*1 SHAW, Appellant, Charles R.

UNION BANK AND TRUST

COMPANY, Appellee.

No. 53271. Court of

Supreme Oklahoma. 10, 1981.

Nov.

As Corrected Nov. Ablah, City,

George ap- M. Oklahoma pellant. Jr., Alexander, Crowe, H.

Robert Dun- Thweatt, Swinford, levy, & Bur- Johnson dick, City, appellees. Oklahoma SIMMS, Justice: an order appeals Charles R. Shaw Division, Claims Small Oklahoma Coun- granting ty, in the amount of Trust against Union Bank and Com- $56.26 pany (appellee).

Appellant, joint tenant account, checking account, safety de- Nauman, posit with Emma who died box B. 9, 1978, possession safety took May deposit account funds box appel- soon after Nauman’s death. When requested remaining funds in the lant account, the bank informed him of necessity release from obtaining Tax Commission. Oklahoma *2 release, sequential Upon damages notification of the tax on or are proximately 31, 1978, appellant about May presented a caused dishonor is a savings withdrawal form which the bank question of fact to be determined in each accepted. The bank made out a cashier’s case.” Appellee check but refused to deliver it. Appellee, hand, on the other contends the bank then refused to release funds without damage issue is resolved not by the UCC a probate of Emma B. Nauman’s estate. O.S.1971, but by 23 22: § Appellant attorney probate hired an “The detriment caused the breach of proceedings, though they proved unneces- obligation to pay money only is sary since Nauman’s estate was worth less deemed to be the amount due $1,000. than obligation, terms with interest June On bank released thereon.” savings account funds on which interest Appellee asserts the action is merely a con- had per accrued at the rate of 5% annum. tractual one. Appellant deposited the funds at another In weighing argu- the merits of these bank for a return of 7.65%. ments, we must following consider the Appellant’s petition alleged that the fol- questions: (1) Whether savings withdraw- lowing damages were suffered because of al order constitutes the wrongful dishonor appellee’s actions: 4-402; of an (2) item under UCC Wheth- § (1) $56.26; Loss of interest of er a tort, dishonor is an action in (2) The unnecessary probate cost of an an action in or a new cause of proceeding ($1000); action. (3) pain suffering Mental resulting alleged wrongful from bank’s dishon- I. ($25,000); 12A, O.S.1971, 4-104 defines § (4) ($125,000). Exemplary item as follows: “ Appellee filed a motion to strike and the ‘Item’ means instrument for the motion, district court sustained the thereby payment money though even it is not removing alleged all damages except the negotiable but does not money.” include loss ($56.26). of interest The district court agree We appellant’s contention that ordered the case transferred to the Small 4-402, under § withdrawal order Claims Division where was en- Though is an commonly most tered for appellant for $56.26.1 thought checks, personal of as an item can At issue are the types damages poten- checks, (tellers include bank cashier’s tially recoverable wrongfully when a bank checks), notes, non-negotiable instru withholds a funds. payable ments at the bank. White and Summers, Handbook of the Law Under the Appellant urges that the Uniform Com- U.C.C., 17-4; Dziurak v. Chase Manhat § (UCC) 12A, O.S.1971, mercial 4-402, Code Bank, Y., ten N. 44 N. Y.2d 406 N. Y.S.2d states the measure of available: (1978); 877 N.E.2d U.C.C.Rep. “A payor bank is liable to its customer 427. proximately Bank, Coleman v. The dishonor of an item. When the Brotherhood State Kan.App., dishonor through Kan.App.2d occurs mistake 592 P.2d 103 (1979) limited to damages proved. actual considered a If withdrawal or- so. proximately 4-402, proved caused and der an item under as did First ages may Bank, include damages Wyoming for an arrest Etc. v. First National or prosecution of the customer or Wyo., other 612 P.2d 469 and Joler consequential damages. Co., Whether an con- Depositors U.C.C.Rep. Trust Summary O.S.1971, transfer from the District Court to and therefore is not an issue. 12 the Small Claims Division has not been raised plaintiff’s Me., against draft drawn 809 A.2d 871 The Oklahoma her own funds, 4-104 makes it clear Code Comment distinguished the court a bank’s re- that item is not restricted to checks: sponsibility ordinary from an breach of an obligation

