Banco Bilbao Vizcaya Argentaria v. Easy Luck Co. Inc. , 2017 Fla. App. LEXIS 718 ( 2017 )

Third District Court of Appeal
State of Florida
Opinion filed January 25, 2017.
Not final until disposition of timely filed motion for rehearing.
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No. 3D15-1376
Lower Tribunal No. 12-22445
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Banco Bilbao Vizcaya Argentaria,
Appellant,
vs.
Easy Luck Co., Inc.,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Gill S. Freeman,
Judge.
Post & Romero and Robert G. Post, for appellant.
Dick Lee & Associates, P.A., and Alan H. Ramer, for appellee.
Before SUAREZ, C.J., and SALTER, J., and SHEPHERD, Senior Judge.
SHEPHERD, Senior Judge.
Banco Bilbao Vizcaya Argentaria (BBVA) appeals a final judgment in favor
of Easy Luck Co., Inc., on BBVA’s action against Easy Luck to recoup the sum of
$85,000, mistakenly paid by BBVA at its office in the Dominican Republic by
draft on an account of a customer there and credited to Easy Luck’s account at
SunTrust Bank in Miami-Dade County. Applying sections 3-303 and 3-418 of the
Uniform Commercial Code, §§ 673.3031 and 673.4181, Fla. Stat. (2012), the trial
court held that BBVA should suffer the full amount of the loss. We agree and
affirm the judgment of the trial court.
FACTUAL AND PROCEDURAL BACKGROUND
This lawsuit arises out of a transaction for the sale of shoes by Easy Luck, a
Florida company, to JAMS Technologies, Inc., a distributor located in the
Dominican Republic. JAMS desired to purchase $43,337 worth of shoes from
Easy Luck. At the time of the transaction, JAMS had an outstanding debt owed to
Easy Luck in the amount of $77,000. Easy Luck told JAMS that it would ship the
shoes to JAMS only if it received payment in advance. Because JAMS did not
have a bank account in the Dominican Republic that transacted business in dollars
and for local tax reasons, JAMS principal, Alex Molina, arranged through three
individuals who represented themselves as principals and employees of a large
paint company, Lanco Manufacturing Corp., and with whom Molina had done
some business in the recent past, to issue a draft payable to Easy Luck in the
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amount of $85,000, purportedly drawn on Lanco Manufacturing’s BBVA bank
account. Anxious to expedite delivery of the shoe order to his company in the
Dominican Republic, Molina carried the draft to Miami and delivered it personally
to Easy Luck’s President, Alan Wu. Molina told Wu to apply the remaining
monies in excess of $43,337 to the unpaid debt owed by JAMS to Easy Luck.
Upon receiving the draft, Wu went to a local BBVA business office to
ascertain the status of the account on which the draft was drawn and try to arrange
quick payment so he could ship the shoes.1 The local BBVA business office
declined to provide any information regarding either the account or the draft. Wu
then deposited the draft for collection with his bank, SunTrust Bank, which
advised him it would take several weeks for the draft to be collected and Easy
Luck’s account credited. Wu advised Molina of the expected delay in the
shipment.
BBVA paid the draft against Lanco Manufacturing’s account at BBVA’s
office in the Dominican Republic on January 27, 2012. The funds were credited
and made available to Easy Luck in its account at SunTrust Bank in Miami on
February 6, 2012. Upon learning the funds were credited and available in Easy
Luck’s account at SunTrust Bank, Wu noted JAMS delinquent balance “paid” on
1 Bowing to the pressure from Molina, Wu actually shipped a small part of the
order in the amount of $7,783 before the $85,000 was credited to his account at
SunTrust.
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the books of his company in the amount of $41,663, the sum remaining on the
$85,000 draft after subtracting the price of the shoe order, confirmed the items to
complete the shoe order and shipped them to JAMS in the Dominican Republic on
February 27, 2012.
On February 7, 2012, the day after Easy Luck’s account was credited with
the full amount of the draft, a Lanco Manufacturing employee contacted BBVA
claiming the draft was invalid. It was quickly determined that the instrument was a
counterfeit and a forgery. Recognizing that it paid the instrument by mistake,
BBVA credited Lanco Manufacturing’s account in the sum of $85,000 and, on
February 9, 2012, advised SunTrust of the counterfeiting and forgery of the
instrument. However, no one advised Easy Luck.
On April 27, 2012, BBVA offered SunTrust a hold harmless letter and
demanded that SunTrust reverse the credit to Easy Luck’s account. One month
later, SunTrust advised BBVA that it would not reverse the deposit to Easy Luck’s
account and that BBVA’s client “would need to take [the] issue up with either
BBVA for clearing the collection as a good item or directly with [SunTrust’s]
client who received the credit for the collection.”
