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Frost National Bank v. Heafner


om. Code §4.401; see also Ray v. Farmers' State Bank, 576 S.W.2d 607, 608 (Tex. 1979). Section 3.404 provides that a person is not liable on an instrument until she has signed the instrument, and any unauthorized signature is wholly inoperative as that of the person whose name is signed. See Tex. Bus. & Com. Code §3.404(a); see also McDowell v. Dallas Teachers Credit Union, 772 S.W.2d 183, 187 (Tex. App.-Dallas 1989, no writ). Therefore, under the Business and Commerce Code, a bank is conclusively presumed to know the signature of a depositor and may not charge the depositor's account with amounts of any checks not signed by the depositor, no matter how artistic the forgery and regardless of whether the bank was negligent. See McDowell, 772 S.W.2d at 188; see also Ames v. Great Southern Bank, 672 S.W.2d 447, 450 (Tex. 1984) (holding that a bank that pays funds in breach of a contract on a missing endorsement is liable for the face amount of the instrument).

Heafner opened her money market account at Frost as a retirement account. When she opened the account, she was given several temporary checks that did not have her name or address pre-printed on them. She never ordered any checks for the account. The two forged $5,000 checks were the temporary checks. When the checks were presented to Frost (in June and July respectively), Frost did not verify that the signature on the checks was Heafner's. Heafner testified that, if she had known about the first forged $5,000 check in June, she would have acted immediately to limit her damages. Instead, she did not discover the two forgeries until August 1994. By that time, Lavely had written several thousand dollars in unauthorized checks from the Bank United account during June, July, and August of 1994.

Frost attempts to escape liability by asserting Heafner's injuries were caused by Heafner herself, Bank United, and Lavely. Frost presented evidence that some of the checks written on the Bank United account after the deposit of the two $5,000 checks were authorized by Heafner and were for her benefit. Heafner testified that checks were written for what she believed to be her business expenses, but that she later discovered were Lavely's expenses. This evidence is legally sufficient to prove that Frost's breach of the account deposit agreement was the cause-in-fact of Heafner's injuries. Moreover, this evidence does not amount to evidence of such great weight and preponderance as to make the jury's finding clearly wrong and unjust.

Proof of foreseeability

Frost also asserts Heafner did not prove foreseeability because Heafner's injuries were too remote or speculative based on its payment of the two forged checks. We disagree.

In Mead v. Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981), the Supreme Court cited Hadley v. Baxendale, 9 Exch. 341 (1854), for the following proposition:

Where two or more parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally; i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach.

Therefore, Heafner had to prove her damages either arose according to the usual course of things from the breach of the deposit account agreement, or were reasonably in the contemplation of the parties at the time they made the contract as the probable result of the breach. Heafner's testimony establishes that the $10,

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