Peoples Bank of Biloxi, Mississippi v. John McAdams

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2014-IA-00635-SCT
THE PEOPLES BANK OF BILOXI, MISSISSIPPI
v.
JOHN McADAMS, IN HIS OFFICIAL CAPACITY
AS CHANCERY CLERK OF HARRISON COUNTY,
MISSISSIPPI AND AS GUARDIAN OF SYBIL
BOWDEN AND JONATHAN DUNN
DATE OF JUDGMENT: 04/21/2014
TRIAL JUDGE: HON. RICHARD W. McKENZIE
TRIAL COURT ATTORNEYS: NATHAN LAMAR PRESCOTT
LAUREN REEDER McCRORY
LAUREN RUTH HILLERY
COURT FROM WHICH APPEALED: HARRISON COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: NATHAN LAMAR PRESCOTT
LAUREN REEDER McCRORY
ATTORNEYS FOR APPELLEE: LAUREN RUTH HILLERY
DONALD C. DORNAN, JR.
NATURE OF THE CASE: CIVIL - OTHER
DISPOSITION: REVERSED AND RENDERED - 08/06/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE RANDOLPH, P.J., KING AND COLEMAN, JJ.
RANDOLPH, PRESIDING JUSTICE, FOR THE COURT:
¶1. John McAdams, in his official capacity as Chancery Clerk of Harrison County
(hereinafter referred to as the Chancery Clerk), was appointed guardian of Sybil Bowden and
Jonathan Dunn. The Chancery Clerk filed suit against The Peoples Bank of Biloxi,
Mississippi (hereinafter referred to as the Bank), alleging gross negligence, negligence, and
conversion of a negotiable instrument. The Bank pleaded that the statute of limitations had
run on these claims and filed a motion for summary judgment. The trial court denied the
motion. The Bank petitioned this Court and was granted leave to file this interlocutory
appeal. See M.R.A.P. 5.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
¶2. In October 2003 the Chancery Clerk opened guardianship accounts for Jonathan Dunn
and Sybil Bowden at Peoples Bank. Woodrow W. “Woody” Pringle III served as the
Chancery Clerk’s attorney. The Chancery Clerk was the sole signatory on both accounts. In
opening the accounts, the Chancery Clerk signed a deposit agreement, which stated, inter
alia:
Statements–You must examine your statement of account with “reasonable
promptness.” If you discover (or reasonably should have discovered) any
unauthorized payments or alterations you must promptly notify us of the
relevant facts.
...
You further agree that if you fail to report any unauthorized signatures,
alterations, forgeries or any other errors in your account within 60 days of
when we make the statement available, you cannot assert a claim against us on
any items in that statement, and the loss will be entirely yours.
¶3. On January 24, 2005, Pringle closed the Bowden guardianship, without any authority
to do so. The Bank issued Pringle a cashier’s check payable to Bowden and Pringle, jointly,
in the amount of $6,609.40. Pringle forged Bowden’s signature, cashed the check, and
retained the funds for himself. The Bank, through its custodian of records, offered evidence
that it sent a statement to the Chancery Clerk’s office on January 31, 2005, revealing this
closure and disbursement at the address listed on the form opening the account: “Sybil
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Bowden Guardianship, by John McAdams Guardian, PO Drawer CC, Gulfport, MS 39502-0860.”
¶4. The Dunn account required a court order before disbursements could be made. On
June 11, 2008, Pringle presented what purported to be a court order1 authorizing the
disbursement of $30,000 payable to Victoria Dunn (Dunn’s mother) and Pringle’s trust
account. The Bank issued a cashier’s check in accordance with the order. On the forged
endorsement of Victoria Dunn, Pringle cashed the check and retained the funds for himself.
On March 25, 2009, Pringle wrote a check for $8,000 on the Dunn Guardianship account
payable to himself and Jonathan Dunn. The check purports to be signed by the Chancery
Clerk and endorsed by Dunn, but both signatures are now alleged to be forgeries. The Bank
paid the check, in the absence of a court order.
