author: CRAWLEY, Presiding Judge.

text:
    John William HARMAND v. Arlene Margo HARMAND.
    2040365.
    Court of Civil Appeals of Alabama.
    Nov. 23, 2005.

      David A. Simon of Wills & Simon, Bay Minette, for appellant.
    Catherine F. Golden, Fairhope, for ap-pellee.
   CRAWLEY, Presiding Judge.

The parties were divorced in April 1995, after a 30-year marriage. At the time of the divorce, John William Harmand (“the husband”) was a civil-service employee of the United States government covered by the Federal Employees’ Retirement System (“FERS”). Arlene Margo Harmand (“the wife”) had no retirement benefits. The final judgment of divorce incorporated the parties’ settlement agreement. Paragraph 10 of the divorce judgment states:

“10. The [wife] shall receive as her separate property, an interest equal to one-half (½) of the value of the [husband’s] retirement plan upon his retirement. If the [husband] shall predecease the [wife], she shall be entitled to one-half of any retirement benefits accrued. If necessary, the parties shall cooperate in submitting and effecting a Qualified Domestic Relations Order to the Plan Administrator and/or to the Circuit Court of Baldwin County. The intent of this paragraph is to assure to each party the benefits of said retirement funds without incurring tax liability or associated penalties or costs. Moreover, the award to [the wife] of an interest in [the husband’s] retirement plan is not intended to affect tax liability, penalties or costs to the retirement funds to be maintained by [the husband]. It is understood that this provision shall not entitle the wife to funds from the [husband’s] separate Social Security checks. Either party agrees, to pay the attorney fees and costs for the other should it become necessary to enforce this provision.”

In December 1995, the trial court entered a Qualified, Domestic Relations Order (“QDRO”) that provided, in pertinent part:

“The former [wife] is entitled to 50% of the [husband’s] gross monthly annuity under the Civil Service Retirement System. The United States Office of Personnel Management is directed to pay the former [wife’s] share directly to the former [wife]. The former [wife] shall have this amount as her separate property and in addition thereto shall have as her separate property any interest or earnings accruing thereon subsequent to the date of this order.”

Neither party appealed the judgment of divorce.

The husband worked eight years after the divorce and retired in June 2003. He testified that his gross monthly FERS retirement benefit was $1,014, from which he received $373 per month, the wife received $296.39 per month, and the balance, he said, was applied to taxes and health insurance. The wife received direct payments of $296.39 per month from the United States Office of Personnel Management (“OPM”) based on the following benefit-calculation formula for a former spouse’s “prorata share” of benefits contained in 5 C.F.R. § 838.621:

“(a) Prorata share means one-half of the fraction whose numerator is the number of months of Federal civilian and military service that the employee performed during the marriage and whose denominator is'the total number of months of Federal civilian and military service performed by the employee.”

OPM determined that the wife’s pro rata share was 29.23% of the husband’s monthly gross retirement benefit. It derived that percentage by calculating one-half of the fraction 145/248, with 145 representing the number of months the husband worked for the federal' government during the marriage and 248 representing the total number of months the husband worked for the federal government. This fraction is known as the “coverture fraction.” See Wilkinson v. Wilkinson, 905 So.2d 1, 14 (Ala.Civ.App.2004)(Yates, P.J., concurring in the result).'

On January 16, 2004, the wife filed a contempt petition, alleging that the husband had failed to pay her one-half of his retirement benefits ($507 per month), which, she claimed, the divorce judgment had ordered him to pay. Following an ore tenus proceeding, the trial court entered a judgment in August 2004 that states, in pertinent part:

“This Court finds that the parties did agree in their original divorce agreement that the [wife] would be'entitled to one-half (½) of the [husband’s] federal retirement annuity. Presently, the husband is receiving $1,014.00 per month. Of this amount, only $296.39 is presently being paid directly to [the wife]. This payment is contrary to the parties’ agreement. [The husband] is ordered to pay ' directly to [the wife] $210.61 per month effective August of 2004 forward to comply with the parties’ agreement.
“A judgment shall be entered against [the husband] to [the,wife] representing monies owed to her since August of 2003 through July of 2004 in the amount of $2,527.32. The monies shall be payable to [the wife] at the rate of $100.00 per month beginning August of 2004 until paid in full.”

The husband appeals. Initially, we note that § 30 — 2—51(b), Ala.Code 1975, the current statute permitting a trial court to divide retirement benefits as marital.property, does not apply to the issues raised in this appeal because the parties were divorced in 1995, before the January 1, 1996, effective date of the statute. See § 30-2-51, Ala.Code 1975 (History).

In the present case, the evidence was undisputed that the husband’s gross monthly retirement benefit was $1,014 and that the wife was receiving direct payments from OPM of $296.39 per month. The trial court’s judgment ordered the husband to pay the wife an additional $210.61 per month, thus giving the wife a total monthly benefit of $507, equal to exactly one-half of the husband’s gross monthly retirement benefit. “It is ... well established that in the absence of specific findings of fact, appellate courts will assume that the trial court made those findings necessary to support its judgment, unless such findings would be clearly erroneous.” Ex parte Bryowsky, 676 So.2d 1322, 1324 (Ala.1996). We conclude that the trial court construed paragraph 10 of the divorce judgment as an agreement by the parties to a simple “50-50” division of the husband’s retirement benefits when those benefits were ultimately determined and distributed, regardless of the fact that the husband worked and accrued retirement benefits for eight years after the parties were divorced. In other words, the trial court determined that there was to be no offset for postdivorce accumulations to the husband’s retirement plan because the parties had agreed that the wife’s share did not depend upon what portion of the total benefits was accrued during the marriage.

On appeal, the husband does not take issue with the trial court’s construction of paragraph 10, at least insofar as the court determined as a matter of state law that the parties had agreed that the wife would receive one-half of his gross monthly retirement benefit. The husband argues, however, that federal law limits the wife to a “prorata share” of his monthly retirement benefit, as defined in 5 C.F.R. § 838.621. He maintains that the wife’s pro rata share is 29.23%, as OPM determined, and that, by virtue of Article VI, clause 2 of the United States Constitution (the Supremacy Clause), neither he nor the state court had the right to assign the wife a greater share of his benefits.

The husband also argues that the trial court impermissibly modified the divorce judgment (1) by making him a payor of the wife’s share of his retirement benefits, when, he says, paragraph 10 of the divorce judgment contemplated that only OPM would pay the wife’s share, and (2) by imposing on him the tax liability for the wife’s share of his retirement benefits when, he says, paragraph 10 of the divorce judgment contemplated that neither party was to suffer increased tax liability as a consequence of the agreement.

I. The Husband’s Federal Preemption Argument

At the outset, we point out that there is no issue in this case regarding preemption by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. ERISA applies “to any employee benefit plan if it is established or maintained ... by any employer engaged in commerce,” 29 U.S.C. § 1003(a)(1), and its provisions “supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title,” 29 U.S.C. § 1144(a). Despite its broad scope, ERISA expressly exempts from its provisions any “governmental plan.” 29 U.S.C. § 1003(b)(1). Section 1002(32) defines “governmental plan” as “a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.”

Preemption of state law occurs in three ways. First, Congress may define expressly to what extent a federal statute preempts state law. See English v. General Elec. Co., 496 U.S. 72, 78, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990). Second, preemption may be found when a pervasive scheme of federal regulation makes it reasonable to infer that Congress intended exclusive federal regulation of the subject matter. Id. at 79, 110 S.Ct. 2270. Third, preemption occurs where there is a direct conflict between the terms of the federal law and the state law. Id. Whether a federal statute preempts a common-law property division by a state court depends on the legislative intent behind the federal statute. The intent may be explicitly stated in the statute, see Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989)(holding that military-retirement pay that had been waived by the former husband in order to receive veteran’s disability benefits was not community property divisible upon divorce), or implied from the legislative purpose underlying the enactment of the statute, see Hisquierdo v. Hisquierdo, 439 U.S. 572, 583, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979)(holding that Railroad Retirement Act benefits are not community property subject to division upon divorce). In Mansell, the Court stated:

“Because domestic relations are preeminently matters of state law, we have consistently recognized that Congress, when it passes general legislation, rarely intends to displace state authority in this area. See, e.g., Rose v. Rose, 481 U.S. 619, 628 (1987); Hisquierdo v. Hisquierdo, 439 U.S. 572, 581 (1979). Thus we have held that we will not find preemption absent evidence that it is ‘ “positively required by direct enactment.” ’ Hisquierdo, supra, at 581 (quoting Wetmore v. Markoe, 196 U.S. 68, 77 (1904)).”

Mansell v. Mansell, 490 U.S. at 587, 109 S.Ct. 2023.

“On the rare occasion when state family law has come into conflict with a federal statute, this Court has limited review under the Supremacy Clause to a determination whether Congress has ‘positively required by direct enactment’ that state law be pre-empted. Wetmore v. Markoe, 196 U.S. 68, 77 (1904). A mere conflict in words is not sufficient. State family and family-property law must do ‘major damage’ to ‘clear and substantial’ federal interests before the Supremacy Clause will demand that state law be overridden. United States v. Yazell, 382 U.S. 341, 352 (1966).”

Hisquierdo v. Hisquierdo, 439 U.S. at 581, 99 S.Ct. 802.

“The pertinent questions are whether the right as asserted conflicts with the express terms of federal law and whether its consequences sufficiently injure the objectives of the federal program to require nonrecognition.”

Hisquierdo v. Hisquierdo, 439 U.S. at 583, 99 S.Ct. 802.

The husband argues that federal law, specifically 5 C.F.R. § 838.621, prohibits a state court or a federal retiree from assigning to a former spouse more than a “prorata share” of the retiree’s retirement benefits. The federal statute governing assignability of civil-service retirement benefits, 5 U.S.C. § 8346, provides, in pertinent part:

“(a) The money mentioned by this subchapter is not assignable, either in law or equity, except under the provisions of subsection[] ... (j) of section 834-5 of this title, or subject to execution, levy, attachment, garnishment, or other legal process, except as otherwise may be provided by Federal laws.”

