Wisper Corp. v. California Commerce Bank

• Decision Date: 26 September 1996
• Docket Number: No. D019999,D019999
• Citation: 57 Cal.Rptr.2d 141,49 Cal.App.4th 948
• Court: California Court of Appeals Court of Appeals
• Parties: , 30 UCC Rep.Serv.2d 863, 96 Cal. Daily Op. Serv. 7264, 96 Daily Journal D.A.R. 11,863, 96 Daily Journal D.A.R. 11,931 WISPER CORPORATION N.V. et al., Plaintiffs and Appellants, v. CALIFORNIA COMMERCE BANK et al., Defendants and Appellants; HIGGS, FLETCHER & MACK, Objector and Appellant.

Page 141

57 Cal.Rptr.2d 141

49 Cal.App.4th 948, 30 UCC Rep.Serv.2d 863,

96 Cal. Daily Op. Serv. 7264,

96 Daily Journal D.A.R. 11,863,

96 Daily Journal D.A.R. 11,931

WISPER CORPORATION N.V. et al., Plaintiffs and Appellants, v. CALIFORNIA COMMERCE BANK et al., Defendants and Appellants HIGGS, FLETCHER & MACK, Objector and Appellant.

No. D019999.

Court of Appeal, Fourth District, Division 1, California.

Sept. 26, 1996.

Certified for Partial Publication. ¹

Rehearing Denied Oct. 23, 1996. ^*

Review Denied Dec. 23, 1996.

Billet & Kaplan, Jerome S. Billet, Terry Kaplan and Michael Dewberry, Los Angeles, for Defendants and Appellants.

Meisenheimer & Herron and Matthew V. Herron, San Diego, for Plaintiffs and Appellants.

Higgs, Fletcher & Mack and Greg A. McAtee, San Diego, for Objector and Appellant.

HUFFMAN, Associate Justice.

California Commerce Bank (CCB) appeals a judgment following a jury verdict finding it liable for (1) 25 percent of the damages suffered by Wisper Corporation N.V. (Wisper) caused by CCB's negligence in dealing with Edgar Benitez (Benitez), an employee of Wisper who diverted proceeds of Wisper's checks through an account he opened with CCB, and (2) conversion of one check payable to International Investments Corporation (International). CCB contends on appeal: (1) CCB is not liable to Wisper because Benitez was listed as an alternate payee on most of the checks diverted by Benitez; (2) equitable estoppel applies to bar International's claim; (3) the CODE OF CIVIL PROCEDURE SECTION 339², subdivision 1 two-year statute of limitations applies to bar Wisper's claim for most of the check proceeds diverted by Benitez; (4) CCB is entitled to a setoff for amounts paid by Benitez to Wisper; (5) the court erred by awarding Wisper postjudgment interest from the date of the verdict rather than from the date of entry of judgment; (6) the court erred by denying a motion for costs filed by Banco Nacionale de Mexico, Banamex USA and Banamex Holding Company (collectively Banamex), which on Wisper's motion were dismissed as defendants; and (7) Wisper's claim is barred by its "unclean hands."

Wisper and International cross-appeal the judgment contending: (1) CCB is liable for conversion of all the checks diverted by Benitez because as a matter of law they were paid on a forged endorsement; (2) the court erred by instructing the jury regarding endorsements; (3) CCB is liable for conversion of those checks on which it purportedly supplied Wisper's endorsement; (4) CCB is liable for conversion of three checks which did not include Benitez's name; (5) Wisper's judgment against CCB should not have been reduced by its own comparative negligence; and (6) the court erred by denying Wisper's request for prejudgment interest.

Higgs, Fletcher & Mack (Higgs), attorney for CCB, appeals an order imposing sanctions against it for discovery abuse, contending the court abused its discretion.

We agree that postjudgment interest should apply from the date of entry of the judgment and not the date of the verdict, and that Banamex should have been awarded its costs as a prevailing party. We disagree with all other contentions. Accordingly, we affirm the judgment in part and reverse it in part and remand for further proceedings, and we affirm the order imposing sanctions.

FACTUAL AND PROCEDURAL BACKGROUND

The Rivera-Torres family purchased the Colony Club apartment complex in Orlando, Florida. Epoch Management, Inc. (Epoch) was hired to manage the complex. The complex ultimately became owned by Wisper, the stock of which was owned by Carlos, Mauricio and Alberto Rivera-Torres. ³

The Rivera-Torres family retained Scott Aurich (Aurich), a commercial real estate broker, to oversee the management of many of its real estate holdings. Aurich opened an office in San Ysidro and advertised for a bookkeeper or accountant to prepare financial statements, reconcile bank accounts and help Aurich oversee the operations of the United States properties. Benitez responded to the advertisement. He spoke fluent Spanish and gave Aurich references. Aurich hired Benitez. Benitez did not disclose to Aurich that he recently had been convicted of embezzling checks from a former employer. Although Aurich knew Benitez was in jail for approximately a month shortly after he was hired and Benitez's daughter told Aurich that Benitez had been convicted of driving while under the influence of alcohol or driving with a suspended license, Aurich did not confirm this information with either the court or the jail. Carlos Rivera-Torres also was aware of Benitez's jail term and loaned Benitez $6,000 for bail money.

