Haywood, Jordan, McCowan of Dallas, Inc. v. Bank of Houston

OPINION ELLIS, Justice. This is an appeal from a take nothing judgment on a conversion suit, pursuant to Tex.Bus. & Com.Code Ann. § 3.419 (Vernon 1968), filed against the Bank of Houston, appellee-bank, for its acceptance of six cheeks as a depositary bank which were allegedly endorsed by an unauthorized agent of appellant. Trial was to a jury. Appellant argues in four points of error that the evidence was legally and factually insufficient to support the jury’s answers supporting the trial court’s judgment. Ap-pellee files two cross-points contending the trial court erred in failing to admit mitigating evidence regarding appellant’s use, in part, of the proceeds of the six cheeks and in failing to submit a jury question concerning appellant’s constructive receipt of the proceeds. We affirm. In 1986, appellant was awarded contracts for the design of five elementary schools in the Dallas Independent School District (DISD). Willie C. Jordan, president of Haywood, Jordan & McCowan of Houston and an affiliate of appellant was instrumental in the negotiation of these contracts. Fred Alexander, appellant’s corporate representative at trial, testified Willie Jordan was the “Jordan” in apellant’s name, Haywood, Jordan, McCowan of Dallas, Inc. Jordan used his prior business contact and excellent working relationship with Project Management Systems (PMS), the DISD project general contractor, to secure the award of these contracts on behalf of appellant. Alexander testified the method by which appellant received funds from PMS for the DISD project. He testified that by virtue of a method Jordan set up, the checks issued for DISD were issued by PMS in — 740 — Houston. He testified that he and Jordan agreed Jordan would pick up the checks PMS issued in Houston and bring them to Dallas for deposit in the Dallas account. Alexander testified Jordan followed this procedure two or three times a week. In December of 1986, November of 1987 and May of 1988, Jordan received checks payable to appellant totalling $50,373.79. Instead of delivering the checks to Dallas, however, appellant endorsed the checks and deposited them in his account at appel-lee-bank. These checks were endorsed as follows: December 1986: Haywood Jordan McCowan of Dallas, Inc. by William Jordan Jr. November 1987: Haywood Jordan McCowan of Dallas, Inc. by Willie C. Jordan Paid to the Order of Haywood Jordan McCowan of Houston Willie C. Jordan Haywood Jordan McCowan of Houston, Inc. May 1988: Haywood Jordan McCowan of Dallas, Inc. by Willie C. Jordan Project Architect of Schools DISD Alexander did not have any complaint regarding these checks. He stated that prior to March of 1988, appellant received all proceeds of the money due to them on the DISD jobs, but was aware that the actual checks from PMS were not being received. Alexander testified that he saw cashier’s checks from Jordan’s bank, appel-lee-bank, before March of 1988 made payable to consultants, or which he believed were sent directly to consultants. Alexander knew Jordan did his banking at appel-lee-bank, that Jordan had taken the checks received from PMS and purchased cashier’s checks at appellee-bank. Nevertheless, Alexander testified it never occurred to him that Jordan deposited the checks in appel-lee-bank and he still did not know whether the checks were deposited at the time of trial. The six checks sued upon bore endorsements almost identical to those that appeared above, and were accepted for deposit by appellee-bank (“Haywood, Jordan & McCowan of Dallas, Inc. by Willie C. Jordan”). Ernest Hogue, the designated representative of appellee-bank, had a 10 year banking relationship with Jordan. He testified that he accepted the checks from Jordan because he thought Jordan was authorized to endorse the checks. Part of the reason Hogue thought Jordan was authorized was because he received no notice of dishonor or question on similar checks, specifically the three checks mentioned above (December 1986; November 1987; and May 1988). In addition, Hogue received from Jordan a copy of the corporate resolution from the Dallas bank for appellant’s account showing Jordan was a required signatory on the account (Appendix 1), a copy of the signature card from the Dallas bank showing his signature on the account (Appendix 2) and copies of contracts between PMS and appellant regarding the DISD job signed by Jordan and Alexander. Fred Alexander identified the contracts as the contracts appellant had with DISD. There were several places where either Jordan or both Fred Alexander signed the contracts on behalf of Haywood, Jordan, McCowan of Dallas, Inc. (Haywood-Dallas). Alexander admitted that both he and Jordan signed the contracts with PMS. On at least one acknowledgement within one of the contracts, admitted as defendant’s exhibit 13, the signatures appeared as follows: Haywood Jordan McCown of Dallas, Inc. SECOND PARTY (ARCHITECT-ENGINEER) By: (signed by Willie Jordan) (PRINCIPAL) (PARTNER) (OFFICER) (signed by Fred Alexander) (attached as