Kuwait Airways Corporation v. American Security Bank, N.A. And First American Bank, N.A.

however, required, to make some We are that are not sufficient items

deduction for In re performed. the work

ly specific as to (D.C.Cir.

Donovan, F.2d

1989). comply congressional with the To (1)

admonition, many inadequate because nature of ren services

descriptions (2) specification

dered, the insufficient tasks, particular

time devoted particular individuals who

names of payment for which is

rendered the services percent deduct ten

requested, we

($4,540.99) the bill of the account

ants/attorneys.

Conolusion Court, Ordered, by appli-

It is compensation the total

cant is awarded $58,005.25 in accordance with 28

amount 593(f)(1). represents That amount

U.S.C. §

$17,136.35 attorneys’ expenses fees applicant’s attorney and

for the services

$40,868.90 applicant’s services of for the

accountant/attorneys. accordingly.

Judgment AIRWAYS

KUWAIT

CORPORATION, Appellant, BANK, N.A.

AMERICAN SECURITY First American

N.A., Appellees. 88-7040, 88-7055,

Nos. 89-7010.

88-7056 and Appeals, Court of States

United of Columbia Circuit.

Argued Sept.

Decided Rehearing on Petition for

Order 10,1990.

Jan. Whalen, P. whom Robert

Thomas J. with Jr., Ludwig, Van Silverberg Robert W. and brief, appellant. for Cal., on the Nuys, were Cahill, Joseph M. Dale A. Cooter Hantzes, Washing- H. whom Nicholas brief, appellees. D.C., ton, MIKVA, EDWARDS Before WILLIAMS, Judges. Circuit filed the Court Opinion for T. EDWARDS. HARRY Judge Circuit EDWARDS, Circuit HARRY T. Judge: Air- by involves suit

This case against (“Kuwait”) Corporation ways (“ASB”), the de- Security Bank American bank, and First American Bank positary During the drawee bank. (“FAB”), trial, Kuwait jury extended of an course depositary bank sought prove funds and Security converted breached a contract the defendant- by opening corporate upon appellee cross-appellant, requests this employee, request jury of a Kuwait Robert Sen- court to vacate the verdict and enter si, judgment documentation ground without tak- its favor on the into ing deposit opened by this account checks ratified the account Sen- Alternatively, si. amounting approximately million on ASB seeks a new trial on $2.5 grounds (1) forged that: missing or indorsements. District Court Kuwait jury failed to instruct sought prove also that the drawee statute of bank issue; (2) limitations approximately Kuwait’s contract by converted million $2.5 claim should not have processing paying been submitted to and checks from ASB jury; (3) newly and discovered evidence deposited by that had been Sensi without exonerates liability. ASB from payee indorsements or some other form of jury authorized indorsement. The returned On the judgment against ASB, we con- against (the a verdict for Kuwait ASB de- that, clude because the District Court bank) $766,- positary in the amount of applied should not have the “discovery 777.66; jury rejected Kuwait’s claim rule” to significant portion this a FAB, against returning thus a verdict of no by Kuwait’s suit is barred the statute of damages against the drawee bank. The jury limitations. The general returned a judgment District Court then entered in verdict, so we cannot portion determine the jury’s accordance with the verdicts. of the award that relates to barred claims. Thus, we must reverse and Kuwait now seeks reversal remand for a and remand covering new trial periods those judgment. of the District Court not barred See Ku- by the statute of limitations. Airways Corp. wait v. We find no American Sec. any merit in Bank, 86-2542, Action other claims Civ. No. advanced WL ASB; by (D.D.C. 23, 1987), we find no in reprinted merit Kuwait’s in seeking claims (“J.A.”) a Appendix judg- Joint directed verdict or Kuwait asks ment notwithstanding judgment against this court to enter the verdict its favor ASB. If on remand against in the the District approximate- ASB amount of Court is again presented ly with the million breach of $2.5 contract and funds, whether to prejudgment interest, award against conversion of FAB in the matter should approximately pursuant the amount of be determined million $2.5 to the standards payment Duggan for conversion of funds for enunciated in Keto, 554 (D.C.1989). A.2d 1126 checks on “unauthorized” indorsements. On the judgment FAB, in favor further we Kuwait seeks an award of find no error prejudg- and affirm. ment interest from the date of conversion Finally, of each check each bank. Ku- requests

wait solely remand for a new trial I. BACKGROUND punitive damages on the issue of against Security advancing Bank.1 In The material facts of this case are undis- claims, these Kuwait puted. asserts that the Dis- In opened Kuwait corporate a (1) trict erred in: holding not ASB account with ASB in the District of Colum- pursuant bia, matter of liable as a law to D.C. required which the bank documen- (1981) Code 28:3-419 for the face amount tation from the § Board of Directors of Ku- converted; (2) of the checks holding not authorizing wait the establishment of the absolutely FAB liable for the face amount account designating persons autho- converted; (3) checks awarding rized to withdraw funds from the account. prejudgment pursuant interest to D.C.Code corporate account, ASB established the (1981); 15-108 or 15-109 dismiss- herein Account,” referred to as the “826 ing punitive Kuwait’s claim for damages Kuwait’s upon receipt name of the docu- against ASB. mentation. punitive