Benitez's duties included receiving from Epoch checks from the operations of the Colony Club complex, which typically exceeded $50,000 per month. Benitez was responsible for depositing the checks received from Epoch into Wisper's existing account with the Bank of America. Benitez had a rubber endorsement stamp which read "FOR CREDIT ACCOUNT OF WISPER CORP. N. # 13884-01625," apparently identifying Wisper's account number with the Bank of America. Benitez did not have any authority to withdraw money from Wisper's Bank of America account. Using Epoch's monthly financial statements and bank account statements from the Bank of America, Benitez also prepared financial statements which were given to Wisper's outside accounting firm for preparation of tax returns. Benitez also prepared financial statements for International.

After CCB's solicitation of the Rivera-Torres family's banking business, Carlos Rivera-Torres opened a personal account with CCB; Anibac, another Rivera-Torres family corporation, later opened a corporate account with CCB, based on the written authority of two of its officers, Carlos Rivera-Torres and Angel Lizardi. At a dinner meeting, Carlos Rivera-Torres introduced Benitez to several CCB officers.

On April 21, 1989, Benitez opened an account in the name of "Wisper Corporation, N.V." at the San Ysidro branch of CCB. Elizabeth Fimbres (Fimbres), CCB's customer service representative for new accounts, opened the account. Fimbres typed a signature card and corporate resolution form, naming Benitez as the only officer of Wisper and the only signatory for the account. In Fimbres's presence, Benitez signed both documents representing himself as an officer of Wisper and as the only signatory named by Wisper's board of directors. Benitez provided no documentation to Fimbres or CCB verifying his authority to act on behalf of Wisper. Benitez merely delivered to Fimbres a translated copy of Wisper's articles of incorporation, which did not identify any of Wisper's shareholders, directors or officers, and did not name Benitez in any capacity. ⁴

Beginning in April 1989 and continuing through August 1991, Benitez deposited into the new CCB account 28 checks received from Epoch and later withdrew those funds on his own signature and for his own benefit. ⁵ Epoch made 24 of the 28 checks payable to "Wisper Corp NV/E. Benitez" or variations of that payee designation. Benitez typically used a rubber endorsement stamp (presumably the Bank of America stamp altered to delete the account number) to endorse the checks "FOR CREDIT ACCOUNT OF WISPER CORP. N." At the time of deposit, CCB's employees typically would write the account number for CCB's Wisper account opened by Benitez (i.e., 32013880-01) below the stamped endorsement.

Alejandro Rivera-Torres was responsible for supervising the financial affairs of the Rivera-Torres family interests, including Wisper, and he received monthly reports from Epoch showing Wisper's net receipts from the Colony Club complex which should have been deposited monthly in Wisper's account with the Bank of America. He also received regular summaries of the balance in Wisper's account with the Bank of America. However, despite this available information, he never noticed Benitez's diversion of money from Wisper over the two-year period.

On May 8, 1992, Wisper and International filed a complaint for damages against CCB, Banamex and Union Bank, asserting causes of action for negligence and mistake. ⁶ Wisper sought damages of at least $1,399,132.83 against CCB and Banamex, and International sought damages of at least $11,820.33 against CCB and Banamex. The court denied CCB's motion for summary adjudication regarding 24 checks. The court rejected CCB's argument that because Benitez was the alternate payee on those 24 checks no cause of action could be stated against it. The court also rejected CCB's motion in limine to exclude claims for checks diverted before May 8, 1990, rejecting CCB's argument that the section 339 two-year statute of limitations applied. The court found the section 338 three-year statute of limitations applied with the time period commencing on discovery of the facts constituting the cause of action. During the course of the trial, Wisper's motion to dismiss Banamex as a defendant was granted. At close of trial, the court granted Wisper's motion to amend its complaint to include a cause of action against CCB for conversion.

On June 29, 1993, the jury found by special verdict that check number 2219 made payable to International in the amount of $11,820.33 was "paid on a forged endorsement" and that CCB did not "act in good faith, and in accordance with reasonable commercial standards, in paying Check No. 2219." The jury further found CCB was negligent and its negligence was a cause of damage to Wisper. It also found Wisper was negligent and its negligence contributed as a cause of its own damage. The jury found the total amount of damages suffered by Wisper and International was $1,445,953.60. The jury attributed 75 percent of the negligence to Wisper and the remaining 25 percent to CCB. On September 22, 1993, the court entered judgment against CCB (1) for International in the amount of $11,820.33 plus 7 percent interest from November 23, 1990, through June 29, 1993, and at the legal rate...