STEPHENS v. BANK

• Decision Date: 12 March 2010
• Docket Number: 1080648.
• Citation: 45 So.3d 735
• Parties: Charles H. STEPHENS v. FIRST COMMERCIAL BANK.
• Court: Alabama Supreme Court

45 So.3d 735

Charles H. STEPHENS

v.FIRST COMMERCIAL BANK.

1080648.

Supreme Court of Alabama.

March 12, 2010.

Bruce F. Rogers and John W. Clark IV of Bainbridge, Mims, Rogers & Smith, LLP, Birmingham, for appellant.

Daniel D. Sparks and Courtney L. Saad of Christian & Small, LLP, Birmingham, for appellee.

STUART, Justice.

First Commercial Bank (“FCB”) sued Charles H. Stephens in the Jefferson Circuit Court, alleging that Stephens had defaulted on a $648,118 promissory note he had executed in favor of FCB. The trial court entered a summary judgment in favor of FCB awarding it $737,686, and Stephens appealed. We affirm.

I.

Beginning in January 2005, Stephens signed and renewed a series of promissory notes with FCB, each in an amount of approximately $650,000. On November 7, 2007, Stephens paid off a previous promissory note and executed the promissory note at issue in this case, the value of which was $648,118. At some point thereafter, FCB adjudged that Stephens was in default on the promissory note. On approximately August 26, 2008, FCB demanded that Stephens immediately remit payment of all sums owed FCB under the note and/or that Stephens put up collateral to provide security for his indebtedness, two remedies specifically provided for by the terms of the promissory note. On September 12, 2008, after Stephens failed to comply with its request, FCB filed a breach-of-contract action against Stephens in the Jefferson Circuit Court, seeking payment of the amount of the promissory note, plus interest, late fees, attorney fees, and court costs. In his answer to FCB's complaint, Stephens acknowledged that he had executed the $648,118 promissory note, but he denied that he was in default on the note.

On November 7, 2008, FCB moved for a summary judgment. FCB supported that motion with a copy of the promissory note and an affidavit from Andrew Brown, an assistant vice president at FCB. In that affidavit, Brown stated, in part:

“I am authorized by [FCB] to make this affidavit. The books, records and accounts of [FCB] with regard to the contractual obligations of [Stephens] are kept and maintained in the ordinary course of [FCB]'s business under my joint supervision and control along with other employees of the company. Any information set forth below with regard to said records is true, valid and correct as reflected upon [FCB]'s books and records. I do certify that all credits due thereon have been applied, and that the balance claimed is due and unpaid. I further state that I have personal knowledge of the matters set forth herein.”

Brown also declared in the affidavit that Stephens had defaulted on the promissory note and stated that Stephens had been sent a letter on August 26, 2008, detailing the basis of FCB's decision finding him in default. Finally, Brown also outlined the damages FCB was claiming.

On December 3, 2008, Stephens filed his response to FCB's summary-judgment motion.

Stephens submitted no evidence with his response; instead, he argued that FCB had failed to establish, through competent evidence, that there were no disputed issues of material fact, because, he alleged, Brown's affidavit violated the best-evidence rule and consisted solely of hearsay, rendering it inadmissible. ¹ Alternatively, in the event the trial court deemed FCB's evidence to be admissible and sufficient to meet its burden on summary judgment, Stephens asked the trial court, pursuant to Rule 56(f), Ala. R. Civ. P., to delay ruling on FCB's summary-judgment motion until he had additional time to conduct discovery. Contemporaneously with his motion opposing summary judgment, Stephens filed a discovery request asking FCB to produce its records relating to Stephens and a motion formally asking the trial court to strike Brown's affidavit pursuant to the best-evidence rule or as inadmissible hearsay.

On December 5, 2008, the trial court entered an order granting Stephens's Rule 56(f) request and stating that it would allow the parties to conduct discovery through January 5, 2009. The court also stated that it would consider the parties' outstanding motions at a hearing on January 6, 2009. It is not clear from the record what, if any, discovery Stephens conducted during that 31-day discovery period; however, he submitted no evidence in opposition to FCB's summary-judgment motion before the January 6, 2009, hearing. At the conclusion of that hearing, the trial court orally granted FCB's summary-judgment motion, and it subsequently entered a written order setting the damages at $737,686, including a principal amount of $648,118, accrued interest of $23,755, late fees of $176, and attorney fees of $65,637. Stephens then timely filed his notice of appeal to this Court.

II.

