Chino Commercial Bank, N.A. v. Peters
190 Cal. App. 4th 1163
| Cal. Ct. App. | 2010Background
- Peters, tied to a Nigerian-style e-mail scam, caused Faux to deposit three altered checks totaling $808,988.90; the Bank then wired $468,000 in transfers based on those deposits, which later bounced when the checks were dishonored.
- Peters and Charlnoes were authorized signers on Faux’s account; Peters administered the arrangement with a 15% fee.
- The Bank sought a right to attach Peters’ property for an overdraft; Peters contested the Bank’s burden of proof on negligence.
- The Bank argued its liability was governed by the UCC, which preempts common law negligence theories, and that it acted with ordinary care in accepting the checks and in making wire transfers.
- The trial court granted the right to attach against Peters, finding the Bank’s evidence supported probable validity of its claim; it denied attachment against Charlnoes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether UCC governs Bank’s liability for check acceptance. | Peters argues Bank could be negligent under common law. | Bank argues UCC provisions preempt common law in this area. | Yes; UCC governs check acceptance, precluding common law negligence liability. |
| Whether Bank can be liable for the wire transfers. | Peters claims Bank negligence in executing transfers. | Article 4A limits liability for receiving banks on transfers; not liable for mere acceptance. | Bank not liable for negligence in accepting a properly payable wire transfer under Article 4A. |
| Whether Bank met its burden to show lack of negligence in accepting altered checks. | Peters contends Bank failed to prove it acted with ordinary care. | Bank presented procedures consistent with national standards; alterations not detectable at deposit. | Bank properly charged back; evidence supports lack of negligence. |
Key Cases Cited
- Pac. Coast Cheese, Inc. v. Sec.-First Nat. Bk., 45 Cal.2d 75, 286 P.2d 353 ((1955)) (overdraft recoveries and negligence burdens under older California law)
- Basch v. Bank of America, 22 Cal.2d 316, 139 P.2d 1 ((1943)) (historical negligence standards for bank liability)
- Glassell Dev. Co. v. Citizens’ Nat. Bank, 191 Cal. 375, 216 P. 1012 ((1923)) (early contract-based recovery principles for banks)
- Holcomb v. Wells Fargo Bank, N.A., 155 Cal.App.4th 490, 66 Cal.Rptr.3d 142 ((2007)) (bank liability standards regarding reliance and ordinary care)
- Joffe v. United California Bank, 141 Cal.App.3d 541, 190 Cal.Rptr. 443 ((1983)) (article 4A and negligent payment framework; bank liability under 4A-401/402)
- Zengen, Inc. v. Comerica Bank, 41 Cal.4th 239 ((2007)) (exclusive scope of Article 4A and boundaries with common law)
- Sheerbonnet, Ltd. v. American Express Bank, Ltd., 951 F. Supp. 403 ((S.D.N.Y. 1995)) (bank liability for acceptance discussed in 4A context)
- Crocker National Bank v. City and County of San Francisco, 49 Cal.3d 881, 265 Cal. Rptr. 1, 784 P.2d 1060 ((1989)) (standards for appellate review of probable validity in attachment)