(Emphasis added.) Title 5 U.S.C. § 8345(j)(l) provides that FERS payments otherwise payable to a retired employee shall be paid to the employee’s former spouse j

“if and to the extent expressly provided for in the terms of—
“(A) any court decree of divorce, annulment, or legal separation, or the terms of any court lorjder or court-approved property settlement agreement incident to any court decree of divorce, annulment, or legal separation. ...”

In McCarty v. McCarty, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589 (1981), the Únited States Supreme Court held that, under the statutory provisions then governing military-retirement benefits, military-retirement pay was not divisible upon divorce. Although that holding was later superseded by the Uniformed Services Former Spouses’ Protection Act, which authorized state courts to treat “disposable retired or retainer pay” as divisible marital property upon divorce, see 10 U.S.C. § 1408(c)(1), it is significant for present purposes that the McCarty Court drew a distinction between the statutory provisions then governing military retirement from those governing civil-service retirement. The Court noted that the civil-service retirement statutes expressly recognized court-approved property settlements awarding retirement benefits to a former spouse, while the military-retirement statutes had no comparable provisions. 453 U.S. at 231-32, 101 S.Ct. 2728. This distinction served as one basis for the Court’s conclusion that the military-retirement statutes preempted state laws regarding marital-property divisions.

We cannot conclude that the federal statutes concerning civil-service retirement require states to abandon their own laws concerning the divisibility of civil-service retirement benefits upon divorce. In fact, the legislative history of the statutes convinces us that the intent behind their amendment in 1978 was to recognize existing state-created property rights and obligations with respect to civil-service retirement benefits and to cooperate with state courts in distributing those benefits. The legislative history of 5 U.S.C. § 8346 is particularly instructive and we set it out in some detail, quoting from an opinion of the Texas Court of Appeals in Boniface v. Boniface, 656 S.W.2d 131 (Tex.App.1983):

“[P]rior to amendment in 1978, 5 U.S.C. § 8346 provided that benefits payable under civil service retirement were ‘not assignable, either in law or equity, or subject to execution, levy, attachment, garnishment, or other legal process.’ This provision created a barrier which prevented the Civil Service Commission from being subject to any legal processes for purposes of making benefit payments to anyone other than the retiree. However, it did not have the effect of classifying civil service retirement benefits as separate property which, as between the parties, could not be divided or partitioned in a divorce proceeding. But its practical effect was to impose the burden that, if, as, and when benefits were received, payment must be made by the recipient to the divorced spouse of a community share as determined by the judgment of the court.
“In 1978, the Code was amended to permit direct payment of benefits to persons other than the retiree to the extent provided for in ‘any court decree of divorce, annulment, or legal separation, or the terms of any court order or court-approved property settlement agreement incident to any court decree of divorce, annulment, or legal separation.’ 5 U.S.C. § 83460(1) (1980)....
“This amendment simply relieved the parties of the burden of making and receiving payments between themselves and permitted the future convenience of direct payment by the Commission (Office of Personnel Management) to the divorced spouse of that portion of the benefits provided for in the court’s order. The amendment created no new substantive property rights between the parties. It merely instituted a procedure by which the Commission was to recognize existing rights and cooperate with state courts in distributing benefits accordingly.
“The legislative history of the 1978 amendment specifically recognized the pre-existing authority of state courts to regard civil service retirement benefits as community property and to deal with them as such:
“ ‘In recent years, many State courts have ruled that future retirement benefits earned during a marriage should be considered an asset of the marriage to be apportioned in the event of a legal separation, divorce, or annulment. [The amendment] will authorize the Civil Service Commission to recognize such court rulings and comply with court determinations.
“‘In the [House Post Office and Civil Service, and Senate Governmental Affairs] committee’s view, the enactment of legislation which permits Federal cooperation with State law and court orders is clearly needed. The committee shares the opinion of the Civil Service Commission that [the amendment] is the proper approach to the problem of benefits for former spouses.
“S. Rep. No. 1084, 95th Cong., 2d Sess. 2, 4, reprinted in 1978 U.S.Code Cong. & Ad. News 1379, 1380-82.
“Thus, ... payments made before the amendments must be disposed of between the parties pursuant to state court orders. But post-amendment benefits would be paid directly to the parties pursuant to those court orders. In other words, the 1978 amendments did not affect the nature of civil service retirement benefits accrued and vested during marriage. Such benefits were and are community property under the law of [Texas] both before and after the amendments. But it was only after the adoption of these amendments that federal authorities' could be bound by state court decisions in their future payment of benefits pursuant to the division of property incident to or arising out of a divorce.
“As stated by the Chairman of the Civil Service Commission:
‘“[In the view of the Commission] State laws and State courts have always controlled in matters of domestic relations and property rights. These courts are specifically geared to determine such questions as an individual’s obligation to a former spouse on an individual case basis after considering many factors such as the financial status of both parties, property settlements, children involved, and the reasons for the divorce.’
“S.Rep. No. 1084, supra, at 1383....”

Boniface v. Boniface, 656 S.W.2d at 133-34 (emphasis removed).

Based on the legislative history, it is clear that Congress intended that OPM cooperate with state courts in distributing civil-service retirement benefits to former spouses. It is also clear that 5 U.S.C. § 8346(a) and 5 U.S.C. § 8345(j)(1) are enforcement statutes, and the accompanying regulations, specifically 5 C.F.R. § 838.621, constitute “a mechanism for the enforcement of domestic-relations orders of all kinds involving ... a division of property.” See Ex parte Smallwood, 811 So.2d 537, 539 (Ala.2001).

In Smallwood, the Alabama Supreme Court decided that a state trial court could approve a settlement agreement between divorcing spouses whereby the husband assigned to the wife 100% of his military-retirement pay, despite the existence of federal law, 10 U.S.C. § 1408(e)(1), limiting to 50% the amount of military-retirement pay that could be paid by the secretary of the appropriate branch of the armed services to a former spouse of a military retiree as alimony, child support, or as a property division. The court held:

“Section 1408 is entitled ‘Payment of retired or retainer pay in compliance with court orders.’ A plain reading of § 1408 indicates that it is an enforcement statute. It provides a mechanism for the enforcement of domestic-relations orders of all kinds involving the payment of child support, alimony, or a division of property. See 10 U.S.C. § 1408(a)(2)(B).”

811 So.2d at 539. Following the rationale of Smallwood, it is apparent to this court that the regulations implementing 5 U.S.C. § 8345(j)(l) indicate Congressional intent to have OPM comply with and facilitate the making of payments due under state-court orders dividing civil-service employee retirement benefits.

Moreover, the provisions of 5 U.S.C. § 8346, 5 U.S.C. § 8345(j)(l), and the accompanying regulations indicate that Congress intended that OPM perform purely ministerial duties, that it refrain from engaging in dispute resolution between the parties to a FERS-benefits controversy, and that any such controversy be submitted to and resolved by state trial courts. See 5 C.F.R. § 838.101(a)(2), which provides:

“(2) In executing court orders under this part, OPM must honor the clear instructions of the court. Instructions must be specific and unambiguous. OPM will not supply missing provisions, interpret ambiguous language, or clarify the court’s intent by researching individual State laws. In carrying out the court's instructions, OPM performs purely ministerial actions in accordance with these regulations. Disagreement between the parties concerning the validity or the provisions of any court order must be resolved by the court.”

Based on the foregoing authorities, we hold that federal law does not preempt the trial court’s construction of paragraph 10 of the parties’ settlement agreement.

We also hold that the trial court’s construction of the agreement was a reasonable interpretation of the language employed by the parties in light of the circumstances existing at the time of the divorce. Paragraph 10 provides that “the wife shall receive as her separate property an interest equal to one-half of the value of the husband’s retirement plan upon his retirement.” The plain language of the agreement refers to the husband’s “retirement plan” without limiting that term to retirement benefits earned during the marriage. The trial court reasonably determined that the agreement contemplated that, upon the husband’s retirement, the wife would receive half of what the husband received as a retirement benefit, regardless of the fact that what the husband received at retirement would be due, in part, to benefits accrued for eight years after the marriage ended. The QDRO issued to OPM eight months after the parties’ divorce reinforces the trial court’s interpretation of paragraph 10 as a simple “50-50” division of the husband’s retirement benefits without offsetting any post-divorce accumulations to the husband’s retirement benefits. The QDRO states, in pertinent part:

■ “The United States Office of Personnel Management is directed to pay the former [wife’s] share directly to the former [wife]. The former [wife] shall have this amount as her separate property and in addition thereto shall have as her separate property any interest or earnings accruing thereon subsequent to the date of this order.”

(Emphasis added.) Because the parties to a divorce are free to bargain away their separate property, the trial court did not err in approving and incorporating into the divorce judgment a provision allowing the wife a share of the nonmarital portion of the husband’s retirement plan, that is, a share that did not depend upon what portion of the total benefits was accrued during the marriage.

The right asserted by the wife in this case — to receive one-half of the husband’s monthly retirement benefit — conflicts with the position taken by the husband — that OPM correctly relied on 5 C.F.R. § 838.621 to pay the wife only 29.23% of the husband’s monthly benefits. By submitting this controversy to the trial court, the parties set in motion exactly what the last sentence of 5 C.F.R. § 838.101(a)(2) contemplates, namely: that “[d]isagreement between the parties concerning the validity or the provisions of any court order will be resolved by the court.” The trial court’s construing the 1995 divorce judgment to require that the wife’s share of the husband’s total retirement benefits be 50% — and thus that the wife’s share did not depend upon what portion of the total was accrued during the marriage — necessarily means that OPM misconstrued the 1995 divorce judgment and the QDRO accompanying it by paying the wife a “prora-ta share.”