1. The District Court dismissed slip dam- can op. Sec. Civ. Action No. ages (D.D.C. Airways Corp. 1987), claim. See Kuwait reprinted Ameri- Oct. in J.A. 43. outstanding Chairman, regarding members the substantial cials over manage- three occasions key only members two or on certain balance Board and country deposits were into period. The six-year the home ment funds from August to withdraw stopped authorized persons 640 Account It is uncontested cancelled Embassy produced Account. the 826 when account” “depositary awas payment proof Kuwait checks as deposited local- were to be funds into which invoices. old airline upon checking account ly; it was ninety percent of accepted over drawn could be funds the 640 Account deposited into checks York. New Washington or employee FAB, the indorsements. missing payee Sensi hired Robert (the “drawee bank Embassy of Kuwait’s Co- manager for the area sales case), processed these the instant bank” in range of au- had broad Sensi lumbia. payment on ASB’s collection and checks for office includ- managing the sales in thority remaining ten only.2 The line indorsement regarding ASB with regular contact ing form some the checks contained percent of November On Account. Kuwait the indorsement, incomplete or unauthorized of request and on the 1980, 25, at Sensi’s (with or with- deposit only” as: “for such alone, ASB signature of Sensi’s basis number); bank-sup- or a account out the (the checking account corporate opened deposit “For payee indorsement plied Kuwait, Account”) in the name “640 the “Deposit to payee”; or to named within withdrawal permitting checks issued Payee Absence of the Within Named Credit In alone. dis- signature funds on Sensi’s Se- Endorsement Guaranteed procedures, ASB own of the bank’s regard D.C.”; or Washington, curity N.A. any documen- without the account opened “For stamp indorsement payee the autho- airline that the from Kuwait tation 21- Airways Account Deposit Only, Kuwait or the account of the opening the rized Ac- 862-93-826,” of the 826 the number account. from the funds withdrawal count. opening of the period from During the the checks from numerous Sensi wrote November Account the 640 members, family to payable 640 Account 1986, his sub- August of Sensi through associates, friends, business ven- business payable checks deposits of ordinates made organiza- political tures, investments and Account and Kuwait into both the 640 checks from also wrote tions. He into the 640 Deposits 640 Account. ranging in amounts to “cash” Account $2,654,- to a total Account amounted deposited these $25,000 and $5,000 to from deposited of the 523 checks Out 232.64. account. When personal into his checks Account, were drawn all but five the out- to collect Sensi pressured Kuwait Washington, Embassy of Kuwait by the Embas- the Kuwait from standing amounts deposited into Embassy checks D.C. the 640 Ac- from funds sy, he transferred approximately represented the 640 Account the old- to cover Account the 826 count to sales Kuwait’s total percent ten invoices, to- in an amount outstanding est Accordingly, Ku- period. Embassy for the $141,060.56. taling Embassy of that the showed records wait bal- their inquired account about Kuwait long past a substantial carried every year for au- the world ances around airline. to the outstanding balance due responded ASB In purposes. dit office, which was York Kuwait The New find stating that inquiry could the audit accounting functions responsible for Airways Corporation. of Kuwait of- no account Washington upon the region, relied ASB referred Chairman outstanding When the balances collect fice to Account, confirmed ASB to the 826 Representatives Embassy. re- letter and a which by telex Embassy offi- visited with New York office processed." Kuwait indorsement,” the check as the 2. A "line Bank, Civ. Ac- Corp. Airways v. American Sec. noted, stamp computer affixed is a "one-line (D.D.C. slip op. n. 3 tion No. 23, 1987), every handled ASB. check reverse side n. 3. reprinted J.A. 82 and the account identifies ASB The indorsement Account, ferred to the balance from the 640 into the 826 Account. Kuwait but did not mention the 640 Account. In claims the banks converted remaining $2,513,172.08. ASB sent Kuwait’s outside audi- Approximately $1,800,000 country listing in the home a form tors deposited of this total amount was into the both account numbers balances for ac- account after the 1984 account verification apparently counts. The auditors deemed form was received Kuwait’s auditors pertaining the information to the accounts country. the home audit, they passed to their but immaterial Analysis II. along Upon the information to Kuwait. information, receiving this Kuwait’s head A. Governing Law office sent a telex to New York office matter, As an initial it is uncontroverted requesting they October applies District of Columbia law in this investigate the Several Account. diversity Furthermore, case. there is no later, months when Kuwait’s New York question that this court must look to local respond, office failed to the Kuwait home applicable law for the statute of limita follow-up office sent telex. There is no Guaranty York, tions. Trust Co. v. follow-up further evidence 326 U.S. 65 S.Ct. 89 L.Ed. 2079 telexes. (1945); Riddell v. Riddell Washington ignored instruc (D.C.Cir.1989); tion mail audit directly to to information Hull Corp., v. Eaton 825 F.2d Instead, gave auditors. ASB the Kuwait’s (D.C.Cir.1987) (per curiam); v. Fitz Hoffa Sensi, requested information to who then simmons, (D.C. 1360 n. 41 (which response altered the had identified Cir.1982). accounts) only to list the 826 both Account. this altered

