MURDOCK, Justice.
This Court's opinion of July 31, 2009, is withdrawn, and the following opinion is substituted therefor.
Retha J. Brannon, as executrix of the estate of Lemuel Morrison, deceased ("the Morrison estate"), the plaintiff below, appeals from a judgment as a matter of law in favor of BankTrust, Inc. ("BankTrust"), on the Morrison estate's common-law tort claims of negligence and wantonness (case no. 1060637). BankTrust cross-appeals from a summary judgment in favor of Brannon on the Morrison estate's claim of breach of contract (case no. 1061059). We reverse both judgments.
Morrison died in March 2001, and Brannon was appointed executrix of his estate. After her appointment as executrix, Brannon retained Douglas McCoy of the law firm of Hand Arendall, LLC, to assist her in the administration of the Morrison estate. Because Hand Arendall maintained its own account at BankTrust and had regularly done business with it, McCoy recommended that Brannon open a checking account for the Morrison estate at BankTrust. On June 26, 2001, Brannon and McCoy met with Lyn Peterson, a vice president of BankTrust, and Brannon opened a checking account ("the estate account") by filling out an information sheet and signing a signature card. Attached to the signature card was a document entitled "Deposit Account Terms and Conditions" ("the agreement"), which provided that the "terms [of the agreement] govern[ed] the operation of this account unless supplemented in writing." The agreement specified that,
The agreement also provided that the signatory on the account must review bank statements with "reasonable promptness" and must "promptly notify" BankTrust of any "unauthorized payments or alterations." The agreement provided, in addition to the foregoing, that no claim for an unauthorized transaction could be made
The signature card contained spaces for multiple signatories, but it is undisputed that Brannon was the only person whose name appears on the signature card as a signatory. The signature card also included the option for making an "agency designation," but no such designation was made on the signature card.
Although McCoy's name does not appear on the signature card, Peterson testified by deposition that Brannon told her that "Doug [McCoy] would handle this account for her." Brannon instructed Peterson to send checks for the estate account to McCoy, and she listed the mailing address as "Estate of Lemuel Morrison, c/o Douglas L. McCoy," followed by Hand Arendall's mailing address. It is undisputed that McCoy initially received all bank statements for the estate account and that he had a responsibility to Brannon to forward them to her.
On April 17, 2002, McCoy telephoned Peterson at BankTrust and told her to transfer $34,821.73 from the estate account to Hand Arendall's account at BankTrust. Peterson testified that McCoy told her that the transfer was for legal fees and that he said nothing else. Peterson did not ask McCoy if he had authorization from Brannon for the transfer, and McCoy did not tell Peterson that he had such authorization. Their conversation lasted less than one minute. Peterson testified that she "assumed" that McCoy had authorization for the transfer and that she trusted McCoy.
In October 2002, Brannon telephoned Peterson to inform her that she had not been receiving bank statements on the estate account, and she asked Peterson to change the address on the account. Brannon claims that, upon receiving a printout of the bank statements from Peterson, she noticed that a large amount of money was missing from the estate account. She telephoned Peterson to inform her that there had been unauthorized transfers from the estate account to Hand Arendall, and she asked to speak to Peterson's supervisor. Peterson transferred Brannon to BankTrust's chief financial officer, Michael Johnson. Brannon demanded that BankTrust credit the missing funds to the estate account. Johnson told Brannon that he would get back to her.
Johnson testified that, after he received Brannon's telephone call, he telephoned McCoy
Upon receiving the letter, Brannon went to the BankTrust office and again requested that the estate account be credited for what she deemed to be McCoy's unauthorized transfers. Upon BankTrust's refusal, Brannon closed the account.
In October 2003, Brannon sued BankTrust in the Geneva Circuit Court; the complaint alleged breach of contract, negligence, and wantonness, stemming from the eight transfers of funds from the estate account to Hand Arendall's account between April and October 2002.
