LaMonte v. Sanwa Bank California

• Decision Date: 14 May 1996
• Docket Number: No. B070428,B070428
• Citation: 45 Cal.App.4th 509,52 Cal.Rptr.2d 861
• Court: California Court of Appeals Court of Appeals
• Parties: , 29 UCC Rep.Serv.2d 1263, 96 Cal. Daily Op. Serv. 3441, 96 Daily Journal D.A.R. 5563 Brigitte LaMONTE, Plaintiff and Appellant, v. SANWA BANK CALIFORNIA, Defendant and Respondent.

Page 861

52 Cal.Rptr.2d 861

45 Cal.App.4th 509, 29 UCC Rep.Serv.2d 1263,

96 Cal. Daily Op. Serv. 3441,

96 Daily Journal D.A.R. 5563

Brigitte LaMONTE, Plaintiff and Appellant, v. SANWA BANK CALIFORNIA, Defendant and Respondent.

No. B070428.

Court of Appeal, Second District, Division 7, California.

May 14, 1996.

Slaff, Mosk & Rudman and Valerie V. Flugge, Los Angeles, for Plaintiff and Appellant.

Foss & Roberts and Patrick M. Roberts, Pasadena, for Defendant and Respondent.

LILLIE, Presiding Justice.

Plaintiff LaMonte appeals from judgment of nonsuit entered in favor of defendant Sanwa Bank California (Sanwa) in LaMonte's action against Sanwa for allegedly wrongfully handling checks payable to her. ¹ LaMonte contends that at trial she presented substantial evidence to permit the jury to determine her claims for breach of fiduciary duty and/or conversion.

FACTUAL AND PROCEDURAL BACKGROUND

In March 1990, LaMonte filed the instant action against Sanwa, asserting numerous causes of action arising out of her allegations that she inherited a 6.5% interest in 34,000 acres of real property in northern California, known as Howard Properties, which generated oil and mineral royalties and other income to its owners; in 1978, the owners of Howard Properties entered into an oral agreement with Sanwa whereby Sanwa was to serve as the collecting and disbursing agent for the various Howard Properties owners; between January 1984 and April 1985, Sanwa mailed to plaintiff's home address various checks drawn on Sanwa and payable to her for her share of the income from Howard Properties; her then husband, Daniel LaMonte, intercepted checks totaling almost $60,000; he deposited the checks, indorsed by him only, in their joint Bank of America account, and then immediately withdrew the funds and misappropriated them for his own use; none of Daniel LaMonte's actions was taken with her knowledge, consent or authorization; Sanwa never notified plaintiff of the improper indorsements, and breached its fiduciary duty to plaintiff by honoring the improperly indorsed checks.

Sanwa answered the second amended complaint, asserting the affirmative defenses of the bar of the statute of limitations and the failure to state facts sufficient to constitute a cause of action. Sanwa admitted, however, that in 1978 it entered into an oral agreement with the various Howard Property owners to handle the collection of income for Howard Properties and to issue income checks to the various owners, including plaintiff.

In plaintiff's trial brief, she asserted that her theories of recovery against Sanwa were based on Sanwa's role as agent of, and fiduciary for, the owners of Howard Properties. Prior to trial, plaintiff's counsel stated to the court that "We aren't suing Sanwa as a payor bank, we are suing Sanwa as [plaintiff's] agent [and] ... fiduciary."

At trial, plaintiff testified that she inherited her interest in Howard Properties when she was seven years old; she began receiving income from Howard Properties; when she was 18, her income from Howard Properties and other inherited property was about $50,000 to $100,000 per year; she met Daniel LaMonte, who was her own age, when she was in high school in 1979; they married in July 1982, when she was 20 years old; a month before they got married, she lent Daniel $50,000 to invest in the stock market. After their marriage, Daniel monitored their accounts at E.F. Hutton and also organized and reviewed her Howard Properties documents; she paid him $1,300 to $1,500 per month for managing her finances.

In late 1983, plaintiff and Daniel LaMonte opened a joint checking account at Bank of America so Daniel could manage her finances and pay her household bills by writing checks from the Bank of America joint account. According to plaintiff, the clerk who opened their joint account told her that the checks coming into the account would need two signatures; plaintiff never saw any of the monthly statements from their joint account at Bank of America; she assumed Daniel handled them as it was his job.

