Ex parte MONY Federal Credit Union

• Decision Date: 16 June 1995
• Citation: 668 So.2d 552
• Parties: Ex parte MONY FEDERAL CREDIT UNION. Ex parte SOUTHTRUST BANK OF BALDWIN COUNTY. (In re SOUTHTRUST BANK OF BALDWIN COUNTY v. EMPIRE CORPORATE FEDERAL CREDIT UNION and MONY Federal Credit Union). 1940337, 1940360.
• Court: Alabama Supreme Court

Page 552

668 So.2d 552

Ex parte MONY FEDERAL CREDIT UNION.

Ex parte SOUTHTRUST BANK OF BALDWIN COUNTY.

(In re SOUTHTRUST BANK OF BALDWIN COUNTY v. EMPIRE CORPORATE FEDERAL CREDIT UNION and MONY Federal Credit Union).

1940337, 1940360.

Supreme Court of Alabama.

June 16, 1995.

Petitions for writ of Certiorari to the Court of Civil Appeals (AV93000713). Appeal from the Baldwin Circuit Court, No. CV-92-602, Charles C. Partin, Judge.

Charles C. Simpson III of Owens, Benton & Simpson, Bay Minette, for petitioner MONY Federal Credit Union and respondent Empire Corporate Federal Credit Union.

D. Charles Holtz and J.M. Druhan of Johnston, Wilkins, Druhan & Holtz, Mobile, for SouthTrust Bank of Baldwin County.

HOUSTON, Justice.

SouthTrust Bank of Baldwin County ("SouthTrust") sued Empire Corporate Federal Credit Union ("Empire") and MONY Federal Credit Union ("MONY"), alleging that they had negligently or in bad faith failed to timely notify it of the nonpayment of a certain share draft, which is the credit union version of a check, and that that omission had resulted in damages to SouthTrust of $28,762; SouthTrust sought damages in that amount, plus interest, attorney fees, and costs. The trial court dismissed SouthTrust's claim against Empire on the ground of lack of personal jurisdiction, and entered a summary judgment for MONY on the ground that MONY was under no legal duty to notify SouthTrust of the non-payment. The Court of Civil Appeals affirmed the dismissal of Empire, but reversed the summary judgment for MONY. See SouthTrust Bank of Baldwin County v. Empire Corporate Federal Credit Union, 668 So.2d 548 (Ala.Civ.App.1994), for a complete statement of the facts and a discussion of the legal principles relied on by the court. Both SouthTrust and MONY sought certiorari review. We affirm in part, reverse in part, and remand.

We note initially that, after carefully considering MONY's petition and briefs, we have concluded that the Court of Civil Appeals correctly held that the summary judgment for MONY was improper. We therefore affirm the judgment of the Court of Civil Appeals insofar as it sets aside the summary judgment entered for MONY.

However, we disagree with the conclusion of the Court of Civil Appeals that the trial court lacked personal jurisdiction over Empire. The pertinent portion of that court's opinion reads as follows:

"Our review of the record reveals the following pertinent facts: The share draft which is the subject of the present litigation was issued by Russell Brian Drake to Floyd Enfinger, who is an attorney. The share draft, which was dated May 20, 1992, was drawn on Drake's account with MONY in the amount of $28,762. The face of the share draft provided an Opelika, Alabama, address for Drake. The share draft also indicated on its face that it was drawn on MONY in Syracuse, New York, and payable through Empire in Albany, New York.

"MONY is a federally chartered credit union, which maintains its only office in the state of New York. Empire is a federally chartered corporate credit union organized to provide financial services to credit unions located in the state of New York. Empire serves as the payable-through bank for share drafts drawn on share draft accounts maintained with MONY.

"When a share draft is accepted for deposit by a bank, the depositary bank forwards the share draft to a collecting bank for collection and payment. Because Empire serves as the payable-through bank for MONY, Empire's federal reserve routing number appears on the face of the share drafts issued on accounts maintained with MONY. Consequently, the collecting bank will forward the share draft directly to Empire for payment, and MONY never receives the actual share draft as part of the payment process. When Empire receives a share draft for payment, it electronically transmits the relevant payment information (the member account number at MONY, serial number, amount, date received by Empire, etc.) to MONY. After receiving the relevant payment information, MONY will determine if the share draft should be paid by Empire. At the end of each business day, MONY makes a payment to Empire for all share drafts paid by Empire for that business day.