The “prorata share” provision at issue in this appeal explains how OPM will interpret orders from state courts containing date-specific annuity valuations when the date specified in the court order is either (1) the beginning of the marriage; or (2) some time before the employee retires. Section 838.621 provides:

“ § 838.621 Prorata share.
“(a) Prorata share means one-half of the fraction whose numerator is the number of months of Federal civilian and military service that the employee performed during the marriage and whose denominator is the total number of months of Federal civilian and military service performed by the employee.
“(b) A court order that awards a former spouse a prorata share of an employee annuity or a refund of employee contributions by using the term ‘prorata share’ and identifying the date when the marriage began satisfies the requirements of §§ 838.305 and 838.504 and awards the former spouse a prorata share as defined in paragraph (a) of this section.
“(c) A court order that awards a portion of an employee annuity as of a specified date before the employee’s retirement awards the former spouse a prorata share as defined in paragraph (a) of this section.
“(d) A court order that awards a portion of the ‘value’ of an annuity as of a specific date before retirement, without specifying what ‘value’ is, awards the former spouse a prorata share as defined in paragraph (a) of this section.”

(Emphasis on “prorata share” original; other emphasis added.)

As we have previously observed, calculating the “prorata share” pursuant to 5 C.F.R. § 838.621 requires the use of the “coverture fraction.” Section 838.621 sets out the circumstances under which OPM 'will use the coverture fraction as a valuation tool — a tool that is useful only when a spouse’s share does depend upon what portion of the total retirement benefits was accrued during the marriage.

“ ‘The sole purpose [of the coverture fraction] is to determine what part of the value of the plan is attributable to the years of the marriage and hence marital property subject to equitable distribution.’ ”

Dylan A. Wilde, Obtaining an Equitable Distribution of Retirement Plans in a Divorce Proceeding, 49 S.D.L.Rev. 141, 157-58 (2003)(quoting Paulone v. Paulone, 437 Pa.Super. 130, 649 A.2d 691, 695 (1994)). See also Wilkinson v. Wilkinson, 905 So.2d at 14 (Yates, P.J., concurring in the result). OPM erroneously used § 838.621 to calculate the wife’s share even though the parties’ agreement was a simple “SO-SO” division of the husband’s retirement plan; the wife’s share did not depend upon what portion of the total benefits was accrued during the marriage. Moreover, the 1995 divorce judgment neither used the term “prorata share” nor identified a specific date before the husband’s retirement as the time of valuation.

The regulations implementing 5 U.S.C. § 8346 and 5 U.S.C. § 8345(j)(l) contemplate the situation that has presented itself in this case, namely: that OPM’s payment to the former spouse of a civil-service retiree may not reflect what the state court intended in the original divorce judgment; that the parties may return to the state court for a clarification of that judgment, see 5 C.F.R. § 838.101(a)(2); and that, upon clarification, the parties may then submit an amended state-court order to OPM for processing. See 5 C.F.R. § 838.225, which provides, in pertinent part:

“§ 838.225 Processing amended court orders.
“(a) If the ... retiree or former spouse submits an amended court order pertaining to payment of a portion of the employee annuity, OPM will process the amended court order prospectively only, effective against employee annuity accruing beginning the first day of the second month after OPM receives the amended court order.”

See also 5 C.F.R. § 838.234 and 5 C.F.R. § 838.225(b) (pertaining to the collection of arrearages).

II. The Husband’s Single-Payor Argument

The husband argues that the trial court erred by making him a payor of the wife’s share of his retirement benefits, when, he says, paragraph 10 of the divorce judgment contemplated that only OPM would pay the wife’s share. We find no error in this portion of trial court’s judgment because we do not believe that the 1995 divorce judgment, by mentioning OPM, thereby precluded payments to the wife from any other source. Cf. Ex parte Smallwood, supra (approving payment to wife of husband’s military-retirement benefits from two sources). Moreover, as we have previously pointed out in Part I of this opinion, the husband has an available administrative remedy; he may submit an amended order to OPM and expect OPM to adjust its payments to the wife accordingly, thereby relieving him of the obligation to pay the wife directly.

III. The Husband’s Tax-Liability Argument

The husband contends that the trial court’s judgment requiring him to make direct payments to the wife of $210.61 per month in order to bring her share of his retirement benefits up to the 50% figure mandated by the divorce judgment wrongly penalizes him and unjustly benefits the wife. He maintains that the trial court’s judgment impermissibly modified the property-division portion of the divorce judgment (which, he says, envisioned no increased tax liability for either party) by forcing him to transfer sums from which the income tax has already been deducted to the wife tax-free.

The record contains no evidence regarding how, or even if, OPM makes income-tax deductions from FERS-benefit payments to the former spouse of a civil-service retiree. We assume that OPM deducts income tax only from the retiree’s share and deducts only the amount of tax applicable to the retiree; we assume that OPM makes no deduction of income tax from the spouse’s share. That assumption is based on the fact that OPM calculated that the wife was entitled to 29.23% of the husband’s total retirement benefit of $1,014, and it paid her precisely that percentage ($296.39) without deduction. We also assume, 'if the husband is currently having income tax deducted from the portion of the retirement benefits that he is receiving, and the amount that he is receiving is reduced upon presentation to and processing by OPM of an amended order, that the tax deducted from the husband’s share will be modified accordingly.

The judgment of the Baldwin Circuit Court is affirmed.

AFFIRMED.

THOMPSON and PITTMAN, JJ„ concur.

MURDOCK and BRYAN, JJ., concur in the result, without writing.


source: Caselaw Access Project

author: BRYAN, Judge.

license: Public Domain

text:
    Keith Clyde HALLMARK v. Barbara Prater HALLMARK.
    2040193 and 2040339.
    Court of Civil Appeals of Alabama.
    Nov. 23, 2005.
    Mark B. Craig, Decatur, for appellant.
    R. Eric Summerford, Sr., Decatur, for appellee.
   BRYAN, Judge.

Keith Clyde Hallmark (“the former husband”) appeals a judgment that awarded Barbara Prater Hallmark (“the former wife”) $12,372.69, plus statutory post-judgment interest, in lieu of an award to the former wife of one-half of the funds in the former husband’s Teachers’ Retirement System (“TRS”) account, as provided in the parties’ divorce judgment. We reverse and remand.

The parties were divorced on June 24, 1998. The divorce judgment stated that it incorporated a May 19, 1998, settlement agreement between the parties. The record on appeal does not contain a copy of the parties’ settlement agreement. However, the divorce judgment, in pertinent part, stated:

“6. [The former wife] shall receive and is hereby awarded fifty (50) percent of all amounts and/or shares in [the former husband’s TRS account].... The date for calculation of the percentage hereby awarded to the [former] wife is the date of this agreement, May 19,1998, and the funds or shares, hereby awarded to the [former] wife, shall be transferred to her account in accordance with the provisions of the Qualified Domestic Relations Order entered this day, and adopted herein by reference as if fully set out herein.”

(Supp. R. 17.)

On September 5, 2002, the former wife petitioned the trial court to modify the divorce judgment. In her petition, she alleged, among other things, that the former husband had not paid her the funds in his TRS account the trial court had awarded to her in the original divorce judgment, and she sought assistance from the trial court in collecting that award. While that petition was still pending, the former wife, on September 12, 2003, filed a motion for relief from the divorce judgment. In that motion, the former wife alleged that she had recently discovered that the funds in the former husband’s TRS account could not be divided and that, therefore, the award of one-half of the funds in the former husband’s TRS account could not be enforced. She sought to be “relieved from” the award of one-half of the funds in the former husband’s TRS account and sought, in lieu of that award, an award of money in an amount equal to one-half of the value of the former husband’s TRS account as of the date of the parties’ settlement agreement.

Subsequently, the parties entered into a stipulation regarding the facts pertinent to the former wife’s request for “relief from” the award of one-half of the funds in the former husband’s TRS account. In pertinent part, that stipulation stated:

“d. A member’s contributions [to a TRS account] are only refundable during a member’s lifetime at the request of the member upon termination of employment and an application for refund. In such an event there would be no partial refunds and all contributions would be refunded. Interest on the contributions under those circumstances would only be refunded if the member had at least three years of service. However, the member would not be entitled to the total interest credited to the account. Upon withdrawal, all service credit established with the TRS would be canceled. For vested members, in such an event, the right to lifetime monthly retirement benefits at age sixty would be forfeited.
“e. Upon a member’s death prior to retirement, his estate or designated beneficiary is entitled to receive all of the contributions plus all interest plus certain additional sums established by statute.”

(Emphasis added.) According to the stipulation, the former husband’s total contribution to his TRS account was $24,745.38 as of May, 19,1998, the date of the parties’ settlement agreement.

On August 31, 2004, the trial court entered an order awarding the former wife $12,372.69, an amount equal to one-half of the funds in the former husband’s TRS account on May 19, 1998, plus statutory interest, in lieu of the award of one-half of the funds in the former husband’s TRS account as provided in the original divorce judgment. The former husband moved the trial court on September 29, 2004, to alter, amend, or vacate its judgment pursuant to Rule 59(e), Ala. R. Civ. P. On October 6, 2004, the former wife moved the trial court, pursuant to Rule 60(a), Ala. R. Civ. P., to amend its judgment to correct a clerical error. The trial court then amended its judgment to correct the clerical error on October 12, 2004. On October 22, 2004, the trial court, acting ex mero motu, again amended its judgment to correct a clerical error. The former husband then filed a notice of appeal on November 23, 2004, appealing the judgment as amended. That appeal was assigned case number 2040193. The former husband’s appeal was held in abeyance until his post-judgment motion was disposed of; that motion was denied by operation of law on December 29, 2004. On January 12, 2005, the former husband filed a second notice of appeal appealing the December 29, 2004, denial of his postjudgment motion. That appeal was assigned case number 2040339. This court has consolidated those two appeals.

