From: "Saved by Windows Internet Explorer 7" Subject: Texas Judiciary Online - HTML Opinion Date: Sun, 18 Nov 2007 13:35:27 -0600 MIME-Version: 1.0 Content-Type: multipart/related; type="text/html"; boundary="----=_NextPart_000_0031_01C829E7.E179F6F0" X-MimeOLE: Produced By Microsoft MimeOLE V6.0.6000.16545 This is a multi-part message in MIME format. ------=_NextPart_000_0031_01C829E7.E179F6F0 Content-Type: text/html; charset="utf-8" Content-Transfer-Encoding: quoted-printable Content-Location: http://www.1stcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionId=84905 =EF=BB=BF
|Send this document to a=20 colleague||Close=20 This Window|
Opinion issued November 15,=20 2007
Court of = Appeals
First District = of=20 Texas
SHEKHANI ENTERPRISES, INC.,=20 Appellant
A/W MECHANICAL SERVICES, L.P.,=20 Appellee
On Appeal from the 334th District=20 Court
Harris County, Texas
Trial Court Cause No. = 2005-09215
MEMORANDUM=20 OPINIONThis appeal = concerns=20 the interpretation of the fraudulent indorsement provisions of = Uniform=20 Commercial Code section 3.405. See Tex. Bus. & Com. Code = Ann. =C2=A7=20 3.405 (Vernon 2002); U.C.C. =C2=A7 3-405 (1990). The trial court = concluded that=20 an employee who cashed company checks for his own benefit was not = an=20 =E2=80=9Cemployee with responsibility=E2=80=9D under section = 3.405. It also concluded that=20 the party paying the instruments (a check cashing facility) = =E2=80=9Cfailed to=20 exercise ordinary care regarding the [c]hecks,=E2=80=9D and, = finding that the=20 employer was not negligent, assessed liability against the check = cashing=20 facility. We affirm.
<= /SPAN>The=20 basic facts are uncontested on appeal. Appellee A/W Mechanical = Services,=20 L.P. provides commercial heating, ventilation, and air = conditioning repair=20 services. William Rittenberry was employed by A/W as a sales=20 representative, and among his duties was picking up checks from = A/W=E2=80=99s=20 clients and delivering the checks to A/W=E2=80=99s office. During = 2004,=20 Rittenberry fraudulently indorsed nine checks totaling $38,130.58 = from two=20 apartment complexes that were A/W=E2=80=99s clients. Rittenberry = cashed the checks=20 at a gasoline station owned by appellant Shekhani Enterprises, = Inc.=20 Although the checks were made payable to A/W, Rittenberry = presented them=20 to be cashed by signing his own name on the back of the checks. = A/W later=20 fired Rittenberry and filed criminal theft charges. After = Rittenberry=20 pleaded guilty to theft, A/W sued Shekhani on claims of conversion = and=20 liability under the Texas Theft Liability Act. Tex. Bus. & Com. Code = Ann. =C2=A7=20 3.405(b) (Vernon 2002); Tex. Civ.=20 Prac. & Rem. Code Ann. =C2=A7=C2=A7 = 134.001=E2=80=93.005 (Vernon=20 2005).
<= /SPAN>After=20 a bench trial, the district court rendered judgment that A/W = recover=20 $38,130.58 plus attorney=E2=80=99s fees from Shekhani, based on = Shekhani=E2=80=99s=20 conversion of checks made payable to A/W and the Texas Theft = Liability=20 Act. Shekhani brings two issues, alleging that (1) the trial = court=E2=80=99s=20 judgment in favor of A/W under Business and Commerce Code section = 3.405 is=20 against the great weight of the evidence and (2) the Texas Theft = Liability=20 Act claim was not supported by factually sufficient = evidence.
