Coral Gables Federal Sav. & Loan Ass'n v. City of Opa-Locka

• Decision Date: 24 November 1987
• Docket Number: OPA-LOCK,No. 86-1634,A,86-1634
• Citation: 516 So.2d 989,12 Fla. L. Weekly 2677
• Parties: 12 Fla. L. Weekly 2677, 6 UCC Rep.Serv.2d 496 CORAL GABLES FEDERAL SAVINGS & LOAN ASSOCIATION, Appellant, v. CITY OFppellee.
• Court: Florida District Court of Appeals

Page 989

516 So.2d 989

12 Fla. L. Weekly 2677, 6 UCC Rep.Serv.2d 496

CORAL GABLES FEDERAL SAVINGS & LOAN ASSOCIATION, Appellant, v. CITY OF OPA-LOCKA, Appellee.

No. 86-1634.

District Court of Appeal of Florida,

Third District.

Nov. 24, 1987.

Rehearing Denied Jan. 11, 1988.

Medalie & Oates, Pompano Beach, Padgett, Teasley, Niles & Shaw, Coral Gables, Richard H.W. Maloy, Key Biscayne, for appellant.

Weintraub, Weintraub, Seiden, Press & Orshan, Elliot R. Weitzman, Miami, for appellee.

Before BARKDULL, HENDRY and NESBITT, JJ.

NESBITT, Judge.

Coral Gables Federal Savings and Loan Association (CGS & L) appeals from the trial court's final judgment finding it liable to the City of Opa-Locka. We affirm.

The City of Opa-Locka employed Lou Ann Johnson as the Finance Director. Johnson controlled two bank accounts at CGS & L, designated "water deposits" and "waste deposits," which were used to deposit predominantly cash payments made by city residents. When the payments were received, Johnson would have a clerk prepare a deposit slip. Johnson would then personally deposit the funds in the city's accounts at CGS & L. Johnson's office would occasionally receive checks from other sources which were supposed to be deposited in an account at another bank. By diverting thirty of these checks, Johnson embezzled $64,291.17 from the city. ¹ Although the city did not establish precisely how Johnson accomplished her scheme, it is clear that the checks were cashed through CGS & L because the checks were cleared through CGS & L's clearing house. When the city discovered the embezzlement, it sued CGS & L for breach of contract and negligence. The city alleged that CGS & L breached a contractual duty owed to the city and was negligent in honoring and cashing checks which were not properly endorsed. ² At a bench trial, the city presented three possible alternative scenarios to prove CGS & L's liability. These were: (1) CGS & L cashed the checks made payable to the city and gave the cash to Johnson, (2) the checks were simply accepted by the bank but never credited to the city, or (3) the checks, although made payable to the city, were cashed, and then the cash was deposited into the city's accounts; Johnson was then able to misappropriate an equal amount of cash funds sent in by city residents. The city presented a number of expert witnesses all of whom agreed that the documentary evidence supported any one of the three possibilities. CGS & L did not present any testimony. At the end of a bench trial, the court held CGS & L liable to the city for $64,291.17 for breach of contract and negligence. The court also held that the city was not comparatively negligent.

On appeal, CGS & L's first argument amounts essentially to a challenge of the factual findings made by the trial court. CGS & L contends that the trial court's findings--that CGS & L breached the contract and was negligent and that the city was not comparatively negligent--are erroneous. We disagree, finding instead that the trial court's final judgment is supported by substantial competent evidence. See Holland v. Gross, 89 So.2d 255, 258 (Fla.1956); Oceanic Int'l Corp. v. Lantana Boatyard, 402 So.2d 507, 511 (Fla. 4th DCA 1981); In re Estate of Donner, 364 So.2d 742, 748 (Fla. 3d DCA 1978).

Each of the three scenarios presented by the city is supported by both the documentary evidence and the testimony of the witnesses, and, in each, CGS & L's negligent procedures played a vital role in the city's loss. Considering that CGS & L undoubtedly received the checks, as evidenced by the fact that the checks were cleared through CGS & L's clearing house, and that CGS & L's statements, which were sent to the city, reflected that all of its deposits were cash deposits, the record clearly supports the trial court's finding that at least one of the scenarios presented by the city accurately depicts the events which led to the loss. The experts testified that the actions of the bank fell below the standard of care practiced by prudent banks. Based on any one of the scenarios, the trial court's determination that CGS & L breached its contract and was negligent is not clearly erroneous but is supported by substantial competent evidence. ³

