Vernon Jones, Jr. v. Wells Fargo Bank, N.A.
666 F.3d 955
5th Cir.2012Background
- Receiver filed suit against Wells Fargo for conversion and breach of contract over a January 29, 2007 cashier’s check purchased by W Financial Group (WFG).
- W Wahab, an authorized signer for WFG, withdrew funds to purchase the cashier’s check payable to the Lateefs and Wahab later deposited it into CA Houston’s account.
- Check was not endorsed by the Lateefs; Wells Fargo stamped it with a mislabelled endorsement note and deposited it.
- CA Houston, through Wahab as its managing member, sought to enforce the instrument, but CA Houston was not the payee and Wahab/VWhahab were not holders of the instrument.
- District court granted summary judgment for the Receiver, finding Wells Fargo liable for $1,701,250 plus interest for conversion; breach of contract claim deemed moot on summary judgment.
- Wells Fargo appeals arguing lack of entitlement to enforce the instrument and various defenses; appellate court affirms the conversion ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to enforce under 3.301/3.420 | Depositing into CA Houston without Lateef endorsement triggers 3.420 conversion. | Stamping suffices for downstream holders; no conversion. | Conversion found due to payment on a missing endorsement and improper deposit. |
| Condition precedent defense via account agreement | Statement-review does not excuse Wells Fargo’s liability; no prompt notice by remitter. | Notice provision bars recovery if not complied with. | Not a bar to liability; agreement not a true condition precedent to conversion claim. |
| In pari delicto defense | Receiver may pursue claims on behalf of investors; corporation vs. individual actor distinction intact. | Wahab’s wrongdoing implicates WFG under in pari delicto. | Defense rejected; receiver authority to pursue claims; corporate entity distinct from individual wrongdoer. |
| Breach-of-contract claim moot | Remains moot after reversal on conversion; no separate holding on breach. |
Key Cases Cited
- Southwest Bank v. Info. Support Concepts, Inc., 85 S.W.3d 462 (Tex. App.—Fort Worth 2002) (depository bank bears liability for missing endorsement payments under 3.420 (conversion))
- Southwest Bank v. Info. Concepts, Inc., 149 S.W.3d 104 (Tex. 2004) (Texas Supreme Court adopts 3.420 endorsement framework)
- Tubin v. Rabin, 382 F. Supp. 193 (N.D. Tex. 1974) (remitter may recover for conversion on a cashier’s check)
- Rogers v. McDorman, 521 F.3d 381 (5th Cir. 2008) (trustee/receiver concepts and duty; receivers may pursue claims)
- Am. Airlines Emp. Fed. Credit Union v. Martin, 29 S.W.3d 86 (Tex. 2000) (notice/4.406-related considerations; contract-like timing.)