Sensi sent document on to Ku B. The “Discovery Rule’’ office. wait’s home Kuwait's Di three-year A statute of limitations the Department of Finance rector sent a applies to the instant case. See D.C.Code asking “please to ASB them to letter send (1981); Mal Ann. Ehrenhaft your direct to our auditors at earliest con Price, Inc., colm (D.C. 483 A.2d either to venience the above address [in 1984) (three-year statute of limitations for Kuwait], number], or telex to Kuwait [a claims); tort and contract Forte Gold of all your confirmation our balances in stein, (D.C.1983) 461 A.2d (per as follows: 1. Balances books ... of all curiam) (three-year statute of limitations accounts; 2. deposit Balances of all current conversion). for The issue is whether the accounts; 3. Balances of all other ac statute began of limitations to when run ” Letter .... from Ali Humood A1 counts payable the checks to Kuwait were convert Ali, Dept. Director Finance Kuwait Air ed or plaintiff when the knew or reason Security to American ways Bank ably should have known of the conversion.4 (June 15, 1986), reprinted in J.A. 204. In The applied District Court “discovery the response, ASB only its identified the 826 case, rule” in this thus tolling the statute and stated that is the Account “[t]his limitations, of allowing claims for relationship we have with Kuwait checks converted years more than three Airways.”3 gave response its written prior plaintiff to date the filed suit. secretary and did not mail it to Sensi’s Airways Corp. v. American auditors. Sec. Civ. Action No. slip op. six-year period, Over the a total (D.D.C. 23, 1987), reprinted in $2,654,232.64 deposited was into the 640 J.A. 88. We hold that the District Court this, $141,060.56 Account; paid point. erred on this The District of Colum- Winfield, rule, 3. Letter from Lewoner W. discovery particular ASB Assist- 4. Under the "a cause Manager, Financing plaintiff of through Dept., ant to Director action accrues 'when the Ku- knows or 11, 1986), diligence exercise of due Auditing (July should reprinted wait Office injury.’” Ehrenhaft, have known J.A. Bell, (quoting A.2d at 1201 Burns v. 409 A.2d (D.C. 1979)). reliance, regard to the factor court, following rule. With local and this courts bia Appeals discovery Court of Columbia applied the the District law, heretofore have malpract ability ordinary of an involving medical that has indicated to cases rule diseases,6 malpractice,7 legal ice,5 the violation “is critical to detect person latent for defi warranty question” of contract and of whether threshold breach and, under design and construction8 There applies. cient at 727. discovery rule Id. involving fraud exception, in cases related in the instant case no can be misrepresentation.9 or concealment ulent detected could have ordinary business an apply However, has declined this court three- funds within a siphoning off of breach-of-warranty in a discovery rule conversion, without period of their year Hull, 825 F.2d liability case. See product Although it professional. hiring another conclude In this we 456-57. at be able customers should may be that do presented the commercial circumstances man- to act in a reasonable rely on banks discovery application call for noted,10the issue ner, District Court as the for that all claims appears rule. goes another parties’ duties to one Account more deposited into the 640 checks discovery in a case where the merits filing years prior to the date three than prior question not to applies, and “the rule Rid are complaint barred. the initial Cf. Woodruff, apply.” See should whether it (date filed plaintiff dell, F.2d at 1489 determining is relevant date action latency factor is The second action); v. Hi-Lo Varela timeliness courts Columbia The District of injury. Inc., Stirrups, Powered discovery rule applied the usually have (same). (D.C.1980) injury itself actual manifests “the where Ap- Court District of Columbia negligent act.” Id. only years after factors four has articulated peals Ap- of Columbia As the District determining whether to consider court occasion, one on more peals has than stated apply: should discovery rule the to redress discovery ‘emerged rule “the the plaintiff on reliance of a justifiable injury was the in which fact situations per- hired to skills of those professional might not readily apparent and indeed not work; (2) latency of the the their form years after for several apparent become (3) the between deficiency; the ” balance injury occurred.’ causing had incident the having protection the in plaintiffs interest 1307, 1316 Schneider, 494 A.2d Stager v. the prejudice to possible and the law the A.2d at 483 Ehrenhaft, (quoting (D.C.1985) (4) judicial defendant; interest the legal mal- or many medical 1201). Unlike 524 McConkey, economy. v. See Woodruff cases latent-disease practice cases (discovery rule 722, (D.C.1987) 727-28 A.2d until manifested injury is not the which con- improvement to home applicable see, act, e.g., Burke unlawful the long after license). failure to tractor’s obtain Center, F.Supp. 293 Hosp. Washington v. payee to the injury (D.D.C.1968),the 1328 factors mili- each of these In at the itself manifests case in a discovery against application of tates Price, Inc., Directors, 483 A.2d v. Malcolm See, 8. See & e.g., v. President 5. Bussineau Ehrenhaft Bell, 1984). (D.C.1986); (D.C. A.2d Burns v. 409 1192 518 A.2d 423 Hospital (D.C.1979); Washington v. 614 Center, Burke 1328, (D.D.C.1968). F.Supp. 1333-34 293 Davis, Young, See, 412 e.g., v. William J. Inc. 9. 1187, (D.C.1980) (tolling statute of 1192 A.2d See, e.g., Sales v. Johns-Manville 6. Wilson fraudulently employer con where limitations 111, (D.C.Cir.1982). 