“(2) pay money. The definition of ‘item’ is similar to 118, except former 6 Okl.St.Ann. § “. .. the business of the community the Commercial Code added the words mercy would be at the they of banks if *3 though negotiable’ ‘even not to make cer- pleasure could at their refuse to honor apply tain that the rules of this Article to checks, their and then claim all usually instruments handled banks that such action was the breach mere of in the collection channels.” an ordinary only contract for which nomi- recovered, nal could be unless II. special damages proved. were There is problematic More than whether a something more than a breach of contract qualifies withdrawal order as an item under question in such cases. There is a question catego- the UCC is the of how to public policy involved .. . and a breach of wrongful rize dishonor. The UCC refuses implied the contract between the bank relegate to wrongful dishonor either to an depositor and its entitles the latter to action in tort or to an action on contract. damages.” p. recover substantial [E.A.] “The the drawee for dishonor citing Patterson v. Marine has sometimes been stated as one for 632, Am.St.Rep. Pa. 18 A. contract, breach of neg- sometimes as for Appellee’s proper maxim “A analysis of ligence or other duty, breach of a tort begins the instant case in the ends and sometimes as for defamation. This realm of contract law” does not conform attempt action does not to specify a theo- interpretation wrongful with the UCC’s ry. ‘Wrongful dishonor’ excludes hybrid dishonor as a cause of action. permitted justified dishonor, as where Commentary Digest U.C.C. Law& Cum. the drawer no has credit extended the Supp.1980, 4-402(A)(2), points out that drawee, or where the draft lacks a neces- 4-402 does not answer the issue sary properly endorsement or is not wrongful grounded whether dishonor is presented.” Comment, 12A, U.C.C. depositor, the contract bank and between 402(2). [E.A.] obligation on the bank’s to administer the “Wrongful dishonor is different from care, depositor’s account with due or on the ‘failure to ordinary exercise care in han- slandering prohibition law’s of anoth- dling item,’ an and the measure of dam- er’s credit. ages section, is that stated in this not that simply “It creates a cause of action and 4-103(5).” stated Section Com- U.C.C. any inquiry theory into the be- eschews ment, 12A, 4-402(4). cause of action. be it. The hind that So Appellee largely rests its case on the con- problem extent of this creates is that the tention that withdrawal was normally . a recoverable not an item. Applying logic, this if there is function of the cause of action asserted.” item, no wrongful there is no dishonor and Summers, supra, postulate White and appellee merely is liable for the breach specify does not obligation i.e., that because the UCC pay money, the amount plus wrongful due whether dishonor sounds in tort disagree. interest. We must Even the draftsmen intended to al- pre-Code in the Commercial National Latham, Okl., Bank v. low for mental distress and other 29 Okl. 116 P. 197 intangible injury consequential as similar fact situation in which payor bank wrongfully pay ages.2 refused to Tex., depositor consequential Palmer, was an element of In Northshore Bank v. James T. (1975) resulting dishonor.- 525 S.W.2d the trial court instructed jury anguish that mental suffered The Court held that argue cites to where

The cases sufficient the restriction of the action in contract are funds remained in decedent’s debt, convincing. These not cases stand for account to cover the the refusal pay relationship general rule that between a the executor constituted dishonor. liable, only bank and is contractual. That Defendant was not for the bal- accounts, general apply special rule does not to the ance of the but consequential damages proximately wrong- situation of dishonor. For exam ple, Sebring Deposit Corp., Federal Ins. ful conduct. Okl., (1968) deals with 401 P.2d possibility awarding punitive As to the obligation pay money only. breach of an damages, 4-402 expressly neither allows The facts involve a failed state bank and nor them. Appellee disallows states cor- duty of the court to order the bank to rectly generally punitive damages are depositors, interest to not the bank’s not obliga- recoverable for the breach of an Sebring failure to honor *4 O.S.1971, arising tion from contract. 23 holds that the issue interest is controlled Wrongful dishonor, 9. by as defined the § O.S.1971, 22, by supra, 23 but the case in § is more U.C.C. than a mere breach of con- way wrongful no that intimates the dishon- Albuquerque tract. Loucks v. National obliga

or of an item is a mere breach of an 76 N.M. U.D.C.Rep. 418 pay money only. tion to (1966), punitive P.2d 191 holds that ages