“This Court's review of a summary judgment is de novo. Williams v. State Farm Mut. Auto. Ins. Co., 886 So.2d 72, 74 (Ala.2003). We apply the same standard of review as the trial court applied. Specifically, we must determine whether the movant has made a prima facie showing that no genuine issue of material fact exists and that the movant is entitled to a judgment as a matter of law. Rule 56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of Alabama v. Hodurski, 899 So.2d 949, 952-53 (Ala.2004). In making such a determination, we must review the evidence in the light most favorable to the nonmovant. Wilson v. Brown, 496 So.2d 756, 758 (Ala.1986). Once the movant makes a prima facie showing that there is no genuine issue of material fact, the burden then shifts to the nonmovant to produce ‘substantial evidence’ as to the existence of a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala.1989); Ala.Code 1975, § 12-21-12.”

Dow v. Alabama Democratic Party, 897 So.2d 1035, 1038-39 (Ala.2004).

III.

On appeal, Stephens argues that FCB failed to establish by competent evidence that he had defaulted on the promissory note or what its damages were even if such a default was established. The only evidence submitted by FCB other than the promissory note itself, Stephens notes, was Brown's affidavit, which, he alleges, was inadmissible because it violated the best- evidence rule and/or the rule prohibiting hearsay in that it “simply repeats statements and facts contained within [FCB's] books and records.” Stephens's brief, p. 12. Accordingly, Stephens argues, because “Rule 56, Ala. R. Civ. P., requires that a motion for summary judgment be supported by facts that would be ‘admissible in evidence,’ ” Aldridge v. DaimlerChrysler Corp., 809 So.2d 785, 797 (Ala.2001), FCB failed to make a prima facie showing that there was no genuine issue of material fact, and, he says, summary judgment was therefore inappropriate.

Stephens is correct that the best-evidence rule or the hearsay prohibition would render Brown's affidavit inadmissible if Brown were simply reciting facts he learned by examining FCB's books and records. In such a case, those books and records would themselves be the best evidence of the asserted facts, and they would themselves be able to directly “state” the facts at issue. However, although Stephens asserts that Brown has, in his affidavit, simply repeated statements and facts contained within FCB's books and records, he overlooks the fact that Brown also swore in his affidavit that “I have personal knowledge of the matters set forth herein.” “[W]hen a witness testifies based upon his own personal knowledge, independent from any document, the ‘best evidence’ rule does not apply.” Ex parte Walker, 623 So.2d 281, 284 (Ala.1992). See also Rose Manor Health Care, Inc. v. Barnhardt Mfg. Co., 608 So.2d 358, 360-61 (Ala.1992) (“[The appellee's affiant] stated that he made the statements of his own personal knowledge and based on his familiarity with [the appellee's] books and records.... Therefore, the failure to attach the invoices was not fatal to [the appellee's] summary-judgment motion, at least in the absence of any response by Rose Manor that made the invoices themselves crucial to the decision in the case.”). Likewise, if Brown is testifying based upon his personal knowledge and not merely repeating the contents of documents, his statements are by definition not hearsay.

Stephens nevertheless argues that “it is apparent that none of the evidence presented to the trial court was within the ‘personal knowledge’ of Mr. Brown.” Stephens's brief, p. 13. In previous cases, we have held testimony inadmissible under the best-evidence rule or the hearsay prohibition, but only when it was readily evident that the witness had no personal knowledge of the facts he or she testified to. See, e.g., Ex parte Walker, 623 So.2d at 284 (applying best-evidence rule where it was clear from the record that a bookkeeper's testimony was based exclusively on books and records of the business and not personal knowledge); Ex parte Head, 572 So.2d 1276, 1281 (Ala.1990) (holding that “testimony regarding the relationships among the defendants, purportedly made ‘from personal knowledge’ gained from the records of the probate court,” was inadmissible where “no copies of the probate records from which [the affiant] gained her ‘personal knowledge’ were provided with [the] affidavit”); McMillian v. Wallis, 567 So.2d 1199, 1205 (Ala.1990) (holding that a doctor's affidavit and deposition testimony describing the contents of an individual's hospital records were inadmissible hearsay where nothing in the record indicated that the doctor had any personal knowledge of the individual's history); and Home Bank of Guntersville v. Perpetual Fed. Sav. & Loan Ass'n, 547 So.2d 840, 841-42 (Ala.1989) (holding that affidavit filed by defendant's attorney was inadmissible hearsay where “[i]t appears from the face of the affidavit that his information concerning these matters must have come to him from his client or from others”).

However, we cannot agree that, in the present case, it is clear that none of the assertions made by Brown was based on...