116-17 684 F.2d employee’s action for basis cealed factual Keto, Walker, See, e.g., Duggan wages); A.2d 1144 256 v. 554 v. unpaid Keener minimum Furlow, 1989); (D.C. Knight (D.C. 1969) (tolling of limita statute A.2d 779 rule, discovery (D.C.1989) but (applying 1236 medical bene defendant obtained tions where of, determining plaintiff knew that because through misrepresentation). fits alleged mal injury defendant’s from sustained filing years before practice more than three Sec. Airways Corp. v. American 10. See Kuwait plain complaint, limitations barred statute of Bank, op. slip Action No. Civ. claims); malpractice Byers prosecution of tiffs v. 23, 1987), reprinted (D.D.C. in J.A. (D.C.Cir.1983). Burleson, 859-60 wrongful time the is, act occurs —that forged ment by copayee); Southwest Bank forger when deposits or cashes the & Trust Co. v. Bankers Commercial Life the injury check. Co., the instant case Ins. (Tex.Civ. S.W.2d 331-32 is not latent. App.1978) (declining apply discovery rule paper context, commercial reasoning We further find that the balance of inter- nothing bank’s “act of conversion weighs ests in favor of the defendant. An- rendered the act resulting or the injury other directly court that has addressed the that, difficult instead, to discover” and question of whether to apply the discovery discovery problems from stemmed fraudu rule in a conversion action for a forged lent by concealment forg indorsement offered indorsement the following rationale er); People Michigan State for its decision not to invoke the discovery Use and Michigan Pub. Benefit of rule: School Employees Sys. Retirement v. Mi analysis of underlying policies leads chigan Bank, Nat’l Mich.App. us to conclude that a payee’s action for N.W.2d (determining conversion of a check governed must be that forged indorsements for deceased’s re by general rule that in the absence tirement benefits accrued when items were fraud those invoking paid, forgeries discovered); statute of when were limitations, a cause of Chemical Union, Workers Basic action in Local conver- No. sion Arnold Sav. accrues at the time the defendant 411 S.W.2d (Mo.1966) (en banc) wrongly dominion, exercises regardless (declining exception invoke plaintiff’s ignorance. statute limitations finality where defendant promoted depositary bank transactions cashed an ascertain- check for party third forged on period indorse able definite of liability is essen- ment of made plaintiff check out to union); tial the free negotiability of instru- see also Adrian v. American Sec. & Trust ments which on commercial welfare so Co., (D.C.1965) (prior appli heavily depends.... cation of U.C.C. or development of dis choosing the date of the wrongful covery rule exception, determining statute point exercise dominion began limitations running at time bank period runs, of limitation takes check missing indorsement). But presumes law of conversion proper- see, e.g., State Bank v. Hackney Branford ty know owners what and where their Tractor (Fla.Dist. 455 So.2d are, despite assets pre- fact that the Ct.App.1984) (per curiam). In Southwest sumption work a hardship upon the Co., Bank & Trust court reasoned that property owner who fails to discover his [sjince discovery no problems are inher- ownership rights or her until after the ent ... we hold that the “discovery rule” period has run. does not apply to toll the statute limi- v. Industrial Fuscellaro Natl tations where a bank is sued for conver- (1977). R.I. We forged sion on a endorsement. In such reasoning persuasive. find this cases, limitations can be tolled proof of the bank’s fraudulent conceal- Finally, judicial economy militates ment of the transaction. against application of discovery rule 563 S.W.2d “because at preference court’s adju to dicate more timely complaints.” Wood We recognize, as this court did in ruff, 524 A.2d at 728. Several other courts declining apply to discovery rule in a that have addressed the issue of whether products liability case, that the District of the discovery rule should be applied to a Columbia “may decide in the future to ex conversion claim have similarly concluded tend discovery rule to a claim of this that it See, should not. e.g., Lumber Vil Hull, sort,” 457; 825 F.2d at but “as of lage, Inc. v. Siegler, 135 Mich.App. 685, today far,” the rule does not so id. reach N.W.2d (declining application And of the standard articulated apply discovery rule payee’s where indorse- leads us to conclude that the Woodruff to D.C.Code pursuant negligence, this Columbia, utory with presented if FAB. (1981), is not available it.11 case, not so extend 28:3-406 would § reject 21-29. We at Appellant Brief See that, general mat- as a Although hold we argument. apply to a this ter, discovery rule should ques- sort, possible there is a this case of matter, an initial there is no mer As concealment,” see “fraudulent tion of contention that section 3-406 it to Kuwait’s Co., 563 S.W.2d & Trust Bank Southwest provide defense to section 3-419 does not a the statute might toll See, e.g., claims. conversion American example, case. For in this limitations Ins. Sec. Bank v. American Motorists ignored Ku- again in (D.C.1988)(“[Drawer’s 538 A.2d information to mail audit instruction wait’s forgery negligence that contributes a Instead, the Kuwait’s auditors. directly to liability, negates the drawee bank’s but (including informa- requested information only if the drawee meets its burden of bank Account) sent regarding the 640 tion proving by preponderance of the evidence Ku- possible for arguably is It Sensi. complied that it reasonable commer by ASB these actions to claim that wait check.”); cial standards when it cashed the so as concealment” in “fraudulent resulted Mach. Tool Distribs. Ass’n v. during the limitations to toll the statute National Permanent Fed. Loan Sav. & parties concealment. of such period (D.C.1983) (dis Ass’n, appeal, this issue on addressed have not cussing con application of section 3-406 to was not submitted the matter claim). generally version J. White & trial, so the first jury at the conclusion Summers, applicability of the no view Code we offer R. Uniform Commercial (3d 1988). exception in this ed. concealment §§ fraudulent However, note that this be we case. 3- further contends that section any retrial consideration jury matter payee’s in- apply does not where of this case. where, However, missing. dorsement is Liability