Jackson v. Secor Bank

• Decision Date: 16 September 1994
• Citation: 646 So.2d 1377
• Parties: Albert J. JACKSON v. SECOR BANK. 1930383.
• Court: Alabama Supreme Court

Page 1377

646 So.2d 1377

Albert J. JACKSON v. SECOR BANK.

1930383.

Supreme Court of Alabama.

Sept. 16, 1994.

James A. Harris III of Pate, Lewis & Lloyd, Birmingham, for appellant.

Robert E. Cooper and Rhonda Pitts Chambers of Rives & Peterson, Birmingham, for appellee.

SHORES, Justice.

Albert J. Jackson appeals from a judgment for the defendant Secor Bank. The judgment was based on a directed verdict on his tort claims and a jury verdict on his breach of contract claim. We affirm.

This case arises out of a mistake allegedly made by Secor Bank when Jackson asked it to open a qualified individual retirement account (IRA) for him. Jackson changed jobs in September 1987, and in early November received a $23,251.41 check from his former employer representing the proceeds from his retirement account ($24,475.17 less $1223.76 federal income tax withheld). Jackson was informed that to avoid income tax liability he must "roll over" this sum into a qualified tax deferred account such as an IRA within 60 days. On November 9, 1987, Jackson went to the Brookwood branch of Alabama Federal Savings and Loan Association (now known as Secor Bank and referred to hereinafter as "Secor" or "the Bank") and told Deborah Eubank, a Bank employee, that he needed to roll this money over into a qualified plan. Jackson had seen the Bank's advertisements for its "Performance Fund account"; he asked Eubank if this account would be the best one to put his money into. Eubank advised Jackson to open a Performance Fund account. According to Jackson and according to affidavits signed by Deborah Eubank, she mistakenly told Jackson that the Performance Fund account was an IRA-type account.

Jackson opened a Performance Fund account with the Bank in November 1987. He received a Form 1099 from the Bank in January 1988 indicating that interest of $281 on the account would be reported to the Internal Revenue Service (IRS) as taxable income for 1987. After meeting with his accountant in early April 1988, Jackson wrote to Renda Grauel, manager of the Brookwood branch, stating:

"Recently, in my annual tax preparation meeting, Russell Stone, CPA, examined the 1099 form you sent me and said it looked like the wrong type of account had been set up and if so, severe tax penalties could result."

In May 1988, after the 60-day roll-over period had expired, he placed his money in a qualified account. His accountant listed the Performance Fund account as a qualified (tax deferred) account on Jackson's 1987 federal income tax return, and Johnson did not report the $281 in interest as taxable income.

The IRS first informed Jackson on January 9, 1990, that his adjusted gross income for 1987 was $25,251 ($23,251 plus interest accrued) more than he had indicated on his 1987 tax return, because the account at the Bank was not a qualified IRA. Jackson's accountant contacted the Bank to help with his discussions with the IRS concerning the discrepancy in Jackson's 1987 tax return. A vice president at the Bank wrote to the IRS, stating in part:

"Mr. Jackson was at that time [when he opened the account] erroneously informed by branch personnel that the account could be used as an IRA investment when, in fact, our computer system could not handle the reporting requirements for that particular type of investment. Our system has since been modified to accommodate the reporting."

The IRS asked for an affidavit, and Debbie Eubank, the teller who had opened the Performance Fund account for Jackson, signed an affidavit in November 1990, stating in part:

"Mr. Jackson opened the account with the check made payable to him from a profit sharing plan. In the course of our discussion, prior to opening the account, there was a miscommunication between Mr. Jackson and me, which resulted in Mr. Jackson understanding that this particular account qualified as an IRA account when in fact this was not the case."

The IRS indicated that this affidavit was not sufficient, and Eubank signed a second affidavit prepared by the Bank's counsel, in which she stated in part:

"The Performance Fund account offered by Secor at that time [November 1987] was not an individual retirement account. I might add that Secor's present Performance Fund account is now utilized for investment of individual retirement account funds.

"I mistakenly opened the Performance Fund account after being informed by Mr. Jackson that he wanted the funds placed in an individual retirement account. His intention that he wanted funds rolled over in a tax-free manner to an individual retirement account was clear, and Secor's error resulted in the funds being invested in a Performance Fund account."

Debbie Eubank testified at trial that, before she signed the second affidavit, she told Gene Woodham, manager of the Bank's branches, that she had no specific recollection of the events and that she "couldn't recall what happened when Mr. Jackson came in."

The IRS assessed Jackson an additional tax liability of $13,482 because it determined that his qualified status did not "roll over" under the Performance Fund account. Jackson reached a settlement with the IRS in March 1991 whereby he paid it almost $5000. Jackson also amended his 1987 Alabama income tax return and paid $726.34 to the Alabama Department of Revenue.

Jackson filed his complaint against Secor on February 13, 1991, seeking damages based...