Contractors Source, Inc. v. Amegy Bank National Association D/B/A Amegy Bank of Texas ( 2015 )

Opinion issued February 5, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-01000-CV
———————————
CONTRACTORS SOURCE, INC., Appellant
V.
AMEGY BANK NATIONAL ASSOCIATION
D/B/A AMEGY BANK OF TEXAS, Appellee
On Appeal from the 157th District Court
Harris County, Texas
Trial Court Case No. 2012-53936
OPINION
Amegy Bank of Texas obtained a summary judgment dismissing Contractors
Source, Inc.’s claims of breach of contract, breach of express warranty, conversion,
and negligent misrepresentation. Contractors Source appeals from the ruling,
which included an award of attorney’s fees. Finding no error, we affirm.
Background
Contractors Source purchases geosynthetic construction materials at a cost
of approximately $5 million per year, which it then resells to the construction
industry. The co-owners and sole officers of Contractors Source are Merri Brecher,
its president, and her husband, Gary Brecher, its vice president.
The Brechers met with representatives of Amegy to investigate opening a
bank account for Contractors Source. The Brechers and Amegy’s representatives
discussed the bank’s offerings. According to Merri Brecher, Amegy represented
that it employed state-of-the-art security systems, operations, and protocols to
protect funds on deposit. In February 2006, Contractors Source opened an account
with Amegy, with the Brechers authorized as the only signatories. Amegy sent
Contractors Source a monthly statement of its account, which arrived on or about
the twelfth day of the month following the month covered by the statement.
In July 2007, Contractors Source hired Maria Straten, also known as Maria
Henry, as its in-house bookkeeper. By January 2008, Straten began
misappropriating money in Contractors Source’s Amegy account, primarily to pay
her personal creditors. Straten’s primary method was to obtain the funds through
third-party websites by using the routing and checking account number for the
account. According to Contractors Source, from January 2008 through at least
September 2010, Straten misappropriated at least $844,358.80. Her activities
2
culminated in a pair of forged checks on which Straten signed Merri Brecher’s
name in September 2010. The first such check was payable to the home-
improvement store Lowe’s for $17,875.43, and the second was payable to “Maria
Henry” for $2,000.00.
Contractors Source did not discover Straten’s unauthorized activities until
November 7, 2010, when Merri Brecher reviewed the September 2010 Amegy
statement, which listed the forged checks. On that same day, she notified Amegy
that the Lowe’s check was unauthorized. The next day she executed and delivered
to Amegy an “Affidavit of Forgery, Endorsement or Alteration” regarding the
$2,000 check to Maria Henry. On November 10, she did the same regarding the
Lowe’s check. Amegy determined that the signature on the Maria Henry check did
not match the signature on file and credited $2,000 to Contractors Source’s
account. Amegy did not reimburse Contractors Source for any other funds
misappropriated by Straten.
At all relevant times, Amegy imposed various rules and regulations on
Contractors Source’s account. As pertinent to this case, Amegy specified that
Contractors Source had at most 30 days to report unauthorized signatures,
alterations, or forgeries in its account, and at most 60 days to report errors in its
account statements other than unauthorized signatures, alterations, or forgeries,
such as encoding errors.
3
Contractors Source sued Amegy for $975,000 plus attorney’s fees on
theories of breach of contract, breach of warranty, and negligence. In the course of
litigation it moved to compel discovery of various Amegy schedules of fees,
disclosures, rules, regulations, and other documents, which the trial court denied.
Amegy moved for traditional and no-evidence summary judgment. The trial
court granted summary judgment to Amegy, without specifying its reasons for
doing so.
Analysis
Contractors Source appeals, arguing that the trial court erred by (1) granting
summary judgment as to the Lowe’s check; (2) granting summary judgment as to
automated clearing house transactions; (3) granting summary judgment as to
common-law claims; and (4) denying a motion to compel discovery.
I. Summary judgment
Both traditional and no-evidence summary judgments are reviewed de novo.
Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005) (traditional);
Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 156–57 (Tex. 2004) (no-
evidence). “A no-evidence summary judgment is essentially a pretrial directed
verdict, and we apply the same legal sufficiency standard in reviewing a no-
evidence summary judgment as we apply in reviewing a directed verdict.” King
Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750–51 (Tex. 2003).
4
To prevail on either type of summary-judgment motion, the movant has the
burden of showing that no genuine issue of material fact exists and that it is
therefore entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co.
Inc., 690 S.W.2d 546, 548 (Tex. 1985). A defendant moving for summary
judgment is required either to negate conclusively at least one essential element of
the plaintiff’s cause of action or to establish conclusively each element of an
affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.
1997). To determine whether there is a disputed issue as to a material fact, we
consider evidence favorable to the nonmovant as true and draw every reasonable
inference in its favor, resolving all doubts in favor of the nonmovant. Nixon, 690
S.W.2d at 548–49.
When, as in this case, the trial court’s order granting summary judgment
does not specify its grounds, “we may affirm the summary judgment if any of the
theories presented to the trial court and preserved for appellate review are
meritorious.” Browning v. Prostok, 165 S.W.3d 336, 344 (Tex. 2005). We will
only consider as grounds for reversal issues that were “expressly presented to the
trial court by written motion, answer or other response.” TEX. R. CIV. P. 166a(c).
An affidavit supporting or opposing summary judgment “shall be made on
personal knowledge, shall set forth such facts as would be admissible in evidence,
and shall show affirmatively that the affiant is competent to testify to the matters
5
stated therein.” TEX. R. CIV. P. 166a(f). An affiant’s belief about the facts is legally
insufficient evidence. Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 122 (Tex.
1996); Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984). Likewise,
conclusory affidavits do not raise fact issues because “[t]hey are not credible, nor
susceptible to being readily controverted.” Ryland Grp., 924 S.W.2d at 122; see
Brownlee, 665 S.W.2d at 112. “A conclusory statement is one that does not
provide the underlying facts to support the conclusion.” Rizkallah v. Conner, 952
S.W.2d 580, 587 (Tex. App.—Houston [1st Dist.] 1997, no writ).
Under Texas law, the Uniform Commercial Code regulates a bank’s
relationship with its Texas customers, as well as its handling of funds transfers. See
generally TEX. BUS. & COM. CODE §§ 3.101–.605 (negotiable instruments); id.
§§ 4.101–.504 (bank deposits and collections), id. §§ 4A.101–.507 (funds
transfers); Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671, 683 (Tex. App.—
Houston [1st Dist.] 2008, pet. denied) (observing that the UCC creates “a discrete
fault scheme, specifically allocating responsibility among parties to a banking
relationship”). The relationship may also be governed in part by agreements
between the bank and its customer, such as an agreement governing the processing
of negotiable instruments presented to the bank. E.g., Bank of Tex., 276 S.W.3d at
677.
6
A. Lowe’s check and the “repeat wrongdoer” rule
In its first issue, Contractors Source argues that it was entitled to recredit of
the check to Lowe’s as a matter of law. Alternatively, it argues that it raised
questions of material fact regarding whether Amegy exercised good faith in paying
the Lowe’s check, thus precluding an adverse summary judgment. Among other
things, Amegy responds that Contractors Source’s failure to exercise ordinary care
and the Section 4.406 “repeat wrongdoer” rule each bar recovery. When a bank
provides periodic statements of an account, the banking customer is required to
examine the statements and report any unauthorized transactions promptly. TEX.
BUS. & COM. CODE § 4.406(c). If the bank proves that the customer has failed to do
so, the customer is precluded from asserting against the bank:
the customer’s unauthorized signature or alteration by the same
wrongdoer on any other item paid in good faith by the bank if the
payment was made before the bank received notice from the customer
of the unauthorized signature or alteration and after the customer had
been afforded a reasonable period of time, not exceeding 30 days, in
which to examine the item or statement of account and notify the
bank.