American Bank’s case, First C. we assume that absence “forged indorsement” awarding any indorsement is a jury’s verdict no uphold the We 3-419(1)(c), Airways Corporation meaning of section within the damages to reading to the apply a similar Kuwait claims must American Bank. we from First signature” in section “unauthorized absolutely lia- term American Bank is that First Empire Moving & Ware 3-406.12 under D.C.Code ble Cf. Corp. Hyde 28:3-419(2) a defense of contrib- house Park Bank & Trust and that trary agreement, to the loan see id. at 1171. Furthermore, it is clear that even if the dis- the court treated the case as a contract covery apply rule were to to this the Dis- contrast, By present action. See id. case failing jury Court erred in to submit to the trict brought under question involves a conversion action the ably of when Kuwait knew or reason- forged negligence known of the indorse- U.C.C. and a defense also embraced should have point plaintiff ments. The in time at which the the U.C.C. injury or have known of an is a knew should event, Corp. was the court in G & R see, jury, e.g., Byers of fact for the interpreting section of the U.C.C. and the same Burleson, 856, (D.C.Cir.1983), 861 precise that we decide did not face the issue judge the trial make this determination as disposi- today, so the decision there is not person a matter of law if no reasonable Furthermore, opin case. since that tive of this ion, date, disagree could id. The facts of this authority reject has been substantial there clarity. do offer such case See, Corp. ing & R view announced in G County Carpet, e.g., Inc. v. Southern Contract previ acknowledge court that this While we 42, Bank, (Fla.Dist.Ct.App. So.2d 43-44 Nat'l 528 one of two ously the absence of determined that Co., 1988); 646 Nat'l Bank v. La Sara Grain First an "un necessary signatures not constitute does 246, (Tex.Ct.App.1982), S.W.2d 251-52 aff’d meaning of signature" within authorized (Tex.1984) part, part, 673 S.W.2d 558 rev’d 4-406, Corp. American G & R see § U.C.C. Rascar, 4-406); (affirming interpretation of § 1164, Co., (D.C.Cir. & F.2d 1169 Sec. Trust 523 446, Oregon, Wis.2d 275 Inc. v. Bank 87 of 1975), determined that the the court there also (1978); Mfg., King All 111 &n. 1 N.W.2d precise cover the situation in Co., U.C.C. did not & 69 Merchants Bank Trust Inc. v. Genesee lacking two (1976); volved in the case—checks one of Mich.App. Fire N.W.2d 104 245 (not required signatures the drawer indorse- Westminster Fund Ins. Co. v. National man's U.S.A., (N.Y.Sup. ments) advances con- Bank 543 N.Y.S.2d 605-06 and disbursement loan Co., Ill.App.3d 753, 757, 2 Ill.Dec. See, usually question is a e.g., fact. (1976) (applying 357 N.E.2d sec Hydroflo Corp. v. First Nat’l tion 3-406 where bank took checks without (1984); Neb. 349 N.W.2d cf. indorsements). required words, In other American Sec. Bank v. American Motor scope of the defense under section 3- ists Ins. (D.C. 739-41 406 is coextensive with the scope of the 1988) (upholding trial finding court’s substantive defined offense section 3- fact that bank had complied with rea 419(1)(c). It would make no sense to con sonable commercial standards when it strue the statute otherwise.13 a series forged cashed checks which forged misspelled). name The District case, jury apparently properly Court submitted this issue to the found that a section 3-406 defense was jury- available to because FAB of its adherence standards,” “reasonable commercial It is also clear depositary that a because of “negligence.” There bank that has not acted in a commercially is no basis for us to judg overturn this reasonable manner in taking checks over Therefore, ment. we decline to disturb the forged indorsements may have available to jury’s verdict judgment or the of the Dis it the defenses of and apparent ratification awarding trict Court damages no on Ku authority. See, e.g., Motors, Senate Inc. v. against wait’s claims FAB. Bank, U.C.C.Rep.Serv. (Calla Industrial D. American Security Bank’s Liability ghan) 387, (D.C.Sup.Ct.1971) (dis cussing defenses both of ratification 3-419(3), ASB, Under section if apparent authority). Thus, bank, Kuwait's claim depositary “in acted accordance with that, 28:3-419, under D.C.Code § reasonable commercial appli standards Security Bank is absolutely business,” liable if it cable to the acted it is not liable in commercially manner, unreasonable “beyond amount of pro see Appellant 16-17, Brief misappre ceeds remaining in hands.” D.C.Code [its] Indeed, hends the law. 28:3-419(3) (1981). U.C.C. itself § Commercial rea Ann. preserves the common law defenses: sonableness ais fact jury. It is not an displaced issue to particular be Unless provi- decided as a law, matter of U.C.C.], sions of principles contends. [the Appellant Brief of equity, at 20-21. law and including ... the law relative to principal ... and agent, estop- courts, Several including the District of pel ... or validating other or invalidating Columbia Court Appeals, deter- have supplement cause shall provisions. its mined that it commercially is unreasonable as a matter law for a (1981). bank to take for See also 28:1-103 § D.C.Code Ann. id. deposit in 28:3-404 an individual (ratification); id. § a check 28:1-201(43) (apparent payable made corporation, authority); § to a J. without Summers, first ascertaining the White & R. authority of the de- Uniform Commercial (3d 1988). ed. See, Code positor/indorser. e.g., American Mach. Tool Distribs. Ass’n v. National Given the verdict in this Ass’n, Permanent Sav. & Loan Fed. appears that the jury that, found after 907, 913-14, (D.C.1983) (citing from notification ASB to Kuwait in 1984 of similar determinations jurisdic- other the existence Account, of the 640 Sensi’s tions). But fairly aside this one wide- conduct was clothed apparent au ly recognized exception, whether a bank thority. contends, however, that the in commercially acted reasonable manner in denying erred ASB’s mo- Ct.1988); Jersey Provident Sav. Bank v. United holding Because of our §on we need

