Larrus v. First Nat. Bank of San Mateo County

• Citation: 122 Cal.App.2d 884,266 P.2d 143
• Court: California Court of Appeals Court of Appeals
• Decision Date: 28 January 1954
• Parties: LARRUS et al. v. FIRST NAT. BANK OF SAN MATEO COUNTY. Civ. 15661.

Page 143

266 P.2d 143

122 Cal.App.2d 884

LARRUS et al. v. FIRST NAT. BANK OF SAN MATEO COUNTY.

Civ. 15661.

District Court of Appeal, First District, Division 2, California.

Jan. 28, 1954.

DiMaria, DiMaria & Daschbach, Palo Alto, for appellants.

Ross, Ross & McGovern, Redwood City, for respondent.

NOURSE, Presiding Justice.

This is an action by depositors for the amount of a check credited to their account, but charged back by defendant bank when it found that the funds were insufficient. The court gave judgment for the bank and plaintiffs, depositors, appeal.

The notice of appeal was filed on October 7, 1952, prior to the rendition of judgment and the filing of the findings of fact and conclusions of law, which were all dated October 8, 1952, and filed the same day. However on August 29, 1952, the court had, in an order for judgment, which appellants mistook for the appealable judgment, announced its intended ruling. Under the last provision of Rule 2(c) of the Rules on Appeal, added by an amendment effective January 1, 1951, we may in our discretion, for good cause, treat such notice of appeal as filed immediately after entry of the judgment. We shall use this power here considering the general desirability of deciding appeals on the merits, the absence of any indication of prejudice and the failure of respondent to urge dismissal of the appeal.

The facts are mainly undisputed. On December 1, 1948, Mrs. Larrus took to the defendant bank, herein further called the bank, with which she and her husband had had no prior dealings, a check of $1500, drawn on it by Martini Motors, signed by Eugene Martini, Mrs. Larrus' brother, and made payable to her and her husband. She testified that the check was given in payment of the balance of a loan made by them to Martini. She asked an employee of the bank whether the check was good and was told that it was, the funds in the account then being sufficient. Mrs. Larrus then stated that she wished to open an account in the name of her husband and herself as trustees for their two named sons and to deposit the check in that account. She was told that for the opening of such an account the signature of her husband also was required. She was given a card for him to sign and signed one herself. The cards contained directly above the space for the signature a printed statement that the depositor agreed that the account was to be carried as a savings account and that the funds in it should be governed by the by-laws, regulations, rules and practices of the bank. Her attention was not expressly called to this clause and she was not advised of the contents of the by-laws, rules and regulations. The following morning, December 2, 1948, Mrs. Larrus took the signed cards and the check endorsed in blank by her and her husband back to the bank and was given a savings pass book in which the amount of the check was entered. The pass book contained printed rules governing savings accounts, which were not called to her attention. The bank records received in evidence show that on December 2, 1948, at the beginning of business there was in the Martini Motors account $2348.88. On that date there were charged to said account one check of $70, one of $1875, one of $25 and the Larrus check of $1500. No deposit was made on it that day. When it was found that by the total of the checks, amounting to $3,470, the account was overdrawn a counter entry of $1500 was made the same day to cancel the charge of the Larrus check and plaintiffs' savings account was charged with that amount. On December 7, 1948, plaintiffs received a return item advice letter dated December 4, 1948, and bearing a postmark of December 6, 1948, advising them that their account had been charged and that the check was being held for their instructions. Appellants did not react in any way on this notice until they communicated with the bank through their attorneys in 1950.

The main question in dispute is the effectiveness of the crediting of appellants' account with the amount of the check. At that time such matters were governed by section 16c of the Bank Act of 1909 as amended, Deering's Gen.Laws, Act 652, which reads in part: 'Any credit allowed by any bank organized under the laws of, or doing business in, this State, for any check, note or other instrument providing for the payment of money and drawn on, through or payable at the same bank in which it is deposited * * * shall be provisional only, subject to final payment * * * provided, that any check, note or other instrument providing for the payment of money and drawn on or payable at the same bank allowing such credit shall either be found good or else returned unpaid, or notice of dishonor duly sent, at or before the end of the next succeeding business day when such check, note or other instrument has been received during business hours * * *.

'Any provision of this section may be modified or set aside by an agreement in writing between any bank allowing such credit and any party from whom any such check, note or other instrument is received for collection, deposit, or other purpose.'

It is undisputed that although the check was received during business hours, the notice was not sent the next succeeding business day. The court below in the order for judgment expressed the opinion that the failure of the bank to give notice of dishonor within the period limited by the Act did not invalidate the revocation of the credit but made the bank liable for injury only suffered by the depositors because of the delay, whereas no such injury was shown. We do not agree. The language of the statute together with the general rules applicable to the payment or crediting of checks by the drawee bank compel the opposite conclusion.

Normally "A credit given for the amount of a check by the bank upon which it is drawn is equivalent to, and will be treated as, a payment of the check. It is the same as if the money had been paid over the counter on the check, and then immediately paid back again to the account or for the use for which the credit is given." Utah Const. Co. v. Western Pac. R. Co., 174 Cal. 156, 164-165, 162 P. 631, 635; Greenzweight v. Title Guarantee & Trust Co., 1 Cal.2d 577, 581, 36 P.2d 186; Briviesca v. Coronado, 19 Cal.2d 244, 246, 120 P.2d 649; 7 Am.Jur. 327; 9 C.J.S., Banks and Banking, § 349, p. 698; 5A Michie Banks and Banking, Perm. Ed. 536-537. In the absence of fraud of the payee a bank which has paid a check which constituted an overdraft, cannot recover the amount paid from the payee (7 Am.Jur. 443; 9 C.J.S., Banks and Banking, § 354, p. 723; 5A Michie, supra, p. 542; Ann. 114 A.L.R. 382, 385, et seq.) Accordingly, the great weight of authority holds that apart from contrary statutory provisions or agreements or fraud or collusion an overdraft when credited to the payee's account in the same bank, cannot be charged back. (7 Am.Jur. 327; 9 C.J.S., Banks and Banking, § 281, p. 587; 5A Michie, supra, 537-38; Ann. 114 A.L.R. 382, 387.) This rule does not suit the banks, which can hardly know before the close of the day's business whether the old balance of the drawer's account plus deposits made during the day are sufficient to pay all checks on the account presented during the day. Compare National Gold Bank v. McDonald, 51 Cal. 64, 69; Ocean Park Bank v. Rogers, 6 Cal.App. 678, 681, 92 P. 879. The American Bankers Association therefore advocated a statutory provision or a bank rule that credit given to a depositor would be subject to revocation at or before the end of the day of deposit if the check was found not good. See I Paton's Digest, 1068. In 1925 such a provision was added to our Bank Code, but it specifically...