Id. § 4.406(d)(2) (emphasis supplied). But if the bank failed to exercise “ordinary
care” in paying an item and that failure contributed to a loss, then the loss must be
allocated between the bank and the customer in proportion to their contributions to
the loss. Id. § 4.406(e). Even if the bank failed to exercise care, however, the
customer must report its loss within one year after a statement of the item in
7
question is made available to the customer; after that time, the customer may not
claim a loss for that item against the bank. Id. § 4.406(f). The applicability of
Section 4.406 is a question of law which we review de novo. Am. Airlines Emp.’s
Fed. Credit Union v. Martin, 29 S.W.3d 86, 91 (Tex. 2000).
The undisputed evidence shows that Straten began making unauthorized
payments using the Contractors Source account by early 2008, more than two years
before any unauthorized transactions were first reported to Amegy. The parties
also agree that Amegy delivered monthly statements to Contractors Source
showing the unauthorized transactions, arriving the month after the transactions
listed occurred. Thus, Amegy has demonstrated that it sent statements, that those
statements reflected unauthorized transactions by Straten, and that Contractors
Source failed to notify Amegy of any unauthorized transactions within 30 days.
Amegy has thus satisfied the requirements of the UCC. See TEX. BUS. & COM.
CODE § 4.406(a), (c), (d)(2). After Amegy has made this showing, Contractors
Source may not recover for “any other item paid in good faith by the bank” due to
Straten’s acts. Id. § 4.406(d)(2) (emphasis supplied).
1. “Items” vs. “payment orders”
The parties dispute whether the non-check transactions by Straten were
“items” that triggered the application of Section 4.406 and the repeat wrongdoer
rule as argued by Amegy. Contractors Source argues that, instead, the transactions
8
were “payment orders” governed by Chapter 4A, which lacks a similar repeat-
wrongdoer provision.
The UCC defines several types of banking transactions. An “item” is “an
instrument or a promise or order to pay money handled by a bank for collection or
payment.” Id. § 4.104(a)(9). An “item” does not include “a payment order
governed by Chapter 4A or a credit or debit card slip.” Id. Relatedly, a “remotely-
created item” is:
an item that is created by a third party, other than the payor bank,
under the purported authority of the drawer of the item for the purpose
of charging the drawer’s account with a bank and that does not bear a
handwritten signature purporting to be the signature of the drawer.
Id. § 3.103(a)(16) (defining term); see also id. § 4.104(c) (Chapter 3’s definition of
“remotely-created item” applies to Chapter 4).
A “payment order” is defined under Chapter 4A as:
. . . an instruction of a sender to a receiving bank, transmitted orally,
electronically, or in writing, to pay, or to cause another bank to pay, a
fixed or determinable amount of money to a beneficiary if:
(A) the instruction does not state a condition of payment to the
beneficiary other than the time of payment;
(B) the receiving bank is to be reimbursed by debiting an
account of, or otherwise receiving payment from, the sender;
and
(C) the instruction is transmitted by the sender directly to the
receiving bank or to an agent, funds transfer system, or
communication system for transmittal to the receiving bank.
Id. § 4A.103(a)(1).
9
Applying these definitions, the non-check transactions at issue were not
payment orders. Straten did not transmit her instructions directly to the receiving
bank or an agent, funds transfer system, or communication system for transmittal
to Amegy. Id. § 4A.103(a)(1)(C). Rather, she submitted them to third parties,
which then submitted instructions to Amegy.
These transactions more closely fit the definition of a remotely-created item
under Section 3.103(a)(16) in that the instructions to Amegy came from third
parties, under the purported authority of Contractors Source, for the purpose of
charging Contractors Source’s account, and they did not bear a signature. Id.
§ 3.103(a)(16). The term “item” is to be read broadly under Texas law. Am.
Airlines Emps., 29 S.W.3d at 92–93. We hold that Straten’s non-check transactions
were not payment orders, but instead were items within the meaning of Chapter 4
and thus not excluded from the scope of Section 4.406(d)(2) on that basis.
2. Bank’s good faith
Contractors Source also argues that it has raised a question of material fact
as to whether the bank acted in good faith by paying the Lowe’s check, which is a
prerequisite to the application of the repeat wrongdoer rule. TEX. BUS. & COM.
