Opinion
NO. 2015-CA-000342-MR
02-02-2018
ELLA HOLT APPELLANT v. COMMUNITY TRUST BANK, INC. APPELLEE
BRIEF FOR APPELLANT: Derrick G. Helm Jamestown, Kentucky BRIEF FOR APPELLEE: John T. McGarvey J. Morgan McGarvey Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM RUSSELL CIRCUIT COURT
HONORABLE VERNON MINIARD, JR., JUDGE
ACTION NO. 12-CI-00339 OPINION
AFFIRMING
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BEFORE: CLAYTON, JONES, AND NICKELL, JUDGES. NICKELL, JUDGE: Ella Holt has appealed from the Russell Circuit Court's February 24, 2015, denial of her motion to vacate the court's order granting summary judgment to Community Trust Bank (CTB). Following a careful review, we affirm.
The events of this case originate from two incidents of check fraud allegedly perpetrated against Holt by Glenda Burchett. Holt wrote two checks to Burchett in July 2011; the first for $25.00 and the second for $20.00. Burchett thereafter changed the amounts on the checks to $2,500.00 and $3,020.00, respectively, then cashed the checks at CTB, which was Holt's bank. CTB sent an account statement to Holt on August 23, 2011, showing checks for $2,500.00 and $3,020.00 as debits from her checking account.
Although Burchett was a defendant in the circuit court action below, she is not a party to the instant appeal.
On July 31, 2012, Holt filed a complaint in Russell Circuit Court against CTB and Burchett, asserting CTB "negligently cashed both check[s] . . . that showed obvious signs of forgery without notifying the Plaintiff." Holt asserted only common law negligence for her cause of action. In its answer, CTB asserted the statute of limitations, and cited portions of KRS Chapter 355, as defenses.
Kentucky Revised Statutes.
Following the court's order setting a trial date, CTB moved for summary judgment, arguing the common law negligence action was subsumed by Kentucky's adoption of the Uniform Commercial Code (UCC), as provided in KRS Chapter 355. Furthermore, CTB contended even if the complaint had been brought under the UCC, Holt did not timely notify CTB pursuant to her account agreement with the bank requiring her to alert CTB to any "unauthorized signature, alterations, or forgeries . . . within 60 days" from when CTB first sent Holt's account statement or made it available. The account agreement further stated any failure to timely report such unauthorized activity would bar a claim against CTB. The trial court deferred action on the summary judgment motion until the Supreme Court of Kentucky rendered an Opinion in Mark D. Dean, P.S.C. v. Commonwealth Bank & Trust Co., 434 S.W.3d 489 (Ky. 2014). When Dean became final, CTB renewed its motion for summary judgment. In its supporting memorandum, CTB reiterated its previous arguments and cited Dean as additional support for the proposition that a bank's liability for check fraud is wholly governed by the UCC.
In her response, Holt continued to allege negligence, as per her initiating complaint, and argued existence of genuine issues of material fact. Further, Holt asserted the matter was not time-barred by the one-year statute of repose discussed in Dean, 434 S.W.3d at 497-98 (citing KRS 355.4-406(6)), because her complaint was filed within one year of CTB providing her evidence of the forged or altered instrument, i.e., the relevant account statement identifying the altered checks. Interestingly, Holt also argued CTB cited no statutory authority and posited the UCC is only "a proposed code of law which states may or may not choose to adopt and codify into law." She then immediately asserted her claims were "preserved by KRS 355.1-103(2)." By its own terms, KRS Chapter 355 "shall be known and may be cited as Uniform Commercial Code." KRS 355.1-101(1). For its part, CTB contended the unauthorized alterations were not brought to its attention within the sixty-day period provided in the account agreement.
Upon submission, the trial court granted summary judgment to CTB "for the reasons set forth in the supporting memorandum," specifying, "nothing in this Order affects [Holt's] claims against Defendant Glenda Burchett[.]" Holt subsequently moved pursuant to CR 59.05 to vacate the order granting summary judgment and, for the first time, attached affidavits averring the fraudulent alterations had been brought to the bank's attention within sixty days of their occurrence. The first affidavit was signed by Holt and attached to her motion. A second affidavit was signed by Holt's daughter who was also a signee on Holt's checking account. This affidavit was attached to Holt's reply to CTB's response to her CR 59.05 motion. The court denied the motion to vacate the order because the affidavits were not presented prior to summary judgment and no new legal theories were advanced. This appeal followed.
Kentucky Rule of Civil Procedure.
Holt contends the trial court erroneously granted summary judgment to CTB and abused its discretion in denying her motion to vacate. We disagree.
A trial court properly awards summary judgment when "the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56.03. Summary judgment should be granted only if it appears impossible the nonmoving party will be able to produce evidence at trial warranting a judgment in her favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991). Further,
a trial judge must view the evidence in the light most favorable to the nonmoving party . . . . The moving party bears the initial burden of demonstrating that no genuine issue of material fact exists and then the burden shifts to the party opposing summary judgment to produce at least some affirmative evidence showing that there is a genuine issue of material fact requiring trial.First Federal Sav. Bank v. McCubbins, 217 S.W.3d 201, 203 (Ky. 2006) (citations omitted). We review a trial court's grant of summary judgment de novo. Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 194 (Ky. 2013).
Here, the trial court indicated its grant of summary judgment was based on CTB's supporting memorandum and made no further comment. CTB provided two independent grounds for the trial court to grant summary judgment: (1) Kentucky's adoption of the UCC displaced Holt's common law negligence claim; and (2) Holt's claim was untimely, barred either by operation of the one-year statute of repose found in KRS 355.4-406 or the contractual reporting deadline of sixty days found in her account agreement with CTB.
