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Buckley v. Trenton Saving Fund Society, 111 N.J. 355 | Casetext
Buckleyv.Trenton Saving Fund Society
Supreme Court of New JerseyAug 11, 1988
111 N.J. 355 (N.J. 1988)
To that extent, plaintiff is precluded from obtaining a double recovery. In Buckley v. Trenton Sav. Fund…
Ingraham v. Ortho–mcneil Pharm.
The elements of the common law cause of action for intentional infliction of emotional distress were set…
holding that the plaintiff had not shown severe distress where he merely claimed to have suffered embarrassment, headaches, and sleep deprivation
Summary of this case from Defilippo v. Almeida
holding that the plaintiff could not recover for his emotional distress because he did not claim any interference with his daily routine
Summary of this case from Cruz v. Seton Hall Univ.
Argued January 4, 1988 —
Appeal from Superior Court, Appellate Division, Stern, J.A.D..
Joseph E. Buckley, Jr., argued the cause for appellant and cross-respondent, pro se. Michael J. Nizolek argued the cause for respondent and cross-appellant ( Backes, Waldron Hill, attorneys).
Hugo M. Pfaltz, Jr., argued the cause for amicus curiae New Jersey Council of Savings Institutions ( Pfaltz Woller, attorneys; Alice Mildred Milmed, on the brief).
Dennis R. Casale argued the cause for amicus curiae New Jersey Bankers Association ( Jamieson, Moore, Peskin Spicer, attorneys; Dennis R. Casale, Kevin L. Lilly, and Michael J. Mann, on the brief).
The fundamental question in this case is whether a customer may recover against a drawee bank for mental anguish and punitive damages caused by the bank's wrongful dishonor of the customer's check drawn payable to a third party. The Law Division dismissed the claim of plaintiff, Joseph E. Buckley, Jr., for punitive damages, but submitted his claim for mental anguish to the jury, which returned a verdict for $25,000 in favor of Buckley and against Trenton Saving Fund Society (the bank). The Appellate Division affirmed the dismissal of the punitive damages claim, and reversed and remanded the claim for mental anguish. 216 N.J. Super. 705 (1987). We granted plaintiff's petition for certification, 108 N.J. 211 (1987), and defendant's cross-petition, id. at 212. We now find that plaintiff may not recover for either punitive damages or his alleged mental anguish. Accordingly, we modify the judgment of the Appellate Division and remand the matter to the Law Division for the entry of a judgment dismissing the complaint.
From 1979 through 1982, over thirty checks drawn on his account were returned to plaintiff for insufficient funds, and on various occasions he was delinquent in his mortgage payments. Some of the overdrafts were attributable to checks drawn by his wife, who signed plaintiff's name as the drawer. In 1981 plaintiff separated from his wife. As part of their separation agreement, plaintiff agreed to pay his wife $150 per week to support her and their four children.
Now, one aspect of damages that is before you under the facts of this case has to do with emotional distress that has been testified to by plaintiff, Mr. Buckley. And I instruct you that in this case there can be, if you're satisfied by the proof, and you find that there was a dishonor of the checks by the — on the part of the defendant, I charge you that as one element of damages, and that you can reach one for intentional infliction of emotional distress.
Now, what is meant by that in the law is that one who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress. Now, liability may exist where the conduct exceeded all bounds usually tolerated by decent society, and where the actions are especially calculated to cause and do cause mental distress of a very serious kind.
So, in this case, if you find that there was a wrongful dishonor of the plaintiff's check, and you find that the plaintiff is entitled to recover damages, you may consider as an element of damage, such intentional infliction of emotional distress as would be — correspond to that definition I've given you.
An action for wrongful dishonor sounds in both tort and contract. Some describe it as a tort action, R. Anderson, Anderson on the Uniform Commercial Code § 4-402.3 at 150 (3d ed. 1982) (Anderson), but others view it as sounding in contract, N.J.S.A. 12A:4-402, New Jersey Study Comment. Still others say the characterization as tort or contract does not make any difference. J. White R. Summers, Handbook of the Law Under the Uniform Commercial Code § 17-4 at 675 (2d ed. 1980) (White Summers). When drafting the Uniform Commercial Code (the Code), the commissioners on uniform state laws did not resolve the issue. U.C.C. § 4-402, comment 2 (1977). To the extent the cause arises out of the contractual arrangement between the bank and its customer, it sounds in contract, but to the extent it arises from the status of the parties and their relationship to each other apart from contract, the cause may more appropriately be characterized as a tort action. We conclude that the wrongful dishonor is a hybrid cause of action, and that characterizing it as tort or contract is not as important as identifying the elements of the cause of action and the recoverable damages.
