nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant’s

favor.” Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215–16 (Tex. 2003).

When the trial court does not specify on what basis it granted summary judgment, the appellant

must argue that every ground in the summary judgment motion is erroneous. 3 Strather v.

Dolgencorp of Tex., Inc., 96 S.W.3d 420, 422–23 (Tex. App.—Texarkana 2002, no pet.) (citing

Star–Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995); Simmons v. Healthcare Ctrs. of

Tex., Inc., 55 S.W.3d 674, 680 (Tex. App.—Texarkana 2001, no pet.)).

           B.       The Bank Established Its Affirmative Defense as a Matter of Law

           AAS and EagleOne alleged that the Bank breached its “deposit agreements, on-line

banking agreements, guaranties, and warranties” by “failing to protect Plaintiffs’ accounts from

the fraudulent bank transfers described above and by failing to reimburse Plaintiffs for the lost

3
    The Bank also filed no-evidence motions for summary judgment.

                                                         9
funds.” They filed claims under the Deceptive Trade Practices Act (DTPA), fraud, fraudulent

inducement, negligence, and negligent misrepresentation claims as well.

        Based upon “Keehn[’s] uncontroverted testimony in his affidavit,” AAS and EagleOne

contend the trial court erred in granting the Bank’s summary judgment. They complain that they

were not informed that the Bank had a policy not to cover fraud losses for commercial accounts.

They also argue that there “was an express agreement between the Bank and AAS/EagleOne

which required the Bank to reimburse the fraudulently transferred funds.”

        Keehn’s affidavit swore that EagleOne and AAS was unaware that it would be responsible

for losses due to fraudulent ACH transactions or that the Bank had discretion whether to reimburse

them. They were also uninformed that other customers had been victims of fraudulent ACH

transactions, or that additional software was needed. Keehn testified that Bank of America

warranted the online services would be safe and secure and that there was an oral agreement of

reimbursement, which was not conditioned upon the Bank recovering the money from the

receiving bank. Keehn also believed that the Bank allowed for another fraudulent transaction to

occur while waiting for required paperwork prior to placing a hold on the account. “In a

conference call with various Bank of America representatives and myself and Linda Kirks on

September 24, 2008, Carrie O’Brien of Bank of America stated that she ‘had seen the Trojan’

malware that was responsible for the fraudulent transactions.” Keehn further stated in his

affidavit:

                                               10
        On May 2, 2008, an unauthorized Automated Clearing House debit transaction was
        posted to All American’s disbursement account. At the direction of Brian Tokarz,
        All American notified Bank of America’s Automated Clearing House
        Services-Corporate Returns, which advised us to set up Automated Clearing House
        Debit Blocks on the specific disbursement account of All American. Bank of
        America did not advise All American to set up similar Automated Clearing House
        Debit Blocks on the bank accounts of EagleOne with Bank of America.

        The fraudulent transactions at issue related to the ACH services. Section 4A.202 of the

Texas Business and Commerce Code, entitled “Authorized and Verified Payment Orders” states:

                (b) If a bank and its customer have agreed that the authenticity of payment
        orders issued to the bank in the name of the customer as sender will be verified
        pursuant to a security procedure,4 a payment order received by the receiving bank
        is effective as the order of the customer, whether or not authorized, if (i) the
        security procedure is a commercially reasonable method of providing security
        against unauthorized payment orders, and (ii) the bank proves that it accepted the
        payment order in good faith and in compliance with the security procedure and any
        written agreement or instruction of the customer restricting acceptance of payment
        orders issued in the name of the customer. The bank is not required to follow an
        instruction that violates a written agreement with the customer or notice of which is
        not received at a time and in a manner affording the bank a reasonable opportunity
        to act on it before the payment order is accepted.

