Title: Ex Parte MONY Federal Credit Union

State: alabama

Issuer: Alabama Supreme Court

Document:

668 So. 2d 552 (1995)
Ex parte MONY FEDERAL CREDIT UNION.
Ex parte SOUTHTRUST BANK OF BALDWIN COUNTY.
(In re SOUTHTRUST BANK OF BALDWIN COUNTY v. EMPIRE CORPORATE FEDERAL CREDIT UNION and MONY Federal Credit Union).
1940337, 1940360.

Supreme Court of Alabama.
June 16, 1995.
Charles C. Simpson III of Owens, Benton & Simpson, Bay Minette, for petitioner MONY Federal Credit Union and respondent Empire Corporate Federal Credit Union.
D. Charles Holtz and J.M. Druhan of Johnston, Wilkins, Druhan & Holtz, Mobile, for SouthTrust Bank of Baldwin County.
HOUSTON, Justice.
SouthTrust Bank of Baldwin County ("SouthTrust") sued Empire Corporate Federal Credit Union ("Empire") and MONY Federal Credit Union ("MONY"), alleging that they had negligently or in bad faith failed to timely notify it of the nonpayment of a certain share draft, which is the credit union version of a check, and that that omission had resulted in damages to SouthTrust of $28,762; SouthTrust sought damages in that amount, plus interest, attorney fees, and costs. The trial court dismissed South-Trust's claim against Empire on the ground of lack of personal jurisdiction, and entered a summary judgment for MONY on the ground that MONY was under no legal duty to notify SouthTrust of the non-payment. The Court of Civil Appeals affirmed the dismissal of Empire, but reversed the summary judgment for MONY. See SouthTrust Bank of Baldwin County v. Empire Corporate Federal Credit Union, 668 So. 2d 548 (Ala.Civ.App. 1994), for a complete statement of the facts and a discussion of the legal principles relied on by the court. Both SouthTrust and MONY sought certiorari review. We affirm in part, reverse in part, and remand.
We note initially that, after carefully considering MONY's petition and briefs, we have concluded that the Court of Civil Appeals correctly held that the summary judgment for MONY was improper. We therefore affirm the judgment of the Court of Civil Appeals insofar as it sets aside the summary judgment entered for MONY.
However, we disagree with the conclusion of the Court of Civil Appeals that the trial court lacked personal jurisdiction over Empire. The pertinent portion of that court's opinion reads as follows:
668 So. 2d  at 549-551.
In Dillon Equities v. Palmer & Cay, Inc., 501 So. 2d 459, 461 (Ala.1986), this Court stated:
In Lowry v. Owens, 621 So. 2d 1262, 1265 (Ala.1993), we noted:
Rule 4.2(a), Ala.R.Civ.P., which sets out the contacts necessary to give an Alabama court jurisdiction over a nonresident defendant, provides in pertinent part:
*557 After examining the particular facts and circumstances of the present case, we conclude that Empire established "sufficient contacts" with this state by contracting with MONY to serve as the payable-through bank for share drafts drawn on share draft accounts maintained with MONY. We agree with the following assessment of the facts, found on page 21 of SouthTrust's brief in support of its petition:
Although, as the Court of Civil Appeals noted, Empire had no physical contacts with Alabama, we have consistently held that physical presence in this state is not a prerequisite to effective service of process on a nonresident defendant. On the other hand, it is determinative that Empire had good reason to anticipate litigation within Alabama if it should fail to timely notify SouthTrust (or any other Alabama bank accepting share drafts drawn on a MONY account) of nonpayment of a share draft. It certainly does not offend traditional notions of fair play and substantial justice to allow an Alabama bank relying on Empire's services to seek redress in an Alabama court. In this respect, this case is materially indistinguishable from Keelean v. Central Bank of the South, 544 So. 2d 153 (Ala.1989). In Keelean, Central Bank was asked to lend money to a Florida corporation, Holdco. As a prerequisite for lending money to Holdco, Central Bank required several defendants to sign a guaranty agreement. Holding that the trial court had personal jurisdiction over the nonresident defendants, this Court wrote:
544 So. 2d  at 157-58. See, also, Steel Processors, Inc. v. Sue's Pumps, Inc. Rentals, 622 So. 2d 910 (Ala.1993); Millette v. O'Neal Steel, Inc., 613 So. 2d 1225 (Ala.1992); Ex parte Lord & Son Constr., Inc., 548 So. 2d 456 (Ala.1989).
We note that we have examined the cases relied on by Empire, including First United Bank of Mississippi v. First National Bank of Atlanta, 255 Ga. 505, 340 S.E.2d 597 (1986); State of Missouri ex rel. the Bank of Gering v. Schoenlaub, 540 S.W.2d 31 (Mo. 1976); Washington Petroleum & Supply Co. v. Girard Bank, 629 F. Supp. 1224 (M.D.Pa. 1983); Jack O'Donnell Chevrolet, Inc. v. Shankles, 276 F. Supp. 998 (N.D.Ill.1967); Oriental Imports & Exports, Inc. v. Maduro & Curiel's Bank, N.V., 701 F.2d 889 (11th Cir.1983); Sears Bank & Trust Co. v. Luckman, 61 Ill.App.3d 260, 18 Ill.Dec. 520, 377 N.E.2d 1156 (1978); and E.I.C., Inc. v. Bank of Virginia, 108 Cal. App. 3d 148, 166 Cal. Rptr. 317 (1980). These cases, which we find unpersuasive under the particular facts of this case, stand for the general proposition that a bank operating in one state is not subject to the jurisdiction of another state's courts merely by virtue of its forwarding checks for collection through normal banking channels or by virtue of a "correspondent relationship" with a bank in the forum state, i.e., a relationship in which "`a forwarding bank ... maintains a deposit account [with another bank] to whom it sends checks for forwarding and collection.'" Washington Petroleum & Supply Co. v. Girard Bank, supra, at 1227, quoting Citizens State Bank v. Martin, 227 