*1 Dist., Div. Three. Apr. 2009.] A120378. First [No. BURNS, P. Plaintiff and Appellant,
BRIAN GROUP, INC., Defendant Respondent. THE NEIMAN MARCUS *4 Counsel
Zelle, Hofmann, Voelbel, Gette, & Mason Daniel S. Mason and Patrick B. for Plaintiff Clayton and Appellant. West, Hobart,
Tucker Ellis & Jean A. Rebecca A. Lefler and Irene Keyse-Walker Defendant and Respondent.
Opinion
JENKINS, Plaintiff Brian P. Bums from a appeals judgment favor of J. defendant (Neiman The Neiman Marcus), Marcus Inc. Group, after its general demurrer to the second amended was sustained without leave to complaint amend. Plaintiff seeks to recover from an damages arising employee’s fraudulent use of checks drawn on his account to make personal checking on the payments Neiman Marcus store credit card employee’s accounts. Plaintiff that he has argues alleged sufficient facts the reinstatement requiring or, alternative, of his causes of action for common law in the Code, cause of action statutory California Uniform Commercial pursuant We accounting. for an and a related (b),1 request subdivision section and, affirm. accordingly, disagree BACKGROUND2 AND PROCEDURAL
FACTUAL alleges complaint, plaintiff in the operative set forth fully As more throughout and secretary, as plaintiffs was employed Carol Young3 $75,000. the sum of exceeded never salary her base time relevant period, with accounts credit card several Young and opened Between 1995 2006, Young spent approxi- prior In the three-year period Neiman Marcus. card, credit Marcus, on “the balance and $1 [one] million at Neiman mately $242,000.” of her “As result 10, 2006, and was in excess January as of into volume, entree Marcus’s] was offered [Young] [Neiman purchasing of- incentive loyalty program rewards INCIRCLE® program—a exclusive custom- highest and spending most frequent fered only Marcus’s] [Neiman associate, or a personal sales designated was also ers.” Young provided tied to the volume price was allegedly whose compensation shopper, her clients. the merchandise purchased her from salary “did not earn a sufficient
According plaintiff, to her by limits the excessive credit provided [Neiman to merit employment known that plaintiff’s to have alleged Young’s shopper Marcus].” $75,000, were Young’s huge purchases than and that annual was less salary justify support. Despite her condition would well what financial beyond *5 and encouraged contacted “repeatedly this knowledge, personal shopper her various Marcus] to make excessive with [Young] purchases [Neiman cards.” negli- rise to plaintiff’s the transactions giving describes complaint 1995, . . . [Young] began as early claim follows. at least as “Starting as
gence means of unauthorized by for all her at purchases Marcus] paying [Neiman would [Young] account of [plaintiff]. drawn on the bank checks basis, checks clearly and forged fraudulent deliver on a regular personally checking Bank of California on Union identified as drawn being [plaintiff’s at the credit card bills down her various account to pay [Neiman Marcus] store.”4 San Franсisco Center Marcus’s] Customer Service [Neiman Code. Uniform Commercial statutory are to the California unspecified references Further demurrer, alleged as in the set forth the facts was resolved we Because action (Shvarts Group, Budget Inc. complaint, operative pleading. second amended 722].) Cal.App.4th 1156 [97 in the she is so identified complaint, initial but by name in the Young was not identified complaint. second amended Young’s conduct: following examples “[0]n proffered the complaint, plaintiff In $13,898.72 5, 2006, on her [Neiman in the amount of January [Young] payment made a Neiman Marcus fraudulent and checks for and forged payment received funds from plaintiff’s account. personal checking
According times, plaintiff, “Young various employed least three different methods of fraudulently presenting [p]laintiff’s for payment of her personal credit card (a) accounts: [Neiman theft of Marcus] [f] checks and the [plaintiff’s thereon; forging [plaintiff’s signature (b) by theft of whatsoever; [plaintiff’s checks with no signature (c) and theft of checks with [p]laintiff’s [plaintiff’s signature presumed by to be for plaintiff towards payment account, own [plaintiff’s Marcus credit card [Neiman store] but which was diverted for by [Young] towards [Young’s] personal credit card account(s).” [Neiman Marcus]
Plaintiff that he was not alleged aware of Young’s unauthorized activity the following reasons. received [Young] bank state- [plaintiff’s “[W]hen ments, she would destroy the checks reflecting made to her рayments credit card accounts. She would [Neiman then alter Marcus] [plaintiff’s account ledger records to reflect made to third payments other than parties to account for the [Neiman Plaintiff did not missing money.” Marcus] learn of the actions of Neiman Marcus until 2006. April The second action, amended contains four complaint causes of two of only .5 which are at issue on this The first cause of action appeal is labeled Care, “Negligence—Breach of Ordinary Commercial Code 3103(a)(7) and §§ 3406(b).” The second cause of action is labeled “Negligence—Breach Care, Ordinary Commercial Code 3103(a)(7) 3405(b).” Despite §§ reference to the California Uniform Commercial Code sections in the titles of action, the two causes of both are based on a claim of common law negligence. action,
As to both causes of alleges “with respect business of in which luxury retailing there engaged, [Neiman Marcus] reasonable commercial prevailing, standard to observe the practice taking *6 additional when with steps so to third-party prevent account, unauthorized use of the and to third-party’s checking prevent harm that would result to the third from such unauthorized activity.” [plaintiff’s] personal upon signature account with check . . . Marcus] which his had been forged. Subsequently, [Young] returned to January San Francisco store on [Neiman Marcus’s] 6, 2006, and made another payment on her credit card account in the [Neiman amount Marcus] $9,486.85 using forged bearing another [plaintiff’s] check name. . . .” 5 The complaint alleges second amended also action causes of for conversion and for an accounting. appeal, plaintiff On not seek does to reinstate his conversion cause of action and acknowledges accounting that the request dependent sufficiency for an on the of the negligence claims. above, with when confronted as set forth “Based on all the circumstances her massive Marcus] down [Young] [Neiman unusual habit of paying checks drawn on personal credit card debt in person, third-party to care ordinary owed a account [p]laintiff, Marcus] [Neiman actions, to take such to ascertain whether was authorized [Young] [p]laintiff or, least, having of [Young’s] practice.” “[D]espite at the to alert [p]laintiff it, so, no one in and belief a requiring to do and information policy upon (i) she [Young]: why Center ever asked Customer Service [Neiman Marcus’s] had (ii) authority checks and/or whether she was with paying [plaintiff’s] Further, no one from with funds. make to her account [plaintiff’s] payments had [Young] to ascertain whether ever contacted [plaintiff] [Neiman Marcus] drawn credit card account with checks her authority pay [Neiman Marcus] even alerted that such . . . account or checking [plaintiff] on his personal account.” According were made from his being checking personal payments known, knew, or actеd with reckless Neiman Marcus should have to plaintiff, authorized to her credit of facts that was not disregard showing Young pay account because checking card bills with checks drawn on plaintiff’s personal that the store that was amounts Young charging large monetary knew income, failed to ask Young exceeded her and the store’s monthly employees checks and whether she had her bills with authority pay plaintiff’s personal failed to alert his checks to her Young pay plaintiff using to exercise credit card bills. “As a direct result of failure [Neiman Marcus’s] such care found in the retail in circumstances degree ordinary industry card as these with and of credit respect acceptance processing as well as failure to follow its own corporate payments, [Neiman Marcus’s] with on credit card accounts using third-party procedure respect payment checks, care in taking failed to observe ordinary [Neiman Marcus] checks,” $100,000.6 in a loss to resulting plaintiff exceeding amended
In
Neiman Marcus’s
demurrer
to the second
sustaining
general
“The
first cause
trial court ruled as follows:
complaint,
[demurrer
the]
Code
of action for
under
Commercial
[California Uniform]
amend. The
3103(a)(7)
3406(b)
and
is sustained without
leave to
Section[s]
does
3406(b)
text and official comments for Section
make it clear that section
action,
not create a
but allows for a defense of comparative
cause
action,
(a)(7)
citing
аnd
Under
cause
to sections
subdivision
first
(b),
sought
acceptance
Marcus’s
of checks
plaintiff
subdivision
to recover
for Neiman
forging
signature
“by
[plaintiff’s
[plaintiff’s
checks and the
acquired
theft of
thereto,
signature whatsoever.” Under the second
[plaintiff’s
theft of
checks with no
action,
(b),
(a)(7),
citing
subdivision
cause of
to sections
subdivision
Young’s
involving
on
sought
acceptance
payments
for Neiman Marcus’s
of checks
to recover
signature presumed
“by
[plaintiff’s
[plaintiff’s
card
theft of
checks with
credit
accounts
account, but which
credit card
[pjlaintiff
to be for
toward
own
[his]
[Neiman Marcus]
*7
credit
by [Young]
[Young’s] personal
toward
payment
[Neiman Marcus]
diverted
for
w[ere]
account(s).”
