Braden Furniture Co. v. Union State Bank

• Decision Date: 19 October 2012
• Docket Number: 1110943.
• Citation: 109 So.3d 625
• Parties: BRADEN FURNITURE COMPANY, INC. v. UNION STATE BANK.
• Court: Alabama Supreme Court

109 So.3d 625

BRADEN FURNITURE COMPANY, INC.

v.UNION STATE BANK.

1110943.

Supreme Court of Alabama.

Oct. 19, 2012.

Ronald R. Brunson, Henry I Frohsin, James F. Barger, Jr., and J. Elliott Walthall of Frohsin & Barger, LLC, Birmingham, for appellant.

Michael R. Lunsford of Porterfield, Harper, Mills, Motlow & Ireland, P.A., Birmingham, for appellee.

H. Hampton Boles, W. Clark Watson, and John D. Pickering of Balch & Bingham, LLP, Birmingham, for amicus curiae Alabama Bankers Association, in support of the appellee.

STUART, Justice.

Braden Furniture Company, Inc., appeals a summary judgment for Union State Bank. We affirm.

Facts and Procedural History

According to Braden Furniture, between 2003 and 2010, Bonnie Manning, an assistant bookkeeper for Braden Furniture, accessed Braden Furniture's accounting program and created over 200 unauthorized checks, totaling over $470,000, that she then deposited in her account at Union State Bank. The majority of the checks did not identify a payee, i.e., the payee on the check was left blank. Braden Furniture sued Union State Bank, RBC Bank, and Manpower, Inc., alleging against Union State Bank claims of common-law negligence and wantonness and violations of §§ 7–3–404(d), 7–3–405(b), and 7–3–406, Ala.Code 1975. Union State Bank moved for a summary judgment. The trial court entered a summary judgment for Union State Bank, stating, in pertinent part:

“It is undisputed that there is no customer relationship existing between [Union State Bank] and [Braden Furniture]. Even if a relationship could have existed between Braden Furniture and Union State Bank, the Court finds that [Braden Furniture's] claims for common law negligence and common law wantonness are displaced by Alabama's Uniform Commercial Code. Cagle's, Inc. v. Valley Nat'l Bank, 153 F.Supp.2d 1288, 1297–98 (M.D.Ala.2001); C & N Contractors, Inc. v. Community Bancshares, Inc., 646 So.2d 1357, 1362 (Ala.1994). With regard to [Braden Furniture's] claims under the Alabama Uniform Commercial Code, [Braden Furniture] amended [its] complaint to make claims pursuant to Alabama Code § 7–3–404, § 7–3–405, § 7–3–406.... Based on the allegations in the complaint and the undisputed evidence presented to this court, the court finds that the Alabama Uniform Commercial Code sections cited by Braden Furniture are inapplicable to this case. In addition, some of the Code sections cited by [Braden Furniture] have been held to be defenses, and not causes of action.”

Standard of Review

Our standard of review of a summary judgment is well settled:

“ ‘The standard of review applicable to a summary judgment is the same as the standard for granting the motion....’ McClendon v. Mountain Top Indoor Flea Market, Inc., 601 So.2d 957, 958 (Ala.1992).

“ ‘A summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c)(3), Ala. R. Civ. P. The burden is on the moving party to make a prima facie showing that there is no genuine issue of material fact and that it is entitled to a judgment as a matter of law. In determining whether the movant has carried that burden, the court is to view the evidence in a light most favorable to the nonmoving party and to draw all reasonable inferences in favor of that party. To defeat a properly supported summary judgment motion, the nonmoving party must present “substantial evidence” creating a genuine issue of material fact—“evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved.” Ala.Code 1975, § 12–21–12; West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989).’

“Capital Alliance Ins. Co. v. Thorough–Clean, Inc., 639 So.2d 1349, 1350 (Ala.1994). Questions of law are reviewed de novo. Alabama Republican Party v. McGinley, 893 So.2d 337, 342 (Ala.2004).”

Pritchett v. ICN Med. Alliance, Inc., 938 So.2d 933, 935 (Ala.2006).

Discussion

This case requires this Court to determine whether provisions in the Alabama Uniform Commercial Code (“the UCC”) displace common-law claims of negligence and wantonness when a drawer seeks to recover from a depository bank the loss of payment for unauthorized checks.

The UCC is found in the Ala.Code 1975, §§ 7–1–101 through 7–11–108. Section 7–1–103, Ala.Code 1975, states the purposes of the UCC:

“(a) This title must be liberally construed and applied to promote its underlying purposes and policies, which are:

“(1) To simplify, clarify, and modernize the law governing commercial transactions;

“(2) To permit continued expansion of commercial practices through custom, usage, and agreement of the parties; and

“(3) To make uniform the law among the various jurisdictions.

