Atlas Vegetable Exchange, Inc. v. Bank of America

• Decision Date: 26 August 1970
• Citation: 10 Cal.App.3d 868,89 Cal.Rptr. 274
• Court: California Court of Appeals Court of Appeals
• Parties: ATLAS VEGETABLE EXCHANGE, INC., a corporation, Plaintiff, Respondent, and Cross-Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Defendant and Cross-Respondent, United California Bank, et al., Defendants and Appellants. Civ. 34864.

Page 274

89 Cal.Rptr. 274

10 Cal.App.3d 868

ATLAS VEGETABLE EXCHANGE, INC., a corporation, Plaintiff, Respondent, and Cross-Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, Defendant and Cross-Respondent United California Bank, et al., Defendants and Appellants.

Civ. 34864.

Court of Appeal, Second District, Division 5, California.

Aug. 26, 1970.

Rehearing Denied Sept. 21, 1970.

Joseph J. Jonesi, Los Angeles, for plaintiff, respondent, and cross-appellant Atlas Vegetable Exchange, Inc.

Harris B. Taylor, and George J. Brusky, Jr., Los Angeles, for defendant and cross-respondent Bank of America National Trust and Savings Assn.

Harris B. Taylor, Ernest M. Clark, Jr., and George J. Brusky, Jr., Los Angeles, for defendant and appellant United California Bank.

STEPHENS, Acting Presiding Justice.

Plaintiff, respondent and cross-appellant Atlas Vegetable Exchange (hereinafter Atlas) was engaged in farming, produce distribution, and selling, and was a depositor of defendant and appellant United California Bank (formerly California Bank) (hereinafter UCB) during all of the times involved in this litigation.

Defendant Mary Matsumura was employed by Atlas as an assistant bookkeeper during 1959 and 1960. In its normal course of business, Atlas purchased various items of merchandise and supplies, and issued approximately 100 checks per week in payment therefor. Mrs. Matsumura was directed to prepare weekly checks to pay all outstanding obligations of Atlas on the bases of statements and invoices received from the company's creditors. After Mrs. Matsumura drew the checks, she submitted them to the persons authorized to sign them for Atlas. The invoices and statements were presented with the checks for review prior to signing.

Between August 27, 1959 and February 4, 1960, Mrs. Matsumura prepared 60 checks, among others, ostensibly drawn in favor of creditors of Atlas, received the signatures of the persons authorized to sign them, but never delivered or sent the checks to the named payees. Instead, Mrs. Matsumura personally endorsed each of the 60 checks in the name of the payee, sometimes by typewriter and sometimes by writing or printing the payee's name, and deposited them in an account in the name of Ruben Rodriguez Enterprises (hereinafter Rodriguez), at the Slauson-Avalon branch of defendant and cross-respondent Bank of America National Trust and Savings Association (hereinafter B of A). Mrs. Matsumura was also the bookkeeper for Rodriguez, and she had authority to draw checks upon the Rodriguez account. She thereafter withdrew the funds represented by the 60 Atlas checks, which totaled $20,210.43, from the B of A account, and used them for her own purposes. None of the named payees received any of this money, and none of them authorized Mrs. Matsumura to endorse the checks.

When the checks were deposited by Mrs. Matsumura in the Rodriguez account, B of A placed its endorsement thereon, guaranteeing all prior endorsements. B of A presented the checks to UCB, and the latter remitted the sum of $20,210.43 to B of A in payment therefor. This amount was charged to Atlas' account at UCB.

When Atlas discovered the foregoing facts, it made immediate demand upon both UCB and B of A for repayment of the sums involved, but neither bank has repaid any of this money. Atlas thereafter filed a lawsuit against UCB, B of A, and Mary Matsumura. The first cause of action sought damages from UCB and Mrs. Matsumura. The second cause of action sought damages from B of A for accepting the checks with the forged endorsements, guaranteeing the endorsements, and presenting the checks to UCB for payment from the Atlas account. The third cause of action charged negligence on the part of B of A in accepting the checks with the forged endorsements.

Mrs. Matsumura was served with summons and complaint; upon failure to answer, her default was taken on October 14, 1960, and judgment for Atlas was subsequently sequently entered against her. UCB filed a cross-complaint against B of A and Mrs. Matsumura, but did not effect service of summons on Mrs. Matsumura. ¹ B of A's demurrer to Atlas' complaint was sustained with leave for Atlas to amend. The parties entered into a stipulation that Atlas would not amend; the judgment would not be entered until after trial; and that neither side waived any rights, including the rights to appeal.