Under 4-402 a bank is liable for dam- are allowable when the conduct of the § intentional, fraudulent, ages proximately “maliciously bank is wrongful caused the words, oppressive, recklessly, dishonor of In other committed or with gears disregard a wanton damages 4-402 the measure of § not Palmer, rights.” item, to the face value of Northshore Bank v. Tex. the dishonored Civ.App., 718, U.C.C.Rep. 525 S.W.2d injury depositor. but to the sustained (1975) interpreted allowing the U.C.C. as Digest, Cum.Supp., U.C.C. 4—§ punitive recovery reasonably if related to 402(A)(5). Where the dishonor is damages. actual damages Punitive mistake, were attributable to the U.C.C. limits not allowed in Wallick v. First Bank State damages proved.3 to actual Mo., Farmington, 532 S.W.2d 520 damages On restriction of when the but the they appro- court stated would be grounded dishonor is on an action other priate if the breach amounted to an inde- mistake, Joler, than 4-402 is silent.4 In § tort, pendent proper allegations wilful supra, the executor of deposi- a deceased of malice. tor’s attempted estate to close out dece- The Oklahoma Code Comment to savings dent’s and account at de- Latham, citing implies punitives are fendant bank. Because decedent owed recoverable: money, the bank insisted on written assur- paid ance the debt would be before releas- expresses prevailing “This section com- ing the funds in the account. mon A damages law. bank is liable for

The trial court in This view has been Commercial National Bank v. codified in 4-402. § Latham, supra, jury instructed the as follows: difficulty proving 3. Because of the that an your plaintiff, “If verdict is for the the meas- injury dishonor, “proximately by wrongful was caused” a first, repayment ure of her formerly the law allowed necessarily expend- her of whatever sum was proof without under “the trader’s rule”. The collecting money ed in the matter of customer, especially depositor, a commercial deposit bank, to her in credit and such presumed injured. U.C.C.Digest, was to be fairly other and further sum as will and rea- Cum.Supp., 4-402(A)(5). § sonably compensate any injury her for to her standing any worry, credit and and for humil- See, Commentary Digest, U.C.C. and Law iation, injury feelings by and to her reason of 4-402(A); U.C.C.Digest, Cum.Supp. the failure of the defendant bank to honor the 4-402(A)(2), and 18 ALR 3d deposit. draft for her said lie, dishonor, by wrongful puni- but I cannot accede exposition to its of the depositor’s recovery tive cannot be awarded for dis- limits.

honor caused mistake.” surviving joint tenant [depositor] account sought to recover dam- Appellant alleges petition here in his that ages from the bank’s refusal to wrongful, bank “acted in a mali- honor his withdrawal petition order. The cious, grossly negligent and manner in re- unmistakably upon single declares cause fusing to Appellant release the funds.” of action in alleges tort. It that because given opportunity should be prove deposit in suit had been cleared for allegations. these release the state tax authority, its with- Therefore, we hold the trial court erred holding by “wilful, the bank constituted a sustaining defendant’s motion to strike the wrongful, malicious grossly negligent” and allegations consequential punitive act. damages allowable under U.C.C. 4-402 in plaintiff’s petition. We set aside the order I the trial court and A remedy against the bank Division, Small Claims and remand to the refusal to his honor order of District Court trial on the merits. payment just is not a breach of a express implied, will bank

