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Newsome v. Peoples Bancshares

Supreme Court of Mississippi

October 4, 2018


          DATE OF JUDGMENT: 03/01/2017







         ¶1. The instant case addresses whether the claims of the Appellant, Marilyn Newsome, survive summary judgment against Appellees, People's Bank and Chris Dunn. The claims address the issuance of cashier's checks by People's Bank and Chris Dunn without the signature or approval of the conservatorship account holder, Marilyn Newsome. For the reasons expounded upon below on the direct appeal, the Court affirms the judgment of the trial court in part and reverses and remands in part. On the cross appeal, under different reasoning, the Court affirms the judgment of the trial court.


         ¶2. On February 9, 2015, Marilyn Newsome filed suit against Chancellor David Shoemake, former Chancellor Joe Dale Walker, Keely McNulty, People's Bank (the Bank), and Chris Dunn (Dunn). The instant appeal focuses only on the liability of the Bank and Dunn, if any. Therefore, the alleged liability and/or wrongdoing of the additional parties[1] is not at issue and is neither addressed in the facts provided below nor in the analysis.

         ¶3. In 2010, Charles Merkel of Merkel & Cocke hired Keely McNulty (McNulty), an attorney, to set up the conservatorship for his client, Victoria Newsome. Victoria Newsome had settled a medical malpractice case, but she was unable to manage her affairs. The trial court appointed Marilyn Newsome (Newsome), Victoria Newsome's mother, as the conservator for Victoria Newsome. The trial court then denied the request to purchase a home for Victoria Newsome, and instead, the trial court ordered that a house be built for her. In the interim, the trial court ordered a mobile home to be purchased.

         ¶4. With the help of Dunn, a Bank employee, Newsome opened a checking account for the conservatorship with the Bank. When Newsome opened the conservatorship account, she signed a Deposit Agreement.[2] According to the Deposit Agreement, Newsome was the sole authorized signor on the account. Newsome testified that she did not have any discussions with the Bank about who would be authorized to sign on the account. The Deposit Agreement also provided that Newsome had thirty days to review her statements for errors or unauthorized activity.

         ¶5. With the conservatorship account opened, McNulty began coordinating the process of building the house, which included hiring a contractor, paying subcontractors, and generally, supervising the building of the residence. In order to pay the subcontractors and herself, McNulty drafted court orders[3] that provided for the release of funds from the conservatorship account. After the trial court signed the orders, McNulty then sent or delivered the court orders to the Bank for release of the funds.[4] The court orders did not provide any guidance on how disbursements should occur. Specifically, the court orders did not provide for the issuance of cashier's checks to disburse the money. In her affidavit, McNulty testified that she instructed the Bank to issue cashier's checks for the money.

         ¶6. To issue the cashier's checks, the Bank withdrew money from Newsome's conservatorship account, placed it in the Bank's account and with a bank employee's signature, issued official Bank checks to McNulty and various subcontractors. Usually, the checks were signed by Dunn. Newsome's signature did not appear on any of the cashier's checks. The withdrawals were shown on Newsome's statements as "Miscellaneous Debit." No further information was provided on the statements, and if more than one cashier's check was issued at one time, the "Miscellaneous Debit" on the statement would lump the entire sum of a number of checks together.

         ¶7. The process continued from March 2011 to October 2011, as the residence was built. Through the process, over $400, 000 was transferred out of the conservatorship account.

         ¶8. Dunn testified that while the residence was being built and the cashier's checks were being issued, Newsome frequently visited the Bank, and sometimes she would bring Victoria Newsome to visit as well. Dunn claims that Newsome never mentioned that she was not receiving her monthly statement and that she never communicated that McNulty "did not have the right to direct payment orders." On the other hand, although she cannot remember the date, Newsome claims that she asked Dunn about why she was not receiving her monthly statement and about the account. She states that Dunn only told her to consult McNulty and the trial court.

         ¶9. On February 9, 2015, Newsome filed suit against the Bank and Dunn alleging common-law claims: conspiracy, fraud, breach of contract, negligence, breach of the duty of good faith and fair dealing, negligence per se, gross negligence, and intentional infliction of emotional distress. Further, falling under the Uniform Commercial Code (UCC), Newsome alleged that the Bank and Dunn were liable for failing to require Marilyn's signature on any of the checks negotiated on the conservatorship account.

