978-1285770178 Case Printout Case CPC-15-06 Part 1

United States Court of Appeals,

Fifth Circuit.

Vernon T. JONES, Jr., as Receiver for W Financial Group, L.L.C., Plaintiff–Appellee,

to cashier’s check purchased by securities group that bank reaccepted for deposit into account other than that of the

named payee, without proper endorsement. The United States District Court for the Northern District of Texas, Sam

A. Lindsay, J., 2011 WL 710877, granted receiver’s motion for summary judgment and found bank liable for con-

version. Bank appealed.

(4) receiver had standing to bring suit on behalf of securities group to recover funds for conversion of cashier’s

check.

Affirmed.

West Headnotes

52k189 k. Issue and payment of drafts. Most Cited Cases

Third party was not entitled to enforce cashier’s check, and thus bank’s payment on cashier‘s check constituted

conversion under Texas law; third party never obtained securities group‘s right to enforce cashier’s check. V.T.C.A.,

Bus. & C. §§ 3.203(b), 3.301(ii).

Bank’s act of depositing cashier’s check into third party’s account without necessary endorsement constituted

conversion under Texas law. V.T.C.A., Bus. & C. § 3.420(a).

[3] Banks and Banking 52 140(2)

52 Banks and Banking

52III Functions and Dealings

52III(C) Deposits

52k137 Payment of Checks

52k140 Obligation of Bank to Payee or Holder

52k140(2) k. Check paid on unauthorized indorsement. Most Cited Cases

Banks and Banking 52 172

52 Banks and Banking

52III Functions and Dealings

52III(F) Exchange, Money, Securities, and Investments

52k189 k. Issue and payment of drafts. Most Cited Cases

52III(F) Exchange, Money, Securities, and Investments

52k189 k. Issue and payment of drafts. Most Cited Cases

In the case of a remitter, the depository bank is technically dealing with the funds of the issuing bank, yet it is

the remitter that has the direct interest in the funds; therefore, if the depository bank acts wrongfully with a cashier’s

check, the remitter will be injured and will have an incentive to sue the depository bank.

52k189 k. Issue and payment of drafts. Most Cited Cases

Securities group’s failure to notify bank of conversion of cashier’s check under terms of account agreement did

not preclude receiver from making conversion claim against bank for bank’s acceptance of cashier’s check for depos-

it into account other than that of named payee, without proper endorsement; securities group could not have discov-

ered missing endorsement on cashier’s check through review of its statement. V.T.C.A., Bus. & C. § 4.406(a).

The doctrine of in pari delicto embodies the common-law notion that a plaintiff’s recovery may be barred by his

own wrongful conduct, and is undergirded by the concerns, first, that courts should not lend their good offices to

mediating disputes among wrongdoers, and second, that denying judicial relief to an admitted wrongdoer is an effec–

13k4 k. Illegal or immoral transactions. Most Cited Cases

In pari delicto is an equitable, affirmative defense, which is controlled by state common law.

[11] Corporations and Business Organizations 101 1011

[12] Corporations and Business Organizations 101 1011

101 Corporations and Business Organizations

101I Nature and Theory of Incorporation

101IX Corporate Powers and Liabilities

101IX(B) Representation of Corporation by Corporate Principals

101k2301 Application of Principle of Agency to Corporations

101k2303 k. Corporation acts through officers or agents. Most Cited Cases

Under Texas law, a corporation is separate and distinct from the members who comprise it, with attributes,

101XI(D) Receivership

101k2920 Powers, Duties and Liabilities of Receiver

101k2922 k. Representing creditors and shareholders. Most Cited Cases

Under Texas law, a receiver is the representative and protector of the interests of all persons, including credi–

tors, shareholders and others, in the property of the receivership.

[14] Corporations and Business Organizations 101 2921

101 Corporations and Business Organizations

101XI Insolvency and Receivers

101XI(D) Receivership

101k2920 Powers, Duties and Liabilities of Receiver

101k2921 k. In general. Most Cited Cases

101XI(D) Receivership

101k2920 Powers, Duties and Liabilities of Receiver

101k2922 k. Representing creditors and shareholders. Most Cited Cases

Under Texas law, although a receiver generally has no greater powers than the corporation had as of the date of

the receivership, it is well established that when the receiver acts to protect innocent creditors he can maintain and

349BI Federal Regulation

349BI(E) Remedies

349BI(E)3 Receivership

349Bk182 k. In general. Most Cited Cases

District courts may appoint receivers as part of their broad powers to remedy violations of federal securities

ant–Appellant.

Appeal from the United States District Court for the Northern District of Texas.

Before KING, JOLLY, and WIENER, Circuit Judges.

deposit into an account other than that of the named payee, without the proper endorsement. The district court found

Wells Fargo liable for conversion. On appeal, Wells Fargo argues that the court erred in finding that Wells Fargo

converted the check, and in rejecting certain defenses. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In September 2006, Adley Abdulwahab (“Wahab”) opened a business cash management account on behalf of

Spring, Texas. Wahab deposited the check into the Wells Fargo account of a separate entity, CA Houston Invest-

ment Center, L.L.C. (“CA Houston”). Wahab was CA Houston’s managing member, and the only authorized signer

on its account. The Lateefs never received or endorsed the cashier’s check. Rather, Wells Fargo stamped the follow-

ing on the back of the check: “CREDITED TO THE ACCOUNT OF WITHIN NAMED PAYEE LACK OF EN-

DORSEMENT GUARANTEED WELLS FARGO BANK, N.A.”

stitute all actions or proceedings necessary to recover W Financial’s assets, and to file such actions in the United

States District Court for the Northern District of Texas.

