Angela Ford v. Faisal Shah
532 S.W.3d 638
| Ky. | 2017Background
- Angela Ford, an attorney, placed large fen-phen legal fees into two LLCs (Villa Paridisio and ATI Ventures) and designated her lawyer, Seth Johnston, as sole signatory on those LLC bank accounts.
- Johnston also represented Harold and Kathleen Baerg in a §1031 exchange and controlled an intermediary account (Emerald Riverport) for their sale proceeds.
- Johnston misappropriated funds as part of an extensive fraud scheme, using funds from Ford's LLC accounts to complete the Baergs’ purchase and to buy a cashier's check that ultimately funded Faisal Shah's deposit.
- Ford sued Johnston, the Baergs, and Shah for conversion; the trial court granted summary judgment for Ford against all defendants.
- The Court of Appeals reversed as to the Baergs and Shah, holding Ford lacked legal title and possessory rights at the time of the transfers.
- The Kentucky Supreme Court affirmed the Court of Appeals and remanded with directions to enter summary judgment for the Baergs and Shah, finding Johnston had apparent authority to transfer funds and that title passed to the transferees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ford had legal title to the funds at the time of transfer | Ford: funds remained her property; Johnston's acts were wrongful so title never passed | Defendants: Johnston was sole signatory with apparent authority; transfers validly divested Ford of title | Held: No—title passed when banks accepted payment orders or when cashier's check was negotiated; Ford lost title |
| Whether Ford had possessory right to funds at time of alleged conversion | Ford: retained right to possess despite unauthorized transfers | Defendants: apparent authority and bank acceptance terminated Ford's possessory rights | Held: No—Ford lacked possessory rights when transfers/negotiations completed |
| Whether third parties (Baergs, Shah) exercised dominion sufficient for conversion | Ford: defendants received and retained proceeds; thus conversion | Defendants: they received good-title transfers from a bank/negotiable instrument; no conversion | Held: Conversion elements fail because first two elements (title, possession) not met; judgment for defendants |
| Whether Johnston should be treated as a "thief" so transferred funds remain Ford's | Ford: theft rule prevents transfer of title by a thief to a bona fide recipient | Defendants: Johnston had apparent authority; his acts are treated as principal's; not a thief for this purpose | Held: Johnston not treated as a thief here; apparent authority means transfers validly divested Ford |
Key Cases Cited
- Abbott v. Chesley, 413 S.W.3d 589 (Ky. 2013) (background precedent cited)
- Kentucky Ass'n of Ctys. All Lines Fund Trust v. McClendon, 157 S.W.3d 626 (Ky. 2005) (elements of conversion)
- Mark D. Dean, P.S.C. v. Commonwealth Bank & Trust Co., 434 S.W.3d 489 (Ky. 2014) (apparent authority and bank reliance)
- Regions Bank v. Provident Bank, Inc., 345 F.3d 1267 (11th Cir. 2003) (UCC Article 4A title transfer on acceptance of payment order)
- Dean Witter Reynolds, Inc. v. Variable Annuity Life Ins. Co., 373 F.3d 1100 (10th Cir. 2004) (banking law on deposit/title transfer)