IRWIN, J., BARNES, J., C. V. C. depositor, order, any or his amount that HODGES, HARGRAVE, JJ., DOOLIN and deposit.1 not does exceed the balance on As *5 concur. “quasi public of institutions character” engaged calling places banks are OPALA, J., concurring part, dissenting in duty them under a common-law to exercise part. in obeying in care their customers’ mandates.2 banker/depositor relationship The embodies OPALA, Justice, concurring part in and obligations. two distinct clusters of Its con- dissenting part: in origin gives sensual rise to a ex- press implied, or which in turn creates a presents questions: (a) The case but two law creditor/debtor bond.3 The itself addi- Does a against have a tort claim tionally yet affixes to it another attribute— his banker for refusal to honor an Anglo-American that of status. In the le- order for deposit? withdrawal of funds on gal tradition a refusal to banker’s so, (b) And if then What elements of dam- honor a customer’s order for withdrawal of age are recoverable? deposited funds is both a breach of contract The appeal judg- is from a duty and a tortious breach of a status-based ment that confined his to lost in- depositor may of care. The elect between plea terest and denied his for other dam- an ex contractu and one ex delicto.4 action ages alleged to have been occasioned chosen, recovery If is limited the former be harmful event. While I concur in the the amount of the dishonored order to court’s view that an ex delicto action does wrongly disobeyed, with interest from the Latham, 88, approach 4. The status Commercial Bank v. 29 116 to the banker’s tort lia- Okl. 197, (1911); Witter, Valley bility may early P. 198 Nat. Bank v. its in the have antecedents 491, 414, (1942). 58 Ariz. 121 English regarded P.2d 418 law which merchants and money-lenders occupying special “a status” as Latham, supra 2. Commercial Nat. Bank v. note Graveson, legal day. in Status order of the 1; 419, Patterson v. Marine 130 Pa. 18 A. (University Law of London the Common 31 (1889); Williams, 633 Marzetti v. Eng.Rep. 1 Barn. Holden, 1953); History The Athelone Press & Adol. Rolin v. Negotiable English in the Law Instruments Steward, Eng.Rep. 14 C.B. (University The Athelone London 1955). Press Newkirk, 3. Brown v. Eastman National Bank of Okl. 291 P2d 55 ALR2d 971. pain suffering, slander —for mental em- and refusal.5 Should date of demand barrassment, humiliation, pursued, composition mortification, remedy latter be may entirely be compensable reparation worry injury feelings or other to the different.6 reputation harm to one’s which was inflict- wilfully ed or with malice.9 In contrast adoption of the Uniform Commercial The slander, tort actions with an element of had no effect in 19617 Code UCC] [Code past respect course taken this court range remedies available under legal depositor’s injury to the loss for a norms of to the common-law from the actionable dishonor of his own depositor wronged dishonor. bank’s withdrawal order confines his abridge Nor did the Code his freedom statutorily those elements which are autho- theories among choose the various delictual litigation rized in for conversion.10 If the (of credit), slander liability negligence, — met, depos- criteria of 28 9 are conversion other wilful and malicious O.S.1971 § may type rem- itor in the respect harm. With to the latter action addition- recovery, the ally punitive damages.11 edies and to his theories of recover pre-Code body precedent re- Oklahoma I leave all those of the would undisturbed mains unaffected and continues in force.8 depositor’s alleged items of which depositor’s petition clearly and un- applicable, are under the terms of 23 O.S. “wilful, mistakably rests his claim on a ma- actions, to conversion as well as grossly negligent” licious or tort. The alle- punitive damages, those for but would gations are sufficient to state ex delicto petition strike from his all references to against cause of action the bank. There pain suffering”. “mental This is so striking peti- was hence error in from the against because his claim the bank for ac- tion all of the tort-related items of recov- tionable dishonor of his own withdrawal ery. order theory cannot be rested on a akin to slander.

Pre-Code Oklahoma case law distin-

guishes types between two of actions for

delictual dishonor. One of these is for the

bank’s refusal to demand

when the order is in the hands a third- holder;

party payee or the other action is dishonor of the direct with-

drawal In order. the former class the law

recognizes impeachment of the custom-

er’s credit may follow as a natural conse- dishonor;

quence it hence al-

lows recovery a manner akin to that in —in Stockton, 120, see First Nat. Bank v. cases collected in the Okl. Annotation of 638, Witter, (1926); Valley P. supra dishonoring Nat. Bank v. of bank to check in 206, note 1. 126 ALR 218-219. Latham, supra 6. Commercial Bank v. note 1. 64; 10. 23 First O.S.1971 Nat. Bank v. Stock ton, 5; also, supra note see McKinnon v. Mon seq. 7. 12A O.S.1971 1-101 et §§ Co., 170, arch Loan 111 Okl. 239 P. following 8. The comment 12A O.S.1971 Co., Watson v. Stockton Morris Plan which deals with the measure of Cal.App.2d (Cal.App. 93 P.2d bank”, “payor for pressly dishonor ex- 1939) 1939). (Cal.App. and 86 P.2d attempt notes that the Code “does not specify theory” liability. Neundorf, Okl., 11. Fuller v. 293 P.2d Latham, supra 9. Commercial Nat. Bank v. note 1; 1; Valley Witter, supra Nat. Bank v. note