During discovery, BankTrust filed a notice of intent to serve a subpoena on a nonparty, Hand Arendall. The nonparty subpoena requested all statements, records of payment, notes, memoranda, and correspondence related to the Morrison estate and directed to or received from Brannon. Brannon objected to the nonparty subpoena. BankTrust contended that it needed the information to demonstrate that Brannon owed money to Hand Arendall for legal services McCoy had rendered to the Morrison estate. In a memorandum of law responding to Brannon's objection to BankTrust's nonparty subpoena to Hand Arendall, BankTrust also stated that it "asserts as a factual matter that it made the transfer from the [estate] account to Hand Arendall's account with the understanding that the transfers were authorized by [Brannon]."
Brannon objected to the subpoena on the ground that the subpoena requested information plainly protected by the attorney-client privilege under Rule 502, Ala. R. Evid. She also argued that any evidence indicating that Brannon may have owed money to Hand Arendall was not relevant, she said, because the transfer was an "unauthorized transfer," and Article 4A of the UCC (§ 7-4A-201 et seq., Ala.Code 1975) provides defenses for such transfers only in the event a bank has in place certain security measures, which, she contended, BankTrust did not have.
On November 24, 2004, the trial court quashed the subpoena, finding that the requested information was protected by the attorney-client privilege and that "[w]hether [Brannon] owed the money to [the Morrison estate's] former law firm is not relevant or material to the issue of whether the transfer [of funds] in the first instance was unauthorized."
On December 17, 2004, BankTrust filed a motion to reconsider the trial court's order quashing the nonparty subpoena. In this motion, it argued that in addition to demonstrating that Brannon owed money to Hand Arendall and that she had received the bank statements for the estate account from McCoy, the information requested from Hand Arendall allegedly could "be used to establish that Ms. Brannon's claim that the transfers were unauthorized is false." Brannon's response to the motion to reconsider stated that BankTrust's UCC Article 4 defense would not work because Article 4 deals with negotiable instruments, while the actions at issue were transfers of funds made by telephone.
In May 2005, Brannon filed a motion for a partial summary judgment on her breach-of-contract claim. She argued that the signature card created a contract between her and BankTrust that BankTrust had breached by carrying out unauthorized transfers from the estate account to Hand Arendall's account and that the Morrison estate had been damaged as a result of BankTrust's actions. The trial court set the motion for a hearing on August 12, 2005.
On August 9, 2005, BankTrust filed a response to the motion. In its response, BankTrust argued that a summary judgment should not be entered for Brannon because genuine issues of material fact existed as to whether Brannon had performed her duties and obligations under the agreement and, specifically, whether she had failed to examine the statements for the estate account with reasonable promptness and to notify BankTrust of any problems with the statements. In BankTrust's "Motion to Continue Argument and Response to [Brannon's] Motion for Partial Summary Judgment," BankTrust argued:
Furthermore, in an affidavit attached to this motion, Ginger D. Johnson, a lawyer who identified herself as representing BankTrust, testified as follows:
As planned, the trial court heard oral arguments on Brannon's motion for a partial summary judgment on August 12, 2005. The trial court denied BankTrust's request for a continuance and granted Brannon's motion for a partial summary judgment as to her breach-of-contract claim.
On August 18, 2005, the trial court received, unsolicited, a large envelope from Hand Arendall for the Court's in camera review. Both parties objected to the submission, and the trial court returned the envelope to Hand Arendall without examining its contents. On August 24, 2005, an attorney from Hand Arendall delivered to BankTrust's counsel an affidavit from McCoy with documents attached. BankTrust filed the affidavit and documents, purportedly to supplement its opposition to Brannon's motion for a partial summary judgment. In the affidavit, McCoy averred that Brannon had authorized him to make the transfers and stated that the attachments to the affidavit documented that authorization. Brannon filed a motion to strike the affidavit and attachments as untimely filed. Subsequently, BankTrust filed a motion for a summary judgment on Brannon's tort claims.