Bank, 303, N.J.Super. 207 504 A.2d whether, 140-41 not processed consider when FAB and (1985). see, Bank, University But v. paid Nat’l checks from ASB on line the Wolfe indorsements (1973). 270 Md. bank, If depositary faced of the the drawee bank was now, question with this acting we are convinced that on valid indorsements under D.C.Code the Appeals District of (1981). Columbia Court of would § 28:4-205 adhere to the construction of the statute enunci by ated these courts. 15-109 or D.C.Code 15-108 § on the issue n.o.v. judgment for tion interest. (1981), prejudgment to award words, ASB asserts In other ratification. provides: 15-108 Section and actions Sensi’s that ratified ef- prospective liquidated retroactive to recover a had a In an action ... this liability. We of all relieving payable by con- interest is fect debt on which reject usage judgment this claim. the by or or tract law on include interest plaintiff of fact. the shall is for of ratification one question The it principal Trust from the time when & the debt Sec. Corp. v. American RG & (D.C.Cir.1975). payable.... due and was F.2d sub- properly Therefore, Court the District in- prejudgment District Court denied The jury. Further- to the mitted parties had grounds that terest on the may differ as people more, fairminded “[i]f payment of a stated not contracted for conclusion, if there is substantial or to the the law sum and that easily or calculated n.o.v. evidence, judgment conflicting damages to specify the amount of not does v. Dun- Carter must be denied.” motion litigant of awarded to a successful be 1225, 1227 Ltd., F.2d can-Huggins, asserted Kuwait. See claims like those (D.C.Cir.1984). Corp., slip op. at re- Airways that previously noted has court This that the 85. We conclude printed in J.A. determining inquiry crucial claim is for the breach of contract amount [t]he ratified subsequently an act was to Kuwait is entitled liquidated. whether party al- of the the intention pursuant concerns to section prejudgment interest Although the act. ratifying the legedly applies also to only if this section 15-108 from inferred ratify can be intention claims. conversion in each the circumstances totality of Ap- of Columbia Court The District find rat- hesitate to courts “[djamages for that has determined peals show- allegedly facts where ification liqui- regarded as a cannot be easily explained can be ing ratification Keto, 554 A.2d debt,” v. Duggan dated grounds. other thus, and, par- (D.C.1989), that (citations F.2d Corp., 523 RG & inter- prejudgment are not entitled ties Court Columbia omitted). District of The in con- for 15-108 actions under section est an subsequently articulated Appeals also court Duggan version. See id. finding exacting standard for more even authorizes that section determined to be act an unauthorized For ratification: tort interest both “post-judgment knowledge have ratified, principal must cases, interest pre-judgment but contract impliedly, ratify the act of the act 1140. The cases.” Id. at in contract implies ratification which the conduct but interest prejudgment concluded court is “inconsistent be conduct must nor “neither authorized actions is tort Lewis hypothesis.” any other with stat- by District Columbia forbidden” Auth., Area Transit Metro. Washington thus, finding court, Duggan Id. The utes. The facts (D.C.1983). 666, 671-72 or in sections 15-108 guidance no compel the certainly do ease in tort interest of prejudgment awards de- ratified Sensi’s that Kuwait conclusion law, held looking to case claims, and the 640 into and posits withdrawals included as may be interest “pre-judgment to Kuwait paid of funds Account con- damages in an action part suscep- are The facts Embassy Kuwait. it make that will extent version Consequent- interpretations. of other tible upheld the whole,” id., party injured judgment motion for reject ASB’s ly, we interest prejudgment court’s award trial n.o.v. damages for conversion part of its bonds, 1140-41.14 id. see Interest Prejudgment E. again is District Court If on remand that the Kuwait maintains whether question of presented pursuant D.C.Code required, e.g., 734 P.2d pre- 241 Kan. Mohr State bar does not awards