On appeal, the former husband argues that the trial court erred because, he says, the trial court’s award to the former wife of $12,372.69, plus interest, in lieu of the award of one-half of the funds in the former husband’s TRS account constituted a modification of the property division contained in the original divorce judgment more than 30 days after the entry of the original divorce judgment. The former wife, on the other hand, argues that the trial court did not modify the original divorce judgment; she argues that the trial court merely clarified the divorce judgment in order to give effect to the parties’ intent in their settlement agreement.

In Fielding v. Fielding, 843 So.2d 766, 770 (Ala.Civ.App.2002), this court stated:

“The property-division provisions of a divorce judgment become final 30 days after the judgment is entered. McGiboney v. McGiboney, 679 So.2d 1066, 1068 (Ala.Civ.App.1995). After the 30 days has elapsed, the property division is non-modifiable. McGiboney, 679 So.2d at 1068; see also Johnson v. Johnson, 585 So .2d 89, 90 (Ala.Civ.App.1991).”

Although “a trial court has the inherent authority to interpret, implement, or enforce its own judgments,” “[t]he trial court’s authority is not, however, ‘so broad as to allow substantive modification of an otherwise effective and unambiguous final order.’ ” Jardine v. Jardine, 918 So.2d 127, 131 (quoting George v. Sims, 888 So.2d 1224, 1227 (Ala.2004)).

In the case now before us, the divorce judgment clearly states that the trial court awarded the former wife “fifty (50) percent of all amounts and/or shares in [the former husband’s TRS account ].” Therefore, the divorce judgment unambiguously states that the trial court awarded the former wife one-half of the funds in the former husband’s TRS account rather than a judgment for a sum certain. Thus, the order under review awarding the former wife a judgment against the former husband for a sum certain in lieu of the award of one-half of the funds in the former husband’s TRS account constituted a modification of the property division in the original divorce judgment more than 30 days after the entry of the original divorce judgment. See Fielding, supra. Therefore, we reverse the trial court’s judgment and remand the case to the trial court for further proceedings consistent with this opinion. Our resolution of this issue pretermits discussion of the remaining arguments raised by the former husband.

REVERSED AND REMANDED.

CRAWLEY, P.J., and THOMPSON and PITTMAN, JJ., concur.

MURDOCK, J., concurs in the result, without writing.

      . It is undisputed that § 16-25-23, Ala.Code 1975, precludes the trial court from ordering the husband to liquidate his TRS account. See Sockwell v. Sockwell, 822 So.2d 1219, 1225 (Ala.Civ.App.2001) (per Pittman, J., with four judges concurring in the result) (concluding that § 16-25-23, Ala.Code 1975, precluded the trial court from ordering the former husband in that case to liquidate his TRS account to satisfy a marital debt).


author: PITTMAN, Judge.

text:
    AOD FEDERAL CREDIT UNION v. STATE FARM FIRE AND CASUALTY COMPANY and Grace P. Clearman.
    2030931.
    Court of Civil Appeals of Alabama.
    Nov. 23, 2005.

      Haydn M. Trechsel of Trimmier Law Firm, L.L.C., Birmingham, for appellant.
    Curtis Wright, Gadsden, for appellee State Farm Fire and Casualty Company.
   PITTMAN, Judge.

This appeal concerns the proper allocation, under Alabama’s version of Articles 3 and 4 of the Uniform Commercial Code (“the UCC”), see Ala.Code 1975, § 7-3-101 et seq. and § 7-4-101 et seq., of losses resulting from a banking institution’s acceptance of a insurer’s draft made payable jointly to three payees without all the payees’ endorsements.

In November 1998, a fire damaged the house of Thomas E. Burt, Jr., and Rhonda L. Burt. Title to the lot on which the house was located was encumbered by two mortgages, a first mortgage held by Nations-Banc Mortgage Corporation (“Nations-Banc”) and a second mortgage held by Grace P. Clearman. On January 26, 1999, State Farm Fire and Casualty Company (“State Farm”), which had insured the house against fire losses, issued a draft in the amount of $49,460.73. State Farm’s draft was made payable to the order of “THOMAS E. BURT & RHONDA L. BURT & NATIONSBANC MORTGAGE CORP. ITS SUCCESSORS AND/OR ASSIGNS ATIMA INSURANCE SERVICE CENTER,” and also bore the legend “SOUTHTRUST BANK OF ALABAMA NA, BIRMINGHAM, AL.” Concerning the relationship between State Farm and SouthTrust Bank of Alabama, NA (“South-Trust”), it is undisputed that SouthTrust, rather than being a “drawee” or “payor bank” with respect to the draft, was merely a “collecting bank” empowered to handle the draft for collection; in contrast, State Farm reserved to itself the power to approve or to refuse payment of its draft. See generally Ala.Code 1975, § 7-4-105 and § 7-4-106(c).

On the same day that the draft was issued, Thomas Burt brought the draft to a teller at AOD Federal Credit Union (“AOD”) and requested payment. At the time that Thomas Burt requested payment, the draft bore the endorsements only of Thomas Burt and Rhonda Burt despite the presence on the reverse of the draft of the conspicuous notice “MUST BE ENDORSED BY ALL PAYEES.” That notice accorded with the requirement, set forth under the UCC, that a negotiable instrument made payable to two or more persons not alternatively “may be negotiated ... only by all of them.” Ala.Code 1975, § 7-3-110(d). AOD’s teller accepted the draft despite the absence of any endorsement by NationsBanc of the draft; $44,000 was then credited to Burt’s credit-union account and $5,460.73 in cash was paid to Burt. It is undisputed that in accepting the State Farm draft without the endorsement of all the payees, AOD’s teller did not exercise ordinary care as is required under Ala.Code 1975, § 7-4-202(a)(1), with respect to presenting or sending an item for presentment.

After paying Thomas Burt and crediting his credit-union account as described, AOD endorsed and forwarded the draft to a SouthTrust Bank branch in Calhoun County on January 27,1999, and requested that its account be credited in the amount of the draft. SouthTrust then secured permission from State Farm to pay the draft from State Farm’s funds on account at SouthTrust, and AOD’s SouthTrust account was credited on January 28, 1999. However, the record reveals that the actual draft was not forwarded to State Farm until “several days” after State Farm had authorized SouthTrust to pay AOD, indicating that State Farm received the actual draft no earlier than February 1, 1999, which was the second business day after payment was approved. The draft was then recorded on microfilm before being shredded.

During the period following AOD’s acceptance of the State Farm draft, Thomas Burt gradually depleted the funds in his account at AOD. Although Thomas Burt’s account balance on January 26, 1999, was $44,100 (an amount reflecting a $44,000 deposit derived from the funds represented by the draft plus $100), the account balance remaining on March 3, 1999, 30 days after the earliest date that State Farm would have received the draft from SouthTrust, was only $11,055.28. Although Thomas Burt later deposited $13,000.38 into his account at AOD, he had, by May 10, 1999, withdrawn all moneys from that account, and the account was then closed.

During July 1999, State Farm personnel ascertained, via an internal audit, that AOD had paid and credited Thomas Burt a sum equal to the amount of the State Farm draft in the absence of endorsements of all the payees named in the draft. State Farm then contacted SouthTrust and indicated that proper endorsements had not been obtained. On August 4, 1999, SouthTrust debited AOD’s account by $49,460.73, the amount of the draft, and sent AOD a notice citing the improper endorsement as a basis for the debit; on August 5, 1999, the same amount of money was transferred via an official check to State Farm by SouthTrust.

Because NationsBanc notified State Farm that it had not received payment with respect to its first-mortgage interest in the lot containing the house that had suffered the fire loss, State Farm issued a new draft in November 1999 in the amount of $49,460.73, payable jointly to Thomas Burt, Rhonda Burt, and NationsBanc. At that time, NationsBanc had quoted a payoff amount of $40,008.32 as necessary to discharge the Burts’ liability on the note secured by its first mortgage on the lot in question. The November 1999 draft was negotiated by all the payees and was paid by State Farm.

Although payment of the second State Farm draft satisfied NationsBanc’s first mortgage on the subject lot, Clearman’s mortgage remained outstanding. The Burts defaulted on the note secured by that second mortgage. In response to that default, Clearman foreclosed on her mortgage.

In November 2000, AOD sued the Burts, State Farm, Clearman, and various fictitiously named defendants in the Calhoun Circuit Court. As amended in February 2001, AOD’s complaint sought, among other things, money judgments against the Burts and State Farm and a judgment declaring that AOD held an interest in the subject lot superior to that of Clearman. The Burts were never served with process; however, State Farm and Clearman denied AOD’s allegations in pertinent part. The case was submitted to the trial court for a decision based upon deposition transcripts, other documentary exhibits, and stipulations of the parties appearing in the action, and the trial court entered a judgment in favor of State Farm and Clearman on AOD’s claims. AOD appealed.

Because the trial court entered its judgment based upon the pleadings, stipulations, documentary evidence, and exhibits, and no oral testimony was taken, the ore terms presumption is not applicable in this case, and the trial court’s findings of fact “are not entitled to the traditional presumption of correctness which is available when the trial court hears oral testimony and observes the witnesses.” Whitehead v. Hester, 512 So.2d 1297, 1299 (Ala.1987). Under such circumstances, an appellate court “must consider the evidence anew and render a judgment in light of the evidence and the applicable legal principles.” Id.

