Jerry W. Paige v. Wells Fargo and Company

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

NO. 2016-CA-00484-COA

JERRY W. PAIGE D/B/A PAIGE ELECTRIC APPELLANT
COMPANY, LLC

v.

WELLS FARGO AND COMPANY APPELLEE

DATE OF JUDGMENT: 03/29/2016
TRIAL JUDGE: HON. LAWRENCE PAUL BOURGEOIS JR.
COURT FROM WHICH APPEALED: HARRISON COUNTY CIRCUIT COURT,
FIRST JUDICIAL DISTRICT
ATTORNEY FOR APPELLANT: BLEWETT W. THOMAS
ATTORNEY FOR APPELLEE: MICHAEL JAMES BENTLEY
NATURE OF THE CASE: CIVIL - OTHER
DISPOSITION: AFFIRMED - 10/03/2017
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

BEFORE LEE, C.J., BARNES AND WESTBROOKS, JJ.

WESTBROOKS, J., FOR THE COURT:

¶1. This appeal is taken from the Harrison County Circuit Court. Paige Electric LLC

(Paige Electric) sought recovery of a check, in the amount of $83,972.08, from Wells Fargo

and Co. (Wells Fargo). Finding no error in the circuit court’s dismissal of Paige Electric’s

case, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2. Paige Electric leased storage space to Bret Gibson (Gibson), an out-of-state contractor

working on the Mississippi Gulf Coast following Hurricane Katrina. Gibson was indebted

to Paige Electric for more than $80,000 for the storage space. On June 14, 2006, Gibson
represented to Paige Electric that he received an insurance check as payment from Jim Wylie

(Wylie) for construction work performed on Wylie’s Louisiana residence.

¶3. Gibson tendered the insurance check to Paige Electric as payment and full satisfaction

of Gibson’s debts. The check was issued by Fidelity and Deposit Company of Maryland

(Fidelity). The check was payable to Jim A. Wylie and the company holding the mortgage

on Wylie’s home, HomeEq Service Corporation (HomeEq), in the amount of $83,972.08.

This check was for the payment of damage done by Hurricane Katrina. Between 2006 and

2008, HomeEq was owned by Wells Fargo.

¶4. Paige Electric contacted Wylie to verify the check had been properly endorsed by all

payees, and was negotiable. Wylie confirmed the genuineness of the endorsements, and that

he rightfully possessed the check. As a result of Wylie’s and Gibson’s representations, Paige

Electric accepted the check in satisfaction of Gibson’s outstanding debts and deposited the

check into its BancorpSouth checking account. Paige Electric also paid Gibson the

difference between his indebtedness and the amount of the check in cash.

¶5. The check was deposited on June 14, 2006, and final payment was made by Wells

Fargo on June 15, 2006. After making the final payment, Wells Fargo did not dispute the

payment of the check or raise any claims of fraudulent endorsement until nearly five months

after it was deposited. From June 14, 2006, to November 27, 2006, BancorpSouth placed no

restrictions or holds regarding the funds deposited.

¶6. On November 1, 2006, HomeEq submitted an affidavit alleging that the check Paige

Electric deposited was wrongfully endorsed. Wells Fargo received that affidavit on

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November 20, 2006. Wells Fargo notified BancorpSouth that an endorsement was forged,

and the check was not enforceable by Paige Electric. On November 27, 2006, Paige Electric

was notified by BancorpSouth that a hold was being placed on Paige Electric’s checking

account, due to Wells Fargo’s wrongful-endorsement claim. On December 5, 2006,

BancorpSouth rejected Wells Fargo’s forged-endorsement claims and released the hold on

Paige Electric’s account.

¶7. For more than a year, Paige Electric received no further communication from Wells

Fargo, HomeEq, or BancorpSouth, regarding the validity of the endorsements or the payment

of the check. On December 31, 2007, BancorpSouth contacted Paige Electric and advised

that another hold was placed on their account, for the entire amount of the check. On March

3, 2008, BancorpSouth deducted the entire amount of the check from Paige Electric’s

account.

¶8. Around May 2010, Paige Electric filed suit to recover the check’s value from Wylie,

Gibson, HomeEq, BancorpSouth, and Wells Fargo. Wells Fargo moved to dismiss the claims

against it, asserting that the claim was barred by the Mississippi Uniform Commercial Code

(UCC), since Paige Electric did not have an account with it. On May 15, 2014, four years

after Wells Fargo’s motion to dismiss was filed, the clerk of the court sua sponte moved to

dismiss Paige Electric’s suit for want of prosecution.

¶9. In response to the clerk’s motion, Paige Electric sought leave to amend and “correct”

its complaint. Wells Fargo opposed the amendment as futile and re-urged its motion to

dismiss Paige’s claims. The circuit court gave Paige Electric leave to amend its complaint.

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¶10. Paige Electric’s amended complaint dropped all claims against Wylie and Gibson and

asserted that HomeEq, BancorpSouth, and Wells Fargo were liable for the full amount of the

check. Paige Electric’s first amended complaint asserted that Wells Fargo was liable to it

under the UCC for the face value of the forged check under the following theories: (1) Wells

Fargo did not provide timely notice of the forgery; (2) Wells Fargo was estopped from

denying the validity of the endorsement of the forged check; (3) Wells Fargo unreasonably

delayed its request that BancorpSouth return the funds transferred under the forged check;

(4) Wells Fargo was careless in handling HomeEq’s claim, which resulted in a failure to

observe reasonable commercial standards of fair dealing; (5) Wells Fargo refused to assert

the applicable defenses under Mississippi Code Annotated Section 75-4-406 (Rev. 2016),

that would have required HomeEq to sustain the loss.