¶5. The Bank, through its custodian of records, offered evidence that it sent a statement
to the Chancery Clerk’s office on June 30, 2008, revealing the $30,000 disbursement at the
address listed on the form opening the account: “Harrison Cty Chancery Clerk, Jonathan A
Dunn Guardianship, John McAdams Guardian, PO Drawer CC, Gulfport, MS 39502-0860.”
In like manner, the Bank offered evidence that it sent a statement to the Chancery Clerk on
March 31, 2009, revealing the $8,000 disbursement to the same address.
¶6. By affidavit filed in this matter, the Chancery Clerk claims he never received these
Bank statements, because “Pringle obtained possession of any bank statements received in
1
This order does not appear in the record, but its existence is not disputed. During
arguments on the motion for summary judgment, the trial court asked plaintiff’s counsel for
an explanation for why the order was “fraudulent.”“[S]omehow Woody Pringle was able to
go and bring an order to a judge and get him to sign it, without any kind of motion or
without anything else.” The order was not certified. While the order purportedly bears Judge
Steckler’s signature, even he cannot verify if he signed it or not.
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the Court Department and took them to his office.” The Chancery Clerk does not know
whether the Bank mailed the statements or not. In January 2011 the Chancery Clerk
requested and obtained these statements from the Bank after discovering Pringle’s
embezzlement scheme in other cases in December of the previous year.
¶7. On May 8, 2013, the Chancery Clerk filed his Complaint on behalf of the
guardianships against the Bank, asserting negligence, gross negligence, and conversion of
a negotiable instrument. The Bank responded with a motion for summary judgment, claiming
the Chancery Clerk’s claims were time-barred by both the deposit agreement and Mississippi
law.
¶8. The trial court heard oral arguments on the motion. The trial court entered an order
denying Peoples Bank’s motion for summary judgment. The Bank petitioned this Court for
permission to submit an interlocutory appeal which was granted. This interlocutory appeal
duly followed.
ISSUES
¶9. Peoples Bank raises the following four issues relating to the trial court’s denial of its
motion for summary judgment:
I. Whether the Chancery Clerk’s claims are time-barred by the sixty-
day notice provision contained in each account’s deposit agreement
that the Chancery Clerk executed.
II. Whether the Chancery Clerk’s claims are time-barred pursuant to
Miss. Code Ann. §75-4-406(f) which imposes a one-year notice
provision after the statement is made available to the customer.
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III. Whether the Chancery Clerk’s claims for conversion of a
negotiable instrument are time-barred by the three-year statute of
limitations contained in Miss. Code Ann. §75-3-118.
IV. Whether the Chancery Clerk’s negligence and gross negligence
claims are time-barred by the three-year statute of limitations
contained in Miss. Code Ann. §15-1-49.
Finding that the three-year statute of limitations has run, rendering the other arguments moot,
this Court will address only the three-year statutes of limitation.
ANALYSIS
¶10. When considering issues of law, such as statutes of limitations, this Court
employs a de novo review. Andrus v. Ellis, 887 So. 2d 175, 179 (Miss. 2004).
When reviewing a trial court’s grant or denial of a motion to dismiss or a
motion for summary judgment, this Court likewise applies a de novo standard
of review.
Whitaker v. Limeco Corp., 32 So. 3d 429, 433-34 (Miss. 2010).
The evidence must be viewed in the light most favorable to the party against
whom the motion has been made. If, in this view, there is no genuine issue of
material fact and, the moving party is entitled to judgment as a matter of law,
summary judgment should forthwith be entered in his favor. Otherwise, the
motion should be denied.
Leslie v. City of Biloxi, 758 So. 2d 430, 431-32 (Miss. 2000).
¶11. The Chancery Clerk filed claims of conversion of a negotiable instruments, which
have a three-year statute of limitations under Mississippi Code Section 75-3-118, and
negligence/gross negligence claims which have a three-year statute of limitations under
Mississippi Code Section 15-1-49.