Appendix 3) On a page entitled, “exhibit 4” which was included within the contract, Willie Jordan signed as president, (attached to this opinion as Appendix 4). Concerning the way — 741 — Fred Alexander signed the contracts, Alexander testified as follows: Q: [by appellee’s attorney] You never indicated on any of the documents that you have just been marked that you were president of Haywood-Jordan-McCowan Dallas, Inc. did you, Mr. Alexander A: On any of these documents? Q: That’s correct. A: I would have to look at them again to refresh my memory. Q: That’s fine. A: I don’t recall that I did, though. No, I did not sign as president. There was not a title that was asked for on the signatures. (emphasis added). In addition to noting the way the signatures appeared on the contracts, Hogue noted that not only was Jordan’s signature the first signature on the signature card for appellant’s bank account in Dallas, but was the one required signature on all withdrawals from the Dallas account. Hogue, therefore, believed Jordan possessed the necessary authority to endorse and deposit checks issued to appellant. At trial, several questions were submitted to the jury, which were later incorporated in the trial court’s take nothing judgment. These questions were: Question No. 1: Did Defendant Bank of Houston convert the six checks belonging to Plaintiff Haywood, Jordan, McCown of Dallas, Inc? Answer: No Question No. 4: Do you find that Willie C. Jordan, Jr. was acting without implied or apparent authority in endorsing the checks in question? Answer: No Question No. 5: Do you find that Haywood, Jordan, McCowan of Dallas, Inc. by its negligence substantially contributed to the making of an unauthorized signature, if any, on the checks in question? Answer: Yes Question No. 6: Do you find that Bank of Houston acted in good faith and in accordance with the reasonable commercial standards applicable to its business in accepting the checks in question for deposit? Answer: Yes Question No. 7: Do you find that Bank of Houston was a holder in due course with respect to the checks in question? Answer: Yes In point of error one, appellant argues that the jury’s answers to questions no. 1 and 4 are against the great weight of the evidence. In reviewing the factual sufficiency of the evidence to support the jury’s answers to questions 1 and 4, wherein appellant bore the burden of proof, the proper standard of review is whether the jury’s finding was “against the great weight and preponderance of the evidence.” Croucher v. Croueher, 660 S.W.2d 55, 58 (Tex.1983). In this type review, we must consider and weigh all of the evidence, both the evidence supporting and contrary to the judgment. Plas-Tex, Inc. v. United States Steel Corp., 772 S.W.2d 442, 445 (Tex.1989). If the jury finding is so contrary to the great weight and preponderance of the evidence as to be manifestly unjust, the point should be sustained, regardless of whether there is some evidence to support it. Watson v. Prewitt, 159 Tex. 305, 320 S.W.2d 815, 816 (1959) (per curiam); In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951) (per curiam). TEX.BUS. & COM.CODE ANN. § 1.201(43) (Vernon 1968) defines an unauthorized indorsement as one made “without actual, implied or apparent authority.” In the present case, there is no dispute that some type of agency relationship existed between appellant and Jordan. The disputes concerns the type and extent of au- — 742 — thority Jordan was given. Actual authority includes express and implied authority. Behring Intern, v. Greater Houston Bank, 662 S.W.2d 642, 649 (Tex.App.—Houston [1st Dist.] 1983, writ dism’d by agreement). Express authority exists where the principal makes it clear to the agent that he wants the act under scrutiny to be done. City of San Antonio v. Aguilar, 670 S.W.2d 681, 683 (Tex.App.—San Antonio 1984, writ dism’d) (citing H. Reuschlein & W. Gregory, AGENCY AND PARTNERSHIP, sec. 14 (1979)). Implied authority exists where there is no proof of express authority, but appearances justify a finding that in some manner the agent was authorized to do what he did. Id. Appellant points to the testimony of Fred Alexander to support the proposition that Jordan had no authority at all to endorse the checks. Fred Alexander testified that Jordan’s only authority with respect to the checks was to pick them up from PMS in Houston and to bring them to appellant in Dallas. He testified that he did not know what Jordan was doing with the six checks in dispute until he got photocopies of the checks back from PMS. He did admit, however, that he received cashier’s checks in ’86 and ’87, other than the six checks in question, drawn from the Bank of Houston which were proceeds from the checks Jordan picked up from PMS. This suggests Alexander was well aware that Jordan endorsed checks in order to convert the proceeds into cashier checks. Alexander testified that Jordan sent cashier checks to his office that were payable for whatever they were issued for, including consultant’s fees. Alexander testified, “given the fact that we