In Dean, our Supreme Court thoroughly analyzed the effect of the UCC on common law claims, ultimately agreeing with a majority of sister jurisdictions in finding "where the Code provides a comprehensive remedy for the parties to a transaction, a common law action will be barred." Dean, 434 S.W.3d at 506-07 (citation omitted). In cases where the UCC does not provide a complete remedy, common law may supplement it. Id. at 506. However, in the case sub judice, there is no need for supplementation. Dean lists a variety of scenarios where the UCC provides a comprehensive remedy, specifically including "the liability between the bank and the customer for payment on unauthorized signature or altered instrument [pursuant to] KRS 355.4-406." Id. at 507. Here, payment on an altered instrument is the core of Holt's claim, and the UCC unequivocally governs such cases.
Having determined the UCC governs Holt's claim, we must determine whether the court appropriately found her claim to be time-barred. In her response to the motion for summary judgment, Holt contended she had "reported said alteration approximately (6) months after the bank withdrew funds from her account in accordance with the UCC." Holt referred to a letter sent by her counsel to CTB on April 16, 2012, alerting CTB to the altered checks. Because KRS 355.4-406(6) requires a bank's customer to alert the bank of fraudulent activity within one year of the relevant account statement, Holt argued she was within the appropriate limitations period.
KRS 355.4-406 is not a statute of limitations, but a statute of repose. Subsection (3) requires a bank customer to review his or her account statements with "reasonable promptness" to determine if a payment is unauthorized due to an alteration or forged signature and then "promptly notify the bank of the relevant facts." Subsection (6) states, in relevant part:
[w]ithout regard to care or lack of care of either the customer or the bank, a customer who does not within one (1) year after the statement or items are made available to the customer (subsection (1)) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration."[T]he statute creates a safe harbor for the bank after one year by requiring action by the customer within a year (a shorter period than the statute of limitations)." Dean, 434 S.W.3d at 498. A bank may contract with its customers through account agreements to abbreviate the length of time a customer has to report potential forgeries, provided the time limit is reasonable. "The effect of the provisions of this article may be varied by agreement[.]" KRS 355.4-103(1). "The account agreement makes examination of bank statements in a timely fashion for any unauthorized withdrawals or alterations a condition precedent to suit and recovery." Concrete Materials Corp. v. Bank of Danville and Trust Co., 938 S.W.2d 254, 257 (Ky. 1997).
As in Concrete Materials, this case involves an account agreement with an abbreviated time period of sixty days. Holt's account agreement with CTB provides:
if you fail to report any unauthorized signature, alterations, or forgeries in your account within 60 days of when we first send or make the statement available, you cannot assert a claim against us on any items in that statement, and as between you and us the loss will be entirely yours.Despite Holt's arguments in response to the summary judgment motion, stressing her compliance with the one-year reporting requirement of KRS 355.4-406(6), her response also indicated she reported the incident to the bank six months after the withdrawals. Unlike Concrete Materials, where the court found "genuine issues of material fact" precluding summary judgment, this case does not present such issues. Holt's failure to comply with her account agreement is evident from the face of her pleading. The trial court did not err in granting summary judgment to CTB.
Concrete Materials does not explain which issues of material fact prevented summary judgment. --------
Holt next contends the trial court erred in denying her motion to vacate the grant of summary judgment. Her assertion is unpersuasive.
In an attempt to support her motion, she attached affidavits in which she claimed, for the first time, she had brought the fraudulent alterations to the bank's attention within sixty days of her account statement being sent or made available. The court found the affidavits did not present newly-discovered facts or facts which could not have been reasonably discovered prior to the entry of summary judgment. The trial court refused to consider the affidavits, quoting Gullion v. Gullion, 163 S.W.3d 888, 893 (Ky. 2005), for the proposition that "[a] party cannot invoke CR 59.05 to raise arguments and to introduce evidence that should have been presented during the proceedings before the entry of the judgment." Thus, the trial court denied Holt's motion to vacate.
Holt argues Gullion is distinguishable because that case "dealt with a motion pursuant to CR 59 to set aside an order after a full evidentiary hearing had taken place." We disagree. In Buridi v. Leasing Group Pool II, LLC, 447 S.W.3d 157, 177-78 (Ky. App. 2014), this Court affirmed a ruling in which the trial court applied Gullion to a CR 59.05 motion following an award of summary judgment. Holt provides no support for her proposition Gullion does not apply to a CR 59.05 motion to set aside summary judgment.
Holt also argues CTB did not present proof in support of its position. Again, we disagree. "[A] party opposing a properly supported summary judgment motion cannot defeat it without presenting at least some affirmative evidence showing that there is a genuine issue of material fact for trial." Steelvest, 807 S.W.2d at 482. Holt's response to the summary judgment motion effectively admitted she only advised CTB about the fraudulent checks after six months had passed, far in excess of her contractual obligation to do so within sixty days. Holt presented no affirmative evidence to challenge CTB's motion until after summary judgment had been granted. Because the trial court properly declined to consider the affidavits appended to Holt's CR 59.05 motion under Gullion, we cannot say an abuse of discretion occurred in denying her motion to vacate.
For the foregoing reasons, the judgment of the Russell Circuit Court is affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: Derrick G. Helm
Jamestown, Kentucky BRIEF FOR APPELLEE: John T. McGarvey
J. Morgan McGarvey
Louisville, Kentucky