The trial court held a hearing on the various pending motions, and on July 31, 2006, it issued a written order affirming its granting of Brannon's motion for a partial summary judgment, denying BankTrust's motion for a summary judgment, and granting Brannon's motion to strike BankTrust's filing of the McCoy affidavit and its attachments as untimely. Concerning Brannon's breach-of-contract claim, the trial court specifically found that BankTrust "allowed a non-signatory to transfer money from the [estate] account into the non-signatory's bank account"; that "the signing of the signature card creates a binding contract on the parties"; and that "[t]he eight separate transactions ... were unauthorized under the terms of the contract, i.e., the signature card, and constituted a breach of [BankTrust's] contract with [Brannon]." The trial court noted that the transfers were carried out by telephone and that they did not involve negotiable instruments. "Thus, [BankTrust's] assertion of § 7-4-406, Code of Alabama, 1975, as a special defense is inapplicable in this case. See Ala.Code § 7-4A-104, Official Comment." The trial court awarded Brannon the amount of the transfers plus prejudgment interest at 6% per annum, for a total judgment of $294,552.37.
The trial court set the negligence and wantonness claims for trial on January 8, 2007. During a pretrial hearing on January 4, 2007, the trial court stated that it had just become aware of Fitts v. AmSouth Bank, 917 So.2d 818 (Ala.2005), and it asked the parties to explain the possible applicability of Fitts to this case. The parties argued as to whether Fitts dictates that the tort claims were precluded under Article 4A of the UCC, but the trial court decided to postpone any decision on the issue until a motion for a judgment as a matter of law was filed at the close of Brannon's case. The next day, BankTrust filed an amended answer to Brannon's complaint in which it asserted Article 4A as a defense to Brannon's claims.
On the first day of trial, January 8, 2007, Brannon filed a motion to strike BankTrust's amended answer. Without ruling on this motion, the trial court began the trial, and the jury then heard Brannon's case on the tort claims. On January 10, 2007, following the close of Brannon's case, BankTrust filed a motion for a judgment as a matter of law, asserting that Article 4A of the UCC, § 7-4A-101 et seq., Ala. Code 1975, displaced Brannon's common-law tort claims and, in addition, arguing insufficiency of the evidence with respect to Brannon's wantonness claim. Following further arguments on the displacement issue, the trial court granted BankTrust's motion. It also granted Brannon's motion to strike BankTrust's amended answer as untimely filed.
Brannon appealed as to the judgment as a matter of law on her negligence and wantonness claims; BankTrust cross-appealed as to the partial summary judgment against it on Brannon's breach-of-contract claim.
This Court explained the standard of review applicable to a ruling on a judgment as a matter of law in Waddell & Reed, Inc. v. United Investors Life Insurance Co., 875 So.2d 1143, 1152 (Ala.2003):
The standard of review for a ruling on a motion for a summary judgment is also well settled:
"Questions of law are reviewed de novo."
Pritchett v. ICN Med. Alliance, Inc., 938 So.2d 933, 935 (Ala.2006) (quoting Capital Alliance Ins. Co. v. Thorough-Clean, Inc., 639 So.2d 1349, 1350 (Ala.1994)).
BankTrust cross-appeals from the partial summary judgment the trial court entered on Brannon's breach-of-contract claim. BankTrust contends, among other things, that a genuine issue of fact exists as to whether Brannon fulfilled her responsibility to timely notify BankTrust in the event of an unauthorized payment from the estate account. It also argues that the record contains substantial evidence indicating that McCoy's request to BankTrust for payment of legal fees from the estate account fell within the authority granted to him by Brannon. At a minimum, according to BankTrust, the trial court's consideration of Brannon's partial-summary-judgment motion should have been postponed pursuant to Rule 56(f), Ala. R. Civ. P., in order to allow BankTrust to engage in discovery regarding the alleged authorization.
(Capitalization in original.)
