Graves v. Wachovia Bank, N.A.

• Decision Date: 10 April 2009
• Docket Number: Civil Action No. 1:08cv75-MHT.
• Citation: 607 F.Supp.2d 1277
• Parties: Chrysta Gales GRAVES, as Administratrix of the Estate of Michael Steven Gales, deceased, Plaintiff, v. WACHOVIA BANK, NATIONAL ASSOCIATION, Defendant.
• Court: U.S. District Court — Middle District of Alabama

607 F.Supp.2d 1277

Chrysta Gales GRAVES, as Administratrix of the Estate of Michael Steven Gales, deceased, Plaintiff, v. WACHOVIA BANK, NATIONAL ASSOCIATION, Defendant.

Civil Action No. 1:08cv75-MHT.

United States District Court, M.D. Alabama, Southern Division.

April 10, 2009.

Stephen Talmadge Etheredge, Sr., Lexa Eugenia Dowling, Buntin, Etheredge & Dowling, LLC, Dothan, AL, for Plaintiff.

Victor Lee Hayslip, William J. Long, Burr & Forman LLP, Birmingham, AL, for Defendant.

OPINION

MYRON H. THOMPSON, District Judge.

Plaintiff Chrysta Gales Graves, as the administratrix of the estate of Michael Gales, brings this lawsuit against defendant Wachovia Bank asserting two state-law claims: (1) breach of agreement and (2) failure to pay in good faith. Jurisdiction is proper pursuant to 28 U.S.C. §§ 1333 (diversity of citizenship) and 1441 (removal). The case is now before the court on Wachovia's motion for summary judgment. The motion will be granted.

I. SUMMARY-JUDGMENT STANDARD

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding whether summary judgment should be granted, the court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

II. PROCEDURAL HISTORY

Plaintiff's initial complaint asserted eight different claims, including tort-law claims for negligence, wantonness, conversion, negligent supervision, and equity. After Wachovia filed its summary-judgment motion, however, plaintiff filed a motion to dismiss six of her claims. Citing a "mental lapse," she noted that she had alleged various tort claims that do not survive the death of the decedent and therefore could not be raised by the estate. M. Dismiss. at 1; Doc. No. 30. The court granted this motion to dismiss, leaving only the contract claims for breach of agreement and failure to pay in good faith.

III. FACTUAL BACKGROUND

On May 26, 2006, Michael Gales opened a multi-party bank account with Wachovia. He opened this account in his own name and in the names of his parents, with rights of survivorship in each. One month later, however, he changed the account to a single-party account, payable on death, with his parents named as beneficiaries. When he opened the account, and again when he converted it into a single-party account, Gales signed a Customer Access Agreement, which incorporated the terms and conditions of Wachovia's Deposit Agreement.

On February 23, 2007, Gales died. Wachovia immediately paid the balance of the account ($ 394,351.93) to his parents. On March 28, 2007, plaintiff, Gales's daughter, was named administratrix of the estate. About this same time, plaintiff requested information concerning her father's bank account with Wachovia. On April 9, 2007, plaintiff contacted the bank concerning a number of checks that she believed to have been forged on her father's account. The allegedly forged checks were cashed between October 20, 2006, and February 26, 2007.

After being contacted by plaintiff, Wachovia reimbursed the account for five of the allegedly forged checks, totaling more than $ 8,330. The bank refused to reimburse the account on the remaining checks, however, citing a provision in the Deposit Agreement which states that a customer has up to 40 days after receiving a statement to notify the bank of any checks that have forged or missing signatures.¹ If a customer fails to report such errors within 40 days, the customer will "lose any and all rights ... to assert the error or discrepancy" against the bank. Deposit Agreement at ¶ 9. There is no evidence that Gales ever reported any forgeries, missing signatures, or discrepancies in his account to Wachovia or anyone else. There is also no evidence that his parents, as beneficiaries on the account, contacted the bank regarding any errors.

One year later, on April 9, 2008, Gales's parents assigned their interest or rights in the account to plaintiff, as administratrix of Gales's estate.

IV. DISCUSSION

Section 7-4-406 of the 1975 Alabama Code governs a "customer's duty to discover and report unauthorized signatures or alterations" on any checks paid by the bank. This section provides that a bank customer is precluded from suing the bank on forged checks if the customer fails to exercise ordinary care in reviewing any statements and notifying the bank of any forgeries within 30 days after the first forged item appeared on a monthly statement. 1975 Ala.Code § 7-4-406(d)(2). There is an exception to this preclusion, however, which provides that a customer may bring a claim, within 180 days, if she establishes that the "bank failed to exercise ordinary care in paying the [forged check] and that failure contributed to loss." 1975 Ala.Code § 7-4-406(e).

Section 7-4-406 is not the only applicable provision here. Section 7-4-103(a) provides that,

"The effect of the provisions of this article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care.... However, parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable."

1975 Ala.Code § 7-4-103(a). And § 7-1-302(b) speaks more directly to the modification of time frames. It states, "Whenever this title requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement." 1975 Ala.Code § 7-1-302(b).

Plaintiff asserts that § 7-4-406(e) of the Code should govern this dispute and that she should be permitted to assert claims against the bank on any checks written with the 180 days preceding her contact with the bank on April 9, 2007. Wachovia responds that the Deposit Agreement modified these provisions, establishing a 40-day time frame for reporting any alleged forgeries, after which all claims are extinguished.

The court determines that the Deposit Agreement should control this dispute. First, the court notes that the Deposit Agreement does not eliminate Wachovia's duty of good faith, nor does it limit the measure of damages; it simply reduces the time period in which a customer must report any forged or missing signatures before any such claims are extinguished. As such, it does not violate the explicit limitations laid out in § 7-4-103(a) of the Code.

Even more, plaintiff has presented no argument that the 40-day period is manifestly unreasonable, nor has she argued that the contract was otherwise unconscionable. She simply asserts that it does not apply. In McCulley v. SouthTrust Bank of Baldwin County, 575 So.2d 1106 (Ala.1991), the Alabama Supreme Court addressed a similar situation; although it did not discuss the interplay between the provisions of the ...