*1 Dist., Div. Seven. Mar. B037851.Second 1990.] [No. LEE, and Appellant, WON Plaintiff
HAE AMERICA, Respondent. Defendant and BANK OF *3 Counsel W. Plaintiff and Appellant.
Donald Barnett and Vincent Davis for Canter, Foxx, B. Jennifer N. Dubrow & Dale Goldfarb and Harrington, Pahre for Defendant and Respondent.
Opinion of action a tort cause state (Fred), J. Does WOODS faith, dealing fair covenant breach of the conversion or account; checking I a one-person facts: had it these alleges dishonor when returned $1,000 it; later the bank check on an unauthorized the bank paid unau- discovered signatures; two account to me requesting two checks reinstatement; within $1,000 and demanded check payment thorized reinstatement. the bank made thirty days sustaining the trial court’s order We therefore affirm is no.
Our answer amend. leave to the demurrer without Background Factual
Procedural *4 1987, 14, against a complaint respondent filed On September appellant faith and good the covenant of of action: breach of alleging bank two causes damages, compensatory The was for prayer fair and conversion. dealing distress, check, $75,000 $1,000 for emotional interest on the unauthorized $250,000 damages. and punitive 26, 1988, which added complaint filed a first amended
On April appellant dishonor, action, the original prayer. but retained a third cause of demurrer, demurred, and the court appellant opposed Respondent amend.1 demurrer without leave to sustained the checking one-person the facts. a Appellant opened As these are alleged, 1986, 25, unau- May the bank an paid with bank. On respondent account $1,000 on account. appellant’s thorized2 check drawn $37 5, 1987, Bank check to payable wrote a February appellant On $56 17, 1987, check to February payable America and on (respondent) 1987, 18, request- bank sent letter February appellant Pacific Bell. On $37 $56 and returned to her new account ing signatures two3 checks.4 which, changing al sought complaint, amended without Appellant to file a second facts, fiduciary duty, negligent negligence, breach of
leged added causes of action for ac wrongful dishonor causes of It deleted the conversion and of emotional distress. infliction tion. identify Respondent’s de maker of the check. complaint The the unauthorized does husband, Douglas Lee. appellant’s the maker murrer memorandum identifies as Presumably they her identify signatories. appellant were complaint 3The does not husband. why explain return as a but fails to 4The characterizes this “dishonor” her rather than the last endorsers. checks were returned to $1,000 1, 1987, the unauthorized
On March “discovered” appellant $1,000 demanded the bank reinstate the check payment.5 Appellant days Within 30 the bank did so. account.
Discussion by trial the demurrer was given sustaining The reason court for referent, The was to Code of “the statute of limitation applies.” presumably, and California Uniform Com (3)6 Civil Procedure section subdivision (4),7 mercial subdivision each (Commercial Code) pro Code section her bank one-year arising limit on actions customer viding check. from unauthorized payment one-year these prescribed
The reason was mistaken. limitation ’n only warranty. (Sun sections to a cause of action based applies Sand, 21 Cal.3d Inc. United 698 [148 920].) 582 P.2d None of causes of action were appellant’s warranty. based upon
The statute of limitations did not bar causes of action. appellant’s two-year A breach of faith and fair statute applied appellant’s dealing (Purdy cause of action. Automobile Ins. Co. Pacific three-year A statute applied *5 Proc., 338, (Former conversion cause of action. Code Civ. appellant’s § Witkin, 433, 3; 3 if (3d 1985) 465.) subd. Cal. Procedure ed. Even a p. § one-year statute dishonor cause of action applied appellant’s wrongful Proc., 338, Witkin, Procedure, (former 3; Code Civ. subd. 3 Cal. § 341, 1987, 369) February it did not commence until when the two § dishonored, checks were and had not allegedly expired September when the was filed.8 complaint monthly Appellant allege that she did receive and cancelled does not not statements $1,000 delayed discovery explain mispaid checks nor she check. does nine-month of Code, (See regarding duty report sig Com. a customer’s to discover and unauthorized § nature.) year: by part: depositor against In “Within . . . a relevant one An action a ...[]]] check, payment forged forged
bank for of a or raised or a check that bears a or unautho rized . . .” endorsement. “(4) regard part: In relevant Without lack care either the to care or of customer or year bank a customer who does not within from the time the one statement items (subdivision (1)) signa report made available to the customer his unauthorized discover asserting precluded ture ... on the fact ... of the item ... the bank such from signature unauthorized . . . .” 8Although complaint, the first amended which added the dishonor cause of ac tion, 26, 1988, one-year upon originally April period, was not filed until after the it relied pleaded original purposes. complaint facts and therefore related back to the for limitation (Smeltzley Mfg. 559 P.2d Nicholson Co. Cal.3d 939 [136 121].) 85 A.L.R.3d review Standards of demurrer, validity sustaining