CODE § 4.406(d)(2). For purposes of the UCC, “good faith” means “honesty in fact
and the observance of reasonable commercial standards of fair dealing.” Id.
§ 1.201(b)(20). It is well-settled in Texas that “[t]he law presumes, in the absence
10
of proof to the contrary, that the business transactions of every man are done in
good faith, and for an honest purpose; and any one who alleges that such acts are
done in bad faith, or for a dishonest and fraudulent purpose, takes upon himself the
business of showing the same.” Compton, Ault & Co. v. Marshall, 29 S.W. 1059,
1059 (Tex. 1895); see also Canfield v. Bank One, Tex., N.A., 51 S.W.3d 828, 837
(Tex. App.—Texarkana 2001, pet. denied). “The test for good faith is the actual
belief of the party in question, not the reasonableness of that belief.” La Sara
Grain Co. v. First Nat’l Bank of Mercedes, Tex., 673 S.W.2d 558, 563 (Tex. 1984);
Canfield, 51 S.W.3d at 837.
As evidence of Amegy’s alleged failure to act in good faith, Contractors
Source first points to an alteration to the front of the Lowe’s check: Straten wrote
her home telephone number in pen above Contractors Source’s printed name and
address. According to Contractors Source, this raises a fact issue whether the bank
acted in good faith by honoring the check. While the copy of the check in the
record does bear a phone number above the printed information, it also bears many
other unidentified markings in the same general area, which Contractors Source
does not allege to be indicators that the check was unauthorized or that Merri
Brecher’s signature was forged. We cannot tell from the record who added these
markings—Contractors Source, Straten, Lowe’s, Amegy, or someone else—much
11
less why the presence of a handwritten phone number would be likely to alert
Amegy to the fact that the check was a forgery.
Moreover, Contractors Source does not articulate any argument as to why
the presence of the handwritten phone number raises any question of fact regarding
Amegy’s good faith, ordinary care, or any other issue. It does not identify—and we
cannot find—any legal authority for the proposition that stray markings on a check,
even alterations of the depositor’s contact information, are indicators of forgery or
an unauthorized check. Nor does Contractors Source provide any authority for the
proposition that somehow Amegy should have recognized the phone number as
belonging to Straten. Accordingly, we reject Contractors Source’s contention that
the presence of Straten’s phone number on the Lowe’s check raised any question
of material fact as to whether Amegy acted in good faith in honoring that check.
Contractors Source also contends, without explanation, that Amegy’s
decision to recredit the $2,000 Maria Henry check is some evidence that it acted
without good faith in honoring the Lowe’s check. Merri Brecher contends in her
affidavit testimony that the signature on the Lowe’s check is “clearly a forgery and
appears to me to be traced.” But the test for good faith is whether Amegy’s
employees held a belief that the signature was legitimate when they processed it,
not whether that belief was reasonable. La Sara Grain, 673 S.W.2d at 563;
Canfield, 51 S.W.3d at 837. Amegy introduced as summary-judgment evidence an
12
affidavit of Laura Poshard, an Amegy vice president, that Amegy’s employees
reviewed both checks and, while the signature on the $2,000 check did not match
Merri Brecher’s signature, the signature on the Lowe’s check did.
Contractors Source does not identify any other evidence that would tend to
show that Amegy did not act in good faith. We hold that Amegy has demonstrated
that the Lowe’s check was paid in good faith, satisfying the requirements of
Section 4.406(d)(2).
3. Bank’s ordinary care
Contractors Source also argues that it raised a question of fact as to whether
Amegy exercised ordinary care in paying the Lowe’s check, as required by
Section 4.406(e). See TEX. BUS. & COM. CODE § 4.406(e). The UCC defines
“ordinary care” as follows:
“Ordinary care” in the case of a person engaged in business means
observance of reasonable commercial standards, prevailing in the area
in which the person is located, with respect to the business in which
the person is engaged. In the case of a bank that takes an instrument
for processing for collection or payment by automated means,
reasonable commercial standards do not require the bank to examine
the instrument if the failure to examine does not violate the bank’s
prescribed procedures and the bank’s procedures do not vary
unreasonably from general banking usage not disapproved by this
chapter or Chapter 4.
Id. § 3.103(a)(9); see also id. § 4.104(c) (Chapter 3’s definition of “ordinary care”
applies to Chapter 4).
13
As support for its argument, Contractors Source’s response to the motion for
summary judgment referred to nearly all of its attached evidence, some 168 pages
of documents consisting mostly of “Collection Entry Reports” detailing individual
transactions produced by Amegy. The response failed to explain the significance of
any particular document or facts contained therein. Moreover, the response did not
provide citations to any legal authority regarding a bank’s duty of ordinary care.
Contractors Source’s appellate brief displays the same defects.
We interpret Contractors Source’s arguments as relying on the affidavits of
Don Coker and John Fricke, who apparently, but not explicitly, were offered as
expert witnesses on banking practices. The Coker and Fricke affidavits are
verbatim duplicates, with the exception of the affiants’ names and work histories,
even including the same grammatical errors. In each one, the affiant opines as to
what constitutes ordinary care and good faith in the banking industry, concluding
that Amegy did not follow best practices and therefore did not act with ordinary
care or in good faith. What the affidavits lack, however, is any recitation of facts
demonstrating that Amegy did not follow such practices. That is, the affidavits
demonstrate an absence of personal knowledge of the facts of this case. See TEX.
R. CIV. P. 166a(f). They instead recite in conclusory fashion the affiants’ beliefs
regarding the facts, and thus are no evidence of a question of fact regarding
14
Amegy’s exercise of reasonable care. Ryland Grp., 924 S.W.2d at 122; see
Brownlee, 665 S.W.2d at 112; Rizkallah, 952 S.W.2d at 587.
Both the Coker and Fricke affidavits, as well as Merri Brecher’s affidavit,
identify the Collection Entry Reports as evidence that Amegy acted without
ordinary care. Many of the reports contain the name “Maria Straten” or “Maria
Henry,” but Contractors Source identifies no evidence as to the significance of
those names on the reports. There also is no evidence in the record that those
Collection Entry Reports indicate a lack of ordinary care with respect to the
Lowe’s check.
Section 3.103’s definition of ordinary care provides that a bank is not
required to examine an instrument “if the failure to examine does not violate the
bank’s prescribed procedures and the bank’s procedures do not vary unreasonably
from general banking usage.” TEX. BUS. & COM. CODE § 3.103(a)(9). We hold that
Contractors Source has failed to raise a fact issue regarding Amegy’s exercise of
ordinary care. Amegy was therefore entitled to summary judgment regarding the
Lowe’s check under the protections afforded by Section 4.406 of the Business and
Commerce Code, and we overrule Contractors Source’s first issue.
B. Unauthorized automated clearing house transactions
In its second issue, Contractors Source argues that Amegy was not entitled
to summary judgment regarding the various payments submitted by Straten
15
through third-party bill-payment websites, which it characterizes as automated
clearing house transactions. Specifically, it argues that it raised a fact issue
regarding whether Amegy established various defenses under Chapter 4A of the
Business and Commerce Code, which governs funds transfers. Contractors Source
concedes that Section 4A.505 of the Business and Commerce Code precludes it
from asserting claims based on unauthorized transactions that Straten made more
than one year before Contractors Source first reported any unauthorized activity to
Amegy. Thus, only the transactions after November 7, 2009 are at issue in this
appeal.
Amegy argues that these claims are barred by the repeat-wrongdoer rule and
that Contractors Source did not produce evidence that it ever notified the bank of
any specific transactions that were unauthorized other than the two forged checks.
We agree. For the reasons discussed above, the repeat wrongdoer rule of
Section 4.406(d)(2) bars recovery on these transactions because Contractors
Source failed to report the initial unauthorized transactions by Straten and has not
raised a fact issue regarding Amegy’s good faith or ordinary care. Amegy therefore
was entitled to summary judgment as to Straten’s non-check transactions, and we
need not address Contractors Source’s issues raised concerning Amegy’s other
defenses.
16
C. Common-law claims
In its third issue, Contractors Source argues that summary judgment was
improper on its claims for breach of contract, breach of warranty, and negligence.