In that portion of its brief on appeal addressing the trial court’s judgment in favor of State Farm, AOD concedes, as it did in the trial court, that its conduct in accepting the jointly payable draft issued by State Farm in January 1999 was improper. Specifically, AOD concedes State Farm’s point that AOD was not “entitled to enforce” that draft because AOD did not acquire title to the draft via a proper negotiation by all parties as required under Ala.Code 1975, § 7-3-110(d). Thus, it is undisputed that AOD simultaneously breached warranties to State Farm arising as a matter of law under Ala.Code 1975, § 7-3-416(a) (governing downstream transfer warranties to nonbanks) and § 7-4-208(a) (governing presentment warranties to collecting banks and drawees), as well as warranties to SouthTrust arising under § 7-4-207(a) (governing downstream transfer warranties to banks) and § 7-4-208(a).

However, AOD claims that State Farm was not, on the facts of this case, entitled to recover the entire face amount of the January 1999 draft ($49,460.73). In essence, AOD contends that State Farm has been unjustly enriched by South-Trust’s debiting of $49,460.73 from AOD’s account and SouthTrust’s subsequent issuance of a check to State Farm in that amount. AOD argues that under the UCC a person claiming that a breach of a transfer or a presentment warranty has occurred is under a duty to notify the pertinent warrantor and that AOD did not receive timely notice. State Farm contends, in response, that it has fully satisfied its contractual liability to its insureds and that AOD has not stated a valid claim against State Farm.

In resolving the parties’ dispute as to this issue, it is important to ascertain the legal basis of State Farm’s potentially viable claims against AOD at the time that SouthTrust unilaterally transferred the funds from AOD to State Farm. In other words, had State Farm been required to litigate AOD’s potential liability in the first instance, rather than acting through SouthTrust to obtain reimbursement from AOD’s account of the amount of the January 1999 draft, what causes of action would have been available to State Farm?

Our review of the law in this area indicates that under the UCC, and specifícálly the 1990 revisions to Articles 3 and 4 of the UCC as adopted in Alabama in 1995, only breach-of-warranty causes of action under § 7-3^416(a) and § 7-4-208(a) would have been available to State Farm. Although we agree with State Farm that AOD’s acceptance of the draft from Thomas Burt without proper endorsements of all the payees amounted to a conversion of the draft under § 7-3-420, that section incorporates the intent of the drafters of the 1990 UCC revisions that conversion actions not be brought by issuers of negotiable instruments such as State Farm (see § 7-3-420(a)), an issue upon which courts applying former § 3-419 of the 1962 UCC had been divided. See generally Official Comment, Ala.Code 1975, § 7-3-420. Thus, the justice of State Farm’s retention of the funds debited from AOD’s account in this case must be assessed based upon AOD’s warranty liability.

The drafters of the 1962 UCC incorporated a significant limitation upon warranty liability with respect to banks’ transfer and presentment warranties. Section 4r-207(4) of that version of the UCC provided that any loss caused by a claimant’s delay in making a claim of a breach of those warranties would be discharged unless the claim was “made within a reasonable time after the person claiming learn[ed] of the breach.” Under that provision, a party entitled to recover based upon a bank’s breach of a transfer or presentment warranty was required to bring a breach-of-warranty claim within a “reasonable time” after obtaining actual knowledge of the breach; failing such timely action, the war-rantor would not be liable for any losses that were shown to have resulted from the claimant’s tardiness. Thus, § 4-207(4) of the 1962 UCC was not a statute governing limitation of actions as much as one limiting liability. See Trust Co. Bank v. State, 420 So.2d 10, 13 (Ala.1982) (observing that Ala.Code 1975, § 7-4-207, as then in effect, represented a limitation upon breach-of-warranty actions “quite different from the ordinary statute of limitations”).

Our research indicates that under former § 4-207(4), insurance companies that utilized “payable through” drafts such as that issued by State Farm in this case were limited in their recoveries when they failed to observe the “reasonable time” principle in bringing claims under the UCC against depositary banks such as AOD. For example, in Great American Insurance Cos. v. American State Bank of Dickinson, 385 N.W.2d 460 (N.D.1986), an automobile insurer issued a draft payable jointly to the owner of a truck and the holder of a lien upon that particular truck, which had been involved in an accidental collision; however, the defendant bank credited the full amount of the draft to the owner’s account despite the absence of the lienholder’s endorsement and transmitted the draft to the bank through which the draft was payable. The insurer approved the payment of the draft after receiving it through banking channels; however, the insurer ultimately issued a second payment in order to discharge the lienholder’s interest, obtained an assignment of that interest, and sued the defendant depositary bank approximately a year later. Although the insurer initially sought relief under warranty and conversion theories, the warranty claim was dismissed, and the trial court entered a judgment in favor of the insurer in the amount (plus interest) that the insurer had paid the lienholder.

On appeal, the North Dakota Supreme Court reversed the trial court’s judgment. After analyzing “the full range of potential theories of liability and parties available” under the UCC (385 N.W.2d at 464), the Great American court held that the depositary bank’s liability on the insurer’s conversion claim was limited by § 4-207(4) even though that statute’s liability limitation applied to warranty actions; it analyzed the effect of § 4-207(4) as follows:

“The objective of the U.C.C. statutory scheme for check collections, and particularly the warranty provisions, is to place the loss on the wrongdoer, or because the wrongdoer is usually unavailable or unable to pay, upon the party who last dealt with the wrongdoer because that party is in the best position to verify and obtain the necessary endorsements. Stapleton v. First Security Bank, 675 P.2d 83 (1983). The policy behind the U.C.C. warranty provisions is to speed up the collection process and to remove the burden from every bank in the collection chain to meticulously check the endorsements of each item transferred, and, thus, the first bank taking an item for collection is primarily responsible for obtaining the necessary endorsements. Federal Deposit Insurance Corp. v. Marine National Bank of Jacksonville, 303 F.Supp. 401 (M.D.Fla.1969); Feldman Construction Co. v. Union Bank, 28 Cal.App.3d 731, 104 Cal.Rptr. 912 (1972); See generally Murray, ‘Joint Payee Checks — Forged and Missing Indorsements,’ 78 Commercial L.J. 393 (1973). Thus, a drawee bank that pays an item over a missing endorsement is generally not obligated to discover that missing endorsement. Federal Deposit Insurance Corp. v. Marine National Bank of Jacksonville, supra; See generally Murray, ‘Joint Payee Checks — Forged and Missing Indorse-ments,’ 78 Commercial L.J. 393 (1973). Consequently, in the usual check collection case involving a drawer customer and a drawee bank, a drawee bank does not ‘learn of the breach’ within the meaning of Section 41-04-17(4) [U.C.C. § 4-207(4) ], N.D.C.C., when it pays an item over a missing endorsement. Additionally, in the usual check collection case, the drawer customer has certain responsibilities with regard to checking his banking statement and items for alterations or unauthorized signatures or endorsements. Section 41-04-33 [U.C.C. § 4-406], N.D.C.C.
“However, the instant case involves a payable through draft in which the drawer and drawee are the same entity, and that entity is not a bank. That entity initially issued the joint payee draft and was in a position to check the draft for the necessary endorsements before paying it. See Murray, ‘Drafts “Payable Through” Banks,’ 77 Commercial L.J. 389 (1972). Professor Murray suggests that a drawer-drawee insurance company is more able’ to detect a forged payee’s signature on a draft by comparing the signature on the draft with the insured’s signature on an insurance application form or claim form. Id. at 390. We need not go so far. The instant case involves a missing endorsement which is easily discernible from the face of the instrument and requires no such comparison. In such a case, a breach of presentment warranties is evident from the face of the instrument. Both logic and equity militate in favor of imposing primary responsibility on the drawer-drawee to check the very draft which it issued in the first place to the ‘forger.’ ”

385 N.W.2d at 465-66. The North Dakota Supreme Court indicated that on the facts presented the trial court should have made findings concerning “what was a reasonable time after [the insurer] learned of the breach and, if a claim were not made within that time, the extent of any loss caused by the delay in making a claim.” 385 N.W.2d at 466 (footnote omitted).

To like effect is Phoenix Assurance Co. v. Davis, 126 N.J.Super. 379, 314 A.2d 615 (1974), in which the New Jersey Superior Court held that a depositary bank, First National State Bank (“National”), was entitled to a set-off based upon § 4-207(4) because of the delay of an insurer in bringing a breach-of-warranty claim; in that case, as here, the insurer had issued a draft to joint payees and that draft had lacked a necessary endorsement at the time it was tendered to National for deposit. In Phoenix Assurance, the insurer’s draft, in a manner similar to State Farm’s draft at issue in this case, specified that it was payable at a particular collecting bank without authorizing the bank to pay it. After considering § 4-207(4) and evidence tending to show that the tendering payee had maintained a small balance on account at National during the two months preceding the insurer’s action, the Phoenix Assurance court held:

“The impact of the provisions here considered (particularly N.J.S.A. 12A:4-207) is to make the initial collecting bank responsible for cheeking endorsements so that the collection process will be speedy and efficient, see Federal Deposit Ins. Corp. v. Marine National Bank of Jacksonville, 431 F.2d 341 (5[th] Cir. 1970) (bank of deposit liable for draft with missing endorsement in suit by as-signee of payee); for the purpose of this decision, the person liable under N.J.S.A. 12A:4-207 is National. However, National has sustained loss due to plaintiffs failure to give reasonable notice. Plaintiff should not he allowed to use the existence of an intermediate hank in the collection chain, or process, to create an artificial immunity to its failure to give notice within a reasonable time. The predicate of liability on the part of National is to encourage the first bank to keep improper paper out of the collection process — an increasingly important function in light of an ever-increasing mechanization of the collection and payment process. Similarly, when claims are to be made, they should be made within a reasonable time on the facts, and the initial bank should have the benefit of N.J.S.A. 12A:4-207(4) arising from the failure to give that notice. On the facts here present plaintiff failed to act within a reasonable time and it should bear the loss to the extent that there is a basis for establishing the existence and amount of the loss.”