It is the of the court’s action (Maheu CBS, reasons, Inc. its which is reviewable. entered reviewing sustaining
“In of dismissal judgment amend, admitting the demurrer as of a demurrer without leave to we treat all which can all material facts reasonable inferences properly pleaded be drawn a demurrer is to test the therefrom. function of [Citations.] sufficiency by of a of law. It is error pleading raising questions [Citations.] to sustain a demurrer of action under plaintiff where has stated cause any theory. But it an abuse possible legal is not of discretion [Citations.] sustain a demurrer without leave to if there possibil amend is no reasonable ity by that defect can be cured amendment. Plaintiff bears the [Citation.] burden that the trial its discretion show demonstrating court abused in what manner it can ing amend its and how that amendment complaint change will effect its Batsch v. legal pleading. (Von [Citation.]” American Dist. Co. 1117-1118 Telegraph Cal.Rptr. 239].) good faith,
Breach dealing covenant fair Since the fails to faith act unfair complaint allege any bad bank, dealing respondent state a breach fails to faith, fair dealing covenant cause of action.9
To this cause of action demurrer was sustained. properly *6 Conversion between a bank and its is that of debtor depositor 228,
and creditor. v. (Morse Crocker 142 (1983) National Bank Cal.App.3d 232 Cal.Rptr. 839].) “Title to the funds deposited immediately passes [190 bank which may use funds for its own business purposes. [Cita The bank thereby does not act as trustee and cannot be with charged tions.] converting the to its own v. deposit (Ibid.; use." Smiths' Cash Store First 32, Nat. Bank (1906) 149 Cal. 35 P. v. 663]; Ins. Co. Metropolitan [84 Life nevertheless, agrees 9The dispositive pages dissent with this conclusion but of dic 12½ ta, viability (1985) discourses on the of Commercial v. Cotton Co. United Bank 163 California 551, concedes, Cal.App.3d Cal.Rptr. 1017], 511 inapposite, 55 A.L.R.4th as the dissent [209 under the instant facts. 920 528, Allied Concord 853]; 534 P.2d 58 (1943) Cal.App.2d
S.F. Bank [136 1, Cal.Rptr. (1969) Cal.App.2d America v. Bank [80 etc. Corp. 622].) for conversion a cause of action allege failed to
Thus the action, demurrer, was sustained. properly cause of to this dishonor Wrongful dishonor she action for a cause of alleged
Assuming appellant any relief. her to allege entitling failed to facts $250,000 damages, none punitive requested Although prayer case, occurs, by mistake. as in the instant for a dishonor which permitted 428, Code, 59 Cal.2d v. Bank America 4402;10Weaver (Com. § Moreover, any cause of for 644].) 380 P.2d 437-438 Cal.Rptr. [30 action, only showing “oppression, are allowed punitive damages Code, fraud, allege. failed (Civ. 3294), appellant which or malice” § reckless, justify damages. cannot punitive if or gross even Negligence, (Krusi Bear, 664, 679 (1983) 144 Cal.App.3d v. Stearns & Co. [192 793].) Cal.Rptr. $75,000 Although emotional distress. also for sought
Appellant as wrong in torts such emotional distress is recoverable caused proximately Code, “subjective of a 3333), allegation more than (Civ. ful dishonor § v. Yacht United (Kendall Corp. of discomfort” is required. state dam 848].) Although Cal.Rptr. (1975) Cal.App.3d [123 may be injury by physical unaccompanied for emotional distress ages severe, i.e., be substantial injury suffered must in a tort action “the awarded v. Bank transitory.” (Young from trivial or enduring distinguished or as Further, Cal.Rptr. America [190 involv to cases suffering damages have limited emotional “California courts wrongdoing intentional injury plaintiff either ing physical impact tort are allowed when the suffering emotional Damages defendant. law, conduct, elements of a matter contains as although negligent feasor’s v. Hart (Quezada malfeasance or bad faith.” intentional Sears, Roe Rosener 815]; see also Jahn 237]; buck & Co. *7 406-407 Brickey (1985) any of these requirements: facts which satisfied allege failed to complaint damages proximately caused payor customer for “A bank is liable to its liability actual through is limited to mistake an item. When the dishonor occurs dishonor of damages proved.” injuries emotionally suffered no or re- appellant physical severe ones and committed spondent no intentional malfeasance or act of bad faith. relief, $1,000, The third prayed-for interest on the is recoverable under theory, conversion appellant’s wrongful dishonor.