The failure of section 402 to specify recoverable damages has perplexed both courts and scholars. At common law, customers who were not business people or "traders" were obliged to prove damages. N.J.S.A. 12A:4-402, New Jersey Study Comment. Under the "trader rule," damages for defamation to a merchant were presumed from a wrongful dishonor. Id.; White Summers, supra, § 17-4 at 670. In this state, by legislative enactment before the adoption of the Code, business people, like everyone else, were obliged to prove damages. N.J.S.A. 17:9A-228, repealed by L. 1961, c. 120, eff. Jan. 1, 1963; New Jersey Study Comment.
Section 402 modified the rules on damages by distinguishing dishonors that occur through mistake from those that occur through the bank's intentional conduct. As the second sentence in section 402 states, "[w]hen the dishonor occurs through mistake liability is limited to actual damages proved." To the extent that a wrongful dishonor results from a bank mistake, every customer, including a "trader," must prove actual damages. N.J.S.A. 12A:4-402, U.C.C. comment 3.
The absence from section 402 of a damages provision concerning an intentional or willful dishonor has led two leading authorities to conclude that the presumption of damages associated with the "trader rule" "still applies when the wrongful dishonor results not from mistake or inadvertence but from the willful action of the bank * * *. The negative implication is that when wrongful dishonors occur not `through mistake' but willfully, the court may impose damages greater than `actual damages.'" White Summers, supra, § 17-4 at 670-71; Hawkland, Leary, Alderman, U.C.C. Series § 4-402:06 (art. 4).
Lack of guidance in the Code has produced diverse responses from courts throughout the country. Ironically, the Code, which was designed to produce uniform results, has in this instance produced diversity, if not confusion. As White Summers point out, "[s]ection 4-402 was much re-written during the Code's evolution and is the worse for wear * * *." White Summers, supra, § 17-4 at 667. The New Jersey Study Commission did not address the issue of damages for emotional distress arising from wrongful dishonor, and no New Jersey court has ever considered the issue. Hence, we are remitted to out-of-state cases, analogous New Jersey cases, and secondary authorities.
The out-of-state cases point toward allowing recovery for emotional distress as a result of wrongful dishonor in egregious circumstances. Recovery for emotional distress has been allowed as "consequential damages," Shaw v. Union Bank Trust Co., 640 P.2d 953, 954 (Okla. 1981), and as "actual damages," Kendall Yacht Corp. v. United California Bank, 50 Cal.App.3d 949, 955, 123 Cal.Rptr. 848, 854 (1975); White Summers, supra, § 17-4 at 675. Claims for emotional distress have been circumscribed with the requirement of proof that the wrongful dishonor was the result of an intentional tort, gross negligence, willful or wanton conduct, Farmers and Merchants State Bank of Krum v. Ferguson, 617 S.W.2d 918, 921 (Tex. 1981), and that the bank had acted willfully or maliciously so as to justify a claim for punitive damages, Bank of Louisville Royal v. Sims, 435 S.W.2d 57, 58 (Ky. 1968). As an alternative to proving egregious conduct by the bank, the Ferguson court would have required that the emotional distress be accompanied by physical injury. 617 S.W.2d at 921. One leading authority, Anderson, supra, § 4-402:12 at 155, would limit claims for emotional distress to instances in which the bank acted maliciously, but another authority would not require proof of malice, White Summers, supra, § 17-4 at 675.
The heightened standards for claims of emotional distress are reminiscent of the standard applicable to such claims that arise from a breach of contract. Mental suffering caused by breach of contract "is not generally allowed as a basis for compensation in contractual actions," S. Williston, A Treatise on the Law of Contracts § 1341 at 214 (3d ed. 1968) (Williston), but a breach provides a basis for recovery when it "is wanton or reckless and the harm was foreseeable when the contract was made," Fiore v. Sears, Roebuck Co., 144 N.J. Super. 74 , 76 (Law Div. 1976); Williston, supra, § 1341 at 215.
