Recoupment of Attorney Fees under U.C.C. § 7-4-208, Ala. Code 1975 - Wells Fargo Bank, N.A. v. National Bank of Commerce


Wells Fargo Bank, N.A. v. National Bank of Commerce, [Ms. 1150992, June 30, 2017] __ So. 3d __ (Ala. 2017). The Court affirms a judgment of the Jefferson Circuit Court denying a claim by Wells Fargo for attorney fees it incurred in defending an action brought against it for an alleged breach of presentment warranty under § 7-4-208, Ala. Code 1975. The Court rejects Wells Fargo's contentions that (a) as an indemnitee, it was entitled to recoup its attorney fees as part of its damages, and (b) it separately was entitled to recover attorney fees because it had incurred those fees as a natural and proximate consequence of the tortious conduct of another bank in wrongfully accepting the check for presentment.

Citing Stone Building Co. v. Star Electrical Contractors, Inc., 796 So. 2d 1076, 1091-92 (Ala. 2000) (Ms. *14-16), the Court explained that the exception to the American rule concerning obtaining attorney fees in indemnification cases is subject to the limitation that the allowance of attorney fees is limited to the defense of the claim indemnified against and does not extend to attorney's services rendered in establishing the right of indemnity. The rule is that "indemnification, including attorney fees, is allowed where one is defending claims predicated solely upon another defendant's negligence; however, where one is defending for his own benefit, an award of attorney fees will not be allowed." Id. Ms. *15 (quoting Stone Building Co., 796 So. 2d at 1092).

Citing Highlands Underwriters Ins. Co. v. Eleganté Inns., Inc., 361 So. 2d 1060 (Ala. 1978) (Ms. *16-17), the Court rules (Ms. *21-22) that the Highlands Underwriters rule was inapplicable because Wells Fargo had been sued directly for its own conduct in paying the check without making any inquiry about whether it was properly endorsed.

Accordingly, neither of the "special equity" rules under which Wells Fargo claimed entitlement to reimbursement of its attorney fees was applicable, such that the Court could not conclude that the Jefferson Circuit Court erred in denying its claim for reimbursement of its attorney fees.

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