In March 1985, plaintiff was in the hospital with a ruptured disc in her back, Daniel told her he wanted a divorce and wanted half of her property; he told her he was being blackmailed and that his Mafia friends did not like the way she (plaintiff) treated him; in the hospital, she signed a document giving him a 3% interest in Howard Properties, but after litigation against him, she got back the 3% interest in late 1988. According to plaintiff, she and Daniel were divorced in April 1985, when he moved out of her house; thereafter, she also discovered that Daniel had been withdrawing funds from her individual account at E.F. Hutton, and then from their joint account at E.F. Hutton, so that at the time of their divorce, almost all of the amount invested at E.F. Hutton, about $160,000, was gone. According to plaintiff, she knew that Daniel had a $10,000 gambling debt during their marriage; several allegedly unauthorized checks which he wrote from the Bank of America account were to pay various Las Vegas casinos.

According to plaintiff, it was in late 1988 that she learned that Sanwa had paid Howard Properties income checks that she had not indorsed; she claimed she never received the proceeds from the checks indorsed by Daniel LaMonte; she understood that the Sanwa checks needed two signatures for deposit into the Bank of America joint account. On cross-examination, however, plaintiff admitted that once the Sanwa checks were deposited into the Bank of America joint account, either she or Daniel could write checks from the account; moreover, nothing in writing limited withdrawals from the account to household expenses only, although she claimed that she mentioned the purpose of the account to the clerk when she set it up at Bank of America. Plaintiff also admitted that there was no way that Bank of America could have discovered from looking at checks written by Daniel from the account whether it was for an appropriate household expenditure. Further, there was no way for Sanwa to know whether Daniel was writing checks to Las Vegas casinos from the Bank of America account.

The manager of the personal trust department of Sanwa, Annaliese Miller, testified that Sanwa collects royalties and income from various lessees of Howard Properties; upon instructions from the Howard Properties ranch manager, Sanwa pays out insurance, taxes, salaries and expenses and also Testifying for the defense case, Daniel LaMonte denied there were any limitations on the Bank of America joint account; he also claimed that plaintiff had access to the monthly Bank of America statements and periodically reviewed them; he admitted making about 10 trips to Las Vegas during their marriage. Another defense witness, a Bank of America investigator, testified there are no checking accounts at Bank of America that could be restricted to use for household expenses; a check made out to one joint accountholder can be indorsed by the other joint accountholder and deposited into the joint account.

monthly distributions to the 13 co-owners of the property; after the Sanwa checks sent to plaintiff were negotiated by the collecting bank, Bank of America, the checks were returned to Sanwa's operations center containing the endorsement by Bank of America, "PEG" for Prior Endorsement Guaranteed. Miller met plaintiff only after her divorce from Daniel LaMonte.

After plaintiff had rested her case-in-chief, Sanwa made a motion for nonsuit, which the court deferred to the close of all the evidence. After both sides had rested, the trial court stated that as to Sanwa, the theory of liability appeared to be "that the bank had failed to verify that the indorsements on the back of the checks were those of the payees." Plaintiff's counsel responded that "The theory is that it wasn't just a failure to check the indorsements, it was the paying of the checks with improper indorsements by Sanwa.... [p] Sanwa was the bank [both] writing and paying the check."

The court then responded that "as the issuer, you're way too late. You can only be suing Sanwa as an agent." Plaintiff's counsel agreed that plaintiff was suing Sanwa "as an agent" of plaintiff. The court stated that "That's the only way you can sue them, so it really doesn't matter whether they drew the checks on their own bank or used a separate bank. You are not suing them as the issuing bank. If you are, you're light years too late." Plaintiff's counsel then responded: "Well, I understand what you are saying. I guess the theory is that a trustee who pays property belonging to a beneficiary to someone else or who allows that property to be paid to somebody else is breaching the fiduciary duty. It goes a little bit further than just checking the indorsements." The court then asked, "Well, what other evidence did you introduce as to Sanwa, other than that they failed to check the indorsements on the back of the check?" Plaintiff's counsel responded that "the checks were paid to somebody other than Brigitte LaMonte, and they released funds belonging to Brigitte LaMonte to somebody other than Brigitte LaMonte."

The court responded that "There has been no evidence whatsoever that any check was issued that was not payable to Brigitte LaMonte.... [p] Now, I have asked you to present some authority for the proposition that the issuer, not the issuing bank, but the issuer of a check, ... assuming the issuer of the check is a fiduciary, is under a duty when those checks are returned to the issuer fiduciary to assure that the person indorsing those checks was somebody authorized to receive them. Do you have any authority for that whatsoever?"

Plaintiff's counsel admitted that "Your Honor, the only authority that I was able to find was that a fiduciary who transfers title to property to somebody other than the beneficiary, breaches the fiduciary duty. I do not have a case where the fiduciary failed to check an...