Finally, appellant sought “compensatory damages, according to proof’ but she failed allege any facts harm which showing there could be compensatory damages. checks,
To the matter put entire case simply, consisted of two one for $37 $56. and one for There allegation is no that either check was returned to the payee last endorser nor that bank respondent imposed insufficient funds charge upon appellant’s account. To the contrary, stated complaint that both checks were returned to appellant.
No grounds for relief having been the trial alleged, court sus- properly tained the demurrer to the wrongful dishonor cause of action.
Appellant has failed to show that the trial court abused its discretion in sustaining demurrer without leave to amend. The essential facts simple, did not change from the original to the first amended complaint they nor were altered in the preferred second amended complaint.
Disposition The judgment is affirmed. Costs on appeal awarded to respondent. Lillie, J., P. concurred.
JOHNSON, J., Concurring Dissenting. I concur in the majority’s conclusion that the trial court properly sustained the Bank of America’s (the Bank) demurrer as to Lee’s causes of action for conversion and breach of the covenant faith or fair I dealing. dissent their respectfully from conclusion that a bank customer may not maintain an action for breach of the covenant of good faith and fair dealing against bank. I further dissent from the majority’s conclusion that Lee has not stated a cause of action for wrongful dishonor for which compensatory damages may be recoverable.
Because believe majority’s discussion all of the issues presented unduly conclusory, I discuss each cause of action below. depth
Discussion Sustaining I. Trial Erred in Bank’s The Court Be Entirety. in Its Lee Should Permitted Demurrer Wrongful on Her Action Dishonor. to Proceed for A. Standard Review. of of a sustaining review a judgment following standard of for treats leave to well settled. An court appellate
demurrer without amend is material and draws admitting plead the demurrer as all of the facts properly CBS, (Maheu v. Inc. (1988) all inferences therefrom. reasonable If stated 304].) plaintiff 669-670 has Cal.App.3d Cal.Rptr. [247 must be any legal theory, judgment cause of under cognizable action (1985) (Id. 670; VonBatsch v. Dist. Co. Telegraph reversed. American 175 Cal.App.3d [222 action,
Since the trial court’s and not its reasons appellate courts review therefor, I of determine whether there have examined each cause action to amend. grounds are other for the demurrer without leave to sustaining 408, 419 (Fuhrman Systems Satellite it is an discretion to sustain Cal.Rptr. 113].) “Ordinarily abuse of amend if a reason complaint demurrer to a without leave to there is general able that the defect in the can be cured amendment. possibility complaint However, that the plaintiff the burden is on to demonstrate [Citations.] court Plaintiff must in what trial abused its discretion. show [Citations.] change manner he amend his and how that amendment will can Structures, Long legal (Profile effect of his Inc. pleading. [Citation.]” 437, 444 Bldg. Beach Co. Material CBS, Inc., omitted; 192], Maheu v. internal marks quotation 670.) at p. if Since the judgment of review us to affirm the of dismissal scope requires so, I action there is basis to do have considered whether Lee’s causes of raise in its against will lie the Bank. failed to these issues Although brief, subject challenge: two of causes of respondent’s Lee’s action Breach of of faith and fair conversion. dealing, the covenant below, based the first may As I conclude Lee state a claim explain upon action, cause of but not the second. May
B. A Bank Customer Maintain a Cause Action Against Its Bank Breach the Covenant Fair Dealing. Good Faith and may a bank recently, Until law in California held very depositor maintain of action her bank for breach the covenant cause
923 forth the clearly The case which most sets rule dealing. faith and fair good Bank (1985) Cal.App.3d is Commercial Cotton Co. v. United 551, There, the Appellate A.L.R.4th Fourth Cal.Rptr. [209 1017]. District, noninterest-bearing One in a depositor checking Division held a faith and may good account its bank of the of fair sue for breach covenant the the when the dealing following bank’s refusal to reimburse depositor forged check on the account. depositor’s bank honored drawn improperly (Id. at p. 516.)
