Court Opinion

ID: 2895157
Source: CourtListenerOpinion
Date Created: 2015-09-07 23:49:21.315423+00
Date Added: 2024-06-11T11:34:59.964373
License: Public Domain

NO. 07-05-0426-CV

                            IN THE COURT OF APPEALS

                     FOR THE SEVENTH DISTRICT OF TEXAS

                                    AT AMARILLO

                                       PANEL D

                               SEPTEMBER 6, 2007
                         ______________________________

                     PANHANDLE PACKING AND GASKET, INC.,
         Individually and d/b/a ARROW BEARINGS & INDUSTRIAL SUPPLY,
         and NAMMCO FABRICATION, and LUBBOCK GASKET & SUPPLY,
                      and LONE STAR GASKET & SUPPLY, INC.,

                                                                   Appellants

                                           v.

               FIRST UNITED BANK, Individually and as Successor to
                       SHADOW HILLS NATIONAL BANK,

                                                                   Appellee
                       _________________________________

            FROM THE 72ND DISTRICT COURT OF LUBBOCK COUNTY;

              NO. 2001-513,275; HON. J. BLAIR CHERRY, PRESIDING
                        _____________________________

                              Memorandum Opinion
                        _______________________________

Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.

      Panhandle Packing and Gasket, Inc., individually and d/b/a Arrow Bearings &

Industrial Supply, Nammco Fabrication, Lubbock Gasket & Supply, and Lone Star Gasket

& Supply, Inc. (hereinafter collectively referred to as Lubbock Gasket) appeal from a

summary judgment granted in favor of First United Bank, individually and as successor to
Shadow Hills National Bank (hereinafter referred to as First United). Lubbock Gasket also

appeals from the trial court’s decision to deny its motion for summary judgment upon its

breach of contract claim against First United. We affirm the trial court’s order.

       Prologue

       This appeal is the second chapter in the embezzlement case involving an employee

of Lubbock Gasket, namely Betty Ann Ebbs Kimbrell. See First United Bank v. Panhandle

& Gasket, Inc., 190 S.W.3d 10 (Tex. App.–Amarillo 2005, no pet.). During her tenure with

Lubbock Gasket, Kimbrell would endorse and cash checks which were made payable to

Lubbock Gasket. The checks in question were payroll reimbursement checks written to

Lubbock Gasket by subsidiaries of the company. The record discloses that Lubbock

Gasket would satisfy the IRS payroll tax obligations of its subsidiaries and then seek

reimbursement from them for the amounts paid. And, though the subsidiaries had their

own bank accounts, the treasurer and chief financial officer of Lubbock Gasket or another

signatory of that company would be the one to execute the reimbursement checks on

behalf of the subsidiaries.

       Evidence further depicted that the same chief financial officer not only had authority

to draft on each account but also received and reviewed the monthly bank statements and

cancelled checks of both Lubbock Gasket and its subsidiaries. After perusing them, he

would forward the documents to Kimbrell. Though he personally made no effort to

compare and reconcile the bank statements and checks of the various companies, he

nonetheless conceded that if he had, he would have discovered Kimbrell’s misdeeds.

Forwarding the entities’ bank statements to an accountant also would have disclosed the

malfeasance, according to Lubbock Gasket’s treasurer.

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       Eventually, Lubbock Gasket discovered Kimbrell’s scheme, and fired her.

Thereafter, she and First United were sued by the company to recover the monies taken.

            Considering Entire Case and Failure to Grant Lubbock Gasket’s
                            Motion for Summary Judgment

       We initially address the first and third points of error given their interdependence.

Through the former, Lubbock Gasket contends that the trial court erred in considering both

the elements of liability and damages on remand viz its claim of breached contract. This

is purportedly so because we had resolved the matter of liability (or breach) in the first

appeal and remanded solely to have the trial court consider damages. Concerning the

latter element, Lubbock Gasket asserts through its third issue that it showed itself entitled

to judgment since it established how much damages it suffered via its motion for summary

judgment. Yet, we note that its motion did not address the topic of breach. This may be

so since it believed that we had settled the issue of breach during the first appeal, and

having allegedly resolved that element, it apparently believed that it need not have

addressed the matter again. We overrule both issues.

       As a result of the prior appeal, we reversed and rendered that portion of the trial

court’s judgment imposing liability on First United for its alleged conversion of property and

negligence. First United Bank v. Panhandle Packing & Gasket, Inc., 190 S.W.3d at 19-20.

However, that portion of the judgment “regarding Panhandle Packing’s contract claim on

its deposit agreement [was] reversed and the cause [was] remanded for further

proceedings.” Id. at 20. As can be seen, in remanding the proceeding we provided the

trial court with no specific instructions. When that occurs, the issue or cause of action

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remanded stands as if it had never been tried. In re Estate of Chavana, 993 S.W.2d 311,

315 (Tex. App.–San Antonio 1999, no pet.) (stating that when the appeal is reversed and

remanded without instructions, then the matter stands as if it has never been tried);

Hallmark v. Hand, 885 S.W.2d 471, 475-76 (Tex. App.–El Paso 1994, writ denied) (stating

the same). So, because the claim of breached contract had to be treated as if it had not

been tried, not only was the trial court obligated to address both the elements of liability

and damages but also Lubbock Gasket was required to address both in its summary

judgment motion before the trial court could even consider whether to grant a summary

judgment against First United. See TEX . R. CIV. P. 166a(c) (stating that the movant must

establish its entitlement to judgment on the issues “expressly set out in the motion”); Cook-

Pizzi v. Van Waters & Rogers, Inc., 94 S.W.3d 636, 643 (Tex. App.–Amarillo 2002, pet.

denied) (stating that the grounds on which the movant relies for summary judgment must

be stated in the motion).