Amegy responds that the UCC displaces these common-law remedies and thus bars
recovery by Contractors Source. We agree.
Contractors Source’s claims for breach of contract and negligence arise from
the common law. Breach of contract is a common-law remedy unless the contract
is for the sale or lease of goods, situations not applicable to this case. Selectouch
Corp. v. Perfect Starch, Inc., 111 S.W.3d 830, 834 (Tex. App.—Dallas 2003, no
pet.); see also TEX. BUS. & COM. CODE §§ 2.102, 2A.102. Similarly, negligence is
a common-law doctrine. See, e.g., Rocha v. Faltys, 69 S.W.3d 315, 320 (Tex.
App.—Austin 2002, no pet.).
A claim for breach of warranty derives from either the common law or from
statute. Sw. Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 576 (Tex. 1991). Here,
however, Contractors Source does not identify in its pleadings, in its response to
the motion for summary judgment, or in its brief on appeal any specific warranty
that Amegy has breached, except a general reference in its petition to
“warranties . . . concerning [Amegy’s] security systems and protocols.” This is a
claim for breach of warranty for services. A cause of action for breach of a
warranty for services, whether express or implied, arises from the common law.
17
See Parkway Co. v. Woodruff, 901 S.W.2d 434, 438 (Tex. 1995) (implied
warranties); Bell Tel., 811 S.W.2d at 574–75 (express warranties as creation of
common law); see also Rocky Mountain Helicopters, Inc. v. Lubbock Cnty. Hosp.
Dist., 987 S.W.2d 50, 52–53 (Tex. 1998) (Texas has recognized “implied warranty
for services only when the services relate to the repair or modification of existing
tangible goods or property”).
When the UCC applies, common-law claims that conflict with the UCC are
precluded. Plano Lincoln Mercury, Inc. v. Roberts, 167 S.W.3d 616, 624 (Tex.
App.—Dallas 2005, no pet.); see also Moody Nat’l Bank v. Tex. City Dev. Ltd. Co.,
46 S.W.3d 373, 378 (Tex. App.—Houston [1st Dist.] 2001, pet. denied) (Chapter
4A precludes common-law remedies); Aquila Sw. Pipeline, Inc. v. Harmony
Exploration, Inc., 48 S.W.3d 225, 235 (Tex. App.—San Antonio 2001, pet.
denied). “To the extent they do not conflict with the Uniform Commercial Code’s
provisions, common law principles complement the Uniform Commercial Code.”
Plano Lincoln Mercury, 167 S.W.3d at 624; see also TEX. BUS. & COM. CODE
§ 1.103(b) (“Unless displaced by the particular provisions of this title, the
principles of law and equity . . . shall supplement its provisions.”); Moody Nat’l
Bank, 46 S.W.3d at 378. In this case, Contractors Source seeks to obtain the same
relief at common law that the Legislature has barred under the UCC. We therefore
hold that Contractors Source’s common-law claims are precluded.
18
II. Motion to compel discovery
Finally, Contractors Source argues that the trial court abused its discretion in
denying its motion to compel discovery. We review the trial court’s denial of a
motion to compel for abuse of discretion. Macy v. Waste Mgmt., Inc., 294 S.W.3d
638, 651 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). An appellate court
should reverse a trial court’s ruling on a motion to compel only when the trial court
acts in an arbitrary and unreasonable manner, without reference to any guiding
principles. Id.
Amegy argues that Contractors Source failed to make clear exactly what
information it sought. Amegy further contends that it produced all relevant
information. Thus, according to Amegy, the trial court did not abuse its discretion.