FN1. According to the SEC, W Financial had illegally conducted an unregistered securities offering, raising

$17.9 million from the sale of investments to at least 182 people. The securities did not have the quality,

safety, or liquidity that W Financial represented to investors.

II. STANDARD OF REVIEW

We review a district court’s grant of summary judgment de novo, applying the same standard as the district

court. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir.2007). Summary judgment is proper only

if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” FED.R.CIV.P. 56(a). When reviewing a summary judgment motion, we draw all reasonable

[3] Banks and Banking 52 140(2)

52 Banks and Banking

52III Functions and Dealings

52III(C) Deposits

52k137 Payment of Checks

52k140 Obligation of Bank to Payee or Holder

52k140(2) k. Check paid on unauthorized indorsement. Most Cited Cases

Banks and Banking 52 172

52 Banks and Banking

52III Functions and Dealings

52III(F) Exchange, Money, Securities, and Investments

52k189 k. Issue and payment of drafts. Most Cited Cases

52III(F) Exchange, Money, Securities, and Investments

52k189 k. Issue and payment of drafts. Most Cited Cases

In the case of a remitter, the depository bank is technically dealing with the funds of the issuing bank, yet it is

the remitter that has the direct interest in the funds; therefore, if the depository bank acts wrongfully with a cashier’s

check, the remitter will be injured and will have an incentive to sue the depository bank.

52k189 k. Issue and payment of drafts. Most Cited Cases

Securities group’s failure to notify bank of conversion of cashier’s check under terms of account agreement did

not preclude receiver from making conversion claim against bank for bank’s acceptance of cashier’s check for depos-

it into account other than that of named payee, without proper endorsement; securities group could not have discov-

ered missing endorsement on cashier’s check through review of its statement. V.T.C.A., Bus. & C. § 4.406(a).

The doctrine of in pari delicto embodies the common-law notion that a plaintiff’s recovery may be barred by his

own wrongful conduct, and is undergirded by the concerns, first, that courts should not lend their good offices to

mediating disputes among wrongdoers, and second, that denying judicial relief to an admitted wrongdoer is an effec–

13k4 k. Illegal or immoral transactions. Most Cited Cases

In pari delicto is an equitable, affirmative defense, which is controlled by state common law.

[11] Corporations and Business Organizations 101 1011

[12] Corporations and Business Organizations 101 1011

101 Corporations and Business Organizations

101I Nature and Theory of Incorporation

101IX Corporate Powers and Liabilities

101IX(B) Representation of Corporation by Corporate Principals

101k2301 Application of Principle of Agency to Corporations

101k2303 k. Corporation acts through officers or agents. Most Cited Cases

Under Texas law, a corporation is separate and distinct from the members who comprise it, with attributes,

101XI(D) Receivership

101k2920 Powers, Duties and Liabilities of Receiver

101k2922 k. Representing creditors and shareholders. Most Cited Cases

Under Texas law, a receiver is the representative and protector of the interests of all persons, including credi–

tors, shareholders and others, in the property of the receivership.

[14] Corporations and Business Organizations 101 2921

101 Corporations and Business Organizations

101XI Insolvency and Receivers

101XI(D) Receivership

101k2920 Powers, Duties and Liabilities of Receiver

101k2921 k. In general. Most Cited Cases

101XI(D) Receivership

101k2920 Powers, Duties and Liabilities of Receiver

101k2922 k. Representing creditors and shareholders. Most Cited Cases

Under Texas law, although a receiver generally has no greater powers than the corporation had as of the date of

the receivership, it is well established that when the receiver acts to protect innocent creditors he can maintain and

349BI Federal Regulation

349BI(E) Remedies

349BI(E)3 Receivership

349Bk182 k. In general. Most Cited Cases

District courts may appoint receivers as part of their broad powers to remedy violations of federal securities

ant–Appellant.

Appeal from the United States District Court for the Northern District of Texas.

Before KING, JOLLY, and WIENER, Circuit Judges.

deposit into an account other than that of the named payee, without the proper endorsement. The district court found

Wells Fargo liable for conversion. On appeal, Wells Fargo argues that the court erred in finding that Wells Fargo

converted the check, and in rejecting certain defenses. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In September 2006, Adley Abdulwahab (“Wahab”) opened a business cash management account on behalf of

Spring, Texas. Wahab deposited the check into the Wells Fargo account of a separate entity, CA Houston Invest-

ment Center, L.L.C. (“CA Houston”). Wahab was CA Houston’s managing member, and the only authorized signer

on its account. The Lateefs never received or endorsed the cashier’s check. Rather, Wells Fargo stamped the follow-

ing on the back of the check: “CREDITED TO THE ACCOUNT OF WITHIN NAMED PAYEE LACK OF EN-

DORSEMENT GUARANTEED WELLS FARGO BANK, N.A.”

stitute all actions or proceedings necessary to recover W Financial’s assets, and to file such actions in the United

States District Court for the Northern District of Texas.

FN1. According to the SEC, W Financial had illegally conducted an unregistered securities offering, raising

$17.9 million from the sale of investments to at least 182 people. The securities did not have the quality,

safety, or liquidity that W Financial represented to investors.

II. STANDARD OF REVIEW

We review a district court’s grant of summary judgment de novo, applying the same standard as the district

court. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir.2007). Summary judgment is proper only

if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” FED.R.CIV.P. 56(a). When reviewing a summary judgment motion, we draw all reasonable