978-1285770178 Case Printout Case CPC-15-06 Part 2

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FN5. The UCC official commentary is an authoritative interpretation of the Code. Texas courts “are mind-

ful of the official comments,” as they “provide valuable guidance to the meaning and purpose of the Code

as enacted in Texas.” Morgan Bldgs. & Spas, Inc. v. Turn–Key Leasing, Ltd., 97 S.W.3d 871, 880

Id. § 3.301 cmt. (emphasis added).

The only conceivable manner in which CA Houston could have acquired W Financial’s enforcement rights in

this case is through a transfer of the cashier‘s check from W Financial to CA Houston. TEX. BUS. & COM.CODE §

3.203(b) (“Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of

the transferor to enforce the instrument, including any right as a holder in due course.”). There is, however, no evi-

lant abandons all issues not raised and argued in its initial brief on appeal.”) (citations omitted). As such, CA Hou-

ston never obtained W Financial’s right to enforce the instrument. Because Wells Fargo made payment on the cash-

necessary endorsement.

The depository bank is ultimately liable in the case of a forged or missing endorsement because of its warranty to

the payor bank under section 4.208(a)(1). A depository bank warrants to a payor bank to which a missing en-

dorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to

enforce the draft. Thus, a depository bank is liable for conversion as a matter of law when it accepts for deposit in-

to a third party’s account checks that were not endorsed in the name of the payee.

Id. at 465–66 (citations omitted) (first emphasis added).FN6 The court then concluded that “Southwest Bank

consistently overlooked the missing endorsements … and in doing so converted the checks pursuant to section

3.420.” Id. at 466. The Supreme Court of Texas affirmed. 149 S.W.3d 104 (Tex.2004). Southwest Bank relied in

large part upon the official UCC commentary, which provides that Section 3.420(a) “covers cases in which a deposi-

tary or payor bank takes an instrument bearing a forged indorsement.” TEX. BUS. & COM.CODE § 3.420 cmt. 1.

The court found no relevant distinction between an instrument with a missing endorsement and one with a forged

FN7. Other jurisdictions agree. See, e.g., Kelly v. Cent. Bank & Trust Co. of Denver, 794 P.2d 1037, 1042

(Colo.App.1989) (“[A] check is converted when it is paid on a forged indorsement…. If such payment oc-

curs on a check with no indorsement or a missing indorsement, it is the legal equivalent of payment on a

forged instrument.”); Gen. Motors Acceptance Corp. v. Abington Cas. Ins. Co., 413 Mass. 583, 602 N.E.2d

1085, 1089 n. 8 (1992) (“A missing endorsement is equivalent to a forged endorsement for the purposes of

count, without the Lateefs‘ endorsement, constitutes conversion as stated in Southwest Bank. CA Houston’s status as

a bank customer does not relieve Wells Fargo of its obligation under the UCC to ensure that instruments are proper-

ly endorsed. See Sw. Bank, 85 S.W.3d at 465 (“[T]he UCC generally places the burden on the first bank in the col-

lection chain to insure the requisite endorsements are present and authentic….”); see also Tubin v. Rabin, 389

F.Supp. 787, 789 (N.D.Tex.1974) (“The statutory scheme of the U.C.C. requires a depository or collecting bank to

of a cashier’s check, as the “true owner” of that check, to recover from the collecting bank for conversion on a

fraudulently endorsed cashier’s check. Id. at 194–96. This is consistent with other authority in this area. As one court

has reasoned, “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.” Old Republic

Nat‘l Title Ins. Co. v. Bank of E. Asia Ltd., 291 F.Supp.2d 60, 68 (D.Conn.2003); see also Lawrence v. Cent. Plaza

Bank & Trust Co., 469 So.2d 201, 204 (Fla.App. 2 Dist.1985) (holding that purchaser of a cashier’s check had stand-

ing to bring conversion claim against bank based upon forged endorsement until delivery to the named payee) (cit-

ing Tubin, 382 F.Supp. 193); see also WILLIAM D. HAWKLAND & LARY LAWRENCE, 6 HAWKLAND UCC

