Cheng v. California Pacific Bank

• Decision Date: 16 November 1999
• Docket Number: No. A085004.,A085004.
• Citation: 76 Cal.App.4th 274,90 Cal.Rptr.2d 401
• Court: California Court of Appeals Court of Appeals
• Parties: Paul C.P. CHENG, Plaintiff and Respondent, v. CALIFORNIA PACIFIC BANK, Defendant and Appellant.

90 Cal.Rptr.2d 401

76 Cal.App.4th 274

Paul C.P. CHENG, Plaintiff and Respondent, v. CALIFORNIA PACIFIC BANK, Defendant and Appellant.

No. A085004.

Court of Appeal, First District, Division 1.

November 16, 1999.

Arnold S. Rosenberg, for Defendant and Appellant.

Lillick & Charles, James S. Monroe and Francisco J. Morales, San Francisco, for Plaintiff and Respondent.

MARCHIANO, J.

California Pacific Bank (the Bank) appeals from a summary judgment awarding prejudgment interest on the appraised value of the shares of a dissenting shareholder in a bank conversion transaction. The only issue raised on appeal is whether prejudgment interest was recoverable. We determine that the Bank was obligated to pay the appraised value of the shares on the date the value was agreed upon and that neither a dispute as to legal ownership, the provisions of federal banking laws, nor the Bank's own plan of conversion excused its duty to pay. Therefore, the shareholder is entitled to prejudgment interest from the date that he requested payment of the agreed value of the shares. The judgment awarding interest is affirmed.

BACKGROUND

Paul CP. Cheng's father was a shareholder of appellant Bank, which was formerly known as California National Bank. After his father died intestate, Cheng presented original stock certificates bearing his father's endorsement to the Bank. The Bank accepted the endorsed certificates, and in 1995 issued new share certificates in Cheng's name. On August 5, 1996, the Bank sent a notice to Cheng and all other shareholders announcing a meeting to ratify a proposal to convert the Bank from a national bank to a California chartered bank pursuant to the procedure in 12 U.S.C.A. section 214a. The proposed plan set out the right of shareholders who dissented from the proposal to receive the appraised cash value of their shares. Following the appropriate statutory procedure for dissenters, Cheng voted against the proposal.

On November 22, 1996, the Bank notified Cheng that the conversion of California National Bank into California Pacific Bank was completed on November 18, 1996. The letter attached a copy of the federal statute governing the conversion, and noted that it required Cheng to make a written request to receive the cash value of his shares within 30 days of the November 18 conversion date. On December 2, 1996, Cheng notified the Bank in writing that he was exercising his rights as a dissenting shareholder, returned his share certificates, and requested the value of his shares in cash under the terms of 12 U.S.C.A. section 214a(b). Pursuant to the statutory procedure for valuation of the shares of dissenting shareholders, appraisers were chosen and an appraisal was performed. The appraisers agreed that the fair market value of Cheng's shares was $12 per share. On July 21, 1997, Cheng notified the Bank that he accepted the valuation of his shares and requested payment. The Bank did not pay.

On February 13, 1998, Cheng filed a complaint for declaratory relief requesting a determination that Cheng was entitled to immediate payment of the value of his shares, plus interest from July 21, 1997, the date of his demand. On March 27, 1998, the Bank filed a motion to strike the prayer for prejudgment interest, which was later amended to set forth the grounds that the federal statute governing bank conversions did not provide for prejudgment interest, and that the Bank had a reasonable time in which to pay Cheng. Cheng countered with a motion for summary judgment filed on July 8, 1998, stating that all requirements of the federal statute had been met, the money was due on July 21, 1997, and Cheng was entitled to prejudgment interest.¹

The Bank responded on July 31, 1998 by filing opposition and depositing the entire appraised value of the shares with the clerk of the superior court. For the first time, the Bank claimed that there was a dispute as to Cheng's rightful ownership of the shares. The Bank attached the declaration of a questioned documents examiner, who stated that on July 17, 1998 the Bank requested him to examine the endorsement on Cheng's father's stock certificates. He concluded that the endorsements were forgeries. Based on this new claim, the Bank argued that Cheng's entitlement to the shares was disputed. The Bank's opposition claimed that it had been unable to obtain the names of Cheng's brother and other heirs to his father's estate, apparently to determine the existence of adverse claims. The Bank also argued that its plan of conversion from a national to a state bank required the shares to be sold prior to payment to Cheng. It repeated its contentions that the federal statute does not allow interest, that it had a reasonable time to pay, and that state law regarding prejudgment interest had no application.