        Summary Judgment for First United

        Next, we turn to the second and final issue pending for review. It concerns whether

the trial court erred in granting First United’s motion for summary judgment. We conclude

that it did not and overrule the issue.

        First United sought summary judgment on several grounds, one of which implicated

§4.406(f) of the Texas Business and Commerce Code and the doctrine of waiver.1 Section

4.406(f) states that:

        1
           Because several grounds were m entioned in First United’s m otion for sum m ary judgm ent and the
trial court did not specify upon which ground it relied in granting the m otion, it is encum bent upon Lubbock
Gasket to establish on appeal that none supported the decision. Carr v. Brasher, 776 S.W .2d 567, 569 (Tex.
1989).

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       Without regard to care or lack of care of either the customer or the bank, a
       customer who does not within one year after the statement or items are made
       available to the customer . . . discover and report the customer's unauthorized
       signature on or any alteration on the item is precluded from asserting against
       the bank the unauthorized signature or alteration.

TEX . BUS. & COM . CODE ANN . §4.406(f) (Vernon 2002). Statute permits the parties to modify

this provision and other portions of Chapter 4 of the Business and Commerce Code, in

certain respects, and the parties apparently did so here and included the changes in their

depository agreement. See id. §4.103 (stating that “the effect of the provisions of [chapter

4 of the Code] may be varied by agreement, but the parties . . . cannot disclaim a bank’s

responsibility for its lack of good faith or failure to exercise ordinary care . . . .”). Though

debate exists between the parties regarding which of two depository agreements admitted

into evidence controlled the outcome here, both nevertheless contain language imposing

upon the account owner (or Lubbock Gasket) a duty to report to First United certain

discrepancies or problems concerning its account. For instance, that which First United

deems controlling stated that Lubbock Gasket was to “carefully examine [its] statement and

report any errors, unauthorized withdrawals or transfers, forgeries, or alterations . . . within

60 days of when the statement [was] first made available [and if] no report is made . . .

within such time, [it] waive[d] [its] right to contest any withdrawals or transfers so disclosed

. . . .” In turn, the contract that Lubbock Gasket considers binding stated that the customer

was to “carefully examine [the] statement and report any errors, forgeries, or alterations to

[the bank] as soon as possible, but, in no event, later than 60 days after the statement is

made available. . . ; if no report is made . . . within such time, [it] waive[d] [its] right to

contest the payment of any items so disclosed . . . .” As can be seen by comparing the two

provisions, both encompass the reporting of “errors.” So too do both effectively result in the

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loss of any claim by the customer arising from the “errors” should those “errors” go

unreported within the prescribed time. And, in comparing these provisions to the allegations

and pivotal facts at issue, we cannot but hold that the circumstances before us fall within

the penumbra of those agreements.

       Lubbock Gasket complains of its bookkeeper omitting a restrictive endorsement, i.e.,

“for deposit only,” from the back of various checks, then presenting to First United those

checks for payment, and converting the cash proceeds received from First United.

Assuming arguendo that the bookkeeper was not authorized to so endorse the checks, the

undisputed evidence illustrates that Lubbock Gasket knew that she omitted the restrictive

phrase from the endorsement on various of the checks in question. Indeed, Lubbock

Gasket’s treasurer and chief financial officer discovered the omission while perusing

company bank statements. He then spoke with Kimbrell, was told by her that it involved

“only four or five checks a . . . month,” said nothing to First United about the purportedly

defective endorsement, and decided not to worry “about it.” This same officer also testified

that the missing deposits and machinations of Kimbrell could have been discovered had the

bank statements and checks of the several accounts over which he exercised control been

reconciled and compared.

       Next, and also assuming arguendo that First United was obligated to know of the

deficient endorsements (even though Lubbock Gasket’s chief financial officer opted not to

worry about them or inform First United), one cannot reasonably dispute that cashing the

checks instead of complying with an unmentioned restrictive endorsement constituted an

“error” on the part of First United. Moreover, and as previously mentioned, these missing

deposits were susceptible to discovery through reconciliation of the bank statements. Given

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this, Lubbock Gasket was obliged to report the “errors” within the time prescribed in the

deposit agreements, and it does not dispute on appeal whether it did so.2 See Willis v.

Willoughby, 202 S.W.3d 450, 452 (Tex. App.–Amarillo 2000, pet. denied) (stating that the

appellant had the burden to negate on appeal each potential ground for summary

judgment).

       In sum, Lubbock Gasket did not negate the validity of each ground upon which

summary judgment could have been founded. Since it did not, we affirm the decree. We

further restrict our holding to the specific facts involved in this case. No opinion is voiced

upon situations wherein the bank customer lacked access to and control over all the bank

statements and checks which would have disclosed the error.

                                                       Brian Quinn
                                                       Chief Justice

        2
         To the extent that Lubbock Gasket cites §4.406(e) of the Business and Com m erce Code as basis
for arguing that First United was barred from claim ing waiver because it acted in bad faith, we note that
§4.406(e) alludes to preclusion asserted under §4.406(d). First United, however, invoked preclusion under
§4.406(f), as m odified by the deposit agreem ent. So, §4.406(e) does not apply.

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