                (c) Commercial reasonableness of a security procedure is a question of law
        to be determined by considering the wishes of the customer expressed to the bank,
        the circumstances of the customer known to the bank, including the size, type, and
        frequency of payment orders normally issued by the customer to the bank,
        alternative security procedures offered to the customer, and security procedures in
        general use by customers and receiving banks similarly situated. A security
        procedure is deemed to be commercially reasonable if:
4
 ‘“Security procedure’ means a procedure established by an agreement between a customer and a receiving bank for
the purpose of (i) verifying that a payment order or communication amending or cancelling a payment order is that of
the customer, or (ii) detecting error in the transmission or the content of the payment order or communication. A
security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption,
callback procedures, or similar security devices. Comparison of a signature on a payment order or communication
with an authorized specimen signature of the customer is not by itself a security procedure.” TEX. BUS. & COM. CODE
ANN. § 4A.201 (West 2002).

                                                        11
                      (1) the security procedure was chosen by the customer after the bank
               offered, and the customer refused, a security procedure that was
               commercially reasonable for the customer; and

                      (2) the customer expressly agreed in writing to be bound by any
               payment order, whether or not authorized, issued in its name and accepted
               by the bank in compliance with the security procedure chosen by the
               customer.

                      ....

               (e) This section applies to amendments and cancellations of payment orders
       to the same extent it applies to payment orders.

TEX. BUS. & COM. CODE ANN. § 4A.201.

       The contracts entered into between the Bank, AAS, and EagleOne guide the application of

Section 4A.202 in this case. With respect to ACH transactions, the Treasury Services Terms and

Conditions stated:

       Each time you use a Service, you represent and warrant that, in view of your
       requirements, the Security Procedure is a satisfactory method of verifying the
       authenticity of Entries and Reversal/Deletion Requests. You agree we may act on
       any Entries or Reversal/Deletion Requests after we have verified its authenticity
       through use of the Security Procedure.

It was uncontroverted that the fraudulent transactions were completed through use of a company

ID and password and were confirmed through the digital certificate. Evans averred that this

method was the security procedure in place for AAS and EagleOne for ACH transactions. This

factual assertion was not contested.

                                               12
       Also, Linda Kirks and president Ken Kirks signed an Authorization and Agreement for

Treasury Services, which acknowledged that “[t]he Client has received and reviewed Bank of

America’s Treasury Services Terms and Conditions Booklet . . . and the Client agrees to adhere to

the Booklet and any applicable User Documentation provided by Bank of America.” The

Treasury Services Terms and Conditions contained contractual limitations of liability, including

the following:

       You have sole responsibility for determining the level of security you require and
       assessing the suitability of the security procedures for these Services. We have no
       duty to investigate the authenticity of any application, instruction or other
       communication you provide us using an Electronic Trade Service. Also, we have
       no liability to you for acting upon any application, amendment or other
       communication purportedly transmitted by you, even if such application,
       amendment or message:

       Contains inaccurate or erroneous information.

       Constitutes unauthorized or fraudulent use of an Electronic Trade Service.

       Includes instructions to pay money or otherwise debit or credit any account.

       Relates to the disposition of any money, securities, or documents . . . .

                 ....

       We are authorized, but not obliged, to rely upon and act in accordance with any
       application, instruction, consent or other communication by fax or other electronic
       transmission (including without limitation any transmission by use of our Software
       or the Internet) received by us purporting to be a communication on your behalf
       without inquiry on our part as to the source of the transmission or the identity of the
       person purporting to send such communication. . . .

                 ....

                                                 13
       We are liable to you only for actual damages incurred as a direct result of our
       failure to exercise reasonable care in providing a Service.

               ....

       In no event will we be liable for any indirect . . . loss or damage, . . . even if advised
       of the possibility of such loss . . . .

       We will not be responsible for the acts or omissions of . . . any other person. . . .

       The agreement stated it could not be changed by oral agreement. It provided:

       NOTICE OF FINAL AGREEMENT.    THIS WRITTEN AGREEMENT
       REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
       MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
       CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
       PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
       BETWEEN THE PARTIES.

