From the Texas Supreme Court
Stop us if you’ve heard this one.
A would-be foreign client who claims to be in the Netherlands contacts an American lawyer by email in 2014 to get the lawyer’s help collecting a debt and, when the client said the obligation had been settled, the lawyer agreed to wire the proceeds to a bank in Japan. A cashier’s check for more than $493,600 was sent for the debt payment with instructions to wire $398,980 to Japan. Do that, the client said, and keep a $10,000 retainer.
A day after the wire transfer to Japan, the bank supposedly issuing the cashier’s check, Chase, had a problem: The check was counterfeit.
Ouch.
The lawyer’s bank, Cadence Bank in Houston, ordered a charge back for what was wired to Japan.
Ouch. Ouch.
And when the lawyer, Roy Elizondo III of Houston, sued Cadence, where he had his IOLTA account, he argued Cadence had liability because he put up $55 that established a new contract overriding the deposit agreement and the UCC. By Elizondo’s theory, the new contract to make the wire transfer put the onus on the bank to verify the cashier’s check before wiring cash to the bank in Japan.
In a divided decision, over now-retired Justice Evelyn V. Keyes’s dissent, Houston’s First Court of Appeals bought Elizondo’s argument.
Not so a unanimous Texas Supreme Court last week.
Ouch. Ouch. Ouch.
Cadence wired $398,980 to the Japanese bank account Elizondo had identified on the wire-transfer form, following the client’s instructions. When Chase returned the cashier’s check to Cadence, Cadence demanded that Elizondo pay the overdrawn funds.
Elizondo said no. Then he sued.
Elizondo did not respond to three email inquiries Tuesday or to a call left at his office Wednesday.
UCC warranties? Didn’t matter. Bank’s deposit agreement? Didn’t matter. To counter the bank’s argument that if not the UCC, then its deposit agreement controlled, Elizondo contended he and the bank had a new contract based on the wire-transfer form that put liability on the bank for making the wire transfer too soon.
Based on her reading of the court of appeals opinion, Karen Neeley of the Independent Bankers Association of Texas, as amicus for two Texas banking groups, surmised in support of a rehearing motion before the appeals court: Roy J. Elizondo III and his firm were victims of a common check-fraud scam.
The Supreme Court remanded Elizondo’s case for remaining, undecided issues not based on contract breach.
Ouch.
William P. Huttenbach and David A. Polsinelli of Crain Caton & James represented Cadence Bank.
In addition to Smith, Beck Redden’s David M. Gunn represented Elizondo. Elizondo also represented himself.
Neeley and John Mark Heasley represented amici Texas Bankers Association and the Independent Bankers Association of Texas.
The case is 20-0273, Cadence Bank N.A. v. Roy J. Elizondo III and Roy J. Elizondo III, PLLC.