DiscussionIn issue 1, Shekhani = challenges=20 the judgment on the conversion claim, contending the evidence is = against=20 the great weight of the evidence. Shekhani challenges the trial = court=E2=80=99s=20 conclusion of law 9, which states, =E2=80=9CRittenberry was not an = A/W employee=20 with =E2=80=98responsibility,=E2=80=99 as that term is defined by = Section 3.405(b) of the=20 Texas Business and Commerce Code.=E2=80=9D Thus, Shekhani = challenges the factual=20 sufficiency of the evidence to support this conclusion of = law. In reviewing Shekhani=E2=80=99s = challenge to the=20 factual sufficiency of the evidence, this Court must consider and = weigh=20 all the evidence and should set aside the judgment only if it is = so=20 contrary to the overwhelming weight of the evidence as to be = clearly wrong=20 and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); = see=20 also Pool v. Ford Motor Co., 715 S.W.2d 629, 635 = (Tex.1986),=20 overruled on other grounds by Crown Life Ins. Co. v.=20 Casteel, 22 S.W.3d 378, 388 (Tex. 2000); In re = King=E2=80=99s Estate,=20 244 S.W.2d 660, 661 (Tex. 1951).
<= /SPAN>Business=20 and Commerce Code section 3.405 provides as follows:
=C2=A7 3.405. Employer=E2=80=99s = Responsibility for Fraudulent=20 Indorsement by Employee
(a) In this section:
(1) =E2=80=9CEmployee=E2=80=9D includes = an independent contractor=20 and employee of an independent contractor retained by the=20 employer.
(2) =E2=80=9CFraudulent = indorsement=E2=80=9D means:
(A) in the case of an instrument payable = to the=20 employer, a forged indorsement purporting to be that of the = employer;=20 or
&= nbsp; &n= bsp; &nb= sp; (B)=20 in the case of an instrument with respect to which the employer is = the=20 issuer, a forged indorsement purporting to be that of the person=20 identified as payee.
(3) =E2=80=9CResponsibility=E2=80=9D = with respect to instruments=20 means authority (i) to sign or indorse instruments on behalf of = the=20 employer, (ii) to process instruments received by the employer for = bookkeeping purposes, for deposit to an account, or for other = disposition,=20 (iii) to prepare or process instruments for issue in the name of = the=20 employer, (iv) to supply information determining the names or = addresses of=20 payees of instruments to be issued in the name of the employer, = (v) to=20 control the disposition of instruments to be issued in the name of = the=20 employer, or (vi) to act otherwise with respect to instruments in = a=20 responsible capacity. =E2=80=9CResponsibility=E2=80=9D does not = include authority that=20 merely allows an employee to have access to instruments or blank = or=20 incomplete instrument forms that are being stored or transported = or are=20 part of incoming or outgoing mail, or similar access.
(b) For the purpose of determining the = rights and=20 liabilities of a person who, in good faith, pays an instrument or = takes it=20 for value or for collection, if an employer entrusted an employee = with=20 responsibility with respect to the instrument and the employee or = a person=20 acting in concert with the employee makes a fraudulent indorsement = of the=20 instrument, the indorsement is effective as the indorsement of the = person=20 to whom the instrument is payable if it is made in the name of = that=20 person. If the person paying the instrument or taking it for value = or for=20 collection fails to exercise ordinary care in paying or taking the = instrument and that failure contributes to loss resulting from the = fraud,=20 the person bearing the loss may recover from the person failing to = exercise ordinary care to the extent the failure to exercise = ordinary care=20 contributed to the loss.
(c) Under Subsection (b), an indorsement = is made=20 in the name of the person to whom an instrument is payable = if:
(1) it is made in a name substantially = similar to=20 the name of that person; or
(2) the instrument, whether or not = indorsed, is=20 deposited in a depositary bank to an account in a name = substantially=20 similar to the name of that person.
Tex. Bus.=20 & Com. Code Ann. =C2=A7 3.405 (Vernon 2002). If = Rittenberry was an=20 employee with responsibility, then A/W may be barred from recovery = unless=20 A/W demonstrates to a factfinder that Shekhani did not exercise = ordinary=20 care in paying the checks. Id. =C2=A7 3.405(b); see = generally=20 Sw. Bank v. Info. Support Concepts, Inc., 149 S.W.3d 104 = (Tex.=20 2004) (discussing U.C.C. revised article 3). If Shekhani did not = exercise=20 ordinary care in paying the checks, then section 3.405(b) provides = for the=20 factfinder to allocate the loss based on how each party=E2=80=99s = failure to=20 exercise ordinary care contributed to the loss.
