GoldCrown Properties, Inc. v. Mutual of Oma ( 2019 )

Case: 19-10094 Document: 00515084420 Page: 1 Date Filed: 08/20/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-10094 August 20, 2019
Summary Calendar
Lyle W. Cayce
Clerk
GOLDCROWN PROPERTIES, INCORPORATED; GOLD CROWN
PROPERTIES, INCORPORATED, TEXAS,
Plaintiffs - Appellants
v.
MUTUAL OF OMAHA BANK, doing business as Community Association
Bank,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:17-CV-527
Before KING, SOUTHWICK, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
The chief financial officer of one of the plaintiffs notified the defendant
bank that the plaintiffs were fraudulently using the funds in their accounts.
The CFO and others also submitted written statements concerning the alleged
fraud. The bank placed a temporary hold on the plaintiffs’ relevant accounts,
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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No. 19-10094
then released the hold six days later. The plaintiffs brought suit against the
bank for alleged damages caused by the hold on their accounts. The district
court granted summary judgment to the bank. We AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff GoldCrown Properties, Inc., which does business as Select
Management, manages homeowner and condominium associations.
Separating the first word of the other company’s name, plaintiff Gold Crown
Properties, Inc., Texas manages apartment complexes. For clarity, we will
refer to GoldCrown under its d/b/a name of Select Management, and the
manager of apartment complexes as Gold Crown. Whenever possible, we
collectively call them “the Plaintiffs.”
Ted Smith was the president and owner of the Plaintiffs. The Plaintiffs
were authorized signatories on numerous accounts at Mutual of Omaha Bank
related to the associations and apartment complexes they managed. In 2011,
Smith, as an authorized agent for Gold Crown, executed an enrollment form
and Master Signature Card and Agreement with the Bank, in which Gold
Crown agreed to be bound by the written Terms and Conditions. Later, in
2012, Select Management executed a Master Signature Card and Agreement,
in which it also agreed to be bound by the Terms and Conditions. Scarlett
Thomas was Select Management’s CFO. She and Ted Smith were identified
on the Master Signature Card and Agreement as authorized agents for the
various accounts managed by Select Management. By contract with the Bank,
“[e]ach authorized agent shall have the power to receive information or give
instructions to Bank concerning any accounts opened under this Agreement.”
On January 21, 2015, CFO Thomas telephoned the Bank to report that
Smith was engaging in fraud by transferring money from the various accounts
related to the managed entities to Select Management’s operating account to
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pay its employees. Thomas specifically identified a $25,000 transfer from an
apartment complex’s account to Select Management’s operating account.
Thomas and two accountants also provided written statements regarding
alleged fraudulent use of the accounts. The next day, the Bank put a
temporary hold on the accounts. Six days after placing the hold, the Bank
released it as to all accounts.
In January 2017, the Plaintiffs filed suit in state court in Houston. They
claimed breach of contract, violations of the Texas Finance Code, conversion,
negligence, and negligence per se. In February 2017, the Bank removed the
case to the United States District Court for the Northern District of Texas. The
Bank moved for summary judgment on all claims. In December 2018, the
district court granted the motion. The Plaintiffs timely appealed.
DISCUSSION
We give de novo review to the grant of summary judgment, applying the
same analysis as the district court. Brand Servs., L.L.C. v. Irex Corp., 909 F.3d
151, 155-56 (5th Cir. 2018). The moving party needs to show “there is no
genuine dispute as to any material fact,” and that it “is entitled to judgment as
a matter of law.” FED. R. CIV. P. 56(a). To determine if genuine issues of
material fact are in dispute, all “inferences to be drawn from the underlying
facts contained in the affidavits, depositions, and exhibits of record must be
viewed in the light most favorable to” the nonmovant. Brand Servs., 909 F.3d
at 156 (citation omitted).