Thereafter, BBVA filed a one-count complaint against Easy Luck to recover
the $85,000 loss it had suffered by payment of the draft. The complaint was
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served on Easy Luck on June 14, 2012. This was the first time Easy Luck had any
knowledge of the counterfeiting and forgery.
ANALYSIS
Resolution of this dispute is governed in the main by Florida’s version of the
Uniform Commercial Code, section 673.4181, titled “Payment or acceptance by
mistake,” which provides as follows:
(1) Except as provided in subsection (3), if the drawee of a draft
pays or accepts the draft and the drawee acted on the mistaken
belief that payment of the draft had not been stopped pursuant to s.
674.403 or that the signature of the drawer of the draft was
authorized, the drawee may recover the amount of the draft from
the person to whom or for whose benefit payment was made or, in
the case of acceptance, may revoke the acceptance. Rights of the
drawee under this subsection are not affected by failure of the
drawee to exercise ordinary care in paying or accepting the draft.
(2) Except as provided in subsection (3), if an instrument has been
paid or accepted by mistake and the case is not covered by subsection
(1), the person paying or accepting may, to the extent permitted by the
law governing mistake and restitution, recover the payment from the
person to whom or for whose benefit payment was made or, in the
case of acceptance, may revoke the acceptance.
(3) The remedies provided by subsection (1) or subsection (2)
may not be asserted against a person who took the instrument in
good faith and for value or who in good faith changed position in
reliance on the payment or acceptance. This subsection does not
limit remedies provided by s. 673.4171 or s. 674.407….
(Emphasis added.) The thrust of the statute is to provide that as between two
innocent victims of a scalawag who perpetrates a fraud on a drawee bank, the bank
can recoup the amount mistakenly paid, even if the bank was negligent in making
the payment, unless the person who received the funds can prove that it either (1)
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“took the instrument in good faith and for value,” or (2) “in good faith changed
position in reliance on the payment . . . .” Id. In this case, the recipient of the
funds, Easy Luck, asserts the first exception in defense of having to return to
BBVA the $41,663 Easy Luck applied to partial payment of the $77,000
delinquent debt owed it by JAMS, and the second exception in defense of
repayment of the $43,337 it credited itself for the cost of the shoes. We agree with
Easy Luck on both points.
As to the $43,337 payment, BBVA concedes that Easy Luck “changed
position in reliance” on BBVA’s mistaken payment of the draft within the meaning
of the second exception to section 673.4181(3) when it shipped the shoe order to
JAMS in the Dominican Republic and therefore is not entitled to recoup that
portion of the mistakenly paid draft. However, BBVA argues that Easy Luck did
not take the draft “in good faith and for value” within the meaning of the first
exception to section 673.4181(3) for the remaining $41,663, the amount which was
credited against the delinquent debt JAMS owed to Easy Luck. We disagree.
BBVA’s main argument on this point is that Easy Luck did not “give value’
for the amount of the draft remaining after paying for the shoe shipment within the
meaning of the first exception because all it did was make a “bookkeeping entry,”
reducing the amount of the delinquent debt on its books, and should now just erase
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the “bookkeeping entry,” a kind of “no harm, no foul” type of argument. The
argument has some appeal. However, the Uniform Commercial Code, as adopted
in this state, allocates the loss between innocent parties in these circumstance
differently.
Section 673.3031, Fla. Stat. (2012), section 3-303 of the Uniform
Commercial Code provides that
(1) An instrument is issued or transferred for value if:
(a) The instrument is issued or transferred for a promise of
performance, to the extent the promise has been performed;
(b) The transferee acquires a security interest or other lien in the
instrument other than a lien obtained by judicial proceeding;
(c) The instrument is issued or transferred as payment of, or as
security for, an antecedent claim against any person, whether or
not the claim is due.
(d) The instrument is issued or transferred in exchange for a
negotiable instrument; or
(e) The instrument is issued or transferred in exchange for the
incurring of an irrevocable obligation to a third party by the person
taking the instrument.
(2) The term “consideration” means any consideration sufficient to
support a simple contract. The drawer or maker of an instrument has a
defense if the instrument is issued without consideration. If an
instrument is issued for a promise of performance, the issuer has a
defense to the extent performance of the promise is due and the
promise has not been performed. If an instrument is issued for value
as stated in subsection (1), the instrument is also issued for
consideration.
(Emphasis added.) The purpose of section 673.3031(1)(c) is explained in
Comment 4 to the Uniform Commercial Code as follows:
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Subsection [1][c] follows former Section 3-303(b) in providing that
the holder takes for value if the instrument is taken in payment of
or as security for an antecedent claim, even though there is no
extension of time or other concession, and whether or not the
claim is due. Subsection [c] applies to any claim against any
person; there is no requirement that the claim arise out of contract.