In addition, as noted, the record indicates that Brannon instructed a BankTrust employee, Lyn Peterson, to send checks for the estate account to McCoy and that she listed the mailing address for the estate account as "Estate of Lemuel Morrison, c/o Douglas L. McCoy" followed by Hand Arendall's mailing address. It is undisputed, as noted, that McCoy initially received all bank statements for the estate account, presumably pursuant to Brannon's instruction to Peterson, and that he in turn had a responsibility to forward these statements to Brannon. In addition, as noted, Peterson testified by deposition that Brannon told her that "Doug [McCoy] would handle this account for her." The record also contains an affidavit from Peterson, in which she avers: "I was told by Ms. Brannon that Doug McCoy would be in charge of this account."
Furthermore, BankTrust argues on appeal that it attempted, by means of a nonparty subpoena, to obtain documents
We agree with BankTrust that, to the extent BankTrust sought to discover information and documents relating to the issue whether Brannon authorized or ratified McCoy's payment requests to BankTrust, such information and documents did not constitute privileged attorney-client communications. The attorney-client privilege shields communications between a lawyer and a client that "are based on, or may disclose, confidential information provided by the client or contain the advice or opinions of the attorney." 81 Am. Jur 2d Witnesses § 357 (2004). When an attorney is the client's agent in regard to a transaction with a third party, the fact of the attorney's employment, the authority of the attorney, instructions given to the attorney, and the attorney's communications to the client in the course of executing his or her duties constitute part of the res gestae of the transaction and would not be privileged information in a lawsuit regarding the transaction. Nyhoff v. Palmer, 217 Ala. 432, 116 So. 520, 524 (1928).
On the basis of the foregoing, we conclude that the trial court's entry of a partial summary judgment on Brannon's breach-of-contract claim was in error. We reverse that judgment and remand this cause to the trial court for further proceedings as to this issue.
Brannon argues that the trial court improperly granted BankTrust's motion for a judgment as a matter of law because, she argues, BankTrust failed to properly plead Article 4A as an affirmative defense in its original answer to Brannon's complaint. Brannon notes that BankTrust never raised the applicability of Article 4A until the trial court inquired about its applicability four days before the trial date. It also observes that the trial court struck BankTrust's amended answer asserting Article 4A as an affirmative defense because it was not filed until just before the trial date. Citing the requirement in Rule 8(c), Ala. R. Civ. P., that a party set forth its affirmative defenses in its pleading, Brannon contends that the trial court should never have considered whether Article 4A displaced the tort claims at issue.
Rule 8(c) does not list the statutory displacement of common-law claims as an "affirmative defense." This is because such
"An `affirmative defense' is defined as a `matter asserted by [the] defendant which, assuming the complaint to be true, constitutes a defense to it.'" City of Birmingham v. Business Realty Inv. Co., 722 So.2d 747, 750 (Ala.1998) (quoting Black's Law Dictionary (6th ed.1990)). For a position to constitute an affirmative defense assumes that the claim against which it is asserted is, in the absence of the assertion of that defense, a cognizable claim under Alabama law.
In International Longshoremen's Ass'n v. Davis, 470 So.2d 1215, 1216 (Ala.1985), this Court held that "under the circumstances of th[at] case," the issue of federal preemption that was presented was an affirmative defense.