The Bank further specified:

       We have no obligation to cancel or amend any Entry after we have received it. If
       you send us a Reversal/Deletion Request and we are able to verify the authenticity
       of the Reversal/Deletion Request using the Security Procedure, we will make a
       reasonable effort to act on your Reversal/Deletion request. We will not be liable
       to you if such Reversal/Deletion Request is not effected. You agree to indemnify
       us in connection with any such Reversal/Deletion Request as provided by UCC 4A.

       Kenneth Kirks and Linda Kirks also “acknowledge[d] and agree[d] that this account is and

shall be governed by the terms and conditions set forth in the. . . . Deposit Agreement and

Disclosures.” This document discussed the access ID and passcode system used for online

banking. It provided:

                                                  14
       From time to time, originators that you authorize may send automated clearing
       house (ACH) credits or debits for your account. For each ACH transaction, you
       agree that the transaction is subject to the National Automated Clearing House
       Association (NACHA) Operating Rules and any local ACH operating rules then in
       effect. . . .

               ....

       Your role is extremely important in the prevention of wrongful use of your account.
       If you find that your records and ours disagree or if you suspect any problem or
       unauthorized activity on your account . . . call us immediately . . . . We may require
       written confirmation of your claim, including an affidavit signed by you on a form
       acceptable to us.

               ....

       You agree that we have a reasonable period of time to investigate the facts and
       circumstances surrounding any claimed loss and that we have no obligation to
       provisionally credit your account. Our maximum liability is the lesser of your
       actual damages proved or the amount of the missing deposit or the forgery,
       alteration or other unauthorized withdrawal, reduced in all cases by the amount of
       the loss that could have been avoided by your use of ordinary care.

               ....

       . . . . [W]e may receive ACH debits to your account from senders you previously
       authorized to debit your account. You may ask us to stop payment on a future
       ACH debit to your account if the item has not already been paid. . . .

               ....

       The ACH stop payment takes effect within three business days.

       Applying Section 4A.202, the agreements above and Evans’ affidavit outline that the

Bank, AAS, and EagleOne agreed that the authenticity of ACH transactions were to be verified

using an ID, passcode, and digital certificate verification. Ryan’s affidavit stated that the Bank

                                                15
“follow[ed] the guidelines of the Federal Financial Institutions Examination Council and requires

multifactor authentication for its online banking customers, including Plaintiffs,” thereby

demonstrating commercial reasonableness of the security procedure.5

        Evans’ affidavit, in conjunction with the audit log, confirm that the “Bank . . . had no

knowledge that the transactions were allegedly conducted by anyone other than Plaintiffs,”

thereby demonstrating acceptance of the payment in good faith according to the security

procedures. AAS and EagleOne argue that the Bank “did not act in a reasonable manner or in

good faith by not immediately stopping the ACH transactions when AAS/EagleOne notified the

Bank.” Keehn alleges in his affidavit, “Once I learned of the fraudulent ACH activity on

September 12, 2008, I immediately contacted Bank of America. Instead of placing an immediate

hold on everything, Bank of America required us to fill out paperwork to reverse the transactions.”

This affidavit does not allege that Keehn or any representative of AAS and EagleOne requested the

Bank to place an “immediate hold on everything.” “Good faith,” as defined by the Business and

Commerce Code, means “honesty in fact and the observance of reasonable commercial standards

of fair dealing.” TEX. BUS. & COM. CODE ANN. § 1.201(b)(20) (West 2009). “[L]ack of good

faith exists when a party has actual knowledge of facts that when acted on constitute a dishonest

disregard of the contractual rights of another party.” Commercial Nat’l Bank of Beeville v.

Batchelor, 980 S.W.2d 750, 754 (Tex. App.—Corpus Christi 1998, no pet.). Here, there is no

5
 Evans’ affidavit stated that AAS and EagleOne refused additional security procedures. Because they agreed in
writing to be bound by the Deposit Agreement and Disclosures, there is an argument that security procedures were
deemed commercially reasonable under Section 4A.202(c).