         ¶10. The parties filed competing motions for summary judgment. The Bank and Dunn argued that Newsome's claims were barred by the statute of repose in Mississippi Code Section 75-4A-505 and that the Bank and Dunn were not at fault because McNulty had the authority to act on Newsome's behalf. Newsome argued that she was entitled to summary judgement as to liability and actual damages. The trial court denied Newsome's motion for summary judgment on liability and actual damages, and it denied the Bank and Dunn's motion for summary judgment on the statute of repose issue. However, the trial court granted the Bank and Dunn's motion for summary judgment as to McNulty's authority, dismissing the Bank and Dunn.[5] Newsome appealed the dismissal of the Bank and Dunn, and the Bank and Dunn cross-appealed the statute of repose issue.


         ¶11. The Court distinguishes between the direct appeal and the cross-appeal. Further, for clarity, the Court addresses the cross-appeal first.


         Whether the claims are barred by the one-year statute of repose.


         (1) Whether People's Bank and Chris Dunn are entitled to summary judgment due to Keely McNulty's actual, implied, and/or apparent authority.

         (2) Whether the duty to review statements contained in the Deposit Agreement warrants summary judgment.

         (3) Whether the Uniform Commercial Code displaces Marilyn Newsome's common-law claims.

         (4) Whether People's Bank risked contempt of court if it refused to comply with the trial court's orders.

         (5) Whether Chris Dunn is entitled to summary judgment as to claims against him in his individual capacity.


         ¶12. The Court reviews a motion for summary judgment de novo. Kinney v. S. Miss. Planning & Dev. Dist., Inc., 202 So.3d 187, 192 (Miss. 2016). "The evidence is viewed in the light most favorable to the party opposing the motion. The moving party has the burden of demonstrating no genuine issue of material fact exists." Id. "Summary judgment is proper 'if the pleadings, depositions, answers to interrogatories, 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 judgment as a matter of law.'" Id. (quoting Hosemann v. Harris, 163 So.3d 263, 267 (Miss. 2015)).


         Whether the claims are barred by the one-year statute of repose.

         ¶13. The Bank and Dunn argue that the statute of repose, codified in Chapter 4A of the UCC, applies and bars Newsome's claims. See Miss. Code Ann. § 75-4A-505 (Rev. 2016).[6] Further, the Bank and Dunn maintain that Newsome is barred from arguing that the cashier's checks were not fund transfers because she failed to make that argument below. On the other hand, Newsome claims that Article 4A only applies to wire transfers, and here, the Bank and Dunn improperly commingled conservatorship funds with the Bank's funds. Although not binding under the de novo standard of review, the trial court denied summary judgment on the instant issue, finding a question of fact.[7]

         ¶14. Before delving into the merits of the statute-of-repose claim, the Court considers the Bank and Dunn's argument that the issue is barred. As argued by the Bank and Dunn, the Court need not consider an issue raised for the first time on appeal. Flagstar Bank, FSB v. Danos, 46 So.3d 298, 311 (Miss. 2010). However, here, Newsome clearly argued before the trial court that the statute of repose does not apply. Specifically, during the hearing on the competing motions for summary judgment, Newsome argued that because the Bank itself signed the cashier's checks, the statute of repose does not apply. Thus, the issue was considered and is not barred. Accordingly, the Court proceeds to the merits of the cross-appeal.

         ¶15. The statute of repose appears in Chapter 4A of the UCC. See Miss. Code Ann. § 75-4A-505 (Rev. 2016). "The Court's role 'is not to decide what a statute should provide, but to determine what it does provide.'" Rankin Cty. Bd. of Supervisors v. Lakeland Income Props., LLC, 241 So.3d 1279, 1283 (Miss. 2018) (quoting Lawson v. Honeywell Int'l, Inc., 75 So.3d 1024, 1027 (Miss. 2011))." The Court considers the words and phrases in the statutes "according to their common and ordinary acceptation and meaning; but technical words and phrases according to their technical meaning." Miss. Code Ann. § 1-3-65 (Rev. 2014).

         ¶16. Chapter 4A applies to "funds transfers defined in Section 75-4A-104." Miss. Code Ann. § 75-4A-102 (Rev. 2016). Section 75-4A-104 defines funds transfers as:

[T]he series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of ...

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