¶12. Section 75-3-118(g) reads, in pertinent part, “Unless governed by other law regarding
claims for indemnity or contribution an action (I) for conversion of an instrument, for money
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had and received, or like action based on conversion . . . must be commenced within three
(3) years after the cause of action accrues.” Notably absent from this section is any provision
for a “discovery rule.” Section 15-1-49, in providing a three-year statute of limitations for
all actions for which no statute of limitations is elsewhere provided, does contain a
“discovery rule.” “In actions for which no other period of limitation is prescribed and which
involve latent injury or disease, the cause of action does not accrue until the plaintiff has
discovered, or by reasonable diligence should have discovered, the injury.” Miss. Code Ann.
§15-1-49(2)(Rev. 2012).
I. Has the three-year statute of limitations for conversion of a negotiable instrument
run?
¶13. The Chancery Clerk filed his complaint May 8, 2013. In Count II, addressing his
claims for conversion, he alleges the Bank “is liable for converting the negotiable
instruments from Dunn’s guardianship account.” 2 The $30,000 disbursement from the Dunn
account occurred on June 11, 2008; the $8,000 disbursement occurred on March 25, 2009.
More than four years elapsed from the time of these transactions to the time the Chancery
Clerk filed his claim, outside the three-year statute of limitations.
¶14. The Chancery Clerk asserts all his claims are saved by the “discovery rule” provision
of Section 15-1-49(2). Not only is this argument betrayed by a plain reading of the statutes
as outlined above, it is contrary to this Court’s precedent. In Smith v. Franklin Custodian
Funds, Inc., 726 so. 2d 144, 148 (Miss. 1998), this Court stated, unequivocally,
2
The Chancery Clerk does not assert a conversion claim regarding the Bowden
Guardianship.
6
We hold today that the rule adopted by a majority of our sister jurisdictions3
is sound and should be applied in our jurisprudence. We therefore hold that the
discovery rule is inapplicable in actions involving conversion of negotiable
instruments unless the defendant asserting the statute of limitations is involved
in the fraudulent concealment.
¶15. In Smith, a son, acting as his parents’ financial advisor, liquidated the securities of
his parents without their knowledge and concealed his actions from them. Id. at 146. In 1987,
Franklin Funds issued a check to the parent-company of a subsidiary for which the son
worked. Id. The son obtained the check, forged his parents’ signatures, and retained the
funds for himself. Id. The parents discovered his acts in 1993 and subsequently brought suit.
Id. The Court applied the new rule to find the discovery rule inapplicable. Id. at 147-48, 151.
¶16. Here, the Chancery Clerk concedes the Bank was not involved in Pringle’s fraudulent
concealment. Because the Bank was not involved in the fraudulent concealment, the
discovery rule does not toll the statute of limitations for the conversion claims. As such, this
Court finds that the trial court improperly denied the Bank’s motion for summary judgment
on this issue, finding Smith, supra, to be controlling.
II. Has the three-year statute of limitations for negligence/gross negligence run?
3
Citing Menichini v. Grant, 995 F.2d 1224, 1229 (3d Cir.1993); Husker News Co.
v. Mahaska State Bank, 460 N.W.2d 476 (Iowa 1990); Kuwait Airways Corp. v. American
Sec. Bank, 890 F.2d 456, 460-63, 466 (D.C. Cir.1989); First Investors Corp. v. Citizens
Bank, Inc., 757 F. Supp. 687, 690-92 (W.D.N.C. 1991), aff'd mem., 956 F.2d 263, 1992 WL
36812 (4th Cir.1992); Wang v. Farmers State Bank of Winner, 447 N.W.2d 516, 518-19
(S.D. 1989); Southwest Bank & Trust Co. v. Bankers Commercial Life Ins. Co., 563
S.W.2d 329, 331-32 (Tex. Civ. App. 1978); Gerber v. Manufacturers Hanover Trust Co.,
64 Misc. 2d 687, 315 N.Y.S.2d 601, 603 (1970).
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¶17. The Chancery Clerk filed his complaint May 8, 2013. The three transactions at issue
occurred on January 24, 2005; June 11, 2008; and March 25, 2009. As with the conversion
claims, the most recent transaction occurred more than four years before the filing of the
complaint–well outside the three-year statute of limitations. However, negligence/gross
negligence claims are subject to the “discovery rule” of Section 15-1-49(2), essentially that
“the cause of action does not accrue until the plaintiff has discovered, or by reasonable
diligence should have discovered, the injury.”