126 NJ.Super. at 392-93, 314 A.2d at 622 (emphasis added).

Taken together, Great American and Phoenix Assurance stand for the proposition, that under the UCC a party reserving the right to pay or refuse to pay a jointly payable draft must either timely notify the depositary bank of that bank’s breach of warranty when all payees do not endorse the draft or must suffer a reduction in any potential recovery from that bank to the extent that the depositary bank’s loss resulting from the breach could have been alleviated by timely notice. That principle of law has, if anything, only been strengthened by the 1990 amendments to the UCC; under revised Article 3 and Article 4 of the UCC as adopted in Alabama, a warrantor’s liability under provisions governing transfer and presentment warranties is even more circumscribed. As we have noted, § 4-207(4) of the 1962 UCC discharged a warrantor’s liability as to losses that could have been avoided had the person claiming a breach of warranty brought a breach-of-warranty claim against the warrantor within a “reasonable time” after “learning] of the breach.” In contrast, the 1990 version of the UCC that has been adopted by our Legislature discharges a warrantor’s liability as to losses that could have been avoided had the person claiming a breach of warranty notified the warrantor within SO days after having reason to know of the breach. See §§ 7-3-416(c), 7-3-417(e), § 7-4-207(d), and 7-4-208(e), Ala.Code 1975.

In this case, AOD credited the account of Thomas Burt, one of its members, based upon the amount of the improperly negotiated draft. At that time, AOD had the right, under federal law, “to impress and enforce a lien upon the shares and dividends” of Thomas Burt “to the extent of any ... charges payable by him.” See 12 U.S.C. § 1757(11). However, State Farm did not notify AOD of the breach of transfer and presentment warranties before SouthTrust debited AOD’s account in August 1999, which occurred several months after Burt had withdrawn all credited moneys from his account at AOD upon which AOD could have claimed a lien and from which AOD could have recouped a portion of its loss. Thus, State Farm’s failure to notify AOD of the breach did cause AOD to suffer a greater loss than it would otherwise have suffered had timely notice been given. To that extent, AOD’s liability, as a matter of law under the UCC, was discharged, and a judgment should have been entered in favor of AOD in the amount of the funds that AOD could have recouped from Thomas Burt’s account.

AOD contends that it was entitled to a judgment in the amount of $16,055.28 (plus interest), the amount that remained in Thomas Burt’s AOD account on January 28, 1999, when State Farm approved the payment of the draft; in the alternative, AOD contends that State Farm should pay $11,055.28 (plus interest) because that lesser amount remained in Thomas Burt’s account as of March 3, 1999, 30 days after the earliest date that State Farm would have received a copy of the draft from SouthTrust. While a strong argument could be made that State Farm’s conduct in approving payment of the draft on January 28, 1999, before receiving it (and being able to physically review it) amounts to negligence, we believe that State Farm could have had “reason to know” of the draft’s missing endorsement, as that term is used in the pertinent UCC warranty provisions, only upon receipt of the draft itself. Compare Great American, 385 N.W.2d at 461, 466 (indicating that where approval of payment of a draft containing a missing endorsement took place after drawer’s receipt of the draft, date of approval of payment would be the date when drawer “should have learned” of the missing endorsement under § 4-207(4)). Thus, we agree with AOD’s alternative assertion that it could have recouped $11,055.28 had notice of the breach of the presentment and transfer warranties been given by the 30th day after State Farm received the draft — i.e., March 3, 1999. To that extent, State Farm was unjustly enriched by SouthTrust’s debiting of AOD’s account in the amount specified in the January 1999 draft and by SouthTrust’s remitting those funds to State Farm.

Although we agree that the trial court’s judgment in favor of State Farm was erroneous, we cannot agree with AOD’s contention that it was entitled, under principles of equitable subrogation, to assume NationsBanc’s priority position as to the real property that suffered the fire loss. Under Alabama law, a party’s entitlement to equitable subrogation depends upon that party’s satisfaction of five required elements: (1) advancement of money at the instance of a debtor in order to extinguish a prior encumbrance; (2) use of the advanced money for that purpose with the just expectation on the part of the advancing party for obtaining security of equal dignity with the prior encumbrance; (3) payment of the entire debt secured by the pertinent mortgage; (4) ignorance on the part of the advancing party of intervening liens; and (5) absence of factors “burdening” or “embarrassing” intervening lienors. See Collateral Inv. Co. v. Pilgrim, 421 So.2d 1274, 1276 (Ala.Civ.App.1982). In this case, AOD plainly did not “advance” money on the Burts’ behalf to NationsBanc in order to pay off the Burts’ first-mortgage note. Rather, the $49,460.73 debited from AOD’s account at SouthTrust was taken without AOD’s consent and in purported satisfaction of a liability of AOD to State Farm based upon AOD’s acceptance of the January 1999 draft; it was State Farm, not AOD, that satisfied the financial obligation giving rise to the NationsBanc mortgage. Moreover, both at the time that AOD accepted the January 1999 draft from Thomas Burt and at the time AOD suffered the debit from its SouthTrust account, AOD could have had no reasonable expectation that it would receive, in exchange, an interest in the real property that had been occupied by the Burts. We conclude that the trial court correctly determined that AOD was not entitled to subrogation to Nations-Banc’s first-mortgage interest in that real property upon State Farm’s satisfaction of the mortgage note.

Based upon the foregoing facts and authorities, we reverse that portion of the trial court’s judgment in favor of State Farm and remand the cause for the entry of a judgment awarding AOD $11,055.28 plus interest at six percent (see § 8-8-1, Ala.Code 1975) accruing from August 4, 1999, the date on which AOD’s account was debited. In all other respects, the trial court’s judgment is affirmed.

AFFIRMED IN PART; REVERSED IN PART; AND REMANDED WITH INSTRUCTIONS.

CRAWLEY, P.J., and THOMPSON and MURDOCK, JJ., concur.

BRYAN, J., concurs in the result, without writing.

      . AOD, being a credit union, falls within the UCC’s definition of "bank.” See Ala.Code 1975, § 7-4-105(1).

      . Thomas Burt has apparently disappeared.

      . We need not, in this case, address whether common-law negligence claims may be brought by drawers such as State Farm against depositary banks such as AOD. See generally Farmers Bank of Maryland v. Chicago Title Ins. Co., 163 Md.App. 158, 168-69, 877 A.2d 1145, 1151-52 (2005) (discussing split of authority). Assuming that (1) such a cause of action is not preempted by the UCC and (2) State Farm's conduct in failing to examine the draft to determine its payability would not amount to contributory negligence defeating such a claim, State Farm’s appellate brief relies solely upon the UCC (and caselaw interpreting the UCC and its predecessor statutes) as a basis for AOD’s liability to State Farm arising from AOD's acceptance of the January 1999 draft.

      . UCC provisions governing conversion of a negotiable instrument have been held to displace common-law conversion causes of action based upon payment of such an instrument and the propriety of its endorsement. See American Liberty Ins. Co. v. AmSouth Bank, 825 So.2d 786, 796 (Ala.2002).

      . Accord, Seaman Corp. v. Binghamton Sav. Bank, 220 A.D.2d 62, 65, 643 N.Y.S.2d 767, 770 (1996) (drawer/drawee in possession of its own canceled checks held to have common-law duty to examine items and to uncover any irregularities in its account).

      . We thus do not reach AOD’s alternative argument that it was prevented from taking steps that may have been available to it under Ala.Code 1975, § 7-3-418(d), to enforce the January 1999 draft. See also § 7-3-309(a), Ala.Code 1975 (enforcement of destroyed instruments). However, we note that there is no indication in the record that NationsBanc ratified the January 1999 draft so as to render that draft enforceable.


author:
MURDOCK, Judge.
      BRYAN, Judge, CRAWLEY, Presiding Judge,

text:
    Barbara Ann Roebuck SUMLIN v. Richard Elgin SUMLIN.
    2040238.
    Court of Civil Appeals of Alabama.
    Dec. 2, 2005.

      Jack W. Smith, Dothan, for appellant.
    Submitted on appellant’s brief only.
   On Rehearing Ex Mero Motu

MURDOCK, Judge.

This court’s opinion of November 4, 2005, is withdrawn, and the following is substituted therefor.

The wife in this divorce action appeals from the trial court’s denial of her motion to set aside a default judgment divorcing the parties and awarding custody of the parties’ 13-year-old daughter to the husband. We reverse and remand.

This action began on February 12, 2004, when the husband, Richard Elgin Sumlin, sued the wife, Barbara Ann Roebuck Sum-lin, for a divorce. Acting pro se, the wife filed an answer to the husband’s complaint.

The matter was set for trial initially on May 19, 2004. By agreement of the parties, however, the court ordered that the trial be continued until June 10, 2004. On June 9, 2004, the case was continued a second time, again pursuant to an agreement of the parties. Sometime before June 16, 2004, the wife retained an attorney who, on that day, filed on behalf of the wife an amended answer to the complaint, as well as a counterclaim.

On August 6, 2004, the wife filed a motion asking the trial court to set the case for trial. Thereafter, the trial court entered an order setting the ease for trial on October 12, 2004.

On October 8, 2004, the wife filed a motion to continue; the trial court denied that motion. The trial court called the case for trial on October 12, 2004, and neither the wife nor her counsel were present at that time. Consequently, the trial court proceeded to enter a default judgment against the wife on the same day. An entry of the court’s case action summary sheet reads: “October 12, 2004— Defendant failed to appear. Entry of default made against defendant. Testimony taken.[] Plaintiffs attorney to submit proposed decree.” Several days later, on October 18, 2004, the trial court entered a judgment of divorce awarding custody of the parties’ 13-year-old daughter to the husband based upon the wife’s default.

