Abramowitz v. Bank of America

• Decision Date: 14 March 1955
• Citation: 131 Cal.App.2d Supp. 892,281 P.2d 380
• Court: California Superior Court
• Parties: 131 Cal.App.2d Supp. 892 Herbert L. ABRAMOWITZ, Plaintiff and Respondent, v. BANK OF AMERICA, a National Trust and Savings Association, Defendant and Appellant. C. A. 8420. Appellate Department, Superior Court, Los Angeles County, California

Page 380

281 P.2d 380

131 Cal.App.2d Supp. 892

Herbert L. ABRAMOWITZ, Plaintiff and Respondent, v. BANK OF AMERICA, a National Trust and Savings Association, Defendant and Appellant.

C. A. 8420.

Appellate Department, Superior Court, Los Angeles County, California.

March 14, 1955.

Rehearing Denied March 22, 1955.

Hugh A. Steinmeyer & George L. Beckwith, Los Angeles, for appellant.

Bertram S. Harris, Los Angeles, for respondent.

PARTOSSO, Judge.

Plaintiff instituted this action to recover damages for the wrongful dishonor of a check drawn by him upon his account with the defendant bank at a time when he had standing to his credit an amount in excess of the face of the check. From a judgment in favor of plaintiff, defendant appeals, and for the reasons hereinafter stated, we are affirming the judgment.

The check in question was drawn in favor of the vendor under a conditional sales contract, pursuant to which plaintiff was purchasing an automobile, in payment of a monthly installment due thereunder, and as a result of the dishonor of the check and the defendant being otherwise unable to make payment, the seller repossessed the automobile and sold the same pursuant to the terms of the contract. The trial court awarded damages in the sum of $731.80, and $45.82 interest, the principal sum representing the amount paid upon the contract by plaintiff ($935), plus the resulting deficiency between the amount realized upon the sale by the vendor ($1,600) and the balance due upon the contract or the sum of $596.80, less $800 found by the trial court to be the reasonable value of the use of the vehicle during the time that it was in plaintiff's possession. The sole question presented is whether, under the circumstances, the award of such damages was proper.

The precise question with which we are confronted is one of first impression in this state, and the authorities elsewhere are neither harmonious nor particularly helpful. (See Annotations in 4 A.L.R. 947; 13 A.L.R. 305; 34 A.L.R. 205; 58 A.L.R. 732; 126 A.L.R. 206; 153 A.L.R. 1035.)

The rule at common law was that substantial damages--'temperate in amount'--were recoverable against a bank for wrongfully dishonoring a check of its depositor; but a distinction was made between traders and nontraders, in that in the case of the former it was presumed, without further proof, that substantial damages had been sustained, 'the rule proceeding upon the fact commonly recognized that the credit of a person engaged in such a calling is essential to the prosperity of his business and that the dishonoring of his checks was plainly calculated to impair such credit and to inflict a most serious injury.' 8 Cal.Jur.2d p. 52, sec. 88; sec. also 9 C.J.S., Banks and Banking, § 365, p. 778. And such was the rule in this State, Siminoff v. Jas. H. Goodman & Co. Bank, 1912, 18 Cal.App. 5, 11 et seq., 121 P. 939, until the enactment in 1917 of Civil Code section 3320, which reads as follows: 'No bank shall be liable to a depositor because of the nonpayment through mistake or error, and without malice, of a check which should have been paid unless the depositor shall allege and prove actual damage by reason of such nonpayment and in such event the liability shall not exceed the amount of damage so proved.'

This statute is substantially identical with that formulated and sponsored by the American Bankers' Association, and which has been adopted in a number of states. (1 Paton's Digest (1940 ed.) pp. 1117-1118), the purpose and effect of which was to abolish the distinction obtaining at common law between traders and nontraders. Allen v. Bank of America, 1943, 58 Cal.App.2d 124, 130-131, 136 P.2d 345. As a result, a depositor (whether trader or nontrader) whose check has been wrongfully dishonored is not entitled to recover substantial damages by mere proof of dishonor, but only actual damage proved to have been sustained as a result thereof.