The case was tried before a jury in January of 1963, and a verdict was returned in favor of Atlas and against UCB. Judgment was entered for Atlas and against UCB, and for B of A in Atlas' suit against it, Atlas having failed to amend. UCB's motion for new trial was granted, and Atlas appealed from the order granting the motion for new trial and the judgment in favor of B of A. The court of appeal affirmed the order granting a new trial, and held that the issues between Atlas and B of A were subject to retrial. Upon counsel's request to the trial court for clarification of the decision of the court of appeal, the trial court held that the original ruling on the demurrer still stood, and that neither party had waived any rights with reference to that ruling.

The case was again tried before a jury in December of 1968. After both sides had presented their cases, each moved for a directed verdict in its favor. The court granted Atlas' motion, and denied UCB's motion. Judgment was subsequently entered in favor of Atlas against UCB, and in favor of B of A in Atlas' suit against it. UCB appeals from the judgment in favor of Atlas, and Atlas appeals from the judgment in favor of B of A.

We first consider the UCB appeal from the judgment in favor of Atlas. UCB raises three contentions on appeal: (1) the trial court erred in denying UCB's motion to read into evidence the deposition of Mary M. Matsumura taken on January 23, 1962; (2) the trial court erred in granting Atlas' motion for a directed verdict as there was substantial evidence in support of the two defenses of UCB; namely, that the checks involved were 'bearer' paper, and that the negligence of Atlas was the proximate cause of the damage sustained; (3) the trial court erred in denying UCB's motion for a directed verdict.

We concern ourselves primarily with the second contention, since its determination dictates the result of this appeal. Upon a retrial, the facts presented on the first contention might well make useless any comments we might make relative to the instant record.

It was error to grant a directed verdict for Atlas, because there was substantial evidence in support of UCB's defense that the negligence of Atlas was the proximate cause of the damage sustained. ² The case of Estate of Lances, 216 Cal. 397, 400, 14 P.2d 768, sets forth the general rule concerning the power of a court to grant a directed verdict:

'It has become the established law of this state that the power of the court to direct a verdict is absolutely the same as the power of the court to grant a nonsuit. A nonsuit or a directed verdict may be granted 'only when, disregarding conflicting evidence and giving to plaintiff's evidence all the value to which it is legally entitled, herein indulging in every legitimate inference which may be drawn from that evidence, the result is a determination that there is no evidence of sufficient substantiality to support a verdict in favor of the plaintiff if such a verdict were given.' (Newson v. Hawley, 205 Cal. 188, 270 P. 364; Perera v. Panama-Pacific Int. Exp. Co., 179 Cal. 63, 175 P. 454; Estate of Sharon, 179 Cal. 447, 177 P. 283; Estate of Gallo, 61 Cal.App. 163, 175, 214 P. 496; 24 Cal.Jur., pp. 912--918.) Unless it can be said as a matter of law that, when so considered, no other reasonable conclusion is legally deducible from the evidence, and that any other holding would be so lacking in evidentiary support that a reviewing court would be impelled to reverse it upon appeal, or the trial court to set it aside as a matter of law, the trial court is not justified in taking the case from the jury. (Umsted v. Scofield Eng. Const. Co., 203 Cal. 224, 228, 263 P. 799.)'

To preclude direction of a verdict, the opposing inferences must be based on evidence, and not on speculation and conjecture. (Rufo v. N.B.C. Nat. Broadcasting Co., 166 Cal.App.2d 714, 334 P.2d 16.)

We recognize that while a bank normally is absolutely liable for payment of a forged check, it may justify the payment on principles of estoppel, or on the basis of negligent or misleading conduct of the depositor which directly or proximately caused the bank to pay. (Basch v. Bank of America, 22 Cal.2d 316, 321, 139 P.2d 1.) UCB contends that there was evidence that Atlas was negligent in that since no markings were placed upon invoices at the time they were presented for payment, there was nothing to prevent a dishonest employee from presenting an invoice more than once to obtain issuance of a check to a creditor who had previously been paid. ³ Apparently Mrs. Matsumura was able to conceal her dishonesty by obtaining the issuance of more than one check to the same creditor for the same supplies. It was not until one of Atlas' creditors complained that he had not been paid, and identified his purported endorsement upon a returned check as a forgery, that Mrs. Matsumura's thefts were uncovered. UCB further argues that Atlas could be found negligent in failing to compare the detailed statements of its commercial account sent to it by UCB each month. These statements showed the date and amount of all checks paid by UCB which were charged to Atlas' account. UCB sent all checks which it had paid and charged to Atlas' account, along with each...