14. The U.C.C. also See, (1987) (affirming prejudg- award claims. judgment for conversion interest 466 interest, evidentiary upon it there was no basis prejudgment should con-

award punitive to submit the claim for against the standards artic- sider the issue damages jury. and the cases cited Duggan, ulated in clearly These cases seem to allow therein. 7-8, Airways Corp., slip op. at Kuwait prejudgment interest for an award refer- reprinted in J.A. 81-82. Aside from cases, the extent that it “to will encing study which showed that ASB injured party whole.” make the corporate forty- lacked documentation percent corporate of the accounts at seven Request F. Kuwait’s a New Trial on question, Kuwait mentions no the branch for Damages Punitive mere- other evidence its brief and claims ly that the actions reflect ASB’s reckless claims that rights indifference to the of Kuwait and its dismissing against Court erred in its claim facts, other customers. On these damages punitive ASB for based on the punitive damages properly claim was flagrant contract, or malicious breach of jury. Brady withheld from Corp., 7-8, Airways slip op. see Kuwait at 476, 479-80, 64 Ry., Southern 320 U.S. reprinted in J.A. seeks remand 232, 234, (1943) (stan- S.Ct. 88 L.Ed. 239 for a new trial on this sole issue. Kuwait verdict); dards for directed see also Wilson properly pleaded contends that F.2d v. Good Humor 757 1298 presented sufficient evidence to warrant (D.C.Cir.1985)(same). punitive submission issue of dam ages jury. to a We conclude that the Dis CONCLUSION trict Court did not err. discovery rule should not have been law, punitive Under District of Columbia applied in the commercial context of this damages for breach of contract be injury where the manifest “ certain, narrowly assessed ‘in defined cir moment of conversion. Consequently we cumstances, where a breach of contract retrial, must remand for barring all claims with, merges of, and assumes the character deposited cheeks or cashed more than tort, a willful calculated rather than inad years prior three to the date Kuwait filed vertent, flagrant, in disregard of obli complaint its barring the breach of ” gations Lee, Wagman of trust.’ 457 contract claim opening the 640 Account. (D.C.)(quoting 405 n. 5 Brown v. addition, should prejudg- the issue of Coates, (D.C.Cir.1958)), ment again, interest arise the District denied, 849, 104 cert. U.S. S.Ct. Court should evaluate Kuwait’s claim in (1983). L.Ed.2d 145 The District Court de light of the District of Columbia Court of termined that: Appeals’ recent decision in Duggan v. punitive damages KAC’s claim for based Keto, (D.C.1989). 554 A.2d 1126 With re- flagrant or malicious breach of spect claims, to the other we affirm the supported by contract was no evidence. determinations of the District Court and Indeed, only evidence of the contract deny parties’ requests for relief. testimony was the of former ASB em- So ordered. ployee, Parker, Jerry and former KAC