¶11. Wells Fargo moved to dismiss Paige Electric’s first amended complaint, contending

that Paige Electric had failed to state a claim for relief against Wells Fargo and, further, that

the UCC precluded Paige Electric from asserting any cognizable claim against Wells Fargo.

Wells Fargo reiterated that Paige Electric was not a customer of Wells Fargo and the fact that

Paige Electric acknowledged the forgery amounted to a breach of its warranties and

precluded it from recovering any amounts from the check.

¶12. On March 12, 2015, a hearing was held on Wells Fargo’s motion to dismiss. On April

16, 2015, the circuit court entered an order dismissing Paige Electric’s complaint under Rule

12(b)(6) of Mississippi Rules of Civil Procedure. It is from that order that Paige Electric

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now appeals.1 Finding no error, we affirm.

STANDARD OF REVIEW

¶13. A motion to dismiss under Mississippi Rule of Civil Procedure 12(b)(6) tests the legal

sufficiency of the complaint. Lagniappe Logistics Inc. v. Buras, 199 So. 3d 675, 676 (¶5)

(Miss. 2016). Rule 12(b)(6) motions should not be granted unless “it appears beyond doubt

that the plaintiff will be unable to prove any set of facts in support of his claim.” Id.

(quotation marks omitted). When reviewing a Rule 12(b)(6) motion on appeal, we conduct

a de novo review and must accept the allegations contained in the complaint as true. Id.

DISCUSSION

Whether the circuit court erred in dismissing Paige Electric’s claims against
Wells Fargo.

¶14. Paige Electric’s amended complaint alleged that Wells Fargo was directly or indirectly

involved in acts of conversion, misappropriation, and coercion regarding the wrongful

appropriation and removal of the check’s proceeds from Paige Electric’s bank account.

Paige Electric further asserts that Wells Fargo’s liability regarding the manner of recovery

of the check’s proceeds from its bank account was supported by Mississippi Code Annotated

Sections 75-3-417 and/or 75-3-418 (Rev. 2016).

¶15. Paige Electric argues that an unauthorized debit from its checking account was a

wrongful recovery and tantamount to conversion. Paige Electric also argues sections 75-3-

417 and 75-3-418 support its claims. We do not agree. Section 75-3-417 discusses the

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We note that although Paige Electric had also appealed the dismissal of its claims
against HomeEq and BancorpSouth, its claims against those entities were resolved on
appeal.

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liability of parties and presentment warranties. This section of Mississippi’s UCC does not

address the wrongful recovery of funds obtained by a fraudulent endorsement. Instead, the

section addresses the applicable warranties of a payee and its responsibilities if those

warranties are breached. Section 75-3-417 does discuss Paige Electric’s liability for a

presentment-warranty breach due to Gibson’s and Wylie’s fraudulent endorsement.

Therefore, Paige Electric warranted to BankcorpSouth and Wells Fargo that all signatures

on the instrument were authentic and authorized, see Miss. Code Ann. § 75-3-417 (a)(2), and

therefore those entities could recover from Paige Electric. We find nothing in this code

section that supports Paige Electric’s claims of wrongful recovery.

¶16. However, it should be noted that Wells Fargo waited more than thirty days after it had

reason to know of the breach of warranty before noticing its claim. Pursuant to Mississippi

Code Annotated Section 75-3-416(c) (Rev. 2016), check warranties are disclaimed if notice

of the claim is not submitted within thirty days after the claimant has reason to know of the

breach and the identity of the warrantor. A warrantor’s liability is discharged to the extent

of the loss caused by the delay in giving notice. Paige Electric’s warranty is discharged to

the extent the loss was caused by the delay. Nevertheless, Paige Electric has not identified

any such issues.

¶17. Paige Electric also asserts that Section 75-3-418 supports its wrongful-recovery

claims. We disagree. Section 75-3-418 addresses payment or acceptance by mistake, and

the right of a drawee to recover funds that were mistakenly paid. This section is inapplicable,

since the payment to Paige Electric was made due to fraud and not mistake. As such, this

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section does not apply.

¶18. Paige Electric maintains that its claim of conversion is a cognizable claim for which

relief can be granted. Paige Electric cites Mississippi Code Annotated Sections 75-1-103(b)

and 75-3-420 (Rev. 2016) as support for its claim. Section 75-1-103 addresses the liberal

construction and application of the UCC. Coercion is only mentioned once in this section

and it states, “Unless displaced by the particular provisions of the Uniform Commercial

Code, the principles of law and equity, including the law merchant and the law relative to

capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion,

mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.”

Miss. Code Ann. Section 75-1-103 (b) (Rev. 2016). Moreover, Paige Electric cites to Miss.

Code Ann. Section 75-3-420 to support its claim of conversion, but we do not find this

argument persuasive. Paige Electric cites to Section 75-3-420, but it fails to adequately

explain how this section justifies its argument of conversion. The trial court found that Paige

Electric failed to state a claim for which relief could be granted. Finding no error, we affirm.

¶19. AFFIRMED.

LEE, C.J., IRVING AND GRIFFIS, P.JJ., BARNES, CARLTON, FAIR AND
GREENLEE, JJ., CONCUR. WILSON, J., NOT PARTICIPATING.

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