Liberty Bank & Trust Co. v. Gulf Coast Bank & Trust Co.

Case: 10-30772 Document: 00511610539 Page: 1 Date Filed: 09/22/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 22, 2011
No. 10-30772 Lyle W. Cayce
Clerk
LIBERTY BANK & TRUST COMPANY,
Plaintiff-Appellee,
v.
GULF COAST BANK & TRUST COMPANY, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:08-CV-4316
Before DAVIS, CLEMENT, and ELROD, Circuit Judges.
PER CURIAM:*
Defendant-Appellant Gulf Coast Bank and Trust Company (Gulf Coast)
appeals from an order granting summary judgment to Plaintiff-Appellee Liberty
Bank and Trust Company (Liberty Bank), which was formerly United Bank and
Trust Company (United Bank).1 During August 2005, Hurricane Katrina caused
*
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5th Cir.
R. 47.5.4.
1
United Bank was the original plaintiff in this action. On April 2, 2009, United Bank
merged with Liberty Bank and Liberty Bank became the plaintiff. Because United Bank was
the entity involved at all relevant times during this dispute, we refer to Plaintiff-Appellee as
United Bank throughout this opinion.
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No. 10-30772
extensive flood damage to United Bank’s corporate office in New Orleans. Less
than two months later, on October 19, United Bank sent a “cash
letter”—essentially a deposit—for $121,748.46 to the Federal Reserve through
Fiserv Solutions, Inc., a data processing company. The amount was mistakenly
credited, however, to Gulf Coast, not to United Bank. Two days later, the
Federal Reserve notified Gulf Coast that it had received an “extra bundle” in the
amount of $121,748.46. Rather than return the amount, Gulf Coast used it to
reconcile its books because, it alleges, the Federal Reserve owed it approximately
$127,000. In 2008, shortly after restoring its accounting department after
recovering from Hurricane Katrina, United Bank conducted an internal audit
during which it discovered the missing credit for the October 19, 2005 cash
letter. United Bank then notified the Federal Reserve of the missing credit. On
August 29, 2008, United Bank filed suit against the Federal Reserve and United
Bank’s insurer, The Kansas Bankers Surety Company. After learning from the
Federal Reserve in March 2009 that Gulf Coast had received its money, United
Bank asked Gulf Coast to return it. Gulf Coast refused, and United Bank
amended its complaint to add Gulf Coast and Fiserv as defendants in this
action.2 On July 16, 2010, the district court granted summary judgment to
United Bank on its conversion claim against Gulf Coast. We AFFIRM.
We review the district court’s ruling on a motion for summary judgment
de novo, applying the same legal standard as the district court. See Moss v.
BMC Software, Inc., 610 F.3d 917, 922 (5th Cir. 2010). Summary judgment is
proper if there is “no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). We “review the
evidence and any inferences therefrom in the light most favorable to the
nonmoving party.” SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993).
2
This appeal only involves United Bank’s claim against Gulf Coast for conversion.
2
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Gulf Coast’s principal contention on appeal is that it cannot be liable for
conversion under Louisiana law. Specifically, Gulf Coast argues that: (1) an
improperly credited cash letter cannot be the basis of the tort of conversion in
Louisiana; and (2) United Bank’s only potential recourse is against the Federal
Reserve, not Gulf Coast. Each of these arguments is incorrect under Louisiana
law. With respect to the first—for which Gulf Coast cites no
authority—“[Louisiana] courts have uniformly considered actions against banks
for wrongful transfer or disposition of account funds as conversion actions.”
Sanderson v. First Nat’l Bank of Commerce, 723 So. 2d 1036, 1038 (La. App.
1998) (collecting cases).
Although somewhat confusing, Gulf Coast’s second argument seems to be
that United Bank’s conversion claim against Gulf Coast can only arise under
Louisiana Revised Statute § 10:3-420, which governs actions for the conversion
of negotiable instruments. Gulf Coast asserts that this statutory section may
plausibly allow a claim against the Federal Reserve, but not Gulf Coast, because
Gulf Coast and United Bank never had a banking relationship. This argument
is flawed because it improperly assumes that § 10:3-420 is the only possible basis
for conversion liability for Gulf Coast. But this is not so. As the district court
apparently took for granted—and rightly so—United Bank has a claim against
Gulf Coast under general Louisiana law conversion principles. See, e.g., Dual
Drilling Co. v. Mills Equip. Inv., Inc., 721 So. 2d 853, 857 (La. 1998). Moreover,
it is immaterial that Gulf Coast did not initially obtain possession of United
Bank’s credit by committing a wrongful act. As the district court correctly
observed, “[a]lthough a party may have rightfully come into possession of
another’s goods, the subsequent refusal to surrender the goods to one who is
entitled to them may constitute conversion.”