                                                      16
indication that a stop payment order as contemplated by the Treasury Services Terms and

Conditions or the Deposit Agreement and Disclosures had been entered, or that the paperwork

required to confirm a fraudulent transaction had been received such that the Bank would be

charged with actual knowledge of the fraudulent activity. Because the Bank’s actions were in

accordance with the contracts, failure to immediately stop the ACH transactions would not

constitute an absence of good faith as defined by Section 1.201(b)(20).

       AAS and EagleOne also argue that they had an “express agreement” with the Bank

whereby the Bank agreed to return the funds connected with the fraudulent transactions. They

point out that the Bank did reimburse the accounts initially, but later reversed the reimbursement

transactions and thereby breached the express agreement. The Bank contends that the original

reimbursement was conditional and was based on the written agreement of the parties:

       Our payment of any debit Entry, returned credit Entry or credit Reversal is
       provisional until we receive final settlement for the Entry or Reversal. If final
       settlement is not received, we are entitled to a refund and we may charge your
       account for the amount previously credited.

       Based on this portion of the agreement, together with the agreement previously recited, we

find that the written agreement could not be contradicted by evidence of subsequent oral

agreements. Thus, we overrule the contention that an oral “express agreement” to reimburse is

available to AAS and EagleOne.

       We find that the Bank’s agreements with AAS and EagleOne, in conjunction with Ryan’s

affidavits, established their affirmative defense as a matter of law.

                                                 17
IV.    No-Evidence Motion Was Appropriate

       We also find that the Bank’s no-evidence summary judgment was properly granted.

       A.      Standard of Review

       “A no-evidence summary judgment is essentially a pretrial directed verdict.” Roberts v.

Titus County Mem’l Hosp., 159 S.W.3d 764, 769 (Tex. App.—Texarkana 2005, pet. denied).

Therefore, we apply the same legal sufficiency standard in reviewing a no-evidence summary

judgment as we apply in reviewing a directed verdict. Id. (citing Wal–Mart Stores, Inc. v.

Rodriguez, 92 S.W.3d 502, 506 (Tex. 2002)). We must determine whether AAS and EagleOne

produced any evidence of probative force to raise a fact issue on the material questions presented.

Id. (citing Woodruff v. Wright, 51 S.W.3d 727, 734 (Tex. App.—Texarkana 2001, pet. denied)).

We consider all the evidence in the light most favorable to AAS and EagleOne, disregarding all

contrary evidence and inferences. Id. (citing Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d
706, 711 (Tex. 1997)).

       A no-evidence summary judgment is improperly granted if the nonmovant presents more

than a scintilla of probative evidence to raise a genuine issue of material fact. Id. More than a

scintilla of evidence exists when the evidence “rises to a level that would enable reasonable and

fair-minded people to differ in their conclusions.” Id. (quoting Havner, 953 S.W.2d at 711).

       B.      DTPA

                                                18
       In its second amended petition, AAS and EagleOne argued that the Bank engaged in

deceptive trade practices. The following is an excerpt of their petition:

       Also, in connection with its advertising and providing banking services to
       Plaintiffs, BOA made express and/or implied representations and warranties
       regarding these services. By allowing the fraudulent transfers of funds from
       Plaintiffs’ accounts and by failing and/or refusing to reimburse Plaintiffs for the
       funds lost, BOA breached such representations and warranties. In addition to any
       liability BOA may have for breaching express and/or implied warranties under the
       common law, BOA’s conduct also violates, inter alia, Sections 17.46(b)(5), (7),
       (9), (12), (20), (24) and 17.50 of the Texas Deceptive Trade Practices – Consumer
       Protection Act.

“The underlying purpose of the DTPA is to protect consumers against false, misleading, and

deceptive business practices, unconscionable actions, and breaches of warranty.” Frost Nat’l

Bank v. Heafner, 12 S.W.3d 104, 111 (Tex. App.—Houston [1st Dist.] 1999, pet. denied) (citing

TEX. BUS. & COM. CODE ANN. § 17.44).