In
against
maintain this cause of action
the
holding
depositor
could
bank,
to that
analogized
the court
of the
depositor/bank relationship
much in
“[B]anking and insurance have
com-
relationship.
insured/insurer
mon,
highly
both
industries
vital
services
being
regulated
performing
public
substantially
in
affecting
depositor
welfare. A
a noninterest-bear-
public
account,
ing
for state
checking
regulatory oversight,
or federal
is
except
totally
banking
on the
which
dependent
institution to
it entrusts deposited
funds and
honesty
on the bank’s
depends
expertise
protect
to
them.
While
provide
by way
banks do
services for the
of
depositor
monitoring
withdrawals,
deposits
very
do
they
so for the
commercial purpose of
making money
using
deposited
depositor
funds. The
allows the bank
to use those
in
funds
for the convenience of
exchange
having
not
to conduct
security
transactions
cash and the concomitant
the bank safe-
having
them.
guard
bank
at
of
least
depositor
quasi-fiduciary,
and depositors reasonably
a bank
claim nonexistent
expect
legal
defenses to avoid reimbursement when the
negligently
bank
disburses the
(163
entrusted
516.)
funds.”
Cal.App.3d
courts,
issue,
Other
always
although not
expressly discussing this
appear
customer,
facts,
agree bank
may
under
proper
proceed against bank for breach of the
good
(See
covenant of
faith
fair
Sanchez
dealing.
892, 897,
Corea v.
Bank
America
Cal. 3d
Cal.Rptr.
[215
of
679,
alia,
701 P.2d
[judgment against bank
upon,
based
inter
breach of
826]
the covenant
fair
good
faith and
dealing reinstated on
Kruse v.
appeal];
America
202 Cal.App.3d
57-58
Cal.Rptr.
[248
217] [1st.
Dist., Div. 1]; Chicago Title Ins.
v. Superior
Co.
Court
Dist.,
1156-1158
Div. 2]; E.F.
Cal.Rptr.
[220
507] [1st.
City
Hutton &
v.Co.
National Bank (1983) 149
72-74
[196
Dist.,
Cal.Rptr.
1]; Sawyer
Div.
v. Bank America
614] [2d.
Dist.,
Div. AARTS
4];
Pro
623] [1st
ductions,
v. Crocker
Inc.
National Bank (1986) 179 Cal.App.3d
Dist.].)1
203] [6th
courts,
rely
they
1I
do not
these cases because
are on all fours but because the
in dis
cussing
may
bank,
the various causes of
acknowledge
action which
be available
viability
of the cause of action
dealing.
for breach
fair
covenant
faith and
For
indicates
over
my
of out-of-state decisions
Additionally,
review
a bank customer
recognize
whelming majority
expressly
implicitly
either
*10
v.
Alaska Statebank
theory. (See, e.g.,
this
its bank on
may
against
proceed
288,
v.
Ross
291;
Filipek
Touche
Ltd.
674 P.2d
(Alaska 1983)
Fairco
721, 730;
re
Const. Co.
In
Cedar
1989) 778 P.2d
(Hawaii
App.
Ct.
228,
63
238
court
[bankruptcy
applying
B.R.
(Bankr.W.D.Mich. 1986)
First, the between relationship a customer and a bank is inherently un- equal. ordinary hardly customer is in a position negotiate to the terms and conditions of her account checking or how the bank will handle certain transactions.