On October 29, 2004, the wife, through her counsel, filed a motion to set aside the default judgment, stating, in part, as follows:

“[Tjhis matter was set for trial on Tuesday, October 12, 2004, at 9:00 a.m., at which time counsel also had several criminal cases set for trial in the Circuit Court of Geneva County.
“Counsel states that on Thursday, October 7th and Friday, October 8th, he tried several times to see the trial judge at his office, and on one occasion in the courtroom, regarding a continuance in this cause, and he missed His Honor on all said occasions. He was unable to talk to the trial judge regarding the matter, as counsel discovered it was an extended holiday weekend (Columbus Day), and the courthouse was closed on Monday, October 11, 2004.
“This counsel further discussed the matter with plaintiffs attorney, Douglas Bates, Esq., and advised him of the conflict in his calendar and the urgency of the criminal cases set in Geneva County on said date, and he told him he was filing a Motion to Continue, said Mr. Bates said he would have to appear because his client would not cooperate with a continuance. Counsel then called the defendant who resides in north Alabama, which is over five hours traveling time away from Dothan, and he advised the defendant of the conflict and that he had filed a Motion to Continue, and he told her not to come as he would not be able to appear in Court on said date.”

The case action summary sheet contains an entry in which the trial court denies the wife’s motion to set aside the default judgment. The trial court states in this entry that counsel for the wife “was in the courthouse in Dothan at [the] time and on [the] date [the] case was set for trial.”

The wife contends on appeal that the trial court abused its discretion in denying her motion to set aside the default judgment. We agree.

Rule 55(c), Ala. R. Civ. P., states:

“In its discretion, the court may set aside an entry of default at any time before judgment. The court may on its own motion set aside a judgment by default within thirty (30) days after the entry of the judgment. The court may also set aside a judgment by default on the motion of a party filed not later than thirty (30) days after the entry of the judgment.”
“ ‘By its plain language, Rule 55(c)[, Ala. R. Civ. P.,] confers broad discretionary authority upon trial judges. This discretion, however, is not boundless. Rule 1(c), Ala. R. Civ. P., states: “These rules shall be construed to secure the just, speedy and inexpensive determination of every action.” Thus, Rule 1 mandates that trial courts construe Rule 55(c) to effectuate an expeditious, efficient, and just resolution of litigation.... See C. Wright, A. Miller & M. Kane, Federal Practice and Procedure, Civil, § 2693 (2d ed.1983).’ ”

Ex parte Family Dollar Stores of Alabama, Inc., 906 So.2d 892, 898 (Ala.2005) (emphasis added) (quoting Kirtland v. Fort Morgan Auth. Sewer Serv., Inc., 524 So.2d 600, 604 (Ala.1988)).

The Kirtland Court established a two-step process for evaluating motions under Rule 55(c). This two-step process is designed to balance the two competing policy interests of judicial economy and a litigant’s right to defend on the merits. Kirt-land, 524 So.2d at 604.

The first of the two steps is that the trial court must presume that cases “should be decided on the merits whenever practicable.” Kirtland, 524 So.2d at 604. The two-step process begins with this presumption because “the interest in preserving a litigant’s right to a trial on the merits is paramount and, therefore, outweighs the interest of promoting judicial economy.” 524 So.2d at 604. It is against this presumption and its recognition of the paramount nature of a litigant’s right to defend on the merits that this court should interpret and apply the second step in the Kirtland analysis. Indeed, we can envision no species of case in which the “strong bias” in favor of reaching the merits, see Kirtland, 524 So.2d at 605, could be any stronger than in a case such as this involving custody of a minor child. See generally, e.g., Davis v. Davis, 743 So.2d 486, 487 (Ala.Civ.App.1999) (quoting Fesmire v. Fesmire, 738 So.2d 1284, 1287 (Ala.Civ.App.1999), quoting in turn other cases that establish a court’s “ ‘ “ ‘duty to guard and protect the interest of its infant wards with scrupulous care’ ” ’ ”).

The second step of the two-step process was described in Kirtland as follows:

“[A] trial court’s broad discretionary-authority under Rule 55(c) should not be exercised without considering the following three factors: 1) whether the defendant has a meritorious defense; 2) whether the plaintiff will be unfairly prejudiced if the default judgment is set aside; and 3) whether the default judgment was a result of the defendant’s own culpable conduct.”

524 So.2d at 605 (emphasis added). Nothing in Kirtland indicates that each of these three factors must be resolved in the mov-ant’s favor in order for the movant to obtain relief from a default judgment. The rule only states that the trial court must “consider” all three factors. The Supreme Court also referred to the Kirt-land analysis as one requiring the court to “balance the equities.” 524 So.2d at 605. We also note that an approach in which all three factors are considered and “balanced,” or weighed, against each other is consistent with federal jurisprudence. See generally C. Wright et al., Federal Practice & Procedure, Civil § 2693 (2d ed.1983).

In addition, a balancing approach is demonstrated by those cases in which our Supreme Court has held that a trial court abused its discretion in failing to set aside a default judgment and to allow a case to be decided on its merits, despite the fact that one or both of the second and third Kirtland factors was decided against the movant. In Fries Correctional Equipment, Inc. v. Con-Tech, Inc., 559 So.2d 557, 561 (Ala.1990), for example, the Supreme Court held that a showing of culpable conduct — the third Kirtland factor— standing alone, did not preclude relief from the default judgment where the judgment was large, liability was sharply in dispute, and damages were both contested and speculative. While the present case does not deal with monetary damages, the judgment at issue, particularly insofar as it relates to the custody of the parties’ daughter, is without question “large,” and “liability” is sharply disputed.

In Aldridge v. Hamilton, 708 So.2d 194 (Ala.Civ.App.1997), this court held that the trial court had erred in failing to set aside a default judgment despite the fact that both the second and third Kirtland factors weighed against granting relief:

“[WJith deference to the diligent and well-meaning trial court, we conclude that the default judgment should have been set aside. In Rooney v. Southern Dependacare, Inc., 672 So.2d 1 (Ala.1995), our supreme court stated as follows regarding the factor of the defendant’s culpable conduct:
‘[T]his Court has held that if there is a dispute as to liability and damages, even avoidance of service or ignoring service is not sufficient grounds for the trial court to refuse to set aside a default judgment. Rather, to deal with such situations, the trial court should impose costs on the defendants.’
672 So.2d at 4 (emphasis added). See also Fries[ Correctional Equip., Inc. v. Con-Tech, Inc.], 559 So.2d [557,] 563 [ (Ala.1990) ] (‘[A] defendant’s avoidance of service might be grounds for imposition of costs or other sanctions, but should not be grounds for a refusal to set aside such a large default judgment.’ (Emphasis added.)) In discussing the factor of prejudice to the plaintiff, the court stated in Rooney and Fries that the prejudice must be substantial and that mere delay in the plaintiff’s recovery on the claim is not sufficient to justify a refusal to set aside a default judgment. Rooney, 672 So.2d at 6; Fries, 559 So.2d at 562. ”

708 So.2d at 196. See also C. Wright et al., Federal Practice & Procedure, Civil § 2693 (2d ed.1983) (discussing federal cases demonstrating an appropriate preference for the awarding of costs to compensate for any prejudice associated with setting aside a default judgment).

It is in the context of the above-stated principles that we now turn to a detailed consideration of each of the three factors that compose the second part of the Kirtland test. Specifically, we turn first to the issue whether the defendant has articulated a meritorious defense.

Unlike many cases, the present case is not one in which the default occurred because of the failüre of a defendant to answer the complaint. Here, the wife answered the complaint. In so doing, she denied in detail various essential elements of the claims alleged by the husband. Furthermore, in so doing, she specifically alleged that the welfare of the parties’ 13-year-old daughter would not be served by being in the custody of the husband and that, instead, the daughter’s welfare would be better served by her being placed in the custody and control of the wife. Further, the wife also included with her answer a counterclaim in which, she specifically alleged that she did not abandon the child as alleged in the complaint but that, instead, the husband had “brutally forced the [wife] from the parties’ home by assaulting her, and causing her such grievous mental suffering that she has now and has been under medical care, and she is unable to work, and she is need of support.” The wife further alleged that it is the husband and not the wife who committed adultery. Further still, the counterclaim alleges that the minor daughter has made known her request to live with the wife through correspondence, a copy of which is attached to the counterclaim. See Mardis v. Mardis, 660 So.2d 597, 599 (Ala.Civ.App.1995) (“while not dispositive, the preference of a child with regard to its custody is entitled to much weight”).

“[A] defaulting party has satisfactorily made a showing of a meritorious defense when allegations in an answer or in a motion to set aside the default judgment and its supporting affidavits, if proven at trial, would constitute a complete defense to the action....” Kirtland, 524 So.2d at 606 (emphasis added). We therefore conclude that the record before us fully satisfies the first Kirtland factor in a manner that favors an adjudication of the issue of divorce and, particularly, the custody of the parties’ child, on the merits.

Turning to the third Kirtland factor, the trial court made an entry on the case action summary sheet on November 1, 2004, stating that the wife’s attorney was in the Houston County courthouse “at [the] time and on [the] date case was set for trial.” In response, the wife filed a motion providing an explanation by her attorney as to how the trial court misunderstood him to be present in the Houston County courthouse at the time of the hearing in question. He specifically explains how he attempted to contact the trial judge several days before the scheduled hearing but was unable to do so and that he was required to attend proceedings in four separate criminal cases in nearby Geneva County on the morning in question. He also explains how he notified the husband’s counsel of his conflict and requested agreement for a continuance but was told that the husband refused to agree to a continuance. He then explains that “he was able to resolve by plea all four felony jury cases [in Geneva County], and by afternoon he did return to [the Houston County] Courthouse] only to find this cause had been adjudicated in his client’s absence.”

“Conduct committed wilfully or in bad faith constitutes culpable conduct for purposes of determining whether a default judgment should be set aside. Negligence by itself is insufficient. Willful and bad faith conduct is conduct characterized by incessant and flagrant disrespect for court rules, deliberate and knowing disregard for judicial authority, or intentional nonresponsiveness....
“However, a defaulting party’s reasonable explanation for inaction and non compliance may preclude a finding of culpability.”

