In a decision pitting a lawyer against his firm’s bank, the Supreme Court of Texas recently issued an opinion holding that a transfer-request form was not sufficiently definite to confirm that a bank actually intended to be contractually bound by a promise to only transfer “collected” funds.
In Cadence Bank, N.A. v. Roy J. Elizondo III and Roy J. Elizondo III, PLLC, Attorney Roy Elizondo claimed that the bank had breached an agreement to confirm the sufficiency of funds necessary to complete a wire-transfer request.
The underlying facts are all too familiar to those frequently engaging in wire transactions. In 2014, Elizondo received an e-mail from a scammer purporting to be a new potential client on a debt-collection matter. Immediately after Elizondo’s engagement, the scammer notified him that the supposed debtor had agreed to settle and would be sending a check to Elizondo’s office. At the scammer’s urging, Elizondo quickly deposited the check in his IOLTA account and, the next day, contacted his firm’s bank to initiate a wire of nearly $400,000 to an overseas account. The day after that, the check was dishonored, and the bank charged Elizondo for the overdrawn funds. The bank sued Elizondo after he refused to pay, and Elizondo counterclaimed.
Elizondo’s position was based on language in the bank’s International Outgoing Wire Request Form. He argued, and a majority of a panel on the lower court of appeals agreed, that the bank’s form constituted a contract in which the bank would transfer money only from a “collected balance,” which he asserted meant the remaining balance in his account once provisionally credited funds were excluded. If the bank, according to Elizondo, had sought to confirm that the collected balance contained sufficient funds for the transfer, it would have realized that the funds were lacking and not made the transfer.
The Supreme Court of Texas rejected this argument. Applying normal rules of contract formation, the Court determined that the wire-transfer form did not impose any contractual obligations on the bank. The Court noted that the form had “all the indicia of a form whose purpose [was] to facilitate [the bank’s] internal process of the wire transfer” and did not form a binding contract. The Court further noted that, if Elizondo’s argument were successful, any routine administrative form could potentially override relevant UCC rules by forming a new, superseding contract. It then sent the case back to the lower court of appeals to consider additional arguments.
The Court’s opinion can be read here.