Second, the motivation for a person for a applying account is checking As nonprofit. the court in Commercial Cotton Co. explained, “[t]he point, At one the Price court claimed subject Commercial Cotton Co. was to criticism already (213 However, had been Cal.App.3d p. 476.) discredited. only at criticism of Commercial Cotton Co. are prepared two student case way *12 on the bank’s depends which it entrusts funds and deposited tution to honesty them”].) protect expertise aware of
Finally, may fairly precarious it be assumed a bank is its when it dishonors a places wrongfully in which it customers position their funds. using deposited check or them from prevents Thus, by not the court in Price even the test but used applying required Bank, may Wells it is manifest a bank customer maintain action Fargo against faith and fair its bank. dealing for breach of the covenant Supreme The test is confirmed viability continued of the Wallis v. Interactive Data Cal.3d 654 Foley Corp. (1988) Court’s decision in There, 211, 765 Court applied P.2d Supreme 373]. sufficiently employment relationship Wallis test when it concluded the was deny the of a dissimilar to the existence insurer/insured 692.)4 (Id. at relationship. special Foley, the Foley my in further conclusion here. In supports decision insurance between the employment
court noted various distinctions relationships. properly determine whether As evidence Wallis continues to state the test used to further exists, District, applied Appellate the Wallis special relationship the Fourth Division One a proceed opinion post-Fo/ey in a to conclude a commercial borrower could criteria (Mitsui theory. Superior a Court
its lender under bad faith Manufacturers 733 [260 breach in the employment place employee context does not “[A] the same economic dilemma that an insured faces when an insurer in bad a claim a within pay accept policy faith refuses to or to settlement offer actions, When an insurer takes such the insured cannot turn to the limits. willing to find another insurance for loss marketplace company pay hand, incurred. The on the other already wrongfully terminated employee, must, (and can in order to . . make reasonable efforts mitigate damages .) Moreover, . . . to seek alternative the role of the employment. employer that with differs from insurance whom indi- ‘quasi-public’ company viduals contract in order specifically to obtain from protection potential economic harm. The specified similarly does not ‘sell’ employer protection to its it is not a service. Nor do we find con- employees; providing public the idea that the is vincing employee necessarily seeking different kind of security financial than entering those commercial contract. If a typical small dealer goods contracts for from a large supplier, goods those business, vital to the small dealer’s a breach by may have supplier financial significance for individuals the dealer or to the dealer employed only himself. Permitting damages contract such a situation has ramifications no different from similar limitation in the direct employer- employee relationship.
“Finally, there is a fundamental difference between em- insurance and In ployment relationships. the insurance the insurer’s and relationship, claim, insured’s financially interests are If odds. the insurer it pays insured, course, diminishes its fiscal resources. The has paid protec- tion and expects to have its losses When a claim recompensed. paid, insured, or, money shifts from insurer to if to a third appropriate, party claimant.
“. . . need place to an disincentives on conduct employer’s [T]he addition to those already by imposed law does not to the simply rise same level as that created by the conflicting interests at stake in the insurance . . .” context. (47 Cal.3d at pp. 692-693.)
aWhere bank duty breaches its of good faith to its it customer its places customer in the same financial dilemma as in the insurance context. A customer who is denied improperly the use of her money essentially own is denied the right The customer support. cannot turn to the marketplace money for that but instead wait must until the bank either chooses to honor its faith good duty or is compelled by to do so the trial courts. This is no different from the insured who is denied the to his right insurance proceeds and must either await payment from the insurer or sue the courts.
Further, bank, insurer, just as an is selling protection agrees when it to act as a depository for the money customer’s and to pay money that upon to that enjoy specifically protec- The seeks out the bank
demand. customer It be unobtainable. would which would otherwise tion and convenience a to have reasonable choice society of our believe ignore people the realities a bank or security money other than relying upon of their concerning similar financial institution. other financially to a at odds the same
Finally, bank customer and bank a bank’s relationship, insured are. In bank degree insurer its a which is not become at odds whenever it suffers loss financially interests if a a negotiates to For bank example, improperly attributable the customer. account, to third thereby funds paying check drawn customer’s upon a loss interest is to shift that loss to customer occurs. bank’s party, its cover the loss. rather than reduce own reserves to capital in the As the relationship. The same of tension is created insurance type claim, re- it diminishes its fiscal pays court the insurer explained, “[i]f insured, course, has have protection expects sources. The for paid If the insurance (47 693.) anything, its losses Cal.3d at recompensed.” is the loss is a calculated and less confrontational because risk relationship for the insurer. planned sum, analysis
In Court’s of the relation- upon Supreme special based test, relationship a bank and its customers possess requisite special ship theory the bank customer to on tort proceed which warrants permitting and fair dealing. breach of the covenant of faith deny deny is realities involved. To existence of this society to a we more and As we move closer closer cashless become reliant the services and other financial institu- provided more banks chooses, may money If a it its access to her deny tions. bank so customer will have no recourse period an indefinite and the bank customer short resolved, the be may that customer unable litigation Until litigation. between this even the most basic necessities. see no difference purchase and that an insured. involving dilemma perilous *14 a a of action Accordingly, against I would hold bank customer has cause faith and fair good dealing. its bank for breach of the covenant of however, remains, facts here are sufficient to The whether thé question theory. majority they I with the agree state a cause of action under this not. Cotton, the in Commercial the here does not allege
Unlike facts plaintiff in that was not to reimbursement for the bank asserted bad faith she entitled
929 contrary, the bank acted the check. To the of improper payment learned it honored improperly Lee’s account once it crediting promptly an unauthorized check.