employee, Hratch Azadian. These wit- nesses testified as to the circum- ORDER surrounding opening stances Upon consideration of the Petition for Re- original KAC ... not the “640” hearing filed Appellant and Cross-Appel- lee, account. No other concerning evidence Airways Corporation, claiming the contract claim was offered. punitive KAC’s claim for damages permitted corporate prohibit ment interest where bank "UCC does not or limit an award of deposit proceeds officer to indorse prejudgment interest”); checks and County see also Bullitt personal account); Hege Landmark Bank v. Printing Bank v. Publishers 684 S.W.2d Co., Inc., man-Harris 522 So.2d 1053 & n. (Ky.Ct.App.1984); First Bank & Trust Co. v. (Fla.Dist.Ct.App.1988) (affirming award of Inc., Ga.App. Insurance Serv. Ass'n prejudgment against deposit interest bank that (Ga.Ct.App.1980). S.E.2d indorsement, improper stating ed check on sub- have been should on conversion based isit jury,

mitted should be question this

ORDERED along trial court by the

reconsidered remanded have been issues that other a re If there is case, p. 456. supra, see District it to the we leave

trial of this determine first instance in the conversion, there

whether, any claim of to submit

is sufficient evidence jury. to the damages punitive 1319, 1322 Stein, A.2d v.

Parker Rostad, (D.C.1989); v. Mason (D.C.1984). ARMY, U.S. THE OF

DEPARTMENT PROVING ABERDEEN

ARMY SUPPORT INSTALLATION GROUND Petitioner,

ACTIVITY,

v. RELATIONS LABOR

FEDERAL

AUTHORITY, Respondent. ARMY, U.S. THE OF

DEPARTMENT PROVING ABERDEEN

ARMY SUPPORT INSTALLATION

GROUND Petitioner,

ACTIVITY, RELATIONS

FEDERAL LABOR

AUTHORITY, Respondent. ARMY, U.S. THE OF

DEPARTMENT ARMAMENT, MUNITIONS ARMY COMMAND, ROCK AND CHEMICAL Petitioner, ILLINOIS, ISLAND, LABOR RELATIONS

FEDERAL

AUTHORITY, Respondent. 88-1896, 88-1897.

Nos. Appeals, Court of

United States Circuit. of Columbia Oct.

Argued 1, 1989.

Decided

Case Details

Case Name: Kuwait Airways Corporation v. American Security Bank, N.A. And First American Bank, N.A.

Court Name: Court of Appeals for the First Circuit

Date Published: Jan 10, 1990

Citation: 890 F.2d 456

Docket Number: 88-7039, 88-7040, 88-7055, 88-7056 and 89-7010

Court Abbreviation: 1st Cir.