In particular the provision is intended to apply to an instrument
given in payment of or as security for the debt of a third person,
even though no concession is made in return.
Section 673.3031 describes the very situation at issue here. It is undisputed
on the record of this case that when Molina delivered the $85,000 draft to Wu,
Molina told Wu to apply any sums remaining after payment of the shoe shipment
to JAMS’ delinquent account with Easy Luck. The plain language of the statute
informs that the $77,000 delinquent debt owed by JAMS to Easy Luck was an
“antecedent debt.” Case law supports our plain reading. See, e.g., Turney v.
Seale, 473 So. 2d 855, 857 (La. Ct. App. 1985) (involving a delivery or transfer of
promissory note in payment of antecedent claim of past-due alimony); Barbour v.
Handlos Real Estate & Bldg. Corp., 393 N.W.2d 581, 589 (Mich. Ct. App. 1986)
(holding assignment made in full payment of prior loan constituted an assignment
in payment of an antecedent claim). It would be so even if Easy Luck had not
engaged in the formality of making the “bookkeeping entry” before the
controversy arose. See, e.g., S. Bank of Commerce v. Union Planters Nat. Bank,
289 S.W.3d 414, 416 (Ark. 2008) (determining bank gave value for check where it
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accepted cashier's check for payment of mortgage, an antecedent claim, even
though it took no immediate action on the mortgage).
BBVA finally argues that Easy Luck did not take the draft “in good faith,”
as also required by the first exception to section 673.4181(3). BBVA apparently
forgets the second exception to section 673.4181(3), to which it acceded on the
$43,337 shoe purchase credit, also contains a “good faith” requirement. When
BBVA conceded it should suffer the loss in the amount of the shoe purchase, it
seems that BBVA must necessarily have conceded Easy Luck “in good faith”
under that exception as well. See § 673.4181(3). BBVA ignores this apparent
inconsistency in its argument.
However, we need not rely on a technical or procedural argument on this
point. We find that there is competent substantial evidence in the evidence
adduced at trial to support the trial court’s conclusion on the merits that Easy Luck
took the draft “in good faith.”
Section 3-103 of the Uniform Commercial Code, adopted in Florida as
section 673.1031 of the Florida Statutes, defines “good “faith” as “honesty in fact
and the observance of reasonable commercial standards of fair dealing.” Under
this provision:
The factfinder must ... determine, first, whether the conduct of the
holder comported with industry or “commercial” standards applicable
to the transaction and, second, whether those standards were
reasonable standards intended to result in fair dealing. Each of those
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determinations must be made in the context of the specific transaction
at hand. If the fact finder's conclusion on each point is “yes,” the
holder will be determined to have acted in good faith even if, in the
individual transaction at issue, the result appears unreasonable. Thus a
holder may be accorded holder in due course status where it acts
pursuant to those reasonable commercial standards of fair dealing—
even if it is negligent—but may lose that status, even where it
complies with commercial standards, if those standards are not
reasonably related to achieving fair dealing.
Any Kind Checks Cashed, Inc. v. Talcott, 830 So. 2d 160, 165-66 (Fla. 4th DCA
2002) (quoting Maine Family Fed. Credit Union v. Sun Life Assurance Co. of
Canada, 727 A.2d 335, 343 (Me. 1999)).
Comment 4 to the definitions, appearing in Article 3 of both the Uniform
Commercial Code and as it exists in this state, provides some further assistance in
our analysis:
Although fair dealing is a broad term that must be defined in context,
it is clear that it is concerned with the fairness of conduct rather than
the care with which an act is performed. Failure to exercise ordinary
care in conducting a transaction is an entirely different concept than
failure to deal fairly in conducting the transaction.
§ 673.1031. In this case, Easy Luck did take precautionary measures upon
delivery of the draft by Molina to Easy Luck’s office in Miami. First, Wu inquired
of the local BBVA office about the funds prior to depositing the draft. Second,
Easy Luck resisted pressure by Molina to send the shoe shipment before the draft
cleared and the funds were available in Easy Luck’s account. Lastly, Easy Luck
had no actual knowledge the check was forged until it was served with the
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complaint in this case. In retrospect, one could always do more. However, the
standard of “fairness” by which Easy Luck’s actions are to be judged is not a
negligence standard. Rather, we are told that the standard of “fairness” to be
applied in cases such as this “should be measured by taking a global view of the
underlying transaction and all of its participants.” Talcott, 830 So. 2d at 165. We
believe these facts are sufficient to support the finding of the trial court that Easy
Luck acted in good faith.
Finding no error in either the findings of fact or the conclusions of law made
by the trial court in this case, we affirm the judgement.
Affirmed.
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