Pinigis v. Regions Bank

• Decision Date: 12 May 2006
• Docket Number: 1041905.
• Citation: 942 So.2d 841
• Parties: Elisa Simmons PINIGIS, as executrix of the estate of Doris Porter Coyle, deceased v. REGIONS BANK.
• Court: Alabama Supreme Court

942 So.2d 841

Elisa Simmons PINIGIS, as executrix of the estate of Doris Porter Coyle, deceased v. REGIONS BANK.

1041905.

Supreme Court of Alabama.

May 12, 2006.

J. Mark Hart, Joseph L. Cowan II, and Khristi Doss Driver of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellant.

Laurence J. McDuff and Elizabeth R. Floyd of Adams & Reese, LLP, Birmingham, for appellee.

WOODALL, Justice.

Elisa Simmons Pinigis, as executrix of the estate of Doris Porter Coyle, deceased, challenges the summary judgments in favor of Regions Bank ("the Bank") in her action against the Bank for its payment of unauthorized checks drawn on Coyle's account and for its alleged conversion of certificates of deposit. We affirm in part, reverse in part, and remand.

I. Factual Background

On September 19, 2003, Pinigis sued the Bank. The complaint contained the following pertinent allegations:

"5. In 1993, Doris Porter Coyle opened a checking account . . . with [the Bank]. The signature card signed by Coyle when the account was opened clearly indicated that she was the only person authorized to draw funds on this account. Coyle also established a number of certificate[s] of deposit[] with [the Bank], of which she was the sole owner.

"6. In late 1997, Coyle suffered a debilitating illness after which she was in a coma for approximately three weeks. Coyle was hospitalized and required extensive care as a result of the illness. Coyle was then age 90. Coyle's health was severely affected as a result of the illness for the last years of her life.

"7. At the time of her illness, Coyle's income was approximately $1,000.00 per month, deriving from two pensions and Social Security benefits.

"8. Shortly after Coyle's illness, [Walter Massey and his wife, Laquana Massey,] began involving themselves in Coyle's affairs. By promoting themselves as business owners, bookkeepers and family, the Masseys impermissibly and fraudulently gained Coyle's confidence and exercised undue influence over her.

"9. After the Masseys became involved with Coyle, the expenditures from Coyle's account with [the Bank] increased substantially. By January 1999 and perhaps earlier, the Masseys began writing checks out of Coyle's account with [the Bank] and forging Coyle's name to the signature line. From mid-1999 until Coyle's death on January 1, 2003, the withdrawals from Coyle's . . . account noticeably and uncharacteristically increased, so that in excess of $257,000.00 worth of checks were written out of Coyle's checking account during that period of time. These unusual expenditures included large amounts for food even though Mrs. Coyle's diet was primarily made up of liquid supplements. The expenditures also included numerous checks for large individual amounts to Wal-Mart [discount department store], electronic gaming stores, sporting goods stores, gourmet markets, liquor stores, restaurants, fast food, Harley Davidson motorcycle shops, academic tutoring, acne medication, and lingerie, to name only a few. Further, the Masseys used Coyle's funds to pay their MasterCard and Home Depot charge accounts. In 2002 alone, $16,700.00 was paid from Coyle's . . . account to the Masseys' personal Sears MasterCard charge account. The Masseys also paid their utilities and their son's truck insurance from Coyle's account. Payments were also made from the Regions account to a McRae's/Saks credit card for purchases of jewelry, watches and menswear by and for the benefit of the Masseys. [The Bank] participated with the Masseys and honored those payments from Coyle's account. The vast majority, if not all, of these expenditures were for the Masseys' personal benefit.

". . . .

"11. Due to the increased spending by the Masseys on Coyle's account, Coyle's account became overdrawn. Prior to the pattern of noticeable and uncharacteristic withdrawals beginning in the middle of 1999, Coyle had never overdrawn her checking account. After 1999, [the Bank] allowed the overdrafts and benefited from the overdraft fees charged to Mrs. Coyle. . . . [The Bank] participated with the Masseys in cashing a number of Coyle's certificate[s] of deposit[] in Coyle's absence and without Coyle's permission, which resulted in substantial early withdrawal penalties paid to [the Bank], and enabled [the Bank] to offer lower yields and interest rates on the remaining certificates of deposit.