Cheng filed opposition to the original motion to strike, urging the court to award prejudgment interest. He attached declarations from the only other heirs to his father's estate disclaiming any interest in the stock. He also attached copies of documents from the Bank's prior law firm, showing that the firm was actively involved in the transfer of shares to Cheng and his entire family. There was a series of letters regarding issuance of the shares, the appropriate arrangement for ownership of the shares, correction of errors and reissuance of the shares, and a confirmation from the Bank's own counsel that Cheng acquired the shares in a purchase transaction from his father. The court denied the Bank's motion to strike on September 2, 1998 and took the motion for summary judgment under submission.

On October 19, 1998, the court entered judgment in favor of Cheng, finding there was no dispute that Cheng was entitled to the funds and awarding prejudgment interest from July 21, 1997 until the date on which the funds were deposited with the court. The Bank appeals from the judgment.

DISCUSSION

The Bank raises two arguments on appeal contesting the award of prejudgment interest. It contends that prejudgment interest is only due when the amount is vested on a particular day, and that Cheng was not entitled to the funds until he proved that the endorsement was not forged. The second argument, based on federal law, is that the Bank was not obligated to pay immediately, but had a reasonable time to attempt to dispose of the shares. We discuss these claims below and conclude they have no merit.

Cheng's Right to Payment Vested When the Sum Certain Became Due

Civil Code section 3287 provides in relevant part: "(a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt."² The Bank argues that Cheng's share certificates carried forged endorsements, which prevented the Bank from paying him until clear title was established. The main case cited in support of this argument is Budget Finance Plan v. Sav-On Food Club (1955) 44 Cal.2d 565, 572, fn. 6, 283 P.2d 694. Budget has no application here, as the plaintiff in that case failed to request interest and made no showing of when the obligations became due. The court noted: "Where there is no express contract covering the matter, the law awards interest on money from the time it becomes due and payable if such time is certain or can be made certain by calculation [citations, including Civ.Code, § 3287]. In the absence of a showing as to such time, and in the absence of a demand for interest, there is no occasion to award it." (Budget Finance Plan v. Sav-On Food Club, supra, 44 Cal.2d at p. 572, fn. 6, 283 P.2d 694.)

Aside from the undisputed fact that the Bank did not challenge Cheng's ownership or consult a questioned documents examiner until after the motion for summary judgment was filed, the existence of a dispute as to title does not prevent the assessment of interest. In Perkins v. Benguet Cons. Min. Co. (1942) 55 Cal. App.2d 720, 132 P.2d 70, plaintiff sought to recover dividends on shares of the stock of the defendant corporation. The defendant claimed that plaintiffs husband was entitled to the dividend under Philippine law. (Id. at p. 724, 132 P.2d 70.) The court stated: "It cannot be successfully urged that the mere existence of a dispute between Mr. and Mrs. Perkins, at least in the absence of an impounding of the dividends, would relieve the defendant of liability for interest." (Id. at p. 766, 132 P.2d 70.) The Perkins court relied on Conner v. Bank of Bakersfield (1920) 183 Cal. 199, 190 P. 801, which involved conflicting claims to a check in an interpleader action brought by a bank. The bank claimed that it was not liable to the successful plaintiff for interest, but the Supreme Court affirmed the judgment awarding interest to the plaintiff for the period prior to the date the bank deposited the funds with the court. (Id. at p. 206, 190 P. 801.) The court noted that depositing the funds with the court stopped the running of interest, but that interest was due up until the bank surrendered control of the money. "When a debtor has deposited the money beyond his control in the custody of the court and within the reach of the rightful owner, he has done all that the law requires of him." (Ibid.) A mere dispute as to the rightful owner does not preclude the assessment of prejudgment interest.

The Bank's response to this statement of the law is that it was undisputed that Cheng was not the rightful owner of the shares, and that interest could not begin to run until the money became payable to Cheng. There is no support for this claim. The actual undisputed fact was that even if Cheng was not the rightful owner, the money never belonged to the Bank, and the Bank was not entitled to retain it during the alleged dispute.³ The Bank's eleventh-hour...