card
3103(a)(7)
care,
Section
negligence.
the definition for
provides
but
ordinary
this section does not create a
relies on Sun 'N
claim. Plaintiff
negligence
Sand[, Inc.
v. United
Bank
(1978)
DISCUSSION n On that he has appeal, plaintiff argues alleged cause of action for common law negligence is not barred the California Uniform Commercial Code. he asserts if he has no law Alternatively, common claim, he has nevertheless alleged sufficient facts to support cause of action (b), under section subdivision for breach of the care.” We conclude that are “ordinary arguments unavailing. plaintiffs’ Our review of the trial court’s demurrer is de ruling sustaining general novo. We evaluate the it independently construing liberally, giving complaint, whole, it a reasonable it as a reading its interpretation, viewing parts (Blank v. Kirwan context. 39 Cal.3d Cal.Rptr. 58].) 703 P.2d as true all material facts we Treating properly pleaded, determine de novo whether the factual of the are allegations complaint a cause of action under of the state adequate any legаl theory, regardless (Id. title under the factual which basis relief is stated. Because
487 a further he should be allowed opportunity does not contend we review whether the factual in his latest allegations complaint, amend demurrer was well taken.7 Does Not Lie in This Case
A. Common Law Claim Negligence “ established is conduct which falls below the standard ‘[N]egligence law for the of others.’ one is by ‘Every responsible, protection [Citation.] acts, for an occasioned to injury for the result of his willful but also only his care or skill in the ordinary management another his want has, or want of or so far as the latter willfully property person, except 1714, care, Code], ([Civ. himself.’ ordinary brought injury upon § 370, (Bily v. Arthur & Co. (a).)” (1992) 3 Cal.4th subd. 396-397 [11 51, (Bily).) P.2d Related to the 834 Cal.Rptr.2d concept 745] that a not liable for the actions “ordinarily is tort law is negligence harm, of another and under no another from in the absence is protect Community v. Grace (Nally or control.” special relationship custody 948].) Church (1988) 47 Cal.3d 763 P.2d 293 Cal.Rptr. [253 is the “The threshold element of a cause of action for negligence existence of a to use due care toward an interest of another that enjoys unintentional invasion. Whether this legal against protection [Citations.] essential to a cause of action has been satisfied in prerequisite (Bily, supra, case of law to be resolved court.” particular question 3 Cal.4th at p. “California courts have of universal explicitly rejected concept ‘ “ ‘It law must not be into our for
duty. forgotten “duty” got very then to be a delusion . . . dangerous what was feared purpose combatting viz., redress for all foreseeable law countenance might legal ” ’ Instead, a new or wrong’ harm.’ whether to recognize ‘legal [Citation.] determi ‘tort’ is often factors. In these governed by making policy [Citation.] nations, both the courts and the must Legislature weigh concepts ‘public loss, inherent measuring ‘floodgates’ as well as problems policy,’ concerns, (The Mega to the element foreseeability.” in addition traditional and Health Ins. Court Superior Co. Cal.App.4th Life 399].) it legal duty In whether determining appropriate impose redress, Christian Rowland v. Cal.2d which law will authorize (Rowland), 443 P.2d “enumerates a number of Cal.Rptr. only leave to eliminate references complaint Plaintiff seeks to amend latest action, not to add additional factual California Uniform Commercial Code in the first cause of determination, allegations. light request to amend is moot. In of our
considerations . . . that have been taken into account by courts-in various *9 . contexts . . : ‘the major are the harm the foreseeability to [considerations] of the of that the plaintiff, degree certainty suffered plaintiff injury, closeness suffered, of the connection between the defendant’s conduct and the injury conduct, the moral blame attached to the defendant’s of policy preventing harm, future the extent of the burden to defendant and to consequences of а community to exercise care with imposing duty resulting liability breach, cost, and the of insurance for the availability, prevalence risk ” (Ballard 564, 572, involved.’ Uribe v. 41 Cal.3d fn. 6 Cal.Rptr. Rowland, (italics 715 P.2d added Ballard) (Ballard), by quoting 113.) Cal.2d at supra, 69 “The of a kind of harm foreseeability particular [citation], role in this calculus plays very significant but a court’s task—in not to determining ‘duty’—is decide whether a particular plaintiff’s injury conduct, in foreseeable reasonably light particular defendant’s but rather to evaluate more whether the of generally category conduct negligent at issue is to result in the kind harm sufficiently likely of experienced liability (Ballard, be on the may appropriately negligent imposed party.” 572-573, words, 6.)8 41 Cal.3d at fn. supra, In other pp. “[examin whether a ing legal duty exists and whether a defendant was particular negligent coterminus .... the court’s Fulfilling responsibility [are not] determine if a legal exists consideration and balanc duty necessarily requires of sometimes ing which be irrelevant to the competing public policies may factual determination of whether the conduct fell challenged below the (Adams standard of care.” Fremont prevailing City Cal.App.4th of 196].) law, Guided these well-honed by of tort we with the trial principles agree court that the focus of our of on the analysis duty of third acceptance check, merchant, a retail another credit card account. party pay person’s discuss, For the reasons we will now a consideration of the Rowland factors leads us conclude that a retailer merchant’s of a third acceptance check to another credit card account is not pay person’s sufficiently likely result