Further, dishonored two wrongfully Lee bank although alleges account, any facts which would allege checks written on her she does not acted in bad faith when it dishonored those finding the bank support the covenant a cause of action for breach of allegations, checks. Absent such dealing faith and fair cannot lie. Lee, Check, May C. Drawer Not Maintain an as the Against Action the Bank Conversion. for One of action in her first amended was for Lee’s causes of below, Lee, check, may I explain conversion. As as drawer of maintain a upon cause of action conversion based bank’s on a check.5 payment forged
California Uniform Commercial Code section 3419 provides pertinent “(1) (c) An instrument is converted when . . . It is on a part: paid [1J] forged Although may endorsement.” the statute does not who explain maintain an action for conversion based an instrument which is paid endorsement, a forged on courts applying concerning banking basic rules and the law of conversion have certain permitted plaintiffs against a bank on a proceed theory conversion while the action to barring Thus, may others. maintain an payee against action for conversion (i.e., collection; bank a bank which collecting handles the check for Cal. U. Code, 4105, (i.e., Com. subd. or a (d)) payor bank the bank on which the § Code, drawn; 4105, check is Cal. U. (b)). (See, Com. subd. Tedesco v. e.g., § 1211, Crocker National Bank 148 Cal.App.3d Cal.Rptr. [196 534]; Cooper Union Bank 9 Cal.3d [107 609]; P.2d Allied etc. Concord v. Bank America Corp. (1969) 275 1, 4 Cal.App.2d Cal.Rptr. 622].) [80 The same is not true by for actions the drawer brought against the payor bank. In such instances an action for conversion will not lie because the bank has not with payor parted (Morse of the drawer’s funds. v. Crock er National Bank (1983) 142 839]; [190 America, Allied Concord etc. v. Bank Corp. pp. 7-8; L. Ins. Co. v. Metropolitan S.F. Bank 853]; P.2d see Cal. Mill v. Bank America Supply Corp. Cal.2d P.2d rationale for this rule was set forth parties Since this issue was unbriefed supplemental briefing. the court invited Inex plicably, responded by stating may bank a drawer payor maintain an action law, response disregards bank for conversion. ignore Since this settled choose to it now. *15 Bank, 376- 9 Cal.3d at pages in v. Union Court Supreme Cooper
the the theory preexisted of collection that 377: the dominant bank “Under . . . unchanged, has left the and which the code code [commercial] not a endorsement are considered forged amounts a bank remits on payor lies in the The for this result explanation the of the instrument. proceeds customer, a and its the depositor-drawer. between bank relationship payor bank to the is and creditor: the is indebted one of debtor only his direction. If the bank and to debit his account promises customer customer, any other than the by person an drawn its on instrument pays, negotiated, a whom the is the or instrument designated payee person diminished. If the bank does not to the customer not bank’s indebtedness account, bank compel the customer can the to recredit debit the customer’s in the sum. Inasmuch as the full amount of the instrument remains the endorsement, forged the when the bank on a the account of drawer pays of the instrument but bank does not with the manifestly part proceeds also, omitted; see merely (Fn. remits funds from its own account.” other Lawrence, Com. 3- Paper, Hawkland & U. Com. Code Series § 419:04, to sue for permitted no courts have drawer [“virtually . . forged of instrument instrument. . Since the bearing conversion bank, he has by have his account recredited lost payor drawer can forged endorsement”].)6 on the nothing payment check, Lee, Here, to state a cause of forged attempted the drawer of lie, bank. an action not action for conversion Since such will against payor cause of the trial court sustained Bank’s demurrer as this properly action. Remaining
D. Lee’s Cause Action Is Not Barred Set Warranty Statute Limitations Forth Civil Commercial Code Section 4406 Code of Uniform (3). Procedure Section Subdivision in California one-year Lee statute of limitations set forth argues Procedure sec- Uniform Commercial Code section 4406 Code Civil bar set (b) tion subdivision does not the causes action forth complaint. agree. first amended (4) pro- section
California Uniform Commercial Code subdivision or care lack care of either the customer regard vides: “Without year who one from the time the statement bank customer does within . . . his report and items are made available to the customer discover $1,000 Here, days of Lee’s the full within 30 Lee discover the bank recredited to account ing payment forged on the instrument.
