Hendricks County Bank & Trust Co. v. Guthrie Bldg. Materials, Inc., 32A01-9510-CV-332

• Decision Date: 16 April 1996
• Docket Number: No. 32A01-9510-CV-332,32A01-9510-CV-332
• Citation: 663 N.E.2d 1180
• Court: Indiana Appellate Court
• Parties: HENDRICKS COUNTY BANK & TRUST COMPANY, Appellant-Defendant, v. GUTHRIE BUILDING MATERIALS, INC., Appellee-Plaintiff.

Page 1180

663 N.E.2d 1180

HENDRICKS COUNTY BANK & TRUST COMPANY, Appellant-Defendant, v. GUTHRIE BUILDING MATERIALS, INC., Appellee-Plaintiff.

No. 32A01-9510-CV-332.

Court of Appeals of Indiana.

April 16, 1996.

Rehearing Denied June 17, 1996.

Appeal from the Hendricks Circuit Court; The Honorable Jeffrey V. Boles, Judge. Cause No. 32C01-9501-CP-26.

Philip L. Gundlach, Hinkle Keck & Hinkle, Danville, for Appellant.

Kurt F. Pantzer, Indianapolis, for Appellee.

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

In this appeal we are asked to construe provisions of the Indiana Depository Financial Institutions Adverse Claims Act ("Adverse Claims Act") codified at Indiana Code § 28-9-1-1 et seq. Hendricks County Bank and Trust Company (the "Bank") appeals from the trial court's grant of summary judgment in favor of Guthrie Building Materials, Inc. ("Guthrie"). Following a hearing on the parties' cross-motions for summary judgment, the trial court entered judgment against the Bank in the amount of $12,785.18.

We reverse.

ISSUES

The Bank presents three issues for our review which we consolidate and restate as two dispositive issues:

1. Whether an electronic facsimile transmission ("FAX") constitutes service of notice of an adverse claim by a non-judgment creditor sufficient to render the depository financial institution accountable for funds claimed by the creditor.

2. Whether Guthrie failed to perfect the preliminary notice of its adverse claim.

FACTS

Leslie Builders I.G.I, Ltd. ("Leslie") maintained a depository account at the Bank. At the close of business on January 25, 1995, the account had a balance of $13,204.80. On January 26, 1995, Guthrie sent a copy of its "Notice of Adverse Claim and Affidavit in Support of Adverse Claim" to the Bank via FAX. That same day, the Bank paid four checks written on Leslie's account totaling $2,966.81. On January 27, 1995, Leslie withdrew $9,485.14 from the account, and on January 30, the Bank paid checks totaling $758.13. Then, on January 31, $2,000.00 was deposited and the Bank paid three checks in the amount of $1,635.30.

On January 30, 1995, Guthrie filed its complaint on accounts stated and for fraud and conversion against Leslie. Guthrie also filed a motion for prejudgment garnishment of any deposit account of Leslie's maintained with the Bank. The trial court approved a bond and signed its prejudgment garnishment order on January 30. That order directed the Bank to appear in the action as a garnishee defendant and to furnish the court with a description of any property belonging to Leslie and held by the Bank. The Bank was not served with the summons and garnishment order until February 2, 1995. The garnishee's statement then filed by the Bank revealed that on February 3, 1995, Leslie's account balance was $15.94.

Following the trial court's denial of the Bank's motion to dismiss and motion to quash the prejudgment garnishment, the parties filed cross-motions for summary judgment, each asserting that it was entitled to judgment as a matter of law under the Adverse Claims Act. After a hearing, the trial court entered summary judgment in favor of Guthrie and concluded that Guthrie had an equitable lien against the Bank in the amount of $12,237.99, plus prejudgment interest of $547.19, for funds wrongfully paid by the Bank from Leslie's account. The Bank now appeals.

DISCUSSION AND DECISION

Standard of Review

When reviewing motions for summary judgment, we apply the same standard applicable in the trial court. Gilliam v. Contractors United, Inc., 648 N.E.2d 1236, 1238 (Ind.Ct.App.1995), trans. denied. Summary judgment is appropriate only if the designated evidentiary matter shows that there is no genuine issue of material fact and that a party is entitled to judgment as a matter of law. Ind.Trial Rule 56(C). All facts and inferences must be liberally construed in favor of the party opposing the motion for summary judgment. Haas Carriage, Inc. v. Berna, 651 N.E.2d 284, 287 (Ind.Ct.App.1995).

The fact that the parties make cross-motions for summary judgment does not alter our standard of review. Laudig v. Marion County Bd. of Voters Registration, 585 N.E.2d 700, 704 (Ind.Ct.App.1992). Instead, we must consider each motion separately to determine whether the moving party is entitled to judgment as a matter of law. Id.