"On May 22, 1992, Enfinger deposited into his trust account with SouthTrust the share draft issued by Drake. Although Drake issued the share draft to Enfinger, he had closed his share draft account with MONY prior to May 1992. At the time that Drake closed his account, MONY notified Empire that Drake had closed his account and that, therefore, as a matter of course, Empire should not pay any future share drafts which were drawn on that particular account. Consequently, the share draft issued by Drake was returned to SouthTrust unpaid.

"On May 29, 1992, a check in the amount of $28,762 was issued by Enfinger on his trust account and was negotiated at [SouthTrust Bank of Opelika]. The unpaid share draft was received by SouthTrust on June 1, 1992.

"The availability of funds and collection of checks are governed by Regulation CC, 12 C.F.R. § 229 (1994), which is divided into three subparts: Subpart A-General, Subpart B-Availability of Funds and Disclosure of Fund Availability Policies, and Subpart C-Collection of Checks. SouthTrust contends that Empire failed to comply with the notice requirements as provided in 12 C.F.R. § 229.33.[ ¹

"SouthTrust notified Empire that it was protesting the return of the share draft because Empire failed to notify SouthTrust in a timely manner that the share draft was being returned unpaid. SouthTrust requested reimbursement of the $28,762. Empire refused to comply with the request. The present litigation followed.

"The first issue is whether the trial court committed reversible error when it granted Empire's motion to dismiss due to lack of jurisdiction. Whether a court has personal jurisdiction over a nonresident defendant is a determination which must be made on a case-by-case basis after considering all of the relevant facts and circumstances. Steel Processors, Inc. v. Sue's Pumps, Inc. Rentals, 622 So.2d 910 (Ala.1993).

"In Keelean v. Central Bank of the South, 544 So.2d 153, 156 (Ala.1989), our supreme court stated:

" 'Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), requires that a nonresident defendant have certain minimum contacts with a state in order for that state's courts to acquire personal jurisdiction over that defendant. A twofold analysis is used in this state in determining whether personal jurisdiction exists over a nonresident defendant:

" '1. the determination of whether it is foreseeable to that nonresident defendant that he will be sued in this state; and

" '2. the determination of the degree of contact the nonresident defendant has with this state.'

"An essential inquiry in answering the first prong of this test is whether Empire acted in such a manner that it could reasonably anticipate that the direct consequences of its actions would be felt in Alabama. Steel Processors, Inc., 622 So.2d 910.

"SouthTrust contends that Empire had minimum contacts with the state of Alabama which were sufficient to require it to submit to the jurisdiction of the courts in Alabama. SouthTrust contends that because Empire deliberately contracted to be the payable-through bank for MONY, which had depositors located in the state of Alabama, and because, under the terms of the contract, Empire was to provide prompt notice to depositary banks such as SouthTrust of the dishonor of MONY checks in the amount of $2,500 or more, Empire could have reasonably anticipated that the direct consequences of its actions would be felt in Alabama.

"The chief operating officer for Empire filed an affidavit in support of its motion to dismiss. The affidavit stated, in pertinent part, that 'Empire's entire field of membership, which is primarily composed of approximately seven hundred fifty (750) credit unions, is located in New York State.' The affidavit also asserted that 'Empire has never transacted business in the State of Alabama'; has 'never had directors, officers or employees located in the State of Alabama'; and has never 'owned or held an interest in any personal or real property located in the State of Alabama.' The affidavit further provided '[t]hat in acting as a payable-through bank for purposes of processing its member credit unions' share drafts, Empire receives and returns items through intermediary banks. Such banks are also located outside the state of Alabama.' It appears that the only contact that Empire had with the state of Alabama occurred when it processed a share draft which was issued by a member of MONY, had an Alabama address on the face of the share draft, and was deposited into an Alabama bank.

"In view of the above, we find that under the facts and circumstances of this particular case, the requisite sufficient contacts with the state of Alabama were not established. Consequently, the trial court correctly granted Empire's motion to dismiss due to lack of jurisdiction."

668 So.2d at 549-551.

In Dillon Equities v. Palmer & Cay, Inc., 501 So.2d 459, 461 (Ala.1986), this Court stated:

"It has long been established that physical presence in the state is not a prerequisite to effective service of process on a nonresident defendant; Milliken v. Meyer, 311 U.S. 457, 61 S.Ct. 339, 85 L.Ed. 278 (1940); see also Shrout v. Thorsen, 470 So.2d 1222 (Ala.1985). What is required is that the out-of-state resident have 'some minimum contacts with this state [so that], under the circumstances, it is fair and reasonable to require the person to come to this state to defend an action.' Rule 4.2(a)(2)(I), Ala.R.Civ.P.

" ' "[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and...