*1 April WALLACE, Gwin, Vickie et
al., Plaintiffs-Appellants, COMMERCE, NATIONAL BANK OF al., Defendants-Appellees. et Tennessee, Supreme Court of at Jackson. Nov. 1996. Denying Rehearing Order Jan. *2 in the decision This concurs
funds. Court of court and the Court by the trial made Appeals.
The Case plaintiffs filed suit
Forty named County Shelby doing business nine banks action, all separate of asserting six causes allegation based on drawn on fees for checks charged “excessive” (“NSF insufficient funds accounts with checks”) deposited third checks and for (“DIR checks”). unpaid and returned damages, puni- compensatory plaintiffs seek damages. The trial damages, and treble tive motions to court sustained defendants’ suit for failure to state a claim dismiss the granted. The Court which relief Appeals, appeal, on the first affirmed allegation except claims of all dismissal duty breached a common law that the banks their performance in the good faith obligations their customers. contractual remand, for sum- the defendants’ motions On Thomas, Thomas, Al H. Thomas & Ira M. pleadings, affi- mary judgment, based on the (Robert Thomas, Green, Memphis, Neely, L. davits, by the granted stipulations, were Green, Brooke, Fargarson Memphis, & Appeals affirmed. trial court and the Court of counsel), plaintiffs-appellants. Bass, Jr., Nashville, Bearman, J. 0. Leo Analysis Nassar, Jr., Speer, J. Monique John C. A. of written is an action for breach This Craddock, Buchignani, Richard E. Robert Appeals noted contract.1 The Glankler, Hester, Jr., Jr., Frank J. Bill R. comply Rule plaintiffs failed to Jr., Humbracht, Memphis, H. Frederick Procedure, 10.03, Rules of Civil Tennessee Wade, Nashville, Memphis, David for defen- upon a claim written founded dants-appellees. found that the references instrument2 but complaint to the substance of
OPINION
base
upon
plaintiffs
which the
requirements
meet the minimum
their suit
REID, Justice.
stating a cause
action.
order
presents for
the decision
This case
review
case,
this Court
the merits
consider
Appeals affirming
the trial
of the Court
Appeals’ decision.
to the Court of
will defer
for the
court’s award
trial
not contend
court found that
do
defendants.
shows,
disputed
of material fact.
as a
that the
issues
matter of
erred
They
did
contend instead that the court
defendant banks
not breach the
the defen
imposing
holding
returned
as a
of law that
fees for
good not breach the
drawn on accounts with insufficient
dants did
claim or
is founded
Tennes-
2. "Whenever a
defense
1. The Court of
has held that in
policy
breach
is no cause of action in tort for
of insur-
see there
instrument other than a
a written
performance of a
ance,
pertinent
in the
copy
of such instrument or
Bank,
Nat'l
contract. Solomon First American
pleading as
parts
thereof shall
attached
(Tenn.App.1989).
also
See
Tenn.R.Civ.P. 10.03.
an exhibit....”
§
Contracts 732
17 AmJur.2d
decision,
their
In a
later
the Court of
to the contracts between the banks and
is measured
customers.
by the terms of
“They
the contract.
[the
parties] may by
however,
agreement,
deter-
The essential facts shown
the record
*3
by
perfor-
mine the standards
which the
plaintiff
are: each
cheeking
had a
account
mance
are to be measured.”
banks;
with at least one of the defendant
84,
Cullipher,
Bank Crockett v.
752 S.W.2d
opened
each account
was
the execution
91 (Tenn.App.1988).
deposit agreement
of a
prepared by the bank
customer;
signed by
and
agreements
the
the
present
to a case in
case is similar
provide
agrees
the
that,
customer
to the
Oregon Supreme
which the
Court held
agreement,
terms stated in
including
ser-
law,
good
as a matter
acted in
the bank
checks;
vice
for NSF and DIR
each
faith. That court
the case as fol-
described
informed, upon
customer was
the execution
lows:
deposit
agreement,
of the amount of
obligation
This class action involves the
fees;
the NSF and DIR
each customer also
good
in
performance
faith
of con-
was informed that
subject
the fees were
primary
tracts. The
issue is the nature of
change upon
customers;
notice to the banks’
good
by
obligation
owed
defen-
each
given
customer was
notice
Oregon
dant First National Bank of
fees;
effective date of the increase in
and
(Bank)
checking
to its non-business
ac-
plaintiff
each
charged
was
at least one ser-
setting
in
(depositors)
count customers
vice
for an
NSF DIR check.
revising,
time,
time to
the fees it
from
charged
depositors who
wrote
The first issue for consideration is the
when
not sufficient funds in
there were
duty
good
nature of the
In
faith.
