Hoffman v. Security Pacific Nat. Bank

CourtCalifornia Court of Appeals
Writing for the CourtFLEMING; BEACH
Citation176 Cal.Rptr. 14,121 Cal.App.3d 964
PartiesDiane HOFFMAN, Plaintiff and Appellant, v. SECURITY PACIFIC NATIONAL BANK, Defendant and Respondent. Civ. 60052.
Decision Date27 July 1981

Page 14

176 Cal.Rptr. 14
121 Cal.App.3d 964
Diane HOFFMAN, Plaintiff and Appellant,
v.
SECURITY PACIFIC NATIONAL BANK, Defendant and Respondent.
Civ. 60052.
Court of Appeal, Second District, Division 2, California.
July 27, 1981.
Hearing Denied October 7, 1981.

[121 Cal.App.3d 966]

Page 15

David Daar, Miller & Daar and Erwin Sobel, Beverly Hills, for plaintiff and appellant.

Rogers & Wells, Sheppard, Mullin, Richter & Hampton and William A. Masterson, Los Angeles, for defendant and respondent.

William Alsup, Charles R. Farrar, Jr., Agustin Medina and Morrison & Foerster, as amicus curiae on behalf of defendant and respondent.

FLEMING, Acting Presiding Justice.

Plaintiff Diane Hoffman, individually and on behalf of all others similarly situated, appeals a judgment on a nonsuit [121 Cal.App.3d 967] and directed verdict in favor of defendant Security Pacific National Bank (Bank). The action attacks the legality of the Bank's practice of charging its customers $4 when they write checks for amounts exceeding the balance in their accounts. We affirm the trial court's judgment.

The action was commenced in October 1974 by Harry Resnick, on behalf of himself and all others similarly situated, to, inter alia, declare illegal and unenforceable the then $3 service charge imposed by the Bank for processing checks written by depositors when the funds in the depositor's account are less than the amount of the check(s) (NSF checks). The charge is assessed whether the bank exercises its option under Commercial Code section 4401 to pay the check and charge the depositor's account or whether it refuses to pay and returns the check. The original complaint contained nine causes of action, of which five were disposed of by demurrer summary judgment, or plaintiff's abandonment. In March 1976 Diane Hoffman was substituted for Resnick as the class representative.

The four remaining causes of action were all based upon the theory that the service charge imposed by Bank for processing an NSF check constitutes an unlawful liquidation of damages, a "penalty" under former Civil Code section 1670. That section declared: "Every contract by which the amount of damage to be paid, or other compensation to be made, for a breach of an obligation, is determined in anticipation thereof, is to that extent void, except as expressly provided in (former § 1671)." Former section 1671 authorized the parties to agree in advance "upon an amount which (would) be presumed to be the amount of damage sustained by a breach of (their contract), when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage." 1 Plaintiff

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alleged the depositors had covenanted with Bank not to write NSF checks and the imposed charge was a penalty for breaching that covenant.

In August 1979 the trial court certified the class as one consisting of persons who have had non-business checking accounts with Bank during a period from 1970 to 1978 and who have paid non-sufficient fund charges for writing NSF checks. 2 The court then declared that the common[121 Cal.App.3d 968] issues of law and fact to be tried were (1) whether there was an implied covenant in the depositors' contracts with Bank that the depositors would not write overdrafts, and (2) if there was such a covenant, whether the charge fixed in anticipation of a breach of that covenant was justified by the impracticability or extreme difficulty of assessing damages, or whether it was merely a penalty.

At trial, the...

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5 practice notes
  • Perdue v. Crocker National Bank, S.F. 24591
    • United States
    • United States State Supreme Court (California)
    • July 18, 1985
    ...21 Cal.3d 801, 811-812, 148 Cal.Rptr. 22, 582 P.2d 109.) Other California decisions (see Hoffman v. Security Pacific Nat. Bank (1981) 121 Cal.App.3d 964, 969, 176 Cal.Rptr. 14; Larrus v. First National Bank (1954) 122 Cal.App.2d 884, 889-890, 266 P.2d 143) and decisions of other states (see......
  • Wilson v. Superior Court, Los Angeles County
    • United States
    • California Court of Appeals
    • July 23, 1982
    ...opinion and separate response to the dissenting opinion filed Sept. 7, 1979; see also Hoffman v. Security Pacific Nat. Bank (1981) 121 Cal.App.3d 964, 176 Cal.Rptr. In the interest of completeness of a reviewing court's product, whenever possible, separate dissenting and/or concurring opini......
  • Perdue v. Crocker Nat. Bank
    • United States
    • California Court of Appeals
    • March 25, 1983
    ...presents an NSF check. A similar contention was raised and implicitly rejected in Hoffman v. Security Pacific Nat. Bank (1981) 121 Cal.App.3d 964, 176 Cal.Rptr. 14, involving a depositor's claim that the bank's imposition of service charges for processing an NSF check constituted unlawful l......
  • Best v. U.S. Nat. Bank of Oregon
    • United States
    • Court of Appeals of Oregon
    • April 17, 1986
    ...banks' NSF charges constituted unlawful liquidated damages in violation of a state statute. In Hoffman v. Security Pacific Nat. Bank, 121 Cal.App.3d 964, 176 Cal.Rptr. 14 (1981), the court upheld a directed verdict in favor of the bank. It held that plaintiff failed to prove that the writin......
  • Request a trial to view additional results
5 cases
  • Perdue v. Crocker National Bank, S.F. 24591
    • United States
    • United States State Supreme Court (California)
    • July 18, 1985
    ...21 Cal.3d 801, 811-812, 148 Cal.Rptr. 22, 582 P.2d 109.) Other California decisions (see Hoffman v. Security Pacific Nat. Bank (1981) 121 Cal.App.3d 964, 969, 176 Cal.Rptr. 14; Larrus v. First National Bank (1954) 122 Cal.App.2d 884, 889-890, 266 P.2d 143) and decisions of other states (see......
  • Wilson v. Superior Court, Los Angeles County
    • United States
    • California Court of Appeals
    • July 23, 1982
    ...opinion and separate response to the dissenting opinion filed Sept. 7, 1979; see also Hoffman v. Security Pacific Nat. Bank (1981) 121 Cal.App.3d 964, 176 Cal.Rptr. In the interest of completeness of a reviewing court's product, whenever possible, separate dissenting and/or concurring opini......
  • Perdue v. Crocker Nat. Bank
    • United States
    • California Court of Appeals
    • March 25, 1983
    ...presents an NSF check. A similar contention was raised and implicitly rejected in Hoffman v. Security Pacific Nat. Bank (1981) 121 Cal.App.3d 964, 176 Cal.Rptr. 14, involving a depositor's claim that the bank's imposition of service charges for processing an NSF check constituted unlawful l......
  • Best v. U.S. Nat. Bank of Oregon
    • United States
    • Court of Appeals of Oregon
    • April 17, 1986
    ...banks' NSF charges constituted unlawful liquidated damages in violation of a state statute. In Hoffman v. Security Pacific Nat. Bank, 121 Cal.App.3d 964, 176 Cal.Rptr. 14 (1981), the court upheld a directed verdict in favor of the bank. It held that plaintiff failed to prove that the writin......
  • Request a trial to view additional results

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