in the kind of harm that so that should liability plaintiff experienced be on in Marcus this case. appropriately imposed Neiman of harm to of foreseeability degree certainty plaintiff, plaintiff harm, would suffer and the connection between Neiman Marcus’s conduct court, Ballard foreseeability of harm in explained concept As further risk determining “ imposed distinguished concept whether a should be is to be from the focused, settings” by a of fact. ‘foreseeability’ fact-specific in two more to be resolved trier “First, (Ballard, may consider 41 Cal.3d fn. [trier fact] whether, fact, foreseeability injury determining particular defendant’s likelihood or Second, foreseeability may be to the negligent place. conduct was in the first relevant [trier legal proximate whether the defendant’s was a or cause determination of fact’s] (Ibid) plaintiff’s injury.” suffered, and the all in favor of not on injury weigh imposing the retail merchant in this case. Plaintiff contends that Neiman Marcus owed him before it his checks because the following inquire accepted circumstances should have alerted the store to a fraud: made Young potential income; numerous and limited relation to her known frequent purchases Young’s encouraged financial рersonal shopper purchases beyond Young’s means; store, delivered on sometimes personally successive days, and the checks were drawn on bank plaintiff’s personal account, But, and not a account. contention—that corporate “ ” Neiman Marcus’s conduct of ‘red occasioned ignoring flags’ Young’s *10 unusual conduct in frames the relevant using plaintiff’s checks—improperly the of inquiry regarding whether a of exists. question legal duty inquiry conduct, Plaintiff’s factual Neiman allegations regarding Marcus’s which are checks, extrinsic to the of the concern the presentation fact-specific concept of that would be considered a foreseeability trier of fact a determina- by after that, tion a a by court that of duty exists.9 His also inquiry argument ignores him, for Neiman Marcus to foresee to it would injury have to foresee that any unauthorized checks “would undetected for go that the drawer long enough bank could to the escape for of those checks. responsibility” plaintiff payment (Simmons v. Lennon 1064].) A.2d To Md.App. accept plaintiff’s argument would stretch the of of harm in foreseeability concept determining duty beyond recognition.
Even assuming Rowland foreseeability of harm factor in deter mining includes the duty properly “red flags” alleged the other by plaintiff, Rowland factors militate against a new of imposing duty on the retail inquiry merchant. of Specifically, future harm and the burden to policy preventing the defendant and do in of consequences community weigh favor a imposing in this case. of the internal inquiry Regardless policies checks, that a merchant have in to might third there are place verify party 9 Indeed, dissenting colleague our concedes “suggest as much because he does not under all inquiry circumstances a upon presentation arises of a party third check.” (Dis. Instead, opn., post, 503.) argues, he “That presented by the check is one who is neither payee maker nor the indeed important is one factor that must be considered. However, alleges the amended complaint numerous additional circumstances that a reasonable fact finder could find would alert a reasonable person right to the likelihood that had no (Ibid.) apply party third to personal numerating her account.” After the additional circumstances, “[wjhether he then concludes that these circumstances were sufficient a to cause person question Young’s reasonable right apply plaintiff’s payment checks to the obligations of her own question is a of fact that plaintiff jury is entitled to have a determine.” (Ibid., However, omitted.) argument fn. misconstrues our task—as mandated Ballard— particular determining duty, are not injury we to decide “whether a (Ballard, particular reasonably light foreseeable in defendant’s conduct.” 41 Cal.3d Rather, fn. our exists must legal duty determination of whether a inquiry precede any jury liability determination as to Neiman Mаrcus’s for a breach of that duty. a retail merchant with on
practical problems
imposing
inquiry
before he can
for
services. Because
accept
person’s payment
goods
retail merchant could not
to him
told
rely upon anything
check,
the third
the usual
tendering
wrongdoer—in
party
presumed
situation,
he
a retail merchant—would have to
his business
time
every
stop
independent
received
a check in order to make an
of the drawer.
such
inquiry
check,
the retail merchant could
locate the drawer of the
he
Assuming
readily
so as
would then have to ascertain what would constitute
reasonable inquiry
reach the drawer
to avoid
Would one or two
liability.
attempts
by telephone
sufficient;
be
or would a letter have to be written? The
of this
scope
boundless,
and would
proposed—yet
ill-defined—duty
inquiry
impose
and unwarranted burden on retail merchants
ascertain
significant
of a third
check
time the instrument
any
proffered
veracity
services,
would far outweigh any resulting
which
goods
Gino’s
(See
embezzlement.
benefit
the isolated instance of
detecting
v. Chem. Bank
Capri
1993)
A.D.2d
N.Y.S.2d
(N.Y.App.Div.
(Gino’s Capri).)10
the other Rowland
factors,
has
In
we note
considering
*11
of Young’s
suffered
losses as
great monetary
consequence
apparently
Nevertheless,
of
blame is
not
deserving
Young,
misconduct.
moral
There
no
that Neiman Marcus
allegation
actively partici
Neiman Marcus.
Also, our
embezzlement of funds from plaintiff.
pated
Young’s alleged
оn Neiman
of
invitation to
of
duty
inquiry
rejection
plaintiff’s
impose
of this case
losses
relative
“assigns
Marcus under the circumstances
best able to
liability
of the
allocating
party
responsibility
parties,
153,
v. American
(Hartford
Express
(1989) 74 N.Y.2d
165
them.”
prevent
(Hartford).)