The problem, therefore, is as to what is comprehended by the words 'actual damage' as used in section 3320. Relevant to the solution of this problem is a determination as to the character of the action here involved. Defendant's argument proceeds upon the thesis that the action is only upon contract, but we do not agree. While it is true that plaintiff might have brought his action upon contract, he was not restricted to this remedy. The prevailing view and that obtaining in this State is that in such circumstances he may, as plaintiff has done here, sue for damages for the injury resulting from the refusal to pay the check, in which case the action sounds in tort. See Allen v. Bank of America, supra, 58 Cal.App.2d 124, 127, 136 P.2d 345, and compare Rubino v. Utah Canning Co., 1954, 123 Cal.App.2d 18, 23-24, 266 P.2d 163.

From the foregoing, it would appear to necessarily follow that the rule of damages applicable is that prescribed by Civil Code section 3333 unless it be that Civil Code section 3302, which provides that 'The detriment caused by the breach of an obligation to pay money only, is deemed to be the amount due by the terms of the obligation, with interest thereon', is controlling here. In Hartford v. All Night & Day Bank, 1915, 170 Cal. 538, 540-541, 150 P. 356, L.R.A.1916A, 1220, decided prior to the enactment of section 3320, it was held that section 3302 prescribes the measure of recovery in cases of this character, but this view was expressly rejected in Siminoff v. Jas. H. Goodman & Co. Bank, supra, 18 Cal.App. 5, 14, 121 P. 939, which although decided prior to the Hartford case and a petition for hearing was denied by the Supreme Court, is not mentioned in the latter case. And in Allen v. Bank of America, supra, 58 Cal.App.2d 124, 131, 136 P.2d 345, 349, it was held that 'recoverable items of damage' were pleaded in a complaint alleging that by reason of the wrongful dishonor of plaintiff's check, business transactions which were being negotiated by plaintiff with others 'which would have returned to him gains and profits' failed of consummation. 58 Cal.App.2d at page 126, 136 P.2d at page 347. Whatever may have been the rule prior to the enactment of section 3320, we are of the view that section 3302 is without application to actions of the character here involved, and that the measure of damages is that prescribed by section 3333 for tort actions.

While there are decisions in this State which undertake to declare that the measure of damages for breach of contract are substantially the same as for tort, Siminoff v. Jas. H. Goodman & Co. Bank, supra, 18 Cal.App. 5, 15, 121 P. 939; Ruzanoff v. Retailers Credit Ass'n, 1929, 97 Cal.App. 682, 687, 276 P. 156, this statement is not accurate, for as the contrasting language of sections 3300 and 3333 clearly indicates, and as our Supreme Court has observed, there is a recognized distinction between the measure of damages in tort cases and that obtaining in actions for breach of contract, in that damages not even anticipated are recoverable in tort while only such damages as were reasonably contemplated by the parties at the time of entering into the agreement are recoverable for a breach thereof. Hunt Bros. Co. v. San Lorenzo Water Co., 1906, 150 Cal. 51, 56, 87 P. 1093, 7 L.R.A.,N.S., 913; Bartlett v. Federal Outfitting Co., 1933, 133 Cal.App. 747, 750-751, 24 P.2d 877; Zvolanek v. Bodger Seeds, 1935, 5 Cal.App.2d 106, 108, 42 P.2d 92; Lacy Mfg. Co. v. Gold Crown Min. Co., 1942, 52 Cal.App.2d 568, 574, 126 P.2d 644. We find it necessary to emphasize this distinction because of the insistence of defendant that damages for the loss of plaintiff's automobile are not recoverable because they may not be said to have been reasonably contemplated by the parties at the time the bank account was opened, as well as its bearing upon the discussion which follows.

We have concluded that the...