Likewise, CGS & L cannot prevail on its argument that the trial court erroneously exonerated the city of comparative negligence. While a customer's comparative negligence is a valid affirmative defense in a negligence action against a bank, cf. Key Bank v. First United Land Title Co., 502 So.2d 1280 (Fla. 2d DCA 1987) (customer's negligence in hiring forger); Flagship Bank v. Complete Interiors, Inc., 450 So.2d 337 (Fla. 5th DCA 1984) (same); Ossip-Harris Ins., Inc. v. Barnett Bank, N.A., 428 So.2d 363 (Fla. 3d DCA 1983) (customer's negligent failure to promptly reconcile bank statements as required by section 674.406, Florida Statutes (1981)); First Nat'l Bank v. Keshishian, 427 So.2d 313 (Fla. 5th DCA 1983) (same), the burden of proving this defense is on the party alleging it, Cuozzo v. Ronan & Kunzl, Inc., 453 So.2d 902, 903 (Fla. 4th DCA 1984). Since CGS & L did not present any evidence to establish that the city was negligent either in its accounting procedures or in hiring the embezzler and since the evidence presented by the city did not suggest that there was any negligence on its part, see Peavey v. City of Miami, 146 Fla. 629, 1 So.2d 614 (1941), the trial court properly determined that the city was not comparatively negligent.

CGS & L attempts to avoid liability by putting forward an argument premised upon the presumption that the third scenario presented below is the only one possible. Proceeding under the presumption that the third scenario is accepted as true, CGS & L argues that it is exonerated of liability under the general rule that a bank is not liable for honoring an improperly endorsed check if the bank establishes that the intended payee received the proceeds. See Florida Nat'l Bank v. Geer, 96 So.2d 409, 412 (Fla.1957); Segel v. First State Bank, 432 So.2d 1378, 1380 (Fla. 3d DCA 1983); Northeast Bank v. Bentley, 413 So.2d 480 (Fla. 2d DCA 1982). There are at least three reasons why this argument fails. First, on appeal CGS & L fails to establish that the third scenario is either the only possible one or even more likely than the other two. Second, in order to be protected by this rule the burden is on the bank to establish that the intended payee received the funds. See Geer, 96 So.2d at 412; Segel, 432 So.2d at 1380; Bentley, 413 So.2d at 481. In the instant case, CGS & L presented no evidence below to prove that the intended payee, the city rather than Johnson, received the funds. Third, the rule in Segel does not apply here. The purpose of the rule is to prevent the bank customer from recovering from the bank where the bank's action in honoring the check does not have a sufficient causal connection with the customer's loss. In Segel, for example, this court affirmed a summary judgment in a bank's favor where the bank paid funds to a corporation when the check had been made payable under a different corporate name. The court determined that the corporation which received the funds was one and the same as the payee corporation. Consequently the intended payee had received the funds despite the bank's error. The result the court reached in Segel reflects a determination that the customer's loss--when the dishonest payee later failed to deliver the goods ordered by the bank customer--was not caused by the bank's error in honoring the improperly endorsed check. See also Commercial Credit Corp. v. Empire Trust Co., 260 F.2d 132 (8th Cir.1958) (bank not liable for negligently honoring improperly endorsed check where intended payee received funds and bank's negligence not the proximate cause of plaintiff's loss). In direct contrast, in the instant case one cannot honestly contend that CGS & L paid the intended payee or that CGS & L's actions were not a cause of the city's loss.

Finally, CGS & L claims that, even if it was negligent, its negligence was not the proximate cause of the city's loss as a matter of law. CGS & L correctly points out that an independent, intervening, and unforeseeable criminal act is a superseding cause which serves to exonerate an original tort-feasor of liability. Relyea v. State, 385 So.2d 1378, 1382 (Fla. 4th DCA 1980); Gulfstar, Inc. v. Advance Mortgage Corp., 376 So.2d 243, 246 (Fla. 3d DCA 1979), cert. denied, 386 So.2d 633 (Fla.1980); Sosa v. Coleman, 646 F.2d 991, 993-94 (5th Cir.1981); see Vining v. Avis Rent-A-Car Sys., Inc., 354 So.2d 54 (Fla.1977); Nicholas v. Miami Burglar Alarm Co., 339 So.2d 175 (Fla.1976). While we agree with this proposition, we disagree with CGS & L's contention that embezzlement is an unforeseeable result of a bank's negligent banking procedures. In order to hold an original tort-feasor liable for the actions of an intervening criminal third party, it is not necessary that the original tort-feasor foresee the precise injury the negligent action causes or the precise manner in which the injury occurs. Crislip v. Holland, 401 So.2d 1115, 1117 (Fla. 4th DCA), review denied, 411 So.2d 380 (Fla.1981); Barclay Kitchen, Inc. v. California Bank, 208 Cal.App.2d 347, 25 Cal.Rptr. 383, 388 (1962). It is sufficient that the resulting injury is within the scope of the danger or risk created by the original tort-feasor's negligence. Gibson v. Avis Rent-A-Car Sys., Inc., 386 So.2d 520 (Fla.1980); Crislip, 401 So.2d at 1117; Bryant v. School Bd. of Duval County, 399 So.2d 417 (Fla. 1st DCA 1981), rev'd on other grounds, 417 So.2d 658 (Fla.1982); California Bank, 25 Cal.Rptr. at 388; see Pinkerton-Hays Lumber...