573,
The retail merchant’s
N.Y.S.2d
Finally, reject that Neiman Marcus has a plaintiff’s argument Bank, ’n Sun Inc. v. United based on inquiry 21 Cal.3d California (Sun Bank, Sand), ’n v. United and its progeny, including Joffe California supra, (Joffe), E. F. Hutton & Co. National City Cal.App.3d *12 Bank (1983) 149 67-68 At issue in Cal.App.3d Cal.Rptr. [196 614]. Sun ’n Sand was “a variation of the theme ... of of recurring rights to recover funds a employer embezzled faithless employee through (21 omitted.) checks.” Cal.3d at citation In manipulation company p. Sand, Sun ’n the court cause of action upheld bank employer’s against aon theory negligence, the bank a circum imposing upon “narrowly checks, amount, scribed” “activated when duty only not in are insignificant drawn to the order of a bank and are payable to the bank presented payee a third (Id. for at party seeking negotiate his own benefit.” 695.) 11 duty imposes upon discovering “Section 4406 a a customer to act and promptly reporting forgeries and alterations If the customer fails to fulfill this then [of checks]. [his] liability one-year may bank is relieved from absolute period and for an initial the loss be only imposed upon negligent year the bank if it was in the matter. one After the statute bars asserting forgery customer from against a or alteration bank unless it has been earlier [his] (Roy Supply, supra, 1065.) reported Cal.App.4th discovered and to the bank.” at p. 39
492 in Sun ’n here, to our there was no discemable
Significant analysis checks, bank, action in to be allowing reason for bank’s payable case, account. In we are into the this employee’s personal deposited checks, to Neiman with Neiman Marcus’s оf third acceptance payable Marcus, debt to the for the in satisfaction of a customer’s store legitimate of the The circumstances attendant submission goods. purchase in Sun ’n Sand. from checks here are those clearly distinguishable present however, that the checks diverted were to by Young Plaintiff some of alleges, own account. to our According dissenting colleague, be credited his store customer Neiman could have determined that was its readily Marcus post, (Dis. account. at and the holder of a Neiman Marcus charge opn., However, there is no contention that when Young proffered on the of her accounts there anything checks for appearing also had lead the store cashier to whether plaintiff checks that would question ’n Sand Sun Thus, extend Neiman store account. we shall not Marcus facts, and we invitation accordingly, reject its beyond specific Sand,12 Sun ’n Marcus based Neiman upon impose upon lie, cause of action does In of our determination that light negligence alternative that a argument we do not reach Neiman Marcus’s Code. the California Uniform Commercial cause of action is preempted Create a Cause Action (b), Subdivision Does Not Section B. Altered or Check Fraudulently Forged in Favor Drawer or who altered fraudulently 3407 allows a person pays Section value, an instrument faith good instrument or takes such forged the instrument accord or to enforce forgery, notice of the alteration without of the obligor terms.13 “If negligence to the instrument’s ing original 12 Kane, Cal.Rptr.2d Neither Karen Inc. v. Bank America Cal.App.4th 67 Arnett, Inc. (Kane) Design Application, Ltd. v. & & nor 712] Hoefer Software (Software Design) supports the extension of Cal.App.4th in both Kane contrary, ’n alleged in this case. To the Sun Sand to the facts found ’n here, Sun Sand courts, analysis apply declined to Design, with our consistent Software 1200-1202; Design, (Kane, supra, Cal.App.4th pp. them. on the records before Software 479-481.) Cal.App.4th pp. *13 (1) change an instrument “(a) unauthorized in ‘Alteration’ means an Section 3407 reads: (2) an unauthorized addition any respect obligation party, the of a or modify in purports that relating obligation of to the change incomplete to an instrument or numbers or other of words (c), fraudulently made [<¡[] alteration (b) subdivision Except provided as party. a is assents or by the alteration unless discharges obligation whose is affected person discharges and the party, asserting alteration. No other alteration from the precluded (c) bank or drawee original payor terms. A may according to its [][] be enforced instrument value, good taking it faith person or a fraudulently altered instrument paying (1) according alteration, rights to the instrument may respect enforce with of the without notice alteration, contributes to an . . . substantially gives section [340614] holder ... the alternative to treat the altered instrument it had right though as com., beеn (U. issued in altered form.” Code 23A Ann. Com. West’s pt. 3406, Thus, 3406, (2002 ed.) Cal. Com. Code foil. section together § 3407, with section outlines the rights enforce and collect on altered or forged checks while whose contributed to precluding obligor the alteration or from forgery the alteration or as a defense asserting forgery to payment.
Plaintiff contends (b) subdivision of section 3406 creates a cause of action statutory against Neiman Marcus. We “In the disagree. statutes, construction of goal of the court is to ascertain and primary give effect to the intent of the The Legislature. court looks first to the [Citations.] statute; language if clear and the court unambiguous, will effect to give its plain statute, Where the meaning. court must construe the it [Citations.] [][] ‘ “turns first to the words themselves for the answer.” [Citation.]’ [Citation.] The usual, words used and, should be their given ordinary if meanings each word and possible, should be phrase given significance. [Citations.] context, words used harmonized, ‘must be construed in and statutes must be ” other, both and with each internally to the extent (Young Gannon v. possible.’ (2002) 97 Cal.App.4th 187].) “Literal construction should not if it prevail is contrary intent in the legislative apparent statute. The letter, will, intent over the and the prevails letter if be so possible, read as to conform to the of the act. An spirit interpretation [Citations.] renders related [citation]; must be provisions nugatory avoided each sentence must be read not in isolation but in the of the light scheme statutory [citation]; аnd if a statute is amenable to two alternative interpretations, one that leads to the more reasonable result will be followed [citation].” (Lungren Deukmejian Cal.3d Cal.Rptr. 299].) 755 P.2d read,
We conclude that when section in its entirety, carefully itself, statutory language (b), indicates that subdivision does not create a contention, cause of action. Contrary (b) subdivision cannot be terms, original to its or in the case incomplete of an instrument altered unauthorized completion, according to completed.” its terms as (a) Section 3406 reads: A person ordinary whose failure to “[ft] exercise care contributes to an alteration making of an instrument or to forged signature on an instrument who, precluded asserting faith, from forgery against the alteration or the person good pays collection, the instrument (b) (a), or takes it for value or for Under person subdivision if the [ft] asserting preclusion ordinary fails to exercise in paying taking care or the instrument and loss, that failure contributes the loss is allocated the person precluded between and the person asserting the preclusion according to the extent to which the failure of each to exercise loss, ordinary (c) (a), care contributed Under subdivision proving burden of [ft] ordinary failure to person asserting exercise care is on the the preclusion. Under subdivi (b), proving sion the burden of ordinary failure to exercise care is on the precluded.” *14 isolation, (a). read in but be read in with subdivision As conjunction must noted, (a) a takes a check the to treat a gives subdivision who person right altered or check it is written if the drawer “contributes fraudulently forged as to the alteration of an or to the on an making forged instrument signature 3406, com., (§ (a); instrument.” see Com. Code 23A 2 West’s subd. U. pt. Code, Ann. Cal. foil. In the absence of a claim Com. § (a) (b) under 3406 is subdivision of section subsection section inapplicable. the Court the acknowledges Virginia,
Plaintiff
that
analyzing
Supreme
8.3A-406,
Commercial Code
as
as sections
Virginia Uniform
sections
well
(its
worded
essentially identically
8.3A-404
versions
our §§
a
a
3406)
to
that a drawer of
check has
recognize
declined
of action under section 8.3A-406.
statutory
(Halifax Corporation
right
Wachovia Bank
Contrary Halifax often on well-established of statutory interpretation, applied principles Murillo v. Fleetwood Inc. Enterprises, (1998) 17 (See, California courts. e.g., In re Chantal S. 985, 993, 858]; Cal.4th P.2d Cal.Rptr.2d [73 1075].) 13 Cal.4th 206-208 P.2d Cal.Rptr.2d Goehring University Chapman Cal.App.4th Goehring, 39], cited In at issue by distinguishable. statute plaintiff, that a school shall make a full refund of all fees students if provided paid did school the student with a disclosure statement. provide required (Id. 377.) at The Court of held that because the p. Legislature Appeal intended to bestow students or former students with indi- unquestionably statute, vidual claims the refund in the it must have monetary language (Id. intended to them a give of action to such claims. private right pursue (Id. Otherwise, 378.) the refund would be rendered provision nugatory. We conclude that we are by noting mindful has sustained plaintiff substantial losses as a of the fraud his over consequence employee But, number of we must and our years. reject arguments plaintiff and dissenting colleague impose inquiry resulting liability stated, breach on Neiman Marcus in this case. As we have of this scope boundless, and would proposed—yet ill-defined—duty inquiry impose and significant unwarranted burden on merchants to ascertain the retail services, of third veracity checks received for goods which burden would far benefit outweigh any resulting detecting isolated instance of fraud.
