BFH v. First National Bank USA

181 So. 3d 204, 15 La.App. 5 Cir. 120, 88 U.C.C. Rep. Serv. 2d (West) 233, 2015 La. App. LEXIS 2351, 2015 WL 7421694
CourtLouisiana Court of Appeal
DecidedNovember 19, 2015
DocketNo. 15-CA-120
StatusPublished
Cited by1 cases

This text of 181 So. 3d 204 (BFH v. First National Bank USA) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
BFH v. First National Bank USA, 181 So. 3d 204, 15 La.App. 5 Cir. 120, 88 U.C.C. Rep. Serv. 2d (West) 233, 2015 La. App. LEXIS 2351, 2015 WL 7421694 (La. Ct. App. 2015).

Opinion

SUSAN M. CHEHARDY, Chief Judge.

laThis appeal arises from the trial court’s grant of an exception of prescription and summary judgment in favor of defendant-bank. For the reasons that follow, we affirm in part and reverse in part.

Facts and Procedural History

For many years, Carmen Baloney (“Ms. Baloney”) worked as funeral director for appellant, Baloney Funeral Home, L.L.C. (“BFH”). Between 2007 and 2010, Ms. Baloney personally negotiated 197 insurance checks, which were made payable to BFH for funeral services. According to BFH, Ms. Baloney, as part of her duties, aside from being a funeral director, made collection calls to. insurance companies and picked up BFH’s mail from the post office. At some point, Ms. Baloney opened mail that contained payments to BFH, endorsed the checks, presented the .checks at the Garyville General Store (“Garyville”), and obtained cash.. Garyville deposited those checks, which had been made payable to BFH into its account with First National Bank USA (“the Bank”). BFH did not have an account with the Bank.

On December 28, 2010, BFH filed the instant petition for damages against the Bank, Garyville, and Ms. Baloney to recover losses from- the converted BFH [¿¡checks, which totaled approximately $630,000.00, • BFH contended that the [206]*206Bank aided Ms. Baloney and Garyville by fraudulently colluding to convert the checks as follows: the Bank issued a line of credit to Garyville, which allowed Gary-ville, for a fee, to cash the checks, which Ms. Baloney fraudulently endorsed.

On January 22, 2013, the Bank filed an exception of prescription and motion for summary judgment seeking dismissal of all of BFH’s claims. In its filing, the Bank contended that Louisiana’s Uniform Commercial Code (“U.C.C.”) bars recovery for any conversions that occurred more than one year before this suit was instituted on December 28, 2010. With respect to claims regarding the remaining 27 checks that had not prescribed, the Bank further argued that BFH alone was liable under La. R.S. 10:3-405 for any alleged conversions as Ms. Baloney was a “responsible employee under the U.C.C.” To its motion for summary judgment, the Bank attached BFH’s contradictory answers to interrogatories, which, in its list of employees for the past six years, included Carmen Baloney as “funeral director, billing and collections,” but also denied that Carmen Baloney was either an employee or subcontractor of BFH. The Bank also attached an affidavit from its employee, Audrey Raziano, stating that its customer, Garyville, is a licensed check casher, which regularly deposits checks into its account. Attached to Ms. Razi-ano’s affidavit is a list dated November 16, 2012 of “active check cashers in Louisiana.”

The motion for summary judgment and exception of prescription were set for hearing on March 11, 2013. However, the Bank did not properly serve BFH so BFH neither filed an opposition to the Bank’s motion for summary judgment or exception, nor appeared at the March 11, 2013 hearing. That day, the trial judge maintained the Bank’s exception of prescription to the checks cashed before December 28, 2009, and granted summary judgment in favor of the Bank for the Ldaims regarding the remaining checks. The trial judge signed a written judgment to that effect on March 21, 2013.

BFH filed a motion for new trial, contending its due process rights were violated as it did not have notice of the hearing and was not afforded an opportunity to respond. After a hearing, the trial court denied BFH’s motion for new trial, finding that service was perfected according to La. C.G.P. art. 1292, which created a rebutta-ble presumption that the return of service was prima facie correct and BFH failed to rebut that presumption.