¶18. “The question of whether a statute of limitations is tolled by the discovery rule often
turns on the factual determination of ‘what the plaintiff knew and when.’” Stringer v. Trapp,
30 So. 3d 339, 342 (Miss. 2010) (quoting Huss v. Gayden, 991 So. 2d 162, 168 (Miss.
2008)). Thus, “‘[o]ccasionally the question of whether the suit is barred by the statute of
limitations is a question of fact for the jury; however, as with other putative fact questions,
the question may be taken away from the jury if reasonable minds could not differ as to the
conclusion.’” Stringer, 30 So. 3d at 342 (quoting Smith v. Sanders, 485 So. 2d 1051, 1053
(Miss. 1986)).
¶19. The Bank offered evidence that it sent statements to the Chancery Clerk concerning
these transactions on the last day of each month. The Chancery Clerk offered no proof to
dispute the Bank’s assertion, although he claims he never received a Bank statement4 because
Pringle removed the Bank statements delivered to the Chancery Clerk.
4
This means the Chancery Clerk never received a Bank statement for more than eight
years from January 24, 2005, the Bowden transaction–until filing suit May 8, 2013.
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¶20. In Union Planters Bank, N.A. v. Rogers, 912 So. 2d 116, 117-18 (Miss. 2005), a
housekeeper forged numerous checks of her employers. The employers (Rogers and her
husband) sued the Bank for conversion and negligence. Id. Rogers failed to inspect the bank
statements because the housekeeper took them in order to conceal her scheme. Id. at 121-22.
The Court found this concealment to be of no consequence:
A reasonable person who has not received a monthly statement from the Bank
would promptly ask the Bank for a copy of the statement. Here, Rogers claims
that she did not receive numerous statements. We find that she failed to act
reasonably when she failed to take any action to replace the missing
statements.
Id. at 122.
¶21. Four years, one month, and eight days elapsed between the time the most recent
statement became available March 31, 2009 and the time the Chancery Clerk filed suit May
8, 2013. He did not request statements from the Bank until January 20, 2011.5 According to
Union Planters, he should have asked the Bank for a copy, but he failed to take any action
to replace the missing statements. Had he asked the Bank for a copy of the missing
statements, he could have discovered Pringle’s fraudulent scheme and any alleged negligence
on the part of the Bank.
¶22. The statute-of-limitations issue is not a question of fact because reasonable minds
could not differ, in light of Union Planters, that the Chancery Clerk lacked diligence in
failing to obtain and review any account statements for more than a year and a half on one
account and more than eight years on the other. Stringer, 30 So. 3d at 342. Based on the
5
This means the Chancery Clerk waited one year, nine months, twenty days before
requesting the most recent account statement.
9
record before us, the trial court erred in refusing to grant Peoples Bank’s motion for summary
judgment because the Chancery Clerk’s claims are barred by the applicable statutes of
limitation.
CONCLUSION
¶23. The circuit court erred in refusing to grant Peoples Bank’s motion for summary
judgment because McAdams’s claims have expired due to the running of the applicable
three-year statutes of limitation. Therefore, the Harrison County Circuit Court’s denial of the
Peoples Bank’s motion for summary judgment is reversed, and judgment is rendered for the
Peoples Bank.
¶24. REVERSED AND RENDERED.
WALLER, C.J., DICKINSON, P.J., LAMAR, KITCHENS, CHANDLER,
PIERCE, KING AND COLEMAN, JJ., CONCUR.
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