931 any on the of the item unauthorized or alteration fact or back or signature endorsement, asserting against ... from precluded unauthorized is . . .” such or endorsement or such alteration. signature bank unauthorized Code of Civil section 340 “Within provides pertinent part: Procedure a year: . . . An . . . bank for the depositor against one action [1J] check, or a check that or raised forged of a raised or bears payment forged check, endorsement, . . or a check that bears a unauthorized forged
The Court has construed California Uniform Commercial Code Supreme (4)’s only section subdivision limitation to extend to periods “actions seeking warranty liability—whether liability to establish the basis for such or, warranty be contractual under the Uniform implied California Com Sand, Code, (Sun statutory warranty.” mercial ’n Inc. United Califor nia 21 Cal.3d 582 P.2d 920], Bank, original italics; Commercial see Cotton Co. United California supra, one-year at p. limitations California [“the Uniform Commercial Code only warranty section to ac applies tions”].) The warranties to which the Supreme Court referred are codified in California Commercial Uniform Code sections 3417 and 4207.7 These statutes set forth implied warranties which in the arise either collection Code, of items through system (Cal. U. banking Com. 4207) or § through transfer commercial not collected paper through banking Sand, Code, (Cal. system (See U. Com. 3417). Sun ’n Inc. v. United § Bank, 680; supra, p. Cal.3d at E.F. & v. City Hutton Co. Bank, National at supra, 70.) p. There is no Lee’s dispute cause of action in her pled first amended com- plaint wrongful dishonor is not based the warranties set forth in California Uniform Commercial Code sections 3417 nor does it from any arise implied warranty contractual between Lee the bank. Accordingly, this statute limitation cannot bar operate to the causes of action set forth in Lee’s first amended complaint.
As to Code of Civil Procedure (3), section subdivision Lee is not seeking recover on the payment forged on check. (See Allied Concord America, etc. v. Bank Corp. Indeed, 3.) $1,000 bank credited Lee’s account with the drawn against account prior commencement of this action.
Rather, Lee seeking to recover the Bank allegedly for its wrong- ful dishonor of two checks which occurred years almost two after the Bank Supreme implied Court did not enumerate what contractual warranties other than those set forth in California Uniform subject Commercial Code sections 3417 and 4207 are one-year period. limitation *17 to recover on seeking on check. Since Lee is not forged the
wrongfully paid check, of Civil subject her action to Code forged of the is the payment forged of a 340’s on actions “for the payment Procedure section limitation check, check, or a check forged or that bears a or raised or raised a check endorsement, . .”8 . forged or unauthorized that bears Is Barred the Remaining E. Lee’s Cause Action Not of Limitation. Statute Applicable of remaining limitation the cause periods govern remains what question by the nature of limitation is determined of action. The statute of applicable or the of rather than the form of the actions the causes action underlying 473, 478 (1986) Inc. v. 176 sought. (Guess, Superior Cal.App.3d relief [222 8, 117 12 v. Allstate Ins. Co. 79]; Richardson Cal.Rptr. Cal.Rptr. [172 rights, an of alleges infringement
Where the nature of the action personal forth in Code of Civil Procedure section one-year period the limitation set 340, 478; at 117 Cal.App.3d will (176 Cal.App.3d p. subdivision apply. rights, of 12.) alleged infringement property at Where there has been an p. Procedure, in of Civil two-year the statute of limitations set forth Code 339, (Ibid.)9 1 applies. section subdivision dishonor, alleges Lee the Bank’s refusal to wrongful As to action for credit, esteem, in her loss of reputation honor two checks resulted community. person’s reputation the Torts to good standing with and, therefore, rights an of infringement personal considered be generally Witkin, 3 Cal. Procedure subject one-year (See to the statute of limitations. 341, 369.) (3d 1985) ed. p. § here,