DISPOSITION is affirmed. Defendant is awarded costs on judgment appeal. McGuiness, J.,P. concurred.
POLLAK, J., dissent. I with the Dissenting. agree majority I respectfully the amended under does not state a cause of action complaint (b). California How- Uniform Commercial Code section subdivision ever, has a cause of action for common law alleged adequately I with the distinction the
negligence.
agree
majority recognizes between
broad
that is relevant
to establish the existence of a
foreseeability
establish a breach of that
or
factually
foreseeability
may
specific
causation, but the distinction leads to
conclusion. The
exactly
opposite
*16
facts here
show that Neiman Marcus committed no breach of
may eventually
affirmative
its
law
or that
claim
common
is defeated
duty,
by
defenses such as
but
no
basis
negligence,
they
comparative
provide
principled
for
the existence of the
that our
Court
denying
duty
recognized
Supreme
Sand,
Sun ’n
Inc. v. United
Bank
(1978)
Plaintiff that when alleges Young repeatedly presented account checking with checks in amounts drawn on large plaintiff’s personal Marcus, Young’s obliga- made to Neiman personal payable accounts, card Neiman Marcus owed plaintiff tions on her credit checks her own against was authorized to whether inquire apply ’n In Sun the checks for purpose. beforе obligations accepting 694-695, “duty the court a limited recognized 21 Cal.3d at pages case, In that factual circumstance. employee in a similar inquiry” for small sums made payable on checks signatures obtained authorized The her bank account. (UCB) California Bank drawn on employer’s United Upon the sums increasing payable. then altered the employee checks, of the checks of the altered UCB permitted proceeds presentation account maintained at UCB. to be into the deposited employee’s personal discovered, common law the fraud sued UCB for When was employer of care in asserted that UCB had breached its negligence. employer be in the checks made to the bank to deposited permitting payable nor the drawee of the checks. account of a who was neither drawer party (Id. the Sun ’n Sand court factors, Rowland Applying concluded that “an a third to divert the check proceeds attempt than the drawn to the order of a bank to the benefit of one other payable and that “Sun ’n drawer or drawee suggests possible misappropriation” that UCB sufficiently Sand’s define circumstances allegations suspicious ’n Sand’s should have been alerted to risk that Sun employee UCB could have a fraud. reasonable By making inquiries, perpetrating *17 (Id. at discovered the fraudulent scheme and its success.” prevented 694-695.) The court that the it was duty recognizing, though pp. emphasized circumscribed,” checks, is activated “when not in “narrowly insignificant amount, are drawn to the order of a bank and are to the payable presented bank a third the to checks for his own payee party seeking negotiate (Id. 695.) benefit.” at p. in Sun ’n Sand has been in cases. duty recognized applied subsequent v. United Bank
In 541 Cal.App.3d Cal.Rptr. [190 Joffe California 443], the check in was made to an investment question payable company the trust account at Wells Bank. The investment company’s Fargo company did not the check into the trust account named as a but deposit payee, bank, it into its own account at another the Bank of America. The deposited sued Bank of America for on the plaintiffs negligence. Relying duty recog- nized in Sun ’n the court held that these circumstances—a “[u]nder amount, escrow, trust, check for a an or substantial to or similar payable indicia, bank, at entity another with on the face of the check inadequate regarding authorized to instrument—. . . representative negotiate risk to the drawer is foreseeable to on a sufficiently duty impose depositary bank ‘not to inherent’ in an ignore danger signals attempted negotiation (Id. 556.) a third at party.” p. in E. F Hutton & Co. v. National Bank City
Similarly, 614], an endorsed and fraudulently Cal.App.3d Cal.Rptr. employee to various into his deposited corporate payable payees account. The bank the checks without to any attempt verify accepted indorsements or the to the checks into his own authority employee’s deposit maker of account. The court held that the bank had a duty inquiry checks, in the fact the checks were substantial amounts citing bank, were at another and bore indicia that the to payable payees inadequate (Id. 68.) to them. The court negotiate quoted was authorized employee “ from Sun ’n Sand the admonition that a bank ignore danger ‘cannot inherent There must be negotiation. objective such signals attempted conclude that reasonably indicia from which the bank could In the the check authorized to transact in the manner proposed. presenting ” (Id. 67.) Referring indicia the bank at its at p. absence of such pays peril.’ Bank, v. United decision in intervening Joffe California the E. F Hutton court stated, not “The decision did Cal.App.3d Joffe or cause action to the situation the check limit the where only bank, (149 and neither do we.” checks are drawn to the order of payable Cal.App.3d v. U.S. Bank Nat. Assn. Casey (2005) 127 Cal.App.4th
More recently, 401], reaffirmed the continuing validity the court law, ’n Sun Sand. rule “under California Although affirming general [that] or disclose investigate suspicious a bank owes no nondepositors (id. noted, 1149), the court an account holder” at p. activities on the part one in which a bank has a “California courts have situation recognized In Sun ’n transaction. investigate banking to nondepositors suspicious Sand ... has a ‘minimal’ and the California Court held a bank Supreme checks, circumscribed’ insignificant ‘when ‘narrowly inquiry amount, to the order of a bank and are are drawn payable *18 own the checks for his negotiate bank a third by seeking payee ” v. Centennial Bank (Id. at 1151, 3.) Chazen fn. from Quoting benefit.’ p. 462], 532, another case still (1998) 61 Cal.App.4th Casey continued, ’n of Sun the court acknowledging “ vitality ’n Sand and its progeny ‘Sun be to a subject . . . have held banks to Each case in narrow factual circumstances: nondepositors only care toward check, a a allowing deposit payable the bank’s for liability person involved account, else, under circumstances should into a personal to someone ” at (127 fraud.’ Cal.App.4th bank to the have alerted the possibility Chazen, on to observe that omitted.) In the court went citations fn. p. to other factual the decisions can be applied not clear whether “[i]t us, now before 545.) except at In case (61 Cal.App.4th p. circumstances.” than extends credit rather a retail store that large the fact that defendant a bank, defendant the same: the exactly the circumstances are “allow[ed] account, else, check, into someone payable to deposit person should have alerted that [allegedly] [defendant] under circumstances (Ibid.) of fraud.” the possibility here, Marcus Neiman that it was under no of its contention In support ante, that, (maj. the majority says opn., decisions as on two heavily
