Banking Law Alabama Supreme Court Significant Decision

In a significant decision regarding banking law, the Supreme Court of Alabama issued a ruling this past October.  In Braden Furniture v. Union State Bank, No. 1110943 (Ala. Oct. 19, 2012) the issue was whether the provisions in the Alabama Uniform Commercial Code (more commonly referred to as simply “the UCC”) supersede common-law claims of negligence and wantonness in the event that a drawer seeks to recover from a depository bank any loss of payment for unauthorized checks.  The background of this case dealt with an employee of Braden’s furniture who misappropriated funds from Braden accounts and then wrote checks from the company and subsequently deposited those checks into her own USB account.  The Supreme Court held that common law claims of negligence and wantonness are in fact displaced by Alabama UCC Article 3 under these circumstances.  The court offered the following explanation “Braden Furniture’s common-law claims based upon Union State Bank’s alleged acceptance of unauthorized checks and Union State Bank’s presentment of those improperly payable checks to Braden Furniture’s bank for payment.  Because the UCC provides that transactions such as these are governed by the relationship between the drawee bank and its customer, and between the drawee bank and the depository/collecting bank, to allow Braden Furniture’s common-law claims of negligence and wantonness to proceed would create rights, duties and liabilities inconsistent with those set forth in the UCC.”  This case was brought before the Alabama Supreme Court on appeal from a summary judgment for Union State Bank and the Supreme Court affirmed the summary judgment.

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