When federal law completely displaces state law, however, there is authority suggesting a different result. Cf. id. (citing, inter alia, Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003), and noting that the United States Supreme Court has recognized that a federal statute may displace or "completely preempt" state law and not merely immunize a defendant from state-created liability); Billy Jack for Her, Inc. v. New York Coat, Suit, Dress, Rainwear & Allied Workers' Union, 511 F.Supp. 1180 (S.D.N.Y.1981) (concluding that a finding of preemption represents a conclusion that Congress has determined to supplant state law altogether and that, therefore, federal preemption is not, by its nature, to be viewed merely as an affirmative defense for purposes of deciding the removability of an action brought in
When the state law itself changes, however, there can be no argument that the law as changed is somehow an "affirmative defense" to the law as it existed before the change. The law as changed is simply the new law. Thus, if a common-law claim is displaced by a set of statutory rights provided by the legislature, then, by definition, the common-law claim no longer exists in state law, having given way to the new statutory causes of action. By definition, pleading a nonexistent claim constitutes a failure to state a claim upon which relief can be granted. Our holding in this regard finds support in the decisions of this Court and other courts. See, e.g., Continental Cas. Co. v. Compass Bank (Civ. A.04-0766-KD-C, March 6, 2006) (S.D.Ala. 2006) (not reported in F.Supp.2d) (concluding that allegations of a common-law conversion by the issuer of a check against a depository bank failed to state a claim because of displacement by the UCC); AmSouth Bank v. Tice, 923 So.2d 1060 (Ala.2005) (holding that the a motion for a judgment as a matter of law should have been granted on the ground that the plaintiff's common-law claims for negligence and wantonness were displaced by the UCC); American Liberty Ins. Co. v. AmSouth Bank, 825 So.2d 786 (Ala.2002) (holding that AmSouth Bank was entitled to a judgment as a matter of law because provisions of the UCC had displaced the plaintiff's common-law cause of action for conversion); Berthot v. Security Pacific Bank of Arizona, 170 Ariz. 318, 321, 823 P.2d 1326, 1329 (Ariz.Ct.App.1991) (affirming the dismissal of the plaintiff's common-law claim of conversion on the ground that, because Arizona's Uniform Commercial Code "displaces" that common-law claim, the complaint failed to state a claim upon which relief could be granted: "[W]hen a provision of the Arizona U.C.C. displaces the common law on that issue, the common law no longer applies.").
Brannon further argues, however, that the trial court erred in holding that Fitts v. AmSouth Bank, 917 So.2d 818 (Ala.2005), dictates that Article 4A displaced Brannon's common-law tort claims. In Fitts, husband-and-wife business partners Fred Fitts and Bellann Fitts filed a complaint that included common-law claims of breach of contract, negligence, suppression, wantonness, and conspiracy against their business partner James George. George argued, and the trial court agreed, that the Fittses' claims were barred by the one-year statute of repose in § 7-4A-505, Ala.Code 1975. This Court affirmed the trial court's judgment, specifically holding that Article 4A displaced the Fittses' common-law claims.
The Fitts Court noted that ordinarily this Court looks to § 7-1-103, Ala.Code 1975, for guidance on the relationship between the UCC and the common law. Section 7-1-103 provides that unless they are displaced by "the particular provisions of" the UCC, traditional principles of law and equity will supplement the provisions of the UCC. Fitts, 917 So.2d at 824 n. 7. In concluding that Article 4A displaced the
(Emphasis added.) See generally AmSouth Bank v. Tice, 923 So.2d at 1065 (discussing and applying criteria for determining whether a statutory provision has displaced a common-law cause of action); American Liberty Ins. Co. v. AmSouth Bank, 825 So.2d at 794-95 (same).
Brannon contends that the rights and responsibilities provided by Article 4A do not displace her common-law claims of negligence and wantonness in this case because, she says, Article 4A does not purport to provide an exclusive remedy with respect to facts like those presented here. Brannon characterizes those facts as involving a "debit transfer," and not a "credit transfer within the contemplation of Article 4A."
We note that § 7-4A-102 provides that, with exceptions not applicable here, Article 4A applies to funds transfers defined in § 7-4A-104. Section 7-4A-104 defines "funds transfers" in pertinent part as follows:
(Emphasis added.)
According to § 7-4A-103(a)(1)(ii), Ala. Code 1975, for an instruction to qualify as a "payment order" under Article 4A, it must be one with respect to which "the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender." (Emphasis
Paragraph 4 of the Official Comment to § 7-4A-104, Alabama Code 1975, explains further the provision that a "payment order" entails reimbursement to the receiving bank from "the sender" or the sender's account:
In the present case, it was contemplated that BankTrust, the receiving bank, would be, and it was, reimbursed by the estate account. Thus, in order for the instruction given in this case to qualify as a "payment order," it must have been given by or on behalf of the Morrison estate as the sender.