To the extent that the wrongful dishonor of a check sounds in tort as well as contract, our decisions treating the negligent infliction of emotional distress shed further light on the problem. Underlying those decisions is a constant concern about the genuineness of the claim. The progression has been from denying recovery unless the emotional distress is accompanied by physical impact, Eyrich for Eyrich v. Dam, 193 N.J. Super. 244, 252 (App.Div.), cert. denied, 97 N.J. 583 (1984), to permitting recovery if the emotional distress results in physical injury, Falzone v. Busch, 45 N.J. 559 , 569 (1965). More recently, we have found a sufficient guarantee of genuineness, even in the absence of physical injury, if the plaintiff perceives an injury to another at the scene of the accident, the plaintiff and the victim are members of the same family, and the emotional distress is severe. Portee v. Jaffee, 84 N.J. 88 , 93 (1980). We have also found a sufficient assurance in the special circumstances surrounding the claim of parents against a hospital for the negligent mishandling of the corpse of their son, Strachan v. J.F.K. Memorial Hosp., 109 N.J. 523 (1988); and in the circumstances surrounding a "wrongful birth" claim of parents who were not advised of the availability of amniocentesis, a procedure that would have indicated that their child could be born with Down's Syndrome, Berman v. Allan, 80 N.J. 421 (1979).
The history of claims for intentional infliction of emotional distress reflects a similar incremental growth. As late as 1975, the New Jersey courts did not recognize a separate cause of action for intentional infliction of emotional distress. Hafner v. Hafner, 135 N.J. Super. 328 , 332 (Law Div. 1975). More recently, however, the Law Division has recognized that extreme or outrageous conduct could give rise to such a cause of action. Hume v. Bayer, 178 N.J. Super. 310 (Law Div. 1981). Both Hafner and Hume refer to Restatement (Second) of Torts, supra, § 46 comment d (1965) ( Restatement), pertaining to "outrageous conduct causing severe emotional distress." Section 46 provides:
Second, the defendant's conduct must be extreme and outrageous. Hume, supra, 178 N.J. Super. at 315; Minzer, supra, § 6.12[2] at 6-22. The conduct must be "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community." Restatement, supra, § 46 comment d. Third, the defendant's actions must have been the proximate cause of the plaintiff's emotional distress. Caputzal v. The Lindsay Co., 48 N.J. 69 , 77-78 (1966); Minzer, supra, § 6.12[2] at 6-22. Fourth, the emotional distress suffered by the plaintiff must be "so severe that no reasonable man could be expected to endure it." Restatement, supra, § 46 comment j; Hume, supra, 178 N.J. Super. at 317-19; Minzer, supra, § 6.12[4] at 6-49 to 6-50. By circumscribing the cause of action with an elevated threshold for liability and damages, courts have authorized legitimate claims while eliminating those that should not be compensable.
Courts in other states have rejected claims for intentional infliction of emotional distress because the emotional distress was not sufficiently severe. American Rd. Serv. Co. v. Inmon, 394 So.2d 361 (Ala. 1980) (resentment at impersonal treatment by employer during internal investigation did not establish severe emotional distress); Venerias v. Johnson, 127 Ariz. 496, 622 P.2d 55 (Ct.App. 1980) (testimony that plaintiff became a "nervous wreck" not sufficient to establish severe distress); Waldon v. Covington, 415 A.2d 1070 (App.D.C. 1980) (allegations that plaintiff suffered embarrassment and difficulty insufficient to support a finding of severe emotional distress); Poulsen v. Russell, 300 N.W.2d 289 (Iowa 1981) (evidence that the plaintiff was feeling "super badly" for one or two months, that he was very disappointed, that he did not know how he and his family were going to make ends meet held insufficient to establish severe emotional distress); United Telephone Co. of Mo. v. Horn, 610 S.W.2d 701 (Mo.Ct.App. 1980) (stress leading to a headache on one day and non-prescription medicine on one evening insufficient to establish severe emotional distress).
We find that this evidence is insufficient as a matter of law to support a finding that the mental distress was so severe that no reasonable man could be expected to endure it. Restatement, supra, § 46 comment j. His complaints amount to nothing more than aggravation, embarrassment, an unspecified number of headaches, and loss of sleep. He does not describe the frequency of the headaches, see United Telephone, supra, 610 S.W.2d at 704 (testimony as to stress leading to a headache and taking nonprescription medicine as a cure insufficient to establish severe emotional distress), or their length or intensity, see Davis v. Texaco, Inc., 210 Neb. 67, 313 N.W.2d 221 (1981) (no recovery where plaintiff's distress was not prolonged; evidence establishes merely that plaintiff suffered some embarrassment and humiliation). Buckley does not claim any interference with his every day routine as a result of his mental distress. Venerias, supra, 622 P.2d at 59 ( prima facie element of severe emotional distress lacking where there was no proof that plaintiff was hampered in any respect from performing his daily functions). Nor are their any allegations that plaintiff was worried that his wife and children would go without food. Fletcher v. Western Nat'l Life Ins. Co., 10 Cal. App.3d 376, 385, 89 Cal.Rptr. 78, 87 (4th Dist. 1970) (plaintiff could recover for worry and anxiety about losing home and family lacking food and clothing). In fact, Mrs. Buckley received the money in both instances; she cashed the March check at a different branch shortly after the Robbinsville branch declined to cash it.
