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Click here for the full text of this decision FACTS:Panhandle Packing and Gasket does business as Arrow Bearings and Industrial Supply, Nammco Fabrication and Lubbock Gasket and Supply. Lubbock Gasket owns all of the stock in Lone Star Gasket and Supply, which acts as the parent corporation for all three of the other corporations. Betty Kimbrell was the bookkeeper for all of the businesses. On behalf of all of the businesses, Lubbock Gasket would pay estimated taxes throughout the year to the IRS. Each subsidiary would write checks to Lubbock Gasket for their portion of the taxes drawn on one of several accounts at First United Bank. The checks were made payable to Lubbock Gasket. Betty Kimbrell was the person who handled the reimbursement transactions. Unknown to her employer, instead of depositing the checks, Kimbrell would cash the checks at First United and use the case proceeds for her own benefits. This practice went on for approximately seven years, until First United inquired about the authority and maker of a check in 2000. A review of the records disclosed that Kimbrell had endorsed 476 checks, resulting in a loss to the companies of more than $676,000. Seeking to recover its losses for Kimbrell’s embezzlement, Panhandle Packing sued First United for breach of contract, conversion, violation of Texas Business and Commerce Code 4.401 and negligence. First United answered with the affirmative defenses of estoppel, the deposit agreement and corporate resolution, failure to satisfy conditions precedent, negligence, comparative negligence, laches, good faith payment, payment and statutes of limitation. The suit went to trial. The jury found that Kimbrell did not have authority to endorse checks without restriction, that First United failed to honor the deposit agreement, and that the failure was unexcused. The jury found First United 49 percent at fault and Panhandle Packing 51 percent. The jury also found that First United failed to exercise good faith in paying cash to Kimbrell, that Kimbrell was Panhandle Packing’s agent; that First United converted Panhandle Packing’s property, and wrongly exercised dominion over that property. The jury awarded Panhandle Packing $294,974 in damages, plus $45,000 in attorneys’ fee for trial work, but no attorneys’ fees for appellate work. HOLDING:Reversed and remanded in part; reversed and rendered in part. The court addresses First United’s challenge to the sufficiency of the evidence supporting the jury’s finding on conversion. Kimbrell was Panhandle Packing’s agent. She was the one charged with the task of preparing checks and conducting necessary banking business to accomplish the reimbursements. The court concludes that there is no evidence to show the checks were paid on unauthorized endorsements, or that payment was made to a person not entitled to endorse the instruments. The jury’s findings that First United wrongfully assumed and exercised dominion over the checks is not supported. The court takes note of Panhandle Packing’s CFO testimony, in which he told Kimbrell to stop endorsing checks without restriction (e.g., with a “for deposit only” limitation). The court finds this is some evidence that Kimbrell did not have authority to endorse checks after that without a restrictive endorsement. On the other hand, the bank did not know of Kimbrell’s endorsement, and the bank employees’ acceptance of Kimbrell’s unrestricted endorsements did not constitute bad faith. And evidence of the tellers’ performance standards were properly admitted into evidence to address to show their good faith. OPINION:Reavis, J.; Johnson, C.J., Quinn and Reavis, JJ.

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