As noted, § 7-4A-202(d) provides that a "sender" includes a customer in whose name a payment order is issued "if the order is the authorized order of the customer under subsection (a), or it is effective as the order of the customer under subsection (b). Section 1 of the Official Comment following § 7-4A-203 explains that "[a] person in whose name a payment order is issued is considered to be the sender of the order if the order is `authorized' as stated in subsection (a) [of § 7-4A-202] or if the order is `verified' pursuant to a security procedure in compliance with subsection (b) [of § 7-4A-202]."
Brannon argues on appeal that the funds transfers at issue in this case were not credit transfers for purposes of the protection afforded banks by Article 4A. Therefore, according to Brannon, her common-law claims of negligence and wantonness are not displaced. She notes that McCoy instructed BankTrust to make the payments to his law firm, a creditor of the Morrison estate, as supportive of her position.
We agree that Article 4A applies only to "credit transfers" as defined in that article and that it displaces common-law causes of action only in relation to credit transfers as so defined. Because the trial court appears to have ignored or rejected this proposition in entering its judgment as a matter of law in favor of BankTrust, and because it cannot be said as a matter of law on the record before us that the transfers at issue constitute credit transfers as defined in Article 4A, that judgment is due to be reversed. In so holding, however, we stop short of concluding that the funds transfers at issue did not, in fact, constitute such credit transfers. Indeed, as we have already noted, there is some evidence already in the record that would tend to support a finding that the transfers fell within the authority granted by Brannon to McCoy and that, for that reason, the Morrison estate should be deemed the "sender" in whose name the payment order was issued. Also, consistent with our discussion above, further discovery appears to be in order as to the extent to which McCoy was authorized by Brannon to make the transfers. See § 7-4A-202(a). By the same token, a genuine issue of fact remains as to whether Brannon, even if she did not authorize McCoy to initiate the transfer, "is otherwise bound by [the transfers] under the law of agency" for purposes of § 7-4A-202. Accordingly, we reverse the trial court's judgment as a matter of law as to Brannon's negligence and wantonness claims and remand the cause for further proceedings.
Based on the foregoing, we reverse the trial court's partial summary judgment in favor of Brannon and its judgment as a matter of law in favor of BankTrust.
1060637—APPLICATION OVERRULED; OPINION OF JULY 31, 2009, WITHDRAWN; OPINION SUBSTITUTED; REVERSED AND REMANDED.
1061059—APPLICATION OVERRULED; OPINION OF JULY 31, 2009, WITHDRAWN; OPINION SUBSTITUTED; REVERSED AND REMANDED.
COBB, C.J., and LYONS, WOODALL, STUART, SMITH, BOLIN, PARKER, and SHAW, JJ., concur.
Also, the Davis Court itself explained that it was not deciding that the state-law claim before it had in fact been preempted by federal law but was addressing only the question whether the assertion that the state-law claim is "subject to preemption" must be properly preserved in the trial court in order for it to be reviewed on appeal. 470 So.2d at 1216 n. 2. In fact, the Court explained that, "if [it] were to rule on the merits, [it] could not find that the state court's jurisdiction is federally preempted." Id. The Court noted that the state-law claim presented to it was "an ordinary misrepresentation suit" against a supervisor, that "[t]he National Labor Relations Board [(`NLRB')] ha[d] already determined that an employer's supervisors are not protected by the Labor Management Relations Act," and "[t]hus, in this case, Plaintiff has no remedy before the NLRB, and this dispute, although somewhat labor-related, is, at most, only of `peripheral concern' to the NLRB." Id. Davis, therefore, is not a case in which the asserted state-law claim arguably had been displaced by federal law.
