Hermetic Refrig. Co., Inc. v. Central Valley Nat. Bank Inc.
| Decision Date | 15 February 1974 |
| Docket Number | No. 73-1420.,73-1420. |
| Citation | 493 F.2d 476 |
| Parties | HERMETIC REFRIGERATION COMPANY, INC., Appellee, v. CENTRAL VALLEY NATIONAL BANK INC., Appellant, Robert L. Walker and First Western Bank and Trust Company, Inc., Defendants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
C. Jay Hollander (argued), Fitzsimmons & Hawthorne, Oakland, Cal., for appellant.
William A. Resneck (argued), Marvin D. Morgenstein, Steinhart, Goldberg, Feigenbaum & Ladar, San Francisco, Cal., for appellee.
Before CARTER and GOODWIN, Circuit Judges, and SOLOMON,* District Judge.
A bank which honored unauthorized endorsements by an embezzler of his employer's checks appeals a judgment in favor of the employer, asserting error in the district court's refusal to accept a defense of contributory negligence.
Robert Walker was employed by Hermetic Refrigeration Company as the manager of its Oakland office. As office manager he had authority to receive checks made payable to Hermetic and to transfer them to Hermetic's Phoenix office, or, in the case of exceptionally large checks, to deposit them in Hermetic's corporate account with the Bank of America in San Leandro. Walker, however, opened a personal checking account with Central Valley National Bank (Central Bank) and, without authorization, deposited therein checks made payable to Hermetic. Walker stamped these checks on the reverse side with a rubber stamp bearing Hermetic's name and address and signed his name below the stamp.
California Commercial Code (hereinafter C.C.C.) § 3406 provides:
"Any person who by his negligence substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee\'s or payor\'s business."
This section does not establish liability, but rather creates a conditional estoppel not otherwise available to a bank. However, before it can take advantage of the estoppel, the bank must first show that it acted in accordance with the reasonable commercial standards of the banking business. Comment, C.C.C. § 3406. See Cooper v. Union Bank, 9 Cal.3d 371, 107 Cal.Rptr. 1, 507 P.2d 609 (1973).
Walker's peculations were undiscovered for more than six years. We will assume for the purposes of this...
To continue reading
Request your trial
-
Aetna Cas. and Sur. Co. v. Hepler State Bank
...his personal account is an unreasonable commercial banking practice as a matter of law. See, e. g., Hermetic Refrig. Co., Inc. v. Central Valley Nat. Bank Inc., 493 F.2d 476 (9th Cir. 1974); Sherriff-Goslin Co. v. Cawood, 91 Mich.App. 204, 283 N.W.2d 691 (1970); National Bank v. Refrigerate......
-
In re World Financial Services Center, Inc.
...Cal. Permanente Medical Group v. Bozinovski, 148 Cal.App.3d 503, 196 Cal.Rptr. 150 (1980), Hermetic Refrig. Co., Inc. v. Central Valley National Bank, Inc., 493 F.2d 476 (9th Cir.1974), Jerman v. Bank of America, 7 Cal.App.3d 882, 87 Cal.Rptr. 88 (1970), this court is of the opinion that th......
-
Maddox v. First Westroads Bank
...bank from liability where a drawer's negligence substantially contributes to a forgery or alteration. Hermetic Refrig. Co., Inc. v. Central Valley Nat. Bank, 493 F.2d 476 (9th Cir., 1974). Center Bank relies on the pre-Code case of Connecticut Sav. Bank of New Haven v. First Nat. Bank & Tru......
-
Allied Ins. Center, Inc. v. Wauwatosa Sav. and Loan Ass'n
...& Sur. Co. v. Hepler State Bank, 6 Kan.App.2d 543, 630 P.2d 721, 727-728 (1981); see, e.g., Hermetic Refrigeration Co., Inc. v. Central Valley Nat'l Bank, Inc., 493 F.2d 476 (9th Cir.1974); Central, Inc. v. Cache Nat'l Bank, 748 P.2d 351, 353-354 (Colo.Ct.App.1987); Mohr v. State Bank of St......