In its motion to compel production, Contractors Source complained that
Amegy had not produced “the schedule of fees and charges, or funds availability
disclosures, or electronic transfer disclosures or any documents responsive to
[Requests for Production Numbers] 2–7, or even all of [Amegy’s] rules and
regulations governing accounts . . . having omitted all of Sections 10K – Section
35 of the Rules . . . .” Contractors Source also complained that Amegy failed to
produce recordings of phone calls related to verbal instructions on its account,
despite the absence of any allegation that any such phone calls took place. It
argued that these documents and recordings were relevant to “the issues of
19
improper transfers and forged checks from [Contractors Source’s] account, the
contract terms under which [Amegy] held [Contractors Source’s] funds, whether
[Amegy] was acting in good faith in making the transfers and payments,
[Amegy’s] exercise of ordinary care in making the transfers and payments and the
bank’s failure to exercise care and/or good faith as a contributing factor and/or the
proximate cause of [Contractors Source’s] losses.” It concluded by arguing that it
was entitled to “all missing financial information.” In a separate brief in support of
the motion, Contractors Source focused almost entirely on documents relating to
security procedures and authentication protocols.
We cannot determine what several of Contractors Source’s requests mean,
nor can we determine how any of them are relevant to its claims in this suit. With
the exceptions of Amegy’s account rules and regulations and documents related to
security procedures, Contractors Source did not explain the relevance of any of the
information requested. With respect to the rules and regulations, the undisputed
evidence shows that Contractors Source failed to give timely notice under the
relevant statutes, and the parties agree that Amegy’s rules and regulations
shortened the timeframes involved, rather than lengthening them. Thus, the rules
and regulations could not have helped Contractors Source survive summary
judgment.
20
Moreover, Amegy responded to the motion to compel by arguing that it had
produced copies of all account rules and regulations applicable to the Contractors
Source account at any time. Amegy’s Carrie Cogburn testified that the bank
provided all relevant rules and regulations to Contractors Source when they
became effective. Indeed, Amegy filed the rules in effect in November 2010 with
its response to the motion to compel. Merri Brecher contends in her affidavit, filed
months after the trial court denied the motion to compel, that Amegy never
produced any such rules or regulations before filing its motion for summary
judgment. But this was not before the trial court when it ruled on the motion to
compel. We also note that the Brechers agreed to be bound by Amegy’s Rules and
Regulations Governing Accounts when they opened the Contractors Source
account. In the absence of fraud, a party to a written agreement is presumed to
have read and understood the agreement, and thus necessarily must have seen it.
NETCO, Inc. v. Montemayor, 352 S.W.3d 733, 739 (Tex. App.—Houston [1st
Dist.] 2011, no pet.).
Contractors Source did not rebut this argument or identify any missing
versions of portions of the rules. Further, we are unable to identify any copy of
those rules and regulations in the record from which sections 10K through 35 are
missing; indeed, not all versions of the rules and regulations in the record have
numbered sections.
21
Similarly, security procedures are irrelevant to Chapter 4 claims, as the
statutes related to security procedures apply only to Chapter 4A claims. See TEX.
BUS. & COM. CODE §§ 4A.202(b)–(c). Because Chapter 4 governs Contractors
Source’s claims, Amegy’s use of security procedures had no relevance.
The requests for production identified in the motion to compel do not
identify any information requested with sufficient particularity that we can
conclude that the trial court abused its discretion in denying discovery. Requests
for production numbers 2 through 6 all asked for documents related to fraud
detection, anomaly detection, authentication of orders, and other security-related
measures. Contractors Source did not explain in its motion to compel why these
documents are relevant to its claims in the absence of an agreed security procedure
under Chapter 4A governing at least some of the transactions in question. Request
for Production number 7 asked for “all documents identifying [Amegy’s] online
banking practices in 2007, 2008, 2009, 2010, 2011 and 2012.” These documents
have no relevance to this suit, as Contractors Source does not allege that any of the
unauthorized transactions took place through Amegy’s online banking services. On
the contrary, the parties agree that Contractors Source never completed setup of
online access to its Amegy account.
In light of Contractors Source’s failure to identify with specificity the
documents requested or the relevance of those documents to any claim or defense,
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we hold that the trial court did not abuse its discretion in denying the motion to
compel. See Macy, 294 S.W.3d at 651. We overrule Contractors Source’s fourth
issue.
Conclusion
Because we have overruled all of Contractors Source’s issues on appeal, we
affirm the trial court’s judgment.
Michael Massengale
Justice
Panel consists of Justices Massengale, Brown, and Huddle.
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