Tennes
(NSF fees).
their accounts
see,
imposes duty
good
the common law
performance
faith in the
of contracts. This
Bank,
485,
Tolbert v.
Nat’l
312 Or.
823
First
rule has been considered in several recent
(1991).
965,
Upon finding
P.2d
966
facts
Appeals.
decisions of the Court of
The law very similar to the facts in the case before
regarding
good
performance
of con
Oregon
court held:
by
tracts was well
Ap
stated
the Court of
The uncontroverted evidence before the
Industries,
Tomlin,
peals in TSC
Inc. v.
743
summary judgment in
trial court on
169, 173 (Tenn.App.1987):
S.W.2d
(1)
depositors initially
case was that:
It is
implied
every
true that
there is
agreed
change
that Bank could
good
contract a
faith and fair deal-
discretion;
of the NSF fees
its unilateral
ing
enforcement,
in its
(2)
deposi-
practice
Bank’s
was to inform
person
presumed
and a
to know the law.
changes
tors of
to the NSF fees
future
(2d) Contracts, §
See Restatement
206
effective;
changes
before such
became
(1979).
of,
What this
consists
howev-
(3)
maintain
plaintiffs continued to
their
er, depends upon the individual contract in
cases,
and, in some
accounts
Bank
contracts,
construing
each case.
courts
checks after
even continued to write NSF
language
look to the
of the instrument and
changes. No
Bank informed them of the
parties,
to the intention of
impose
(other
than
inference available to
a construction which is fair and reasonable.
disbelief,
flat
is not an inference that
Robinson,
In Covington
summary
v.
plaintiffs may
judg-
invoke on
ment)
(Tenn.App.1986),
645-46
which was
relied
creates an issue
fact as to these
upon by
pivotal
TSC Indus-
on this rec-
circumstances. Based
tries,
Tomlin,
ord,
Inc. v.
any
expectations
by
the Court of
reasonable
held that in determining
parties
proce-
whether the
depositors
were met
Bank’s
good
acted in
faith in the
of a
As a
Bank acted in
dures.
contract,
judge
perfor-
the court must
of the NSF
its treatment
fees;
parties
regarding any
mance
the intent of the
there was no issue
fact,
determined
a reasonable and fair con-
to a
material
and Bank was entitled
language
struction of
judgment
of the instrument.
as a matter of law.
expectations
(emphasis
original). That
and the reasonable contractual
Id. at 971
Knight,
parties.
308 Or.
per-
See Sheets
court’s rationale
faith was
as follows:
P.2d
form
stated
objec-
that it
emphasize
We
plaintiffs’ allegations
two
raise
further
tively
parties
expectations of
questions
—whether
determining
that will be examined in
and,
if
are
contracts
adhesion
obligation
whether the
has
adhesion,
are the
enforce-
contracts of
In the context of this case—
been met.
recently approved
fol-
able. This Court
(1)
(and
parties agree to
lowing
defining and
forth
statement
for)
provides
exercise
contract
unilateral
of an adhesion
characteristics
essential
*4
regarding changes in
of discretion
one
contract:
terms,
(2)
the
and
the discretion is
contract
been
An
contract-has
defined
adhesion
hold
a
exercised after
notice —we
as
to
as “a
contract form offered
standardized
parties’
that the
law
goods
and services on essen-
consumers
expectations have been met.
basis,
tially
it or
it’
a ‘take
leave
without
opportu-
affording
the consumer a realistic
Id. at
nity
bargain and
under such conditions
case,
case,
In this
as in the Tolbert
obtain
de-
that the consumer cannot
the
charge
the contract authorized the banks
except by ac-
product
sired
or service
fees,
overdraft
the
were advised
customers
the
quiescing to the form of
contract.”