eventually received all of the funds, it just frankly never occurred to me that something not quite right was going on at this point.” This evidence suggests that Alexander had given Jordan, at the very least implied authority. Other evidence in addition to Alexander’s testimony suggests Jordan may even have had express authority. Jordan was the “Jordan” in appellant’s corporate name, Haywood, Jordan, McCowan of Dallas. He testified that he thought he was an officer of Haywood-Dallas, because of representations that he would be made an officer of a future corporation when he was asked to negotiate a contract with Dallas Independent School District (DISD). As illustrated by a portion of the DISD contract, Appendix-3, Jordan signed as a “(Principal) (Partner) (Officer)” above Fred Alexander’s name. Also illustrated in the same contract, Appendix-4, Jordan signed as president. It may be inferred that Alexander, the representative who testified against Jordan’s authority, certainly was aware of the way Jordan signed in both instances since he signed the contract as well. In addition, the bank card, entitled “Certificate of Corporate Resolutions,” Appendix-1, which was presented to appellee-bank, shows that Jordan was a required signator among Fred Alexander and Norcell D. Haywood for Haywood-Dallas’ corporate account in Dallas. This further substantiates that the representations made to Jordan regarding the promise for an official capacity in Haywood-Dallas were true. Nevertheless, even if Jordan was not acting as an officer, and conferred with express authority to endorse the checks, he certainly was acting with implied authority based on the needs of Haywood-Dallas for Jordan’s assistance in the contract with DISD. Jordan indicated that part of the reason he was asked to make the deal with DISD is because Fred had some problems with Dallas Independent School District and because of his personal connections with PMS. In addition, there was sufficient evidence of apparent authority. Apparent authority arises either from a principal knowingly permitting an agent to hold himself out as having authority or by principal’s actions which lack such ordinary care as to clothe an agent with indicia of authority, thus leading a reasonably prudent person to believe that the agent has the authority she purports to exercise. Ames v. Great Southern Bank, 672 S.W.2d 447, 450 (Tex.1984). A prerequisite to finding apparent authority is evidence of conduct by the principal relied upon by the party asserting estoppel which would lead a reasonably prudent person to believe an agent had authority. Id. In the present case, as — 743 — already discussed, Fred Alexander jointly signed the DISD contract with Jordan, and Jordan signed both as a principal and president in this contract. Further, Alexander signed a bank card for Haywood-Dallas’ corporate account which required that Jordan always be the required signators. Further, Haywood-Dallas never complained about Jordan’s endorsement of checks Jordan received from PMS payable to Haywood-Dallas in December of 1986, November of 1987 and May of 1988. These checks were indorsed almost identical to the checks being sued upon in the present case. In conclusion, we find there was overwhelming evidence to support the jury’s negative response to jury question 4. Appellant failed to prove an essential element in appellant’s case for conversion, namely that there was a forged endorsement. See TEX.BUS. & COM.CODE ANN. § 3.419(a)(3) (Vernon 1968) (Vernon 1968). It also follows that the jury’s conclusion that appellee did not convert the six checks in response to question no. 1 was supported by the evidence since they found that Jordan was not without authority. The jury’s responses to questions 1 and 4 were not manifestly unjust. Appellant’s point of error one is overruled. Because the evidence was sufficient to support the jury’s finding that the endorsement was not unauthorized, and no conversion took place, we need not address appellant’s other points of error concerning the jury’s answers to questions no. 5, 6 and 7 which concern defenses to a conversion suit. Question 5 addresses the defense issue of appellant’s negligence in contributing to an unauthorized signature pursuant to TEX.BUS. & COM.CODE ANN. § 3.406 (Vernon 1968). Question 6 addresses a bank’s defense to conversion pursuant to TEX.BUS. & COM.CODE ANN. § 3.419(a)(3) (Vernon 1968). Question 7 addresses the defense of holder in due course status of TEX.BUS. & COM.CODE ANN. § 3.305 (Vernon 1968). Since jury questions 1 and 4 are supported by the evidence and the jury found no conversion took place, appellant’s points of error two through four concerning the issues of defenses to conversion need not be addressed. Appellant’s points of error two, three and four are overruled. In addition, we need not consider appellee’s cross-points since we find no error in the trial court’s judgment. Accordingly, the judgment of the trial court is affirmed. — 744 — [[Image here]] — 745 — [[Image here]] — 746 — [[Image here]] — 747 — [[Image here]]