Kan. 580, 587, 609 P.2d 670, 676 (1980). However, SouthTrust does not take the position that foreign banks in general are subject to the jurisdiction of Alabama courts merely because of their participation in the interstate check collection process. SouthTrust argues, and we agree, that Empire's contractual obligation to provide a service (to give notification of dishonored share drafts) to Alabama banks accepting share drafts drawn on MONY accounts was sufficient to subject it to the reach of Alabama's long-arm rule. Empire clearly benefited from its relationship with MONY, and MONY can do business in Alabama partly because its share drafts are accepted by Alabama banks. As previously noted, Empire should have foreseen, from its arrangement with MONY, that it would be sued in Alabama if it failed to provide the requisite notice and if that failure resulted in loss to an Alabama bank. Empire's position is thus similar to that of the Louisiana Insurance Guaranty Association and the South Carolina Property and Casualty Insurance Guaranty Association in Olivier v. Merritt Dredging *559 Co., 979 F.2d 827 (11th Cir.1992), cert. denied, 507 U.S. 983, 113 S. Ct. 1577, 123 L. Ed. 2d 145 and 508 U.S. 910, 113 S. Ct. 2342, 124 L. Ed. 2d 252 (1993). In Olivier, the plaintiff, a Louisiana resident, sustained personal injuries aboard a vessel in Alabama while employed by Merritt, a South Carolina corporation with its principal place of business in South Carolina. The plaintiff obtained a judgment against Merritt in Alabama, and, after Merritt and its insurer, Midland Insurance Company, had filed bankruptcy petitions, requested that the district court in Alabama issue writs of garnishment to both guaranty associations. The district court ruled that it lacked personal jurisdiction over the associations. The Eleventh Circuit Court of Appeals reversed, holding that "under the interstate arrangements made by the insurance industry to protect policyholders from losses resulting from the insolvency of an industry member, [the associations] consented to be subject to the same personal jurisdiction as one of their insolvent members, and ... that judicial economy would best be served by keeping [the] litigation within that forum." 979 F.2d  at 829. After noting that the Fourteenth Amendment would not permit a defendant to be subject to legal liability in a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, the court stated:
979 F.2d  at 833. As to whether jurisdiction in Alabama over the associations would comport with "fair play and substantial justice," the court noted:
979 F.2d  at 834.
There is nothing random, fortuitous, or attenuated about Empire's voluntary undertaking to timely notify Alabama banks of any share drafts dishonored by MONY, an institution over which the trial court apparently has jurisdiction. Empire is obviously aware *560 of which banks have forwarded share drafts for collection. We can see no logic in allowing Empire to use the interstate nature of the banking industry as a shield against liability in Alabamato, in effect, "stick its head in the sand" and ignore the ramifications of its actions on Alabama banks accepting share drafts drawn on MONY accounts. Lending support to our conclusion in this regard is the fact that Empire, in dealing with SouthTrust, arguably had available to it the benefit and protection of Alabama law. Under Ala.Code 1975, § 7-4-207 (part of Alabama's version of the Uniform Commercial Code), SouthTrust, as a "collecting bank," makes certain warranties to "the payor bank or other payor who in good faith pays or accepts the item." Had those warranties been breached, it is at least reasonable to conclude that Empire would have had the benefit and protection of this Alabama law. Furthermore, we note that SouthTrust has an interest in obtaining convenient and effective relief; that Alabama has an interest in providing a forum to its residents for the adjudication of disputes occurring within its borders, see, e.g., Edy Clover Productions, Inc. v. National Broadcasting Co., 572 F.2d 119 (3d. Cir.1978); and that requiring adjudication of SouthTrust's claims in Alabama should not impose a substantial burden on Empire.
For the foregoing reasons, the judgment of the Court of Civil Appeals, insofar as it affirms the trial court's dismissal of Empire, is reversed and the case is remanded for further proceedings, or an order, consistent with this opinion.
1940337 AFFIRMED.
1940360 REVERSED AND REMANDED.
MADDOX, ALMON, SHORES, COOK, and BUTTS, JJ., concur.
[1]  Section 229.33(a) provides in pertinent part:

"Requirement. If a paying bank determines not to pay a check in the amount of $2,500 or more, it shall provide notice of nonpayment such that the notice is received by the depositary bank by 4:00 p.m. (local time) on the second business day following the banking day on which the check was presented to the paying bank.... Notice may be provided by any reasonable means, including the returned check, a writing (including a copy of the check), telephone, Fedwire, telex, or other form of telegraph."
Under the regulations, Empire appears to be a "paying bank," SouthTrust appears to be a "depositary bank," and a "check" appears to equate with a share draft.
Section 229.38(a) provides in part:
"A bank that fails to exercise ordinary care or act in good faith under this subpart may be liable to the depositary bank ... [for] the amount of the loss incurred, up to the amount of the check, reduced by the amount of the loss that party would have incurred even if the bank had exercised ordinary care. A bank that fails to act in good faith under this subpart may be liable for other damages, if any, suffered by the party as a proximate consequence."