regarding
the amounts
those fees
the
observed that
Professor Henderson has
deposit agreements,
execution of the
and
“the
of an
contract is that
essence
adhesion
of the
in the
were advised
increases
fees
leverage
positions
enable
bargaining
the
before
increases became effective. The
as-
one
‘to select and control risks
language
agreements clearly
of the
states the
”
gen-
sumed under the contract.’ Courts
parties.
the
terms
reflects
intent of the
erally
feature
agree that
distinctive
“[t]he
requires
the
that
Reason
conclusion
the
of a
is that
weaker
contract
adhesion
the
plaintiffs
expect
could
that
the stated fees
its
party has no realistic choice as to
imposed
would be
on
and DIR
their NSF
terms.”
according
of a
checks. Performance
contract
Buraczynski
Eyring,
to its
be
terms cannot
characterized
bad
(citations omitted).
(Tenn.1996)
faith.
The
in this
does not
record
case
would avoid
conclu
agreements
plaintiffs’ claim
the
be-
the
that
that,
by asserting
though
sion
even
the
tween
banks and their customers
the
charging
banks’ acts in
were consistent
fees
the character-
adhesion contracts. Some of
agreements,
the
deposit
with
are present,
istics
adhesion contract
of an
agreements
those
were adhesive
nature
are standardized
and, therefore, provided
no author
forms, and, undoubtedly,
opportunity to
ity
plain
fees characterized
particular
bank was
open an account
“excessive,”
“too
“in
high,”
tiffs as
excess
basis.
take-it-or-leave-it
in handling
of the
own cost
the trans
banks’
However,
standing alone are
these factors
action.”
shows that
not sufficient.
record
addressing
checking accounts which
plaintiffs’
provided
alle banks
Before
charges. The
deposit agreements
exempt from
gation that the
are adhe were
overdraft
and, therefore,
enforceable,
not
of the
not
it should record does
include a schedule
sive
and,
significantly,
charges,
perhaps
most
noted
the common law
be
showing
in the
no
in the
of a contract does
no
choice but to ac-
apply to
formation
a contract.
customers had
realistic
not
See
(Second)
Contracts,
imposition
quiesce
§
of the banks’
Restatement
showing
no
that the fees
Consequently, the common
There is
cmt. c
at all
defendant banks
not extend be were the same
law
does
not be
banking
services could
obtained
yond
agreed upon
terms of the contract
if,
context,
from other
institutions.
It
is common
unduly
considered in its
it is
knowledge
banking industry
very
oppressive
that the
or “unconscionable.”
competitive.
example,
For
different banks
(citations omitted).
Id. at 172-173
may charge lower fees for some services and
discussed,
previously
As
the reasonable ex-
higher
services,
fees for other
also pectations
appellants
were that fees
may charge
interest
lower
rates on loans but
imposed
would
to the terms of
higher
services,
fees
providing
thus
Further,
agreements.
based on the rec-
may appeal
choices which
pro-
to various
provisions
ord before the
in the
spective customers.
In the absence of a
agreements regarding
and DIR
NSF
fees
showing that
competi-
there was no effective
oppressive
were not
or unconscionable.
providing
tion in the
among
of services
that,
on the facts
determination
shown
defendants,
banks in the area served
record,
defendants,
by the
as a matter of
there is no
concluding
basis for
have not breached the common law
appellants had no
realistic choice
of the con-
obtaining banking
terms for
services.
checking
tracts with
account
customers
presented in
resolves the issue
this case.
And, further, not all adhesion con The
*5
defendants’ assertion
unconsciona-
tracts are unenforceable. Even if a contract
oppressive provisions
ble and
of a contract
adhesive,
is found to be
it is enforceable
cannot
for a cause of
constitute the basis
it
unduly oppressive
unless
is
or unconsciona
action,
pleaded in defense to
but
ble. The Court discussed
this issue
Bu
contract,
an
of
need not
action for breach
be
raczynski
Eyring:
v.
considered.
