Far West Citrus, Inc. v. Bank of America

Opinion

KINGSLEY, Acting P. J.

Plaintiff appeals from a judgment adverse to it after an order sustaining a demurrer to its second amended complaint. We reverse the judgment.

I

Plaintiff’s first cause of action alleges that it opened a checking account with defendant bank and deposited therein substantial sums of money. The signature card for that account required two signatures and gave an address in Pacoima, California. Plaintiff’s complaint then alleges that the bank permitted withdrawals from that account on the sole signature of plaintiff’s then corporate secretary (Zonker) and sent periodic statements of the account to an address in Camarillo.

1

The pleading also alleges that the withdrawals were, to the bank’s knowledge, deposited in Zonker’s personal account with the bank and used by him for his own purpose.

The trial court, in sustaining a demurrer to that count, relied on section 4406 of the California Uniform Commercial Code, and respondent here relies on that same section. That section provides as follows:

“(1) When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its

[916]

customer or otherwise in a reasonable manner makes the statement and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover his unauthorized signature or any alteration on an item and must notify the bank promptly after the discovery thereof.

“(2) If the bank establishes that the customer failed with respect to an item to comply with the duties imposed on the customer by subdivision (1) the customer is precluded from asserting against the bank.

“(a) His unauthorized signature or any alteration on the item if the bank also establishes that it suffered a loss by reason of such failure; and

“(b) An unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank after the first item and statement was available to the customer for a reasonable period not exceeding 14 calendar days and before the bank receives notification from the customer of any such unauthorized signature or alteration.