SERIES § 3–420:4 (Nov.2011) (“While it makes little sense to say that a drawer has a property right in his own

promise, it makes a lot of sense to say that the remitter, prior to delivery, has a property right in the issuing bank’s

promise. A remitter should be found to have an action for conversion on a bank check.”); Gregory E. Maggs, De-

termining the Rights and Liabilities of the Remitter of a Negotiable Instrument: A Theory Applied to Some Unsettled

Questions, 36 B.C. L.REV. 619, 654 (1995) (“Section 3–420(a) ... excludes drawers and persons who never received

cashier’s checks lacked standing to sue bank for conversion because they had no rights in the instruments);

Lassen v. First Bank Eden Prairie, 514 N.W.2d 831, 838–39 (Minn.Ct.App.1994) (holding that first holder

of cashier‘s checks lacked standing to bring conversion claim after delivery of the checks to another party,

but recognizing that the checks were the holder‘s property “after he purchased them from First Bank”);

C.A.L., Inc. v. Worth, 813 S.W.2d 12, 16 (Mo.Ct.App.W.D.1991) (“[T]he remitter, who has purchased a

[5] Wells Fargo asserts that W Financial should have discovered and reported the conversion of the cashier’s

check after reviewing its February 2007 account statement. Wells Fargo maintains that W Financial’s failure to do so

precludes the Receiver from pursuing the conversion claim, as the reporting obligation in its Account Agreement

constitutes a condition precedent. We disagree.

As noted above, W Financial signed an Account Agreement when it opened its account with Wells Fargo. This

ment, “release[s] the Bank from all liability for the Items charged to your Account and for all other transactions cov-

ered by the statement or other Account–Related Information.”

[6] Account agreements, such as the one here, are governed by Section 4.406 of the Texas Business and Com-

merce Code.FN9 Section 4.406(a) provides, “[a] bank that sends or makes available to a customer a statement of ac-

count showing payment of items for the account shall either return or make available to the customer the items paid

C. In Pari Delicto Doctrine

[7] Wells Fargo argues that it was entitled to summary judgment based on the in pari delicto doctrine, as Wahab

was primarily at fault for the conversion of the cashier’s check. Furthermore, it contends that it is incorrect to differ-

tiff’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 effective means of deterring illegality.” Rogers v. McDorman, 521 F.3d 381, 385

(5th Cir.2008) (internal quotation marks and footnote omitted). A court will not extend aid to either of the parties to

a criminal act or listen to their complaints against each other but will leave them where their own acts have placed

ated the company. “The legal concept that a corporation is a distinct entity separate from its stockholders, officers

and directors is fundamental to the law of corporation.” Wynne v. Adcock Pipe & Supply, 761 S.W.2d 67, 68

(Tex.App.—San Antonio 1988) (citation omitted). A corporation is “separate and distinct from the members who

comprise it, with attributes, rights, and liabilities of its own,” even though it must act through its officers or agents.

Hirsch v. Tex. Lawyers’ Ins. Exch., 808 S.W.2d 561, 563 (Tex.App.—El Paso 1991); see also Singh v. Duane Mor–

shareholders and others, in the property of the receivership.” Sec. Trust Co. of Austin v. Lipscomb Cnty., 142 Tex.

572, 180 S.W.2d 151, 158 (1944). The receiver “has a duty to pursue a corporation’s claims.” Akin, Gump, Strauss,

Hauer and Feld, L.L.P. v. E–Court, Inc., No. 03–02–00714–CV, 2003 WL 21025030, at *5 (Tex.App.—Austin

2003) (quoting Burnett v. Chase Oil & Gas, Inc., 700 S.W.2d 737, 741 (Tex.App.—Tyler 1985, no writ)). Although

a receiver generally “has no greater powers than the corporation had as of the date of the receivership,” it is well

of federal securities laws.” SEC v. Byers, 609 F.3d 87, 92 (2d Cir.2010). As one court has explained,

“[r]eceivers appointed at the SEC’s request are equipped with a variety of tools to help preserve the status

quo while the various transactions [are] unraveled … to obtain an accurate picture of what transpired…. [A]

primary purpose of appointing a receiver is to conserve the existing estate…. Receivers are directed to mar-

shal the assets of the defendant, and prevent the dissipation of [the] defendant’s assets pending further ac-