Gulf Coast also argues, in the alternative, that even if the district court’s
finding of liability is upheld, the district court erred by not allocating fault
3
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between Gulf Coast, United Bank, Fiserv, and the Federal Reserve. Gulf Coast’s
argument presupposes that the Federal Reserve and Fiserv were negligent in
applying the credit to Gulf Coast’s account, and that United Bank was negligent
in not sooner discovering the missing credit on its books. Gulf Coast does not
point to any evidence to support this argument, and thus the district court would
not have been required to consider the question of comparative fault on
summary judgment. Even assuming arguendo, however, that Gulf Coast could
prove the negligence of another party, its plea for an allocation of fault fails as
a matter of law. Because Gulf Coast is liable for conversion, an intentional tort,
Louisiana law plainly forecloses an allocation of fault between Gulf Coast and
United Bank: “[I]f a person suffers . . . loss as a result partly of his own
negligence and partly as a result of the fault of an intentional tortfeasor, his
claim for recovery of damages shall not be reduced.” La. Civ. Code art. 2323(C)
(emphasis added). Although this provision would be inapplicable were a third
party, such as Fiserv or the Federal Reserve, to be found negligent,3 Gulf Coast
still would not be entitled to an allocation of fault because any negligence by
Fiserv or the Federal Reserve would not be the legal cause of United Bank’s
injury.
Under Louisiana law, Gulf Coast’s conversion is an intervening cause that
would cut off any liability on the part of Fiserv or the Federal Reserve. The
3
Louisiana law is silent about how to treat cases involving both intentional and
negligent tortfeasors. Article 2324(B) of the Louisiana Civil Code broadly states that “[a] joint
tortfeasor shall not be liable for more than his degree of fault and shall not be solidarily liable
with any other person for damages attributable to the fault of [the] other person,” but this rule
does not apply to joint intentional tortfeasors, who remain liable in solido. La. Civ. Code art.
2324(A). This ambiguity has led the author of one civil law treatise to observe that “[t]he legal
relationship of the separate intentional and negligent tortfeasors who both are a cause of harm
to the plaintiff has created a rapidly growing and very serious brier patch . . . [because] the
degree of culpability of an intentional wrongdoer is so disparate from that of a negligent
wrongdoer that the two will not mix.” William E. Crawford, 12 Louisiana Civil Law Treatise:
Tort Law § 21:12 (2d ed. 2010).
4
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Second Restatement of Torts, to which the Louisiana Supreme Court has
repeatedly turned when determining whether an intervening cause relieves
liability, see, e.g., Adams v. Rhodia, Inc., 983 So. 2d 798, 808 (La. 2008); Olsen
v. Shell Oil Co., 365 So. 2d 1285, 1293 n.15 (La. 1978); Laird v. Travelers
Insurance Co., 267 So. 2d 714, 719 n.1 (La. 1972), provides that a third-party
intentional tort “is a superseding cause of harm to another resulting therefrom,
although the actor’s negligent conduct created a situation which afforded an
opportunity to the third person to commit such a tort . . . , unless the actor at the
time of his negligent conduct realized or should have realized the likelihood that
such a situation might be created, and that a third person might avail himself
of the opportunity to commit” the intentional tort. Restatement (Second) of
Torts § 448 (1965). Nothing in the summary judgment record demonstrates that
it was foreseeable to Fiserv or the Federal Reserve that another legitimate bank
would avail itself of the opportunity to convert the credit and refuse to return it
to its rightful owner.
Gulf Coast also argues that the district court erred by failing to offset the
amount United Bank received in settlements from Gulf Coast’s co-defendants
against Gulf Coast’s liability. Gulf Coast cites no evidence or authority to
support this argument, and we will not consider it.4
The judgment of the district court is AFFIRMED.
4
Plaintiff also asserts, for the first time on appeal, that United Bank’s claim is
prescribed by its failure to file the case within the one-year prescriptive period for conversion
claims under Louisiana law. See La. Civ. Code art. 3492. Gulf Coast has waived this defense
because it failed to raise it below. See Spotts v. United States, 613 F.3d 559, 569-70 (5th Cir.
2010) (arguments “not raised before the district court are waived and cannot be raised for the
first time on appeal”) (citation and internal quotation marks omitted).
5