BFH appealed the denial of its motion for new trial. BFH v. First Nat’l Bank USA 13-904 (La.App. 5 Cir. 5/14/14), 147 So.3d 730. On appeal, this Court found that the service return did not establish a prima facie case to shift the burden to BFH for rebuttal, reversed the denial of its motion for new trial, and remanded for a hearing on the Bank’s exception of prescription and motion for summary judgment. Id. at 737.

On June 12, 2014, the Bank moved to reset the hearing on its exception of prescription and motion for summary judgment. Thereafter, BFH filed its opposition to the Bank’s exception of prescription alleging that its claims for conversion were not prescribed because Carmen Baloney was not a “responsible employee” so, under LaCombe v. Bank One Corp., 06-1374 (La.App. 3 Cir. 3/7/07), 953 So.2d 161, prescription was suspended under the theory of contra non valentum. Further, BFH argued that the Bank failed to exercise ordinary care in paying the instruments in question, which substantially contributed to BFH’s loss from Ms. Baloney’s fraud, citing Med Data Serv. Bureau, L.L.C. v. [207]*207Bank of Louisiana, 03-2754 (La.App. 1 Cir. 12/30/04), 898 So.2d 482.

In a supplement to its opposition, BFH attached an affidavit from Carl Baloney, Sr., the General Manager of BFH, admitting that Carmen was an | ^‘independent contractor” for BFH, who was “funeral director” and “occasionally responsible for billing and collection ... limited to administrative duties, such as making collection inquires [sic] on unpaid insurance policies,” but not “authorized to indorse instruments on behalf of BFH” or “process instruments for bookkeeping purposes.” BFH also attached its L.L.C. operating agreement and an affidavit from Yvette Cola, Vice President of FNBC Bank in New Orleans, who attested that “it is not standard procedure for a bank to accept for deposit, corporate checks that do [not] bear the signature of an authorized agent of the corporation” and “acceptance of checks payable to a corporation for deposit into the account of another was a deviation from ordinary and acceptable banking standards.”

On September 4, 2014, the Bank filed its reply to BFH’s opposition averring that, with respect to prescription, BFH failed to present evidence of fraudulent concealment of the conversion on the Bank’s part, which precludes BFH from relying on that theory of contra non valentum, citing Peak Performance Phyiscal Therapy & Fitness LLC v. Hibernia Corp., 07-2206 (La.App. 1 Cir. 6/6/08), 992 So.2d 527. Further, the Bank, citing Specialized Loan Servicing, LLC v. January, 12-2668 (La.6/28/13), 119 So.3d 582, 591 and Hardin Compounding Pharmacy LLC v. Progressive Bank, 48,397 (La.App. 2 Cir. 9/25/13), 125 So.3d 493, writ denied, 13-2517 (La.1/27/14), 131 So.3d 60, avers that, even with respect to non-customers, the discovery rule of contra non valentum cannot suspend the one-year prescriptive period for check conversion claims under La. R.S. 10:3-420. Regarding summary judgment, the Bank argued that BFH failed in its opposition to establish that a genuine issue of material fact exists as to whether Carmen Baloney was a “responsible employee” under La. R.S. 10:3-405(a)(3) or whether the Bank [,¡violated its internal policies or failed to exercise “ordinary care”1 when accepting checks from its customer, Garyville.

On September 8, 2014, the matter came for hearing. On September 25, 2014, the trial judge maintained the Bank’s exception of prescription with respect to all checks converted before December 28, 2009 and granted its motion for summary judgment with respect to the remaining checks. BFH appeals both rulings.

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181 So. 3d 204, 15 La.App. 5 Cir. 120, 88 U.C.C. Rep. Serv. 2d (West) 233, 2015 La. App. LEXIS 2351, 2015 WL 7421694, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bfh-v-first-national-bank-usa-lactapp-2015.