Our conclusion that the contracts were
judgment
Appeals
The
of the Court
contracts of adhesion is not ... determina-
sustaining summary judgment
defen-
enforceability.
tive of the contract’s
En-
dismissing
dants and
the suit is affirmed.
forceability
generally
depends
plaintiffs.
Costs will be taxed to the
whether the terms
the contract are be-
yond
expectations
the reasonable
an
BIRCH, C.J.,
DROWOTA,
ordinary person,
oppressive
or
or uncon-
WHITE, JJ.,
ANDERSON and
concur.
scionable. Courts will not enforce adhe-
ORDER ON
REHEAR
PETITION TO
sion
oppressive
contracts which are
to the
petition
by
plain-
The
filed
rehear
weaker
or which serve to limit the
tiffs-appellants insists that the Court should
liability
stronger
of the
have remanded this case to the trial court for
party.
trial rather than dismiss the case on sum-
(citations
Buraczynski,
Generally speaking, judi- Court, there are two expectations within the reasonable cially imposed limitations on parties petitioners the enforce- to the contracts. The provisions ment of adhesion contracts exception or take to this Court’s conclusion that thereof. “plaintiffs The first is that such a contract contend that do not there are provision or disputed which does not fall within suggest issues of material fact” and expectations astray” of the weaker or the Court was “led because the case “adhering” party will not be enforced was before the Court on motions for sum- against him. The principle mary judgment. petitioners second —a The assert equity applicable general- to all discovery they contracts with additional can “indeed ly provision, that a contract or if generate even Record all a to substantiate —is claims, expectations according peti- consistent with the reasonable claims.” Those to the tion, parties, of the will be denied enforcement include claims that the banks “intention- nonmoving party then must demon- ally” of checks on increased number materials, strate, discovery by affidavits charges could be made and “doubled or which charges.” genuine, material fact dis- NFS is a there regard, a In this pute trial. to warrant appeal from petitioners did not The nonmoving provides Rule 56.05 first of the decision Court simply rely upon plead- his party cannot dismissing alleged five claims because specific facts ings must set forth but cause of Both the did not state a action. genuine there a issue showing that put best Court “If does not so fact for trial. he material possible remaining on the claim made face summary ... respond, judgment shall original complaint1 found that it him.” entered of action stated cause for breach (Tenn. Hall, 208, 211 Byrd v. faith in of a contract. In a 1993); Tenn. R. P. The see also Civ. 56.05. joint on this motion claim, surviving petitioners presented asserted that no evidence defendants customer, agreement of the now made that the banks inten claim bank, tionally an notified of increase increased the number charges before it becomes effec service could be made doubled tive, genuine material fact is no issue of NSF fees are within as whether the increased throughout petitioners’ assertion The expectations. the customer’s reasonable been, in their brief this case has as stated issue defendants’ statement court, filed the trial that the banks breach as “the is con amount” NSF “implied ed their covenant petitioners’ response firmed charge.” its NSF summary judgment. peti motion for *6 essentially petitioners contending now are specifically tioners state that cause guilty prove that can the banks implied action is bank’s of its “for the breach for “oppressive” and “unconscionable” acts covenant of they are recover. The sub which entitled to charge.” of its NSF petition rehear is that stance of their The motion prove can action than some cause of other
filed the banks is on based affidavits claim than breach of contract. No other showing petitioners that knew the breach contract is before the Court. existing amount of the service reaffirms the decision that they opened the peti their accounts and that all which is that can before any tioners change received notice of considered, support does not Having those established facts asserted, that cause of action showing acted con defendants banks breached the contracts between the contracts, formance with the and their customers. petitioners burden shifted to the to either petition to rehear is denied. counter the evidence demon strate that facts other than the amounts of plaintiffs-appel- taxed The costs are charges support claim the service lants. the defendants breached their C.J., BIRCH, of the contracts. DROWOTA ANDERSON, JJ., petitioners mistakenly concur. assert complaint allegations in their must be taken WHITE, J., participating. not position of their
as true motion an summary judgment. This is not accu rate statement of the law. moving party it
Once is shown fact, genuine of material no issue Spinnaker’s plaintiff.” determining complaint Cook whether a fails to favor of (Tenn.1994). granted, Inc., Rivergate, state claim relief S.W.2d complaint liberally "courts should construe the