relies fact, both recognize In 12), not its position. fn. do suрport p. Kane, Inc. v. In both Karen here majority rejects. confirm the principle Cal.Rptr.2d 712] Bank America 67 Cal.App.4th Inc., Arnett, Ltd. v. & & Design Application, Hoefer Software the check so that checks were presented payee Cal.App.4th and the risk of the face of the instrument from readily fraud was apparent Kane, Karen an employee not foreseeable. In harm to the drawer was checks to issue his by having employer embezzled from money employer the fictitious orders. as Posing fictitious based on falsified purchase payees (67 store. check-cashing cashed the checks at a employee payees, which unaltered checks at “The checks were printed, Cal.App.4th Kane in what and were issued Karen deliberately bore genuine signatures of business. . . . There to even Karen Kane to be the course regular appeared were or that were forged, is no claim that the checks or endorsements funds Kane, Karen albeit selected as the to other than the selected paid payees (Id. 1194—1195, added.) That the checks result of internal fraud.” at italics pp. to cash the checks to be attempting appeared properly payable person (id. ’n rendered the facts dissimilar” to the circumstances in Sun Sand “quite 1200) case. as are to facts they present Likewise, in the name banks into accounts Design, deposited Software that a had from fictitious funds financial аdvisor entity misappropriated and transferred to the banks accounts also in through brokerage plaintiff the name of the fictitious & Ltd. v. entity. (Software Design Application, Arnett, Inc., 480-481.) & The court held supra, 49 Cal.App.4th pp. Hoefer that the banks did not owe of care because there were no circumstances that them on notice of the likelihood of suspicious placed fraud. The court ’n Sun Sand and its distinguished progeny, explaining stemmed in these all from the danger signals triggered cases particular “[t]he checks, circumstances of the endorsements or where the depositors, Here, the check is not the no checks were attempting negotiate payee. Rather, to either bank for funds were into the deposit. deposited *19 accounts which were directed wire transfer. The accounts they by precise at the and of funds wired from the banks were identified intended destination contrast, case, (Ibid.) the . . .” In in the the accounts . brokerage present to Neiman Marcus for of her debt checks Young presented personal were “the accounts to which were directed.”1 they applied precise by distinguishable. cited are also Under The out-of-state authorities Neiman Marcus case, the defendant applicable plaintiff required state laws in each to show example, accepted knowledge a fraudulent check with actual of the fraud or in bad faith. For Coatings Exp. (8th 2006) Watson v. American Travel employer F.3d filed an Cir. Act, which against company action a credit card under Missouri’s Uniform Fiduciaries “ duty inquiring propriety into the of each expressly banks of their common law of ‘relieves] deal fiduciary’ prevents] typically and . . . ‘banks and others who transaction conducted being] fiduciary’s duty breach of absent either with fiduciaries held liable for the [from knowledge” knowledge or of sufficient facts to constitute “bad “actual of breach
The factors that must be considered in the existence of a determining legal Christian, Rowland v. supra, as duty, articulated 69 Cal.2d were ’n Court in Sun Sand. considered Supreme of risk is Foreseeability “ ” Sand, (Sun ’n supra, ‘the chief 695) element’ 21 Cal.3d at and the p. for fraud potential from the face of a check one apparent who presented by is neither its maker nor bank is confronted with an payee. obvious “[T]he when the drawer’s irregularity dishonest such employee negotiate attempts checks for his own benefit. The bank does not have to be vigilant; especially its need read what agent only on the face of the check to be warned appears (Id. that a fraud be in may 696.) at a check from progress.” one p. Accepting who is neither the maker nor creates a payee significant risk of financial harm to the maker if the circumstances are such that a reasonable would person When, that the suspect check is not authorized to do person presenting so. here, as the third сhecks are credited to the account of one had party who no them, it is certain right present suffered and there injury, is a close connection between the unquestionably the checks acceptance and While plaintiff’s injury. other factors also have contributed to the may such injury, as own a matter plaintiffs negligence, of defense does not bear on the analysis while there be no duty. Similarly, normally may check, moral blame in a third one who credits that check to accepting the account of a he should have had no it to person suspected right apply all of the Rowland her own account is not blameless. After considering factors, including future harm and the policy preventing consequences care, to exercise duty Court concluded that a imposing Supreme does arise when a bank is with checks it as the inquiry naming other than the drawer who payee by seeks to check to his apply or her account. bank’s is minimal. We hold obligation simply “[T]he that the bank may not inherent in such an ignore danger signals attempted There must be indicia from negotiation. objective which bank could conclude that the check is authorized to reasonably party presenting (Id. 695-696.) transact the manner at proposed.” pp. Sand,
The bank in Sun ’n here, like Neiman Marcus and the majority claimed that “a would be burdensome excessively inquiry (Sun ’n 695.) therefore should not be at Cal.3d imposed.” p. The Court this contention. “We are not rеjected Supreme explicitly persuaded that commerce will be so in this context that we impeded inquiry should from the fundamental that actors are liable for depart principle ’ ” (Watson Coatings, that under faith.” court noted Missouri law “[m]ere 1041; (Id. are suspicious circumstances” insufficient to show bad faith. see also Hartford *20 Express American [rejecting 74 N.Y.2d N.Y.S.2d 542 N.E.2d against provision claim credit card based on a non-uniform of the Uniform company Virginia showing a bad faith unique requires Commercial Code to New York and that objective might which by subjective knowledge “determined a test of actual rather than an test knowledge”].) involve constructive (Id. 695.) their conduct.” p. occasioned by foreseeable losses reasonably the the allegations further by of the burden is suggested The insignificance in the industry it is both the standard practice amended complaint with a make an when presented Marcus’s to policy inquiry Neiman corporate account. There is no support on a credit card third check for party payment recognizing assertion logic majority’s either in the record or in the his business every would a retail merchant “to stop inquiry require of the time he received a check in order to make an independent inquiry such ante, ’n As Sun Sand pointed omitted.) italics drawer.” (Maj. opn., p. Sand, (Sun ’n out, supra, the circumscribed” and “minimal.” “narrowly 695.) circumstances that 21 Cal.3d at It is the triggered only by presence fraud, which the likelihood of should cause reаsonable person suspect occurrence, not an and then reasonable only steps everyday requires the the the check to it to his or confirm authority person presenting apply documentation or examining her own account. This be met duty may by check, the an the by presenting possibly explanation provided person drawer, after the check in for a brief holding abeyance inquiry period the drawer other means. Whether undoubtedly of its or notifying presentation, the taken are reasonable well become a but that is no may jury steps question, different from what is other case. required any
It well be that there are circumstances under which the may presentation a third check would not raise mind of a reasonable party suspicions But in other fraud circumstances the likelihood of will be person. apparent. Sun ’n Sand and its confirm of a third check to use progeny pay one’s own is not the norm and in some obligations circumstances (Sun ’n be “obvious.” 21 Cal.3d at irregularity may ’n Sand and the Sun reconciliation of the enunciated in proper principle demands of commerce is that when the are such that circumstances of a check who is neither the drawer nor by payee presentation person would cause reasonable question authority presenter benefit, by use check for his or her own inquiry imposed Sun ’n Sand arises. If the circumstances do not rise to such reasonably give there is no such duty.2 suspicions, Sales, Rapids (W.D.Mich. 2002) In Grand Auto Inc. v. MBNAAmerica Bank F.Supp.2d
721, 726, ’n of Sun Sand holding extend the to a situation in which a bank court refused to explained, receives a check in of amounts owed on a credit card account. The court Byron [Leasing distinction between this case and Sun ’N Sand and Allis Chalmers key “The Ctr. St. Bank cases Mich.App. N.W.2d is that the banks in those 837]] actually have alerted the circumstances—a check inspected the checks and should been payable drawn to the order of the bank a drawer not indebted to the bank and employee’s conduct party seeking negotiate a third the check for his own benefit—that words, may circumstances on the face of the checks improper. suspicious have been In other contrast, to its potential pursuant have alerted the banks to the for loss to the drawer. In should examining them. procedure, processed standard without [the bank] [drawer’s] *21 here, in contrast to the situation in Sun ’n
The that majority states opinion Sand, Neiman “we are with Marcus’s of third acceptance party checks, Marcus, to Neiman in satisfaction of a payable customer’s legitimate ante, 492.) debt to the store for the of goods.” at But purchase (Maj. opn., p. does not what is different about a bank a third majority explain accepting check made to itself for to the account of one who is payable deposit not the maker of the check and a retail merchant such check accepting to itself and it to the account of one payable who is not maker depositing of the check. There is as much reason to of the question authority person the check for or her his own account in one situation as presenting deposit in the other. Were the authorized to the check to his or her presenter apply account, own would be in either case. The further deposit “legitimate” statement in the that “there majority is no contention that when opinion, the checks her Young for accounts there was proffered payment anything on the checks that would lead the store cashier to whether appearing question ante, also had a Neiman Marcus store account” at plaintiff (maj. opn., 492), discloses fundamental error in the The whole p. majority’s analysis. Sand, ’n Sun of the holding as well as the claim asserted in the point amended is that when the cashier with complaint, Young personally presented Marcus, checks made to Neiman the fact that was payable Young of the checks was reason to neither the maker nor the whether payee question were intended into her account rather than into an deposit had, have, account that himself have and in fact did at the store. may Neiman Marcus did “not to be need have its especially vigilant; agent only read what on the face of the check to warned that a fraud be be appears may (Sun ’n supra, 21 Cal.3d at The number and size progress.” of the checks and the knowledge making personal shopper’s far her known are additional beyond may means circumstances purchases have reasonable heightened suspicions. which of the Rowland factors that
The does not majority opinion explain Court held militate in favor of in this recognizing Supreme in the situation case of a retail merchant. As apply differently Supreme Thus, any suspicious was not aware of circumstances and could not have [Citation.] [the bank] Sales, (Grand Rapids Auto Inc. v. MBNA America prevented foreseen or harm to [the drawer].” Bank, 726-727, omitted.) The outcome of that case is F.Supp.2d pp. fn. in Sun ’n Sand and the recognized inquiry application with the limited consistent to a financial institution that present here. The case does not involve high without contact with the mechanically processes a volume of checks wrongdoing. presenting suspect the check or reason to majority policy preventing states that “the future harm and the burden to duty of community weigh imposing do not in favor of consequences defendant and ante, defendant, 489.) Except for the burden to discussed inquiry (Maj. opn., in this case.” text, why factors majority explain and the does not how or these other I do not understand discouraging duty. Certainly favors conduct imposing public policy favor of fail to militate in *22 in Sand, crediting conduct in ’n is bank’s] made clear Sun [the Court “[i]t that forms the to drawn with checks payable [itself] embezzler’s account 693.) That conduct 21 Cal.3d (Sun . . . .” ’n basis for relief there difference any as is case. Insofar the same in present is precisely here, the difference Marcus ’n and Neiman in Sun Sand between bank in here. The plaintiff a of duty inquiry reason for recognizing greater provides no and had absolutely of the bank ’n not a Sun Sand was depositor determined, Here, readily Marcus could have it. as Neiman with relationship Marcus account. charge of a Neiman customer and the holder was its plaintiff sizable checks with does not when why, The majority explain itself, the bank to and made payable on the account of another person drawn to make a reasonable duty Neiman Marcus had the ’n Sand but not Sun of credited to the account if the checks were to determine properly inquiry them. who presented person arises upon a duty inquiry I that under all circumstances suggest do one check. That the check is presented of a third the presentation party factor that indeed one important who is neither the maker nor is payee However, numerous alleges the amended complaint must be considered. a could find would alert that a reasonable fact finder additional circumstances third had no to right to the likelihood that Young apply reasonable person circumstances include the size to her account. These checks party personal income, the in relation to her known of Young’s frequency purchases who encouraged and her shopper close between relationship personal deliver unusual Young’s personally and facilitated her practice purchases, the fact days, the store in sizable amounts on successive to checks ing account, rather checking that the checks drawn on personal were plaintiff’s were these circumstances or business account. Whether than on corporate Young’s right apply to cause a reasonable question sufficient is a own obligations to the of her personal payment 4 determine. jury that is entitled to have of fact plaintiff question fraud, extent that community suffers to the and the that facilitates the commission to succeed. permitted embezzlement is (See York. against nonbank entities in New duty likely cognizable in actions A similar action (1900) [employer has & C.T.R. Co. v. Paviour N.Y. 281 N.E. 114] Rochester [58 payment for unauthorized company employee check from against accepted individual who Boasberg debt]; N.E.2d Munn 371] N.Y. 8-9 employee’s where accepting before funds duty inquiry make defendant has [individual him, gave the check debt to and where party’s of a third plaintiff’s check is offered any right proceeds]; to the check party or the third had why no indication either the individual N.E.2d N.Y.S.2d Shapiro v. McNeill N.Y.2d 98-99 imposed has . . . where this Court [“Assuming, deciding, those few cases without similar, good after our decision nonbank payee, are still law duty inquiry on strict Co., 153], supra, 74 N.Y.2d cases are Express v. American such & Indem. Co. [Acci. Hartford suggesting circumstances “there were neither distinguishable” ground on the that in this case The states that majority of this recognition confuses qualification court’s task of defining with scope legal duty application duty ante, facts. particular (Maj. fn. Not so. opn., ’n Sun Sand and the other cases cited above is the follows from to make before inquiry account a third check applying presenter’s should has recipient reasonably not been authorized the maker suspect Or, of the check. stated more it generally, before inquire *23 a third check that accepting one should party reasonably suspect has been This is a determination misappropriated. of whether “the category conduct at issue is negligent to result in the sufficiently likely kind of harm that be experienced liability may on the appropriately imposed negligent (Ballard v. Uribe 564, 573, party.” (1986) 41 Cal.3d fn. 6 Cal.Rptr. 624].) 715 P.2d The circumstances surrounding Young’s misapplication checks in this case to whether plaintiff’s go this “particular injury plaintiff’s was foreseeable in reasonably light defendant’s conduct.” particular (Ibid., Ballard omitted.) italics that the recognizes court should make the former determination before the decides the jury latter The question. majority can hardly that harm is foreseeable when one dispute accepts applies However, check that he should has been the suspect misappropriated. major holds, effect, the role of thе ity preempts It that Neiman jury. because bank, Marcus is retail merchant rather than a the circumstances could not have it possibly caused had no suspect to her authority apply accounts checks not made her. plaintiff’s payable