However, one-year period the limitation Lee’s action even applying A does not accrue until timely. for is cause of action wrongful dishonor still 8 negli applicable of limitations in a Supreme contends the Court also held the statute Lee years. gence upon honoring forged is three This not entire action based a bank’s check three-year period ly Supreme applied statute of set forth correct. The Court limitations Proc., 338, 338, (now3 Civ. subd. former Code of Civil Procedure section subdivision Code § i.e., only recovery proceeds (c)) plaintiff seeking property, because the was Bank, Sand, 698, (Sun 22; supra, p. v. Cal.3d at fn. see ’n Inc. United checks. California 113, Cal.Rptr. 50].) Products United Cal. Fabricon [70 However, negligence seeking applicable statute of limitations for actions court noted Sand, Bank, supra, year. (Sun recovery personal injury is 'n Inc. v. United for one California Proc., 340, 698, 22; (3).) p. fn. Code Civ. subd. Cal.3d § years: upon “Within 1. An action provides: of Civil Procedure section 339 two 9Code [an] writing,. . obligation liability . .” . . not founded instrument (3) provides part: pertinent “An action of Civil Procedure section subdivision Code another, wrongful neglect injury of one caused act or ... to or for the death liability (Heyer Flaig (1969) act is done and the arises. wrongful Auto 161]; Cal.2d 449 P.2d State Assn. Inter-Ins. Bureau v. Cohen Witkin, Procedure, Here, 890]; 380.) Cal. § February dishonor of Lee’s two checks occurred in 1987. Lee’s filed in original was 1987. September *18 Although original did not contain a cause of complaint specifically dishonor, action for Lee wrongful did the bank refused to allege wrongfully honor the two in February sought recovery checks 1987 and for the same injuries by caused allegedly wrongful dishonor. Since the cause of action wrongful dishonor was based the same general facts and refers to the same acts and wrongful injuries contained in the it original complaint, relates back to the original complaint for of the statute limitations. purposes (Sm v. eltzley Mfg. Nicholson Co. Cal.3d 939 [136 P.2d 121]; Sidney A.L.R.3d Court Superior (1988) 198 Cal.Rptr. 31].) Accordingly, Lee’s action for dishonor was wrongful timely filed. sum,
In Lee’s cause of action for wrongful dishonor is not barred however, statute applicable of limitations. The majority, Lee concludes cannot recover under theory this based on the damages she seeks. While I agree fails to allege facts which would entitle her recovery for emotional distress or punitive damages, why fail to see she may not $1,000, recover for interest on the or damages from loss of resulting credit reputation community. majority states interest is not theory recoverable under a of wrongful dishonor but authority cites no for this Absent some bar proposition. to her recovery dishonor, for damages proximately caused Lee should be permitted to on proceed theory. (See this Kendall Yacht Corp. United 50 Cal.App.3d 848].) I would therefore reverse the judgment as to this cause of action. notes in law reviews. While I in no mean analysis, hardly to belittle these students' it “devastating rises to level of criticism” (Id. as the p. 1; Price court so Fiduciary asserts. at fn. Controversy: see Note The Injec Fiduciary tion Principles Into Bank-Depositor Relationships Bank-Borrower Loyola 795; L.A. L.Rev. Note Commercial Cotton Co. v. United Bank: Califor nia's Newest Litigation Extension Bad Faith Into Commercial Law 16 Sw.U.L.Rev. 645.) Further, the Price court criticized opinion the Commercial stating quasi- Cotton Co. fiduciary relationship (213 existed between the bank and its Cal.App.3d pp. customers. at 476-477.) This herring. criticism is a red The existence relationship or absence of such a is not dispositive of whether the requisite special commercial contract creates the so a cause of action for (See breach of the dealing covenant of faith fair will lie. Wallis v. Court, Superior supra, pp. 1118-1119.) at for the conve- exchange funds in the bank to use those allows depositor cash and the concomitant to conduct transactions in having nience of not 516.) at p. them.” security safeguard (163 Cal.App.3d the bank having Third, to deter the Bank from ordinary inadequate damages only require Lee alone would damages conduct or to make whole. Contract be money out. The Bank would not repay erroneously paid Bank to as a conse- Lee for emotional distress suffered required compensate Wallis v. (See Superior conduct. allegedly of the Bank’s tortious quence Court, 1119.) at supra, p. Fourth, extremely in an vulnerable since it position a bank customer is necessary correc- readily compel cannot monitor her bank’s conduct If, tortiously. as the bank did Com- once the bank has acted tive action Co., out, erroneously the funds paid mercial Cotton the bank refuses debit money effectively using then barred from her own until a bank customer is Cotton United Cali- remedy wrong. (Commercial the bank agrees Bank, in a noninter- depositor [“A fornia totally banking ... on the insti- checking dependent account est-bearing