Statutory Construction

In construing a statute, our primary task is to determine and give effect to the intent of the legislature. Ashlin Transp. Serv. v. Indiana Unemployment, 637 N.E.2d 162, 166 (Ind.Ct.App.1994). When a statute is clear and unambiguous on its face, this court may not interpret the statute. Id. Rather, we look to the plain and ordinary meaning of the words and phrases in a statute to discern the legislative intent, although technical words and phrases having a peculiar and appropriate meaning in law shall be understood according to their technical import. Id.; see IND.CODE § 1-1-4-1(1). Further, we presume the legislature intended its language to be applied in a logical manner consistent with the statute's underlying policies and goals. Ashlin, 637 N.E.2d at 166. As a reviewing court, we must examine both the grammatical structure of the clause or sentence in issue and the structure of the statute as a whole. Greyhound Financial Corp. v. R.L.C., Inc., 637 N.E.2d 1325, 1327 (Ind.Ct.App.1994).

Adverse Claims Act

We first consider the underlying purpose of the Adverse Claims Act. This court has stated that the purpose of the Act is to protect banks and other financial institutions from double liability in situations where a creditor seeks to obtain the funds of a bank's depositor. McClure Oil Corp. v. Whiteford Truck Lines, 627 N.E.2d 1323, 1325 (Ind.Ct.App.1994); First Bank v. Samocki Bros. Trucking Co., 509 N.E.2d 187, 194 (Ind.Ct.App.1987), trans. denied. Because the relationship between a bank and its depositor is one of a debtor and creditor, the Act protects the bank from claims of its depositor that could arise if the bank, in compliance with the Act, fails to follow its depositor's instructions. McClure Oil, 627 N.E.2d at 1325.

Generally, the Act provides that upon service of notice of an adverse claim in accordance with the Act, the bank is obligated to freeze the depositor's account until all parties' respective rights to the account can be determined. See Samocki, 509 N.E.2d at 194 (citing Indiana Code § 28-1-20-1.1, repealed and recodified as Indiana Code § 28-9-1). Considering the predecessor to the current Adverse Claims Act, in Samocki we emphasized the importance of the claimant's compliance with the specific procedural requirements of the Act and stated that "an adverse claimant's failure to abide by the provisions of an adverse claim statute leaves a financial institution with no recourse but to honor its depositor's demands." Id. at 195.

Issue One: Notice of Adverse Claim

The record shows that Guthrie sent written verified notice of its adverse claim against Leslie to the Bank via FAX. The Bank contends that a FAX does not constitute sufficient service of notice under the Adverse Claims Act to render the Bank liable to Guthrie. ¹ We agree.

Indiana Code § 28-9-3-3 provides in pertinent part:

(b) A depository financial institution may not be held accountable to an adverse claimant for funds in a deposit account that are claimed by the adverse claimant unless the adverse claimant:

(1) serves on the depository financial institution written verified notice of the adverse claim stating in detail:

(A) the nature of the adverse claim, including the facts from which the adverse claim arose;

(B) that an action has been instituted in a court having jurisdiction in Indiana, or will be instituted within three (3) working days after receipt by the depository financial institution of the notice; and

(C) that the action instituted will include all persons known by the adverse claimant to have a claim against or an interest in the deposit account....

(emphasis added). We must consider the meaning of "serves" as that term is used in Section 3(b)(1) in order to determine whether Guthrie's action of sending written verified notice via FAX was sufficient service of notice to have placed a duty on the Bank to restrict the withdrawal of funds from Leslie's account.

Despite Guthrie's argument to the contrary, we decline to differentiate between the verb "serves" and its corresponding noun "service," as both have the same peculiar and appropriate meaning in law. See IND.CODE § 1-1-4-1(1). The term "service" has been defined as "the exhibition or delivery of a writ, summons ... notice, order to a person who is thereby officially notified of some action or proceeding in which he is concerned, and is thereby advised or warned of some action or step which he is commanded to take or to forbear." Black's Law Dictionary 1368 (6th ed. rev. 1990). Specifically, our supreme court has stated that "service of notice" has a definite meaning, and unless otherwise provided by law means "personal service of the individual in such a way that the party who makes service may be in a position to make due proof thereof to the court." Lock Joint Tube Co. v. Citizens Trust and Sav. Bank of South Bend, 218 Ind. 162, 170, 31 N.E.2d 989, 993 (1941); see also Leons v. Bloemker, 649 N.E.2d 1041, 1043 (Ind.Ct.App.1995); Bayes v. Isenberg, 429 N.E.2d 654, 659 (Ind.Ct.App.1981).

It is inherent in the concept of "service" that service of notice upon a person or entity imposes legal obligations and consequences that make the manner and proof of such notice of utmost importance. Indeed, proper service of the notice prescribed by statute is a prerequisite to a bank's accountability to an adverse claimant for funds in a deposit account. See IND.CODE § 28-9-3-3; Samocki, 509 N.E.2d at 194. Thus, when construed within the context of the Adverse Claims Act and its underlying policy to protect banks from the risk of inconsistent claims of liability, the term "se...