"12. [The Bank] did nothing to question these increased expenditures, overdrafts, suspicious activity on the accounts, premature cashing of certificates of deposit, nor took any other steps to protect Coyle's account. Further, [the Bank] allowed the Masseys to substantially deplete Coyle's account of all available funds and further misappropriate the balance of her investment and certificates of deposit[].

". . . .

"14. On January 1, 2003, Mrs. Coyle died at the age of 95. Pinigis was appointed executrix of Coyle's estate.

"15. Although [the Bank] was notified of Mrs. Coyle's death as early as January 2, 2003, a number of checks written by the Masseys on Coyle's account were processed after Coyle's death, and after [the Bank] had notification of her death."

(Emphasis added.) Pinigis sought to recover funds the Bank had "improperly charged Coyle's account [for the allegedly forged checks], in violation of [the Alabama Uniform Commercial Code — Bank Deposits and Collections, Ala.Code 1975, §§ 7-4-401 and -405]." Pinigis also alleged that the Bank converted two certificates of deposit, which Pinigis attempted to redeem after Coyle's death as property of the estate, and sought compensatory and punitive damages under a conversion claim.

The Bank answered the complaint on November 4, 2003. The answer stated, in pertinent part: "The plaintiff's claims are barred by the applicable statutes of limitations, including but not limited to the provisions of UCC Articles 3 and 4." (Emphasis added.)

Subsequently, the Bank moved for a summary judgment directed chiefly to the claim asserting that the Bank had paid unauthorized checks. In that motion, the Bank argued that "Pinigis's claim that Regions Bank is liable for paying unauthorized [checks] is absolutely barred by the statute of repose stated in the Alabama Commercial Code." (Emphasis added.) More specifically, the Bank insisted that Pinigis had never "identified a particular check that was unauthorized," and, consequently, that "[u]nder the authority of section 7-4-406(f) of the [Alabama Commercial] Code, Pinigis's claims that [the Bank] improperly paid checks containing Ms. Coyle's forged signature or that it paid checks not authorized by Ms. Coyle are absolutely barred." (Emphasis added.)

In her response to that motion, Pinigis objected to the Bank's reliance on § 7-4-406(f). She argued that "[a] statute of repose, such as § 7-4-406(f), is an [affirmative defense]," which the Bank was required to include in its answer, or it was waived. The Bank "did not plead the statute of repose" in its answer, Pinigis insisted, and, therefore, could not "avail itself of the affirmative defense for the first time in its motion for summary judgment."

On May 2, 2005, the trial court entered a partial summary judgment in favor of the Bank. The court stated that the Bank "was not given any specific notification of the unauthorized signatures on checks until the instant lawsuit was filed . . . almost nine months after the last unauthorized check was written." The court concluded that, under § 7-4-406(f), Pinigis could not "hold the [B]ank liable for checks paid by the [B]ank more than 180 days prior to discovery and reporting." The judgment left pending Pinigis's claim alleging conversion of the certificates of deposit.

Pinigis filed a motion to vacate the partial summary judgment. The Bank filed a second summary-judgment motion directed to Pinigis's conversion claim. On August 3, 2005, the trial court entered a final summary judgment for the Bank on the conversion claim, and Pinigis appealed.

On appeal, Pinigis first contends that the trial court erred in relying on § 7-4-406(f) to bar her claims alleging the wrongful payment of forged checks. Next, she insists that the "trial court erroneously concluded that under Alabama law a certificate of deposit cannot be the subject of a conversion claim." Pinigis's brief, at 52.

II. Section 7-4-406(f)

The partial summary judgment for the Bank on Pinigis's payment-of-unauthorized checks claim was based on § 7-4-406(f); the trial court concluded that Pinigis had defaulted on her statutory "duty to discover and report [an alleged] unauthorized signature or alteration." Section 7-4-406 provides:

"(a) A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid. The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.

"(b) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.

"(c) If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer...