Opinion
Unitеd California Bank (UCB) appeals a judgment in favor of Commercial Cotton Company, Inc. and its principal shareholder, Travis H. *514 Calvin, Jr., awarding them $4,000 for negligently debiting Commercial Cotton’s commercial checking account in that amount on a check containing unauthorized signatures, $20,000 for intentionally inflicting emotional distress by unjustifiably refusing to repay Calvin the loss sustained by its error, and $100,000 punitive damages because UCB breached the implied covenant of good faith and fair dealing inherent in the contractual relationship with its depositor.
UCB admits it negligently debited the bank account for a check plainly containing unauthorized signatures, but contends no substantial evidence supports a finding Calvin suffered compensable emotional distress from its refusal to reimburse. UCB further argues it did not breаch its duty of good faith and fair dealing because it legitimately pursued its economic interest by raising what it perceived as legitimate defenses in refusing to reimburse the loss its negligence caused. We find no substantial evidence supports the award of damages for emotional distress, but affirm the rest of the judgment.
Factual Background
Since approximately 1972, Commercial Cotton’s noninterest bearing commercial checking account at UCB (Calexico branch) was essentially dormant, with only two or three checks a month being written. Calvin is а neurosurgeon practicing in El Centro, California, and since at least 1972 has been the sole signatory on that account which in prior years had been an active conduit for transactions relating to cotton ginning and cotton sales.
In 1972, Calvin’s wife reportеd the loss of a series of blank checks to UCB and received a new number series in a different style and color. She did not report the checks stolen because she believed they only had been inadvertently discarded.
Four years later, August 1976, one of the missing checks in the amount of $4,000 containing two unauthorized signatures was negligently paid by UCB.
Although Commercial Cotton’s monthly bank statements for September 1976 listed the $4,000 unauthorized transaction, Calvin did not read the statement or discover the loss until March 1978. He promptly presented the faulty check to the manager of the Calexico UCB branch who admitted the bank had erred but refused to reimburse Calvin on advice of UCB’s in-house counsel who stated the claim was barred by a one-year statute of limitations. (Cal. U. Com. Code, § 4406, subd. (4), and Code Civ. Proс., § 340, subd. (3).)
When Calvin renewed his claim through his attorney, on July 31, 1978, the bank’s general counsel denied the claim by letter on the same grounds.
*515
However, on July 20, 11 days before the date of the general counsel’s letter, the California Supreme Court, in a landmark decision directly involving UCB, expressly held these one-year statutory limitations do not apply where a customer sues a bank for negligent conduct. The holding of
Sun
TV
Sand, Inc.
v.
United California Bank
(1978)
We find it inexplicable that UCB’s general counsel could have been unaware of the Supreme Court holding affecting the bank for which he was general counsel at the time he wrote the July 31 letter. However, he later admitted these statutory bars were not applicable but, without stating reasons for his belief, still advised “notwithstanding the foregoing decision [Sun TV Sand] it is our оpinion [Commercial Cotton] would be required to prove its case on the merits and we believe that the factual issues would be resolved in favor of United California Bank.” UCB’s “hard line” is unsupported by any reasonable analysis of the known facts. The letter was writtеn following receipt of a memorandum from a staff attorney suggesting, although the check was drawn on an outdated form and did not contain authorized signatures, UCB “may argue that as a result of fully automated check processing, very few signatures are actuаlly examined before payment and that this is a reasonable commercial practice.” 1
Further, the memorandum suggested UCB might “be allowed to diminish any liability on its part” by proving comparative negligence on the part of the depositor. However, although a tortfeasor may diminish the amount of damages he or she must pay by the proportionate share of fault for which the victim is responsible, that doctrine is factually inapplicable here. At trial, the only contention regarding comparative negligence was that the bank was never told there were missing checks. Plaintiffs’ evidence is contrary and, on appeal, we view the evidence in the light most favorable to the prevailing party. The further claim, originally made but not presented at trial, that Cаlvin was negligent in not discovering the loss for one and one-half years when, had he examined his September 1976 bank statement he would have been able to notify the bank of the loss approximately one month after it occurred, is irrelevant to the issue of comparative negligence. The delay in reporting had nothing to do with the bank negligently paying the $4,000 unauthorized check. The delay in discovery and reporting the loss to UCB did not contribute to the transaction. *516 Calvin’s after-the-fact conduct did not contribute to UCB’s nеgligence in making the $4,000 unauthorized payment.
Covenant of Good Faith and Fair Dealing
UCB acknowledges the tort of breach of the covenant of good faith and fair dealing is not limited to insurance cases but claims the “special relationship” that must exist before a tort action will arise does not exist here.
In the context of an insurance contract the Supreme Court emphasized the relationship between insurer and insured, characterized by elements of public interest, adhesion, and fiduciary responsibility created the necessary sрecial relationship. (See
Egan
v.
Mutual of Omaha Ins. Co.
(1979)
Analogizing to the factors set out in Egan we agree with Calvin’s contention that banking and insurance have much in common, both being highly regulated industries performing vital public services substantially affecting the public welfare. A depositor in a noninterest-bearing checking account, except for state or federal regulatory oversight, is totally dependent on the banking institution to which it entrusts deposited funds and depends on the bank’s honesty and expertise to protect them. While banks do provide services for the depositor by way of monitoring deposits and withdrawals, they do so for the very commercial purpose of making money by using the deposited funds. The depositor allows the bank to use those funds in exchange for the convenience of not having to conduct transactions in cash and the concomitant security in having the bank safeguard them. The relationship of bank to depositor is at least quasi-fiduciary, and depositors reasonably expect a bank not to claim nonexistent legal defenses to avoid reimbursement whеn the bank negligently disburses the entrusted funds. Here, UCB’s claimed defenses are spurious, and the jury found experienced legal counsel interposing them in an unjustifiable, stonewalling effort to prevent an innocent depositor from recovering money entrusted to and lоst through the bank’s own negligence, is a breach of the bank’s covenant of good faith and fair dealing with its depositor. Viewing the evidence in a light most favorable to the verdict, we hold it is overwhelmingly supported by the evidence.
Emotional Distress
However, the evidence does not support a finding Calvin suffered compensable emotional distress. Calvin testified, but not on this issue. The
*517
only relevant evidence was through his lawyer stating Calvin told him on the telephone he was “angry and that he felt he was being given a run around and ... it appeared to [the witness] that he was aggravated and irritated and upset about it.” UCB equates characterizations of Calvin’s emotional state to allegations pleaded in
Fuentes
v.
Perez
(1977)
However, while damages for emotional distress unaccompanied by physical injury may be awarded in a tort action arising out of a breach of a covenant of good faith and fair dealing, the injuries suffered must be severe, i.e., substantial or enduring as distinguished from trivial or transitory.
(Young
v.
Bank of America
(1983)
*518 No Reversibly Prejudiciаl Error Occurred by Admitting the Comprehensive Financial Summary
Finally, the bank claims it was prejudiced on the issue of punitive damages when Calvin introduced the annual report of UCB’s parent company, First Interstate Bancorp., into evidence and argued First Interstate’s annual net profit of $236 million was in fact the operating profit of its subsidiary, UCB. 3 Although the exhibit, admitted into evidence, actually shows UCB’s net operating profit was only $127,497,000, it correctly, but somewhat ambiguously, segregates the net profits of the subsidiaries and a juror correсtly reading it could arrive at an accurate figure. In any event, UCB’s counsel discovered the purported discrepancy and brought it to the court’s attention before his final jury argument. He elected not to alert the jury to any possible misstatements about UCB’s nеt worth in plaintiff’s argument or to attempt to avoid any potential prejudice. Further, defense counsel did not object to the exhibit at the time of its admission. To the extent that plaintiff’s counsel had incorrectly referred to UCB’s annual net earnings as $236 million, UCB waived redress when it asked only for a mistrial for improperly admitting the exhibit and never asked the court to correct the supposed misrepresentations and, when given the opportunity to do so itself, elected to forego it.
The judgment is modified by striking the award for emotional distress and, as modified, is affirmed.
Brown (Gerald), P. J., and Wiener, J., concurred.
Petitions for a rehearing were denied January 29,1985, and on February 8, 1985, the opinion was modified to read as printed above. Appellant’s petition for a hearing by the Supreme Court was denied March 28, 1985. Lucas, J., was of the оpinion that the petition should be granted.
Notes
It is noteworthy that this “defense” was not pursued at time of trial and UCB conceded it negligently paid the check.
We recognize exemplary damages ordinarily cannot be assessed without a showing plaintiff sustained actual damages from defendant’s wrongful conduct, although only nominal actual or compensatory damages are required.
(James
v.
Public Finance Corp.
(1975)
UCB has now changed its name to First Interstate Bank of California.