In the final it must be that the analysis, recognized decision is a majority’s from “the departure fundamental that actors are liable for principle reasonably Sand, (Sun ’n foreseeable losses occasioned their conduct.” by If, circumstances, Cal.3d at under Neiman Marcus should have reasonably foreseen a loss to when it his checks to applied pay there is no reason it should not bear Young’s obligations, why responsibility loss, for that to such defenses as refuses to subject may majority apply. ’n situation, Sand “extend”—I would “apply”—Sun say this thus relieving Neiman Marcus of even if a trier of fact would find loss to liability plaintiff’s foreseeable, have been entirely because Neiman Marcus is a retail simply merchant rather than a bank. common law claim is not negligence displaced by provisions
Plaintiff’s Commercial Code. California Uniform does not on this conclusion Although majority rely ground, my opinion that the demurrer should not have been sustained also consideration requires any apparent authority bad faith nor the total absence of on the face of the checks which would triggering a put [attorney, accepted irregularity possibly who fraudulent on notice of an checks] inquire”].) of the makes in support that Neiman Marcus additional argument of the claim is displaced common law negligence ruling, Commercial Code. of the California Uniform provisions 1103 declares Code section California Uniform Commercial “the Uniform Code principles Commercial is supplemented California are not “displaced if such only principles law and but equity,” ’n the court rejected of the code. In Sun provisions” particular the narrow of action based on that a common law cause argument by any that it recognized displaced provision inquiry is no court reasoned that there Uniform Commercial Code. The California Although intended to to this factual situation. specific provision apply amended numerous times California Uniform Commercial Code has been decided, limiting no amendment has been directed at since Sun ’n Sand was when with a third check. scope payee’s duty *24 been Marcus’s claim has not suggestion, Neiman Contrary plaintiff’s Uniform Commercial Code section subdivi- by California displaced (a), sion which that is not liable on an instrument provides person “[a] that unless ... the instrument. . . .” Neiman Marcus signed argues person “[sjince the checks written were Bums was not liable for by Young forged, Since the those and the bank those checks out of its own funds.” charges paid Uniform California Commercial Code a loss distribution scheme “articulates for drawers’ on checks” the risk of loss on the forged signatures by placing bank, continues, drawer’s was to seek argument remedy plaintiff’s bank, checks, recourse from his which honored the and he forged may Marcus, recover from Neiman that the checks merely accepted transmitted them for I disagree. payment.
Plaintiff’s claim is not based on the fact that the checks Neiman Marcus which Young allegedly were At least two of the means forged. accepted checks. Plaintiff made no use misappropriated money forged that checks were with no and others were alleged signature some Marcus but when induced Neiman signed by plaintiff misappropriated to credit them to the account. The claim is based on wrong allegation it checks in Neiman Marcus breached of care when accepted plaintiff’s her to divert the debt without as to Young’s inquiring authority payment Sand, (See to the Sun ’n funds of her discharge personal obligations. supra, Cal.3d at is the embezzler’s crediting conduct p. [“It [the bank’s] for account with checks drawn that forms the basis payable [the bank] .”].) relief. . reason, Bank Security For Fireman’s Fund Ins. Co. v. Nat. this Pacific In Fireman’s
(1978) 85 Cal.Rptr. distinguishable. Cal.App.3d Fund, insurance as the employer’s acting company, employer’s subrogee, $25,000 to recover sought stolen from employer using forged company check. When the bank refused to credit company’s the stolen funds back to account, the insurance company’s and filed company paid employer an action to recover the funds from the bank. The trial сourt collecting sustained the bank’s demurrer without leave to amend. On the court appeal, affirmed, observing “Fireman’s If it has a suing wrong cause party. bank, of action [defendant], it is not against but against against [the company’s its contractual breaching to its primary obligation bank] customer . . . and for violating its under section 4401 to implicit duty ” Fund, (Fireman’s pay only at ‘properly payable.’ supra, omitted.) fns. The court held that common law claim for any against bank was collecting the California Uniform Com- preempted by mercial Code. The court Sun ’n Sand distinguished on the primarily ground that “the check in Sun TVSand did not involve a drawer’s as forged signature Fund, did the check in (Fireman’s in the case at bar.” question supra, 813-814, that, is worth pp. unlike Sun TV repeating supra, [“It Cal.3d our case deals with over a essentially drawer’s payment forged and a signature, bank’s collecting liability noncustomer drawer for such (fn. omitted)].) The court payment” into explained forgery “brings code section 3418 under certain play [authorizing circumstances drawee check to recover the amount of the forged check from the whom or for benefit whose which articulate a does loss made] distributive scheme that an action for law common displaces negligence.” Fund, (Fireman’s *25 Newman, M.D.,
Lee Inc. v. Wells Bank Fargo Cal.App.4th Newman, In two similarly distinguishable. employ- ees endorsed and their fraudulently thereby misappropriated employer’s checks, (Id. the funds in their bank accounts. depositing personal bank, The filed an action against recover employer employees’ seeking based on common damages law The court held that the common negligence. law claim negligence California Uniform Commercial Code displaced by 3405, section which and liabilities of expressly governs rights persons or an instrument a fraudulent indorsement made taking bearing paying who has been his or her for such employee given employer responsibility (87 80-81.) court held that instruments. because Cal.App.4th pp. of that section are the common law cause “particular controlling, provisions” of action for has been negligence displaced. Commercial 3401 would gov- California Uniform Code section
Although check, ern no claim his bank for on any by plaintiff against paying of the California Uniform Commercial Code governs provision plaintiff’s claim Neiman the third checks. Marcus against accepting remand matter for trial
I would reverse judgment issues, were determine, such other whether circumstances among had no right apply should have Neiman Marcus suspected account, took if so whether Neiman Marcus checks to her so, determine and all affirmative authority her to do reasonable measures be raised such as might plaintiff’s comparative defenses the bar of the statute limitations.
On was modified to read as above. printed May opinion denied for review Court was Supreme July Appellant’s petition J., therein. Corrigan, S173556. did participate