<= /SPAN>Shekhani=20 challenges the finding that Rittenberry was not a =E2=80=9Cperson = with=20 responsibility=E2=80=9D under section 3.405. Shekhani also = challenges the trial=20 court=E2=80=99s additional findings that Shekhani was negligent = and A/W was not.=20 In its conclusion of law 7, the trial court stated, =E2=80=9CA/W = did not fail to=20 exercise ordinary care in connection with the Checks.=E2=80=9D = This conclusion was=20 based on findings of fact 1 through 17, which Shekhani does not=20 specifically attack. Instead, Shekhani attacks the factual = sufficiency of=20 conclusion of law 7, as well as conclusions 8, 9, 14, and = 15:
8.No act or omission on the part of A/W=20 substantially contributed to Rittenberry=E2=80=99s forgery of the=20 Checks.
9.Rittenberry was not an A/W employee = with=20 =E2=80=9Cresponsibility,=E2=80=9D as that term is defined by = Section 3.04(b) of the Texas=20 Business and Commerce Code.
. . . .
14.A/W did not fail to exercise ordinary = care in=20 connection with the procedure for handling the Checks or in any = other=20 regard pertinent to the loss at issue here.
15.A/W=E2=80=99s conduct in no way = contributed to the=20 forged signature on the Checks.
<= /SPAN>In=20 its brief, Shekhani claims the following to support its claim that = the=20 judgment is based on factually insufficient evidence: (1) = Rittenberry=20 picked up checks from A/W=E2=80=99s clients as part of his job and = at his=20 discretion; (2) A/W had no internal controls in place which = allowed it to=20 monitor when or if Rittenberry picked up a check; and (3) A/W knew = Rittenberry was unable to meet his day-to-day expenses, and A/W = had give=20 Rittenberry advances on his salary. However, there was also = testimony that=20 (1) Rittenberry had a good work history before he began = fraudulently=20 indorsing checks, (2) he had no authority to sign, indorse, = dispose of, or=20 otherwise process incoming checks payable to A/W, (3) he also had = no=20 authority over outgoing checks, (4) he endorsed the checks in his = own=20 name, and (5) Shekhani never attempted to verify whether = Rittenberry was=20 authorized to endorse A/W checks.
<= /SPAN>After=20 reviewing the record, we hold that the portion of the judgment = based on=20 findings of fact 1 through 17 is not against the great weight and=20 preponderance of the evidence. Because the trial court=E2=80=99s = conclusion that=20 A/W did not fail to exercise ordinary care is not based on = factually=20 insufficient evidence, and Shekhani did not challenge that = conclusion on=20 appeal, we need not reach the factual sufficiency challenge to the = trial=20 court=E2=80=99s conclusion of law 9, which states, = =E2=80=9CRittenberry was not an A/W=20 employee with =E2=80=98responsibility,=E2=80=99=E2=80=9D because = it would not change the trial=20 court=E2=80=99s judgment, which is independently supported by the = trial court=E2=80=99s=20 conclusions that Shekhani was negligent and acted with conscious=20 indifference and that A/W was not negligent. The trial court, = thus, has=20 already allocated the loss based on how each party=E2=80=99s = failure to exercise=20 ordinary care contributed to the loss under section 3.405(b) and = concluded=20 that all of the loss is attributable to Shekhani=E2=80=99s = conduct. See=20 Tex. Bus. & Com. Code = Ann. =C2=A7 3.405(b) (Vernon 2002) (noting that even if = employee is=20 =E2=80=9Cemployee with responsibility,=E2=80=9D =E2=80=9Cthe = person bearing the loss may recover=20 from the person failing to exercise ordinary care to the extent = the=20 failure to exercise ordinary care contributed to the = loss=E2=80=9D). We therefore=20 overrule issue 1.
<= /SPAN>In=20 issue 2, Shekhani claims the judgment based on the Texas Theft = Liability=20 Act claim was not supported by factually sufficient evidence. = See=20 Tex. Civ. Prac. & = Rem. Code=20 Ann. =C2=A7=C2=A7 134.001=E2=80=93.005 (Vernon 2005). This = is an alternative ground=20 to support the trial court=E2=80=99s judgment. We need not reach = issue 2 because=20 we have already overruled Shekhani=E2=80=99s challenge to the = judgment based on=20 conversion.
ConclusionWe affirm the trial = court=E2=80=99s=20 judgment.
&= nbsp; &n= bsp; &nb= sp; &nbs= p;  = ; Sam=20 Nuchia
&= nbsp; &n= bsp; &nb= sp; &nbs= p;  = ; Justice
Panel consists of Justices Nuchia, = Hanks, and=20 Bland.