The Plaintiffs argue the district court erred in not considering its
supplemental complaint. The Plaintiffs, though, filed the new complaint
without leave of court after summary judgment briefing was completed and a
year and a half after the deadline to amend pleadings. A plaintiff “cannot
simply file documents and declare them to be amended complaints”; amending
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the complaint at that point required “the opposing party’s written consent or
the court’s leave.” Prince-Rivers v. Fed. Express Ground, 731 F. App’x 298, 300
(5th Cir. 2018) (quoting FED. R. CIV. P. 15(a)(2)). “[F]ailing to request leave
from the court when leave is required makes a pleading more than technically
deficient. The failure to obtain leave results in an amended complaint having
no legal effect.” U.S. ex rel. Mathews v. HealthSouth Corp., 332 F.3d 293, 296
(5th Cir. 2003). The district court did not err by refusing to consider the
amended complaint filed without leave of court.
The Plaintiffs also contend the district court erred in holding Chapter 95
of the Texas Finance Code does not give rise to a private right of action. They
acknowledge that Chapter 95 does not include an explicit private right of action
but argue Sections 95.103(a) and 95.104(b) imply one. Under Texas law,
whether a constitutional or statutory provision provides a private right of
action turns on the intent of the drafters. Brown v. De La Cruz, 156 S.W.3d
560, 563 (Tex. 2004). Nothing in the sections the Plaintiffs identify supports
that the state legislature intended to create a private right of action under
Chapter 95 of the Texas Finance Code. The district court did not err in holding
Chapter 95 does not include a private right of action. Because Chapter 95 is
the only section of the Texas Finance Code pled as a cause of action, it is
unnecessary to address other arguments under the Texas Finance Code.
The Plaintiffs argue further that the district court improperly relied on
hearsay evidence, namely, an unsworn statement. The Bank offered the
unsworn statement of Select Management’s CFO to show it had been given
notice of alleged wrongdoing, and that notice led to a hold being placed on the
Plaintiffs’ accounts. The truth of the allegations of fraud is not the relevance
of the evidence. “Testimony offered to prove that the party had knowledge or
notice is not hearsay because ‘the value of the statement does not rest upon the
declarant’s credibility and, therefore, is not subject to attack as hearsay.’” In
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re Morrison, 555 F.3d 473, 483 (5th Cir. 2009) (quoting Alexander v. Conveyors
& Dumpers, Inc., 731 F.2d 1221, 1230 (5th Cir. 1984)). The district court did
not err in considering the statement.
The Plaintiffs also argue that there was no wrongdoing by Select
Management or Gold Crown. Even if that is so, the point gains the Plaintiffs
nothing. Under its contract with these depositors, the “Bank may suspend or
terminate this Agreement or any Service if Bank has reason to believe that
Customer or Customer’s Agent has engaged in fraudulent or illegal activity.”
The unsworn statement of Select Management’s CFO put the Bank on notice
of alleged fraud or wrongdoing by Smith, acting as agent for the Plaintiffs. The
truth of the matter asserted is irrelevant. Regardless of whether either
Plaintiff was engaged in fraudulent or illegal activity, the district court did not
err in granting summary judgment on this issue.
Finally, the Plaintiffs argue the Bank did not have authority to make the
$25,000 transfer identified by the CFO and thus was responsible for creating
the transaction that led to the temporary hold. The only evidence identified in
the record on this question is an account document for Gold Crown in which
the box that would authorize “Wire Transfers” was not checked. The initial
problem with the argument is that there is no evidence that the transfer
indicated was a wire transfer. “Summary judgment cannot be defeated
through ‘[c]onclusional allegations and denials, speculation, improbable
inferences, unsubstantiated assertions, and legalistic argumentation.’” Acker
v. Gen. Motors, L.L.C., 853 F.3d 784, 788 (5th Cir. 2017) (alteration in original)
(citation omitted). Because there is no evidence the Bank breached its contract
by initiating the transfer or that it was negligent, it is unnecessary to discuss
the economic loss doctrine.
AFFIRMED.
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