“(b) Unless displaced by the particular provisions of this title, the principles of law and equity ... supplement its provisions.”

Braden Furniture contends that the trial court erred in holding that the provisions of the UCC displaced its common-law claims of negligence and wantonness because, it says, allowing its common-law claims to proceed does not “create rights, duties and liabilities inconsistent” with the UCC. See AmSouth Bank v. Tice, 923 So.2d 1060, 1066 (Ala.2005)(recognizing that “common-law claims are displaced or preempted if allowing the common-law claims would ‘create rights, duties and liabilities inconsistent with those set forth in the [Florida UCC]’ ”). Specifically, Braden Furniture maintains that because the provisions of the UCC do not address the duty and responsibility a depository/collecting bank owes a non-customer drawer when the depository/collecting bank accepts an unauthorized check and then presents it for collection to the drawer's bank, common-law claims of negligence and wantonness are not displaced by provisions of the UCC.

In C & N Contractors, Inc. v. Community Bancshares, Inc., 646 So.2d 1357 (Ala.1994), a business sued the depository bank of one of its employees. The employee had been fraudulently endorsing company checks and either cashing or depositing them at her bank. The business alleged that the employee's bank had acted negligently and wantonly in accepting the forged checks. This Court considered whether former § 7–3–405(1)(c), Ala.Code 1975, displaced common-law claims of negligence and wantonness. We concluded that we could not decide the issue because the business presented no authority for its contention that the common-law claims were not displaced by provisions in the UCC. We further opined that under the facts of the case § 7–3–405(1)¹ “appear[ed] to displace an action for common law negligence and wantonness, and [the business had] cited no authority to establish that it does not displace their claims ....” 646 So.2d at 1362.

In Cagle's, Inc. v. Valley National Bank, 153 F.Supp.2d 1288 (M.D.Ala.2001), the Alabama federal district court held that the provisions of the UCC displaced a business's claims of negligence and gross negligence against an employee's bank that accepted forged business checks for deposit into the employee's account. The court held that the business's common-law claims were displaced by the provisions of the UCC because allowing the business to pursue common-law negligence claims “potentially would allow for [the depository bank] to be held liable for allegedly negligent acts, which [were] insufficient to establish liability under the Alabama UCC, which provides a subjective, good faith defense ....”

Thus, C & N Contractors and Cagle's stand for the proposition that the provisions of the UCC do not displace common-law claims unless dependence on the common-law claims thwarts the purposes of the UCC. Additionally, although the common-law claims may not necessarily be displaced by the provisions of the UCC, when the common-law claims are inconsistent with the remedies and defenses in the UCC, the provisions of the UCC prevail.

We can glean some guidance from this Court's analysis in AmSouth Bank v. Tice, in which we considered whether provisions of the Florida UCC displaced Alabama common-law claims of negligence and wantonness. In Tice, a bank customer sued his bank, alleging negligence and wantonness based on the bank's payment of “stale checks” and the bank's alleged wrongful dishonor of properly payable checks. Initially, we noted that common-law principles supplemented the Florida UCC unless a particular UCC provision or provisions displaced the common-law claims. We further observed:

“Even if the applicable Florida UCC sections do not expressly preempt the common-law negligence and wantonness claims asserted by [the bank customer], those common-law claims are displaced or preempted if allowing the common-law claims would ‘create rights, duties and liabilities inconsistent’ with those set forth in [provisions of the Florida UCC].”

923 So.2d at 1066. We concluded that the customer's common-law claims of negligence and wantonness were encompassed in provisions of the Florida UCC, see § 674.402, Fla. Stat. Ann. (West 1993) (providing a bank's liability to a customer for wrongful dishonor), and § 674.404, Fla. Stat. Ann. (West 1993) (providing that a bank is not obliged to pay a check more than six months old). Accordingly, we concluded that the customer's common-law claims were displaced by the provisions of the Florida UCC because “[a]llowing [the customer] to recover under common-law theories ... would constitute an unwarranted infringement upon the statutory scheme set forth in the UCC and would, for obvious reasons, create rights, duties, and liabilities inconsistent with the UCC.” 923 So.2d at 1067.

In this case, Braden Furniture alleged in its complaint that Union State Bank acted negligently and wantonly by accepting the unauthorized checks. To establish its common-law negligence claim, Braden Furniture must establish that Union State Bank owed it a duty, that Union State Bank breached that duty, and that...