Dodd v. Citizens Bank of Costa Mesa

Opinion

WALLIN, Acting P. J.

Raymond Dodd appeals the judgment of dismissal of his causes of action for negligent mismanagement of a payroll account against Citizens Bank of Costa Mesa (Citizens) following the sustaining of a demurrer without leave to amend. Dodd claims the court erred in ruling, as a matter of law, that he was not a customer of Citizens and therefore Citizens owed him no duty. We affirm.

In his first amended complaint, Dodd alleges he runs a trucking business under the name of Citrus Transport Service. He contracted with Pacific

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Payroll Systems, Inc., for preparation of his payroll checks and tax returns and authorized it to transfer funds from his bank directly into Pacific’s account at Citizens. Dodd attached as an exhibit to the complaint the signature card for the Citizens account, which authorized Judi Kramer and Richard Hunter, employees of Pacific, to write checks on the account. The card also identified the account as belonging to Pacific and labeled it a “payroll trust account.” Although Dodd received statements from Pacific showing his taxes and payroll were being paid, in fact Kramer and Hunter diverted over $90,000 of Dodd’s funds to their own use.

Dodd alleges various causes of action in tort against Pacific, Kramer and Hunter. His sixth and seventh causes of action, however, are against Citizens for negligence. Dodd alleges he was a customer of Citizens because Citizens knew Pacific was using the account to collect funds “solely for the payment of payroll and taxes on behalf of its clients.” Furthermore, Citizens supplied Pacific with checks designed to be customized with the name and address of the particular client on whose behalf the check was written. Dodd alleges the checks with his business name and address on them “constituted representations and an acknowledgment by [Citizens] that [Dodd] was a customer of [Citizens], that [Citizens] was a depository of [Dodd’s] funds and that [Dodd] was the drawer of said checks.”

Dodd alleges that based on this customer relationship with Citizens, the bank should have sent him monthly statements and all canceled checks issued in his company’s name. If Citizens had done so, Dodd would have been able to compare the checks with the statements sent by Pacific and would have detected the unauthorized use of his funds. Dodd also alleges Citizens negligently failed to determine whether Pacific was in compliance with the requirements of the California Financial Code before allowing it to open a trust account.