We agree with the lower courts that Buckley may not recover punitive damages, the recovery of which depends on common law principles apart from the Code. N.J.S.A. 12A:1-106(1); see also N.J.S.A. 12A:1-103 ("[u]nless displaced by the particular provisions of this Act, the principles of law and equity * * * shall supplement its provisions."). With rare exception, punitive damages are not available in an action for a breach of contract, Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58 , 72-73 (1980), and have been restricted to tort actions, Sandler v. Lawn-A-Mat Chem. Equip. Corp., 141 N.J. Super. 437 , 448 (App.Div. 1976); Note, "Exemplary Damages in the Law of Torts," 70 Harv.L.Rev. 517 (1957).
Other states have denied punitive damages in cases of wrongful dishonor absent conduct that is maliciously intentional, fraudulent, oppressive, or recklessly committed with wanton disregard of the other person's rights. Loucks v. Albuquerque Nat'l Bank, 76 N.M. 735, 418 P.2d 191 (1966); see also Kendall Yacht Corp., supra, 50 Cal.App.3d 949, 123 Cal. Rptr. 848 (no punitive damage award absent malice on the part of bank personnel); Luxonomy Cars, Inc. v. Citibank, N.A., 65 A.D.2d 459, 408 N.Y.S.2d 951 (2d Dept. 1978) (no punitive damages recoverable for wrongful dishonor where bank does not exhibit a "high degree of moral turpitude" and only a private wrong is involved); In re Brandywine Assocs., 30 U.C.C.Rep. 1369 (Bankr.D.C.Pa. 1980) (punitive damages denied where dishonor not considered "malicious, oppressive or reckless of the rights of the customer").
Punitive damages are allowable, however, when the wrongful dishonor reflects actual malice by a bank officer toward the customer. H. Bailey, Brady on Bank Checks, ¶ 20.17 at 20-37 (6th ed. 1987); see Twin City Bank v. Isaacs, 283 Ark. 127 , 672 S.W.2d 651, 39 U.C.C. Rep. 35 (1984) (punitive damages allowed where bank froze couple's account and refused to release funds for four years upon prompt report that their checkbook had been lost and the discovery that forged checks had been paid); Yacht Club Sales Serv., Inc. v. First Nat'l Bank, 101 Idaho 852, 623 P.2d 464 (1980) (punitive damages justified where bank places "hold" on customer's account without consulting bank's attorney or notifying customer); First Nat'l Bank v. Acra, 462 N.E.2d 1345 (Ind.Ct.App. 1984) (punitive damages recoverable where bank made setoff against borrower's account but then represented to the borrower that the account was in order, and the borrower relied on the misrepresentation); C-K Enters, Inc. v. Depositors Trust Co., 438 A.2d 262 (Me. 1981) (a bank that closed several accounts of a customer's without giving adequate notice was liable for punitive damages because it acted in total disregard of the depositor's rights); Northshore Bank v. Palmer, 525 S.W.2d 718, 17 U.C.C. Rep. 488 (Tex.Civ.App. 1975) (punitive damage award justified where depositor notified bank of forgery of his endorsement on a check and the bank refused to take any action, called in a uniformed guard, and then deliberately dishonored the checks on the account, in disregard of the depositor's claim of right).
Absent conduct that is wantonly reckless or malicious, punitive damages should not be allowed for wrongful dishonor. See Nappe v. Anschelewitz, Barr, Ansell Bonello, 97 N.J. 37 , 49 (1984). Our review of the record leads us to conclude that the bank's conduct, even if viewed as intentional or deliberate, does not contravene that standard.
Here, the bank required that a person making presentment must maintain an account at the branch where presentment is made or provide other reliable proof of identification. Believing that the requirement was consistent with "local practice" and necessary to protect its depositors, the bank contends that its requirements were reasonable. Amici contend that because Mrs. Buckley did not comply with those requirements, she did not make a valid presentment and, therefore, the bank did not dishonor her checks. Before the lower courts, however, the bank did not contest the sufficiency of evidence to support a finding that it intentionally dishonored the checks. Because we have otherwise found that Buckley failed to establish a cause of action for wrongful dishonor, we need not determine whether Mrs. Buckley made a valid presentment. Suffice it to state that a bank may require a party making presentment to comply with reasonable requirements for identification.
For modification and remand — Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O'HERN, GARIBALDI, and STEIN — 7.