Coastal Agricultural Supply, Inc. v. JP Morgan Chase Bank, N.A.
759 F.3d 498
5th Cir.2014Background
- Coastal Agricultural Supply, Inc. sues Chase Bank after Hollaway embezzled over $2.5 million by depositing checks into his own Chase account.
- Hollaway opened a business under Coastal’s name and used 964 checks to steal funds, including ATM deposits.
- Coastal settled with Hollaway for at least property and assets; value contested between $313,311 and $556,100.
- Coastal filed suit in district court asserting conversion, negligence under UCC, and money had and received; seeks damages and equitable relief.
- Chase Bank moves for partial summary judgment asserting § 3.405 as defense and seeks a settlement credit of $556,100; district court grants in part.
- On appeal, the district court certified two controlling questions of law under 28 U.S.C. § 1292(b), which Coastal appealed: (i) § 3.405 can be an affirmative defense to money had and received, and (ii) settlement credits reduce the nonsettling defendant’s liability rather than Coastal’s total loss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 3.405 can serve as an affirmative defense to money had and received | Coastal concedes the issue can be answered in the affirmative | Chase Bank argues district court correctly applied § 3.405 | Affirmative defense applies; district court did not err |
| How settlement credits should be applied under the one-satisfaction rule | Settlement should offset Coastal’s total loss | Credit should reduce Chase Bank’s liability, not Coastal’s total loss | Settlement credit must reduce nonsettling defendant’s liability with allocation on remand |
Key Cases Cited
- Bryan v. Citizens National Bank in Abilene, 628 S.W.2d 761 (Tex. 1982) (UCC interaction with common law restitution; non-displacement framework)
- Peerless Ins. Co. v. Texas Commerce Bank-New Braunfels, N.A., 791 F.2d 1177 (5th Cir. 1986) (UCC modifications of common law in fraud/indirect indorsement contexts)
- Crown Life Insurance Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000) (allocation of settlement credits between joint and separate damages; allocation burden)
- AMX Enterprises, Inc. v. Bank One, N.A., 196 S.W.3d 202 (Tex.App.-Houston [1st Dist.] 2006) (one-satisfaction rule applies to a multi-party settlement scenario)
- Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) (foundational one-satisfaction rule principles)