Kirtland, 524 So.2d at 607-08 (citations omitted; emphasis added). There therefore exists a genuine issue with respect to the third Kirtland factor.

Finally, we turn to the second Kirtland factor: whether the plaintiff will be unfairly prejudiced by setting aside the default judgment. As to this factor, we first note that the prejudice must be substantial. Ex parte Gilliam, 720 So.2d 902 (Ala.1998). Mere delay or increased costs are not sufficient to justify a refusal to set aside a default judgment. Gilliam, 720 So.2d at 904. As the Kirtland Court, itself, said:

“Federal cases construing [the second] requirement suggest that the prejudice must be substantial to justify a denial of a motion to set aside a default judgment. ... The rationale for requiring substantial prejudice is that the federal courts are vested with discretionary power to impose costs as a means of alleviating the adverse affects of delay. The underlying presupposition is that minimal prejudice can be effectively offset ‘by requiring the defaulting party to provide a bond to secure costs, to pay court costs, or to cover expenses of the appeal.’ C. Wright, [A. Miller, & M. Kane, Federal Practice & Procedure, Civil,] § 2200 [ (2d ed.1983) ]; ...
“Awarding costs as a means of mitigating the prejudice suffered by the plaintiff upon the setting aside of a default judgment is a practical and fair rule, one that has received the imprimatur of this Court. In Mosaic Templars of America v. Hall, 220 Ala. 305, 124 So. 879 (1929), .... we held, inter alia, that the ‘court may impose reasonable terms, such as the payment of costs, as a penalty for’ an attorney’s negligence in failing to appear. 220 Ala. at 306, 124 So. at 880_ Thus, we hold that the prejudice warranting denial of a Rule 55(c) motion must be substantial. If the harm suffered by the nondefaulting party, as by a delay in vindicating its rights, could be mitigated by the imposition of reasonable terms and conditions, the prejudice is not substantial. Moreover, the task of determining whether the defendant has caused substantial prejudice is a burden to be borne by the trial judge, after review of the facts, and not by the plaintiff.”

Kirtland, 524 So.2d at 607.

We note secondly that our Supreme Court in Kirtland did not state which party had the burden of showing each of the Kirtland factors. Obviously, as a general rule, a movant has the burden of demonstrating those elements necessary to justify the trial court in granting the relief requested. This would be particularly appropriate as to the first and third Kirtland factors — the existence of a meritorious defense and the absence of culpability on the part of the movant in allowing the default judgment to occur — in that those factors speak to matters within the knowledge of the movant. The same may not be true of the second factor, however. To put the burden of demonstrating the lack of prejudice to the nonmovant on the movant may be problematic in two ways: (1) its asks the movant to prove a negative, and (2) whether or not the nonmovant has been prejudiced in some manner, such as by the death or other unavailability of a witness, is information more commonly within the knowledge of the nonmovant.

Nonetheless, in Rudolph v. Philyaw, 909 So.2d 200 (Ala.Civ.App.2005), this court cited our Supreme Court’s decision in Phillips v. Randolph, 828 So.2d 269 (Ala.2002), for the proposition that the party that files a motion to set aside a default judgment has the initial burden of making a prima facie showing that the nonmovant will not be unfairly prejudiced if the default judgment is set aside. Rudolph v. Philyaw, 909 So.2d at 203 (“ ‘If the movant makes a prima facie showing that the [non-movant] will not be unfairly prejudiced, the burden then shifts to the [nonmovant] to present facts showing that the [nonmov-ant] will be unfairly prejudiced if the default judgment is set aside.’ ” (Quoting Phillips v. Randolph, 828 So.2d at 278.)). In Phillips v. Randolph, however, all three of the Kirtland factors weighed in favor of denying the defendant’s motion for relief from the default judgment. As discussed above, a failure to demonstrate that one or both of the second and third Kirtland factors supports the granting of relief from a default judgment is not necessarily fatal to a motion for such relief. Further, in the case now before us, the motion for relief from the default judgment was filed within a matter of days after the default judgment was entered, and there is nothing in the record to suggest that the husband will, in fact, be substantially prejudiced by having to litigate the ease on its merits.

As already noted, our Supreme Court has referred to the Kirtland analysis as a process in which the trial court is called upon to “balance the equities,” 524 So.2d at 605, and has emphasized the paramount importance of affording litigants an opportunity to attain an adjudication on the merits:

“Article I, §§ 6 and 13, Alabama Constitution of 1901, by guaranteeing the due process rights of citizens, and Article I, § 10, by holding inviolate a person’s right to defend himself in a civil action to which he is a party, elucidate[ ] this state’s commitment to protect an individual’s right to attain an adjudication on the merits and to afford litigants an opportunity to defend. We, therefore, emphatically hold that a trial court, in determining whether to grant or to deny a motion to set aside a default judgment, should exercise its broad discretionary powers with liberality and should balance the equities of the case with a strong bias toward allowing the defendant to have his day in court.”

Kirtland, 524 So.2d at 605 (emphasis added).

In Ex parte Gilliam, 720 So.2d at 906, the Supreme Court found fault with the nonmovant for not presenting concrete facts indicating that any witnesses had become unavailable or that any evidence had been lost. Also, in Sampson v. Cansler, 726 So.2d 632 (Ala.1998), the Supreme Court indicated its favorable disposition toward a defendant’s motion for relief from a default judgment on the ground that “Ms. Cansler [the nonmovant ] has not argued prejudice except in the form of delay and increased costs.” 726 So.2d at 635. Further, as recently as December of last year, our Supreme Court stated that “common sense dictates that a plaintiff [the nonmovant] is usually in a far better position to know what prejudice might befall him from the delay, and more importantly how substantial that prejudice would be,” even as it indicated that the Court’s holding in Phillips v. Randolph, 828 So.2d 269, required an initial showing by the movant. Royal Ins. Co. of America v. Crowne Invs., Inc., 903 So.2d 802, 811 (Ala.2004). While this court’s holding in Philyaw was to the same effect as the Supreme Court’s holding in Phillips v. Randolph, both Phillips and Philyaw were cases in which the analysis of all three Kirtland factors weighed against granting relief from the default judgment.

We are aware of no case in which this court or our Supreme Court has held that a “consideration” of the Kirtland factors and the necessary “balancing] of the equities” made it appropriate to deny relief from a default judgment under circumstances such as those present here. The meritorious-defense factor weighed in favor of such relief, and there is at least a genuine issue as to whether the culpable-conduct factor did also. Neither the record nor the nonmovant suggests that there would be substantial prejudice if relief were granted. Nor do we believe it appropriate to interpret Phillips as supporting a denial of relief under such circumstances, particularly in a case such as this, where so much (the proper custody of a child) is at stake and the record reflects that the defaulting party moved so promptly for relief.

As noted at the outset, a trial court’s discretion in deciding whether to grant or to deny a motion for relief from a default judgment is not absolute. In reviewing trial-court decisions denying relief from default judgments, we must take care not to abdicate our responsibility as an appellate court to ensure that trial courts, within the discretion afforded them, are fairly balancing the equities in such cases and preserving the “strong bias” in favor of deciding cases on their merits.

Applying the foregoing principles, we conclude that the trial court erred in this particular case in denying the wife’s motion for relief from the default judgment. Accordingly, that judgment is reversed, and the cause is remanded to the trial court for further proceedings.

ON REHEARING EX MERO MOTU: OPINION OF NOVEMBER 4, 2005, WITHDRAWN; OPINION SUBSTITUTED; REVERSED AND REMANDED.

PITTMAN, J., concurs.

BRYAN, J., concurs specially.

CRAWLEY, P.J., concurs in the rationale in part and concurs in the result, with writing.

THOMPSON, J., dissents, without writing.

BRYAN, Judge,

concurring specially.

Upon further reflection, and consideration of the application for rehearing, I am now persuaded by the main opinion that a failure to demonstrate the second Kirtland factor is not the shattering blow to the wife’s motion for relief from the default judgment, especially given the specific facts of this case. The main opinion has convinced me that where the ultimate issue to be decided is glaringly substantial to all parties involved, e.g., the custody of a minor child, the “balance of equities” tilts in favor of relief from the default judgment.

CRAWLEY, Presiding Judge,

concurring in the rationale in part and concurring in the result.

I write specially to discuss an issue affecting the third Kirtland factor: whether the default judgment was a result of the defendant’s own culpable conduct.

The defendant failed to utilize the Attorney Calendar- Conflict Resolution Order which our Supreme Court adopted in 1990 — 15 years ago! This flagrant disrespect for court rules is culpable conduct weighing strongly against the defendant’s motion for relief, except in a case such as this involving custody of a minor child.

      . Rule 55(e), Ala. R. Civ. P., provides that ”[n]o judgment by default shall be entered against minors, incompetents, or parties to an action for divorce or annulment of marriage unless the claimant establishes the party’s claim or right to relief by evidence.”

      . While a failure to answer a complaint is a common basis for the entry of a default, a default may be entered on other grounds, including, as in the present case, a failure to appear at trial. See Rule 55(a) (providing for entry of a default when a party fails to "otherwise defend”); Rule 55(b)(1) (referring to the entry of a default for a party’s "failure to appear”); Triple D Trucking, Inc. v. Tri Sands, Inc., 840 So.2d 869 (Ala.2002) (note 2 and accompanying text). Where a default is entered because of the failure of the defendant to answer the complaint, there would naturally be a focus on the defendant's motion for relief from the default judgment in the effort to find an articulation of a meritorious defense. See, e.g., Rudolph v. Philyaw, 909 So.2d 200 (Ala.Civ.App.2005).

      . In particular, we note that the first Kirtland factor' — the meritorious-defense factor— weighed against the granting of relief in both Phillips and Philyaw. Kirtland emphasized the first factor as a "threshold prerequisite” to the granting of relief. 524 So.2d at 605.