       AAS and EagleOne argue that the source of the injury is not due to failure to enforce the

contract, but due to implied and express warranties and representations that the banking services

were safe and secure. The Bank complains that AAS and EagleOne may not repackage a breach

of contract claim into a violation of the DTPA claim.

       As we have previously mentioned in Canfield v. Bank One, Texas, N.A.:

       The DTPA does not define the term “warranty.” The act does not create any
       warranties; therefore, any warranty must be established independently of the act.
       Express warranties are imposed by the agreement of the parties to a contract.
       Implied warranties are created by operation of law and are grounded more in tort
       law than in contract law. Implied warranties are derived primarily from statute,
       although some have their origin in common law. The UCC is a statutory source of

                                                19
       implied warranties. The UCC imposes a number of warranties on customers and
       collecting banks in the payment process, but there is no warranty by a payer bank in
       favor of its customer. A bank’s implied promise that it will not pay checks on an
       unauthorized signature is not a warranty, but only an implied term of the contract.
       A mere breach of contract is not a violation of the DTPA. The actions of [the
       Bank] in paying checks on an unauthorized signature do not constitute “false,
       misleading or deceptive acts or practices in the conduct of any trade or commerce.”.
       ..

               An allegation of breach of contract, without more, does not constitute a
       false, misleading, or deceptive act in violation of the DTPA. Nonperformance
       under a contractual obligation does not equate to misrepresentation under the
       DTPA. If so, then every breach of contract would be converted to a DTPA claim.

51 S.W.3d 828, 838–39 (Tex. App.—Texarkana 2001, pet. denied) (internal citations omitted).

       Also, Crawford v. Ace Sign, Inc., reminded that courts should look to the source of a

defendant’s duty to act and the nature of the remedy sought by the plaintiff in deciding whether a

claim is a contract or DTPA action. 917 S.W.2d 12, 13 (Tex. 1996). In their brief, AAS and

EagleOne argue “[b]y allowing the fraudulent transfers of funds from plaintiffs’ accounts and by

failing and/or refusing to reimburse plaintiffs for the funds lost, the Bank breached such

representations and warranties in violation of Sections 17.46(b)(5), (7), (9), (12), (20), (24) and

17.50 of the DTPA.”       The nature of the remedy sought by AAS and EagleOne is the

reimbursement of the stolen funds. The source of any duty requiring such a remedy in this case

would either come from the written agreements between the parties or the alleged oral

reimbursement agreement Keehn asserted. These are matters of contract.

                                                20
            As in Crawford, statements that the product was safe and secure,6 assuming they were

made, did not cause any harm. Id. at 14. “When the injury is only the economic loss to the

subject of a contract itself the action sounds in contract alone.” Cont’l Dredging, Inc. v.

De-Kaizered, Inc., 120 S.W.3d 380, 389–90 (Tex. App.––Texarkana 2003, pet. denied).

            In this case, we find the trial court properly granted summary judgment in favor of the

Bank with respect to AAS and EagleOne’s DTPA claims. This point of error is overruled.

            C.       Fraud/Fraudulent Inducement

            AAS and EagleOne alleged that the Bank committed fraud and fraudulently induced them

into agreeing to the written contracts. They claim the Bank represented that the online services

would be “safe and secure,” that the Bank had always reimbursed them for losses due to fraudulent

transactions, and that the Bank told them to use their online services to avoid any further

fraudulent activity and to receive reimbursement for fraudulent transactions. AAS and EagleOne

argue that the Bank did not tell them the “dirty little secrets” that the Bank’s policy was not to

cover losses for commercial transactions, that it does not disclose the foregoing policy to its

customers, and that it is a “business decision” not to cover fraud losses.

            The elements of fraud are:

            (1) that a material representation was made; (2) the representation was false;
            (3) when the representation was made, the speaker knew it was false or made it
            recklessly without any knowledge of the truth and as a positive assertion; (4) the
            speaker made the representation with the intent that the other party should act upon

6
    We need not address whether this statement, if made, constituted puffing or opinion.

                                                           21
        it; (5) the party acted in reliance on the representation; and (6) the party thereby
        suffered injury.

        Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 338 (Tex.

2011) (quoting Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per

curiam)). To bring a claim for fraud in the inducement, a plaintiff must show the elements of

fraud and must show that he or she has been fraudulently induced to enter into a binding

agreement. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001). AAS and EagleOne bore the

burden to produce more than a scintilla of probative evidence to raise a genuine issue of material

fact.

        The summary judgment evidence cited by AAS and EagleOne is the following excerpt of

Keehn’s affidavit:

        Bank of America represented and warranted that the online services would be “safe
        and secure.”7 And as stated above, Bank of America had always reimbursed All
        American and/or EagleOne for any losses due to any fraudulent transactions. And
        it was Bank of America who told us that we had to use their online services to avoid
        any further fraudulent activity (and to continue Bank of America’s agreement,
        policy, and practice of reimbursing All American and EagleOne for any losses due
        to fraudulent activity). But for Bank of America’s representations and warranties
        that its online services were safe and secure and if All American and EagleOne
        would have known the information that was not disclosed as stated in the
        immediately preceding paragraph, we would not have used Bank of America’s
        online banking services.

7
 Keehn merely asserted that the Bank represented the product would be safe and secure, without indicating when this
occurred, or what Bank representative made this statement. Although there were allegations in the pleadings that
representations as to safety and security were made on the Bank’s website, no evidence was introduced with respect to
these allegations.

                                                         22
        We do not believe AAS and EagleOne’s evidence produces more than a scintilla of

probative evidence that the Bank made material representations of fact knowing them to be false or

asserting them recklessly without knowledge of their truth. Assuming, without deciding, that

representations of safety and security could constitute material misrepresentations of fact, and

even assuming falsity, no evidence suggests that the Bank was aware of any alleged falsity of the

statement, or made the statement recklessly without knowledge of its truth. See Heafner, 12
S.W.3d at 112, 114 (finding insufficient evidence of intent where bank made statement that

customer’s money would be “safe and secure in the bank”).

        Further, there is no allegation or evidence that the Bank ever promised AAS and EagleOne

that it would unconditionally reimburse any funds purportedly transferred without their consent if

they used the suggested security programs. The fact that the Bank had previously reimbursed

AAS and EagleOne for some transactions does not constitute material misrepresentations of fact.8

Recommendations to use online banking to increase safety and security also do not constitute

misrepresentations.      The “secrets” concerning the policy of reimbursement for fraudulent

transfers which the Bank allegedly failed to disclose cannot constitute a misrepresentation, as the

policy was fully explained in the contract the parties entered.

8
 Moreover, the mere failure to perform a contract is not evidence of fraud. See Heafner, 12 S.W.3d at 112 (citing
Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998)).

                                                       23
        We agree there is no evidence on relevant elements of fraud and fraudulent inducement

claims. This point of error is overruled.9

V.      Point of Error Relating to the Granting of the Motion for Bench Trial is Moot

        The Treasury Services Terms and Conditions contained the following waiver:

        [A]ny dispute or controversy that arises from an Electronic Funds Transfer Service
        will be decided by a judge without a jury in a United States of America federal or
        state court (except as you and we expressly agree otherwise in writing). This
        means that in these instances you waive any right to a trial by jury in any action or
        proceeding and agree that such action or proceeding will be tried before a judge
        without a jury.

The Deposit Agreement and Disclosures also contained a similar waiver. AAS and EagleOne

complain that these purported waivers of jury trial were not entered into knowingly and

voluntarily.

        Because we have determined that the trial court’s summary judgment was properly

granted, we overrule AAS and EagleOne’s last point of error as moot.

9
We note that AAS and EagleOne also asserted claims of negligence/negligent misrepresentation in their petitions.
However, they fail to address these claims in their appellate brief.

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VI.   Conclusion

      We affirm the judgment of the trial court.

                                           Jack Carter
                                           Justice

Date Submitted:      March 13, 2012
Date Decided:        April 20, 2012

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