Opinion ID: 1241202
Heading Depth: 1
Heading Rank: 2

Heading: Piedmont.

Text: That the Court so soon after issuing its opinion in Piedmont so readily strikes down that portion approving of the White & Summers analysis of § 4-402 of the Uniform Commercial Code will startle the trial bench and bar. The bench and bar may pause to wonder how soon that portion of White & Summers relied on in today's opinion will be discarded. Hopefully this will not happen, but that it is happening today is much cause for concern. This is especially true where the Court need not be taking such drastic and unprecedented action, and should be more mindful than it is of the demoralizing effect on those trial judges and practitioners of the law who like to believe that there can be a science to jurisprudence. First of all, what White & Summers wrote with relation to § 4-402 is sound, and the Court having accepted it in Piedmont, should be loathe to now deny it. Second, there is no need to do so, this for the simple reason that the trial court in this case did not instruct the jury that a plaintiff whose check has been wrongfully dishonored is entitled to a presumption that he has been substantially damaged. The court properly could have so instructed, but it did not.
There can be no honest doubt but that in this case the plaintiff assumed the burden of proving causation, and that the trial court's instructions informed the jury that compensatory damages could be awarded only if plaintiff was injured as a result of the bank's dishonor of the checks which were exhibits 6A, 7, 8, 9, 10, 11, 12 and 13. The special verdict submitted to the jury, a portion of which is set forth above, clearly told the jury that compensatory damages, if any,  had to result from and be proximately caused by the bank's dishonor of those checks. In the quoted portion in the foregoing sentence I have emphasized the words if any. Here the trial court carefully avoided leaving any thought whatever with the jury that there was any suggestion or inference, let alone presumption, of substantial damages, which flowed from the wrongful dishonors. And, as the Court's opinion concedes, instruction no. 22 placed upon the plaintiff the burden of proving by a preponderance of the evidence the elements of claimed damages said to have resulted from the wrongful dishonors. Included in that instruction was the specific language which laid at plaintiff's door the obligation to establish injury proximately caused to its credit and business standing. In that instruction the trial court again carefully avoided telling the jury that the plaintiff had been injured by the wrongful return of the checks, making use of the word any as an adjective modifying the word injury. (How differently the instruction would read had the trial court instructed the jury to return damages in the amount of money which will compensate plaintiff for the injury proximately caused to its credit and business standing.) Instruction no. 22, as given by the trial court left with the plaintiff the burden of proving both that there was injury to its credit and business standing, and that it was caused by and resulted from the wrongful dishonors. Instruction no. 24 [1] was far more favorable to the bank than it should have been. Following instructions no. 22 and 23, it told the jury that if it found some damages occasioned to plaintiff by the wrongful dishonor, but no measurable pecuniary injury, it should relegate the plaintiff to nominal damages. This was clearly an invitation to the jury that it could fall back to an award of nominal damages if it had trouble in arriving at fair and just compensation for the injury done. As the Court's opinion points out, with which I agree, [E]vidence of the exact dollar amount of damages resulting from the injury is not necessary to support a compensatory award. The instruction, taken with the others given to the jury, further evidences the trial court's placing of the burden of proof on the plaintiff. Yet, the Court's opinion seizes on one sentence of instruction no. 23, and says of it that it conflicts with instruction no. 22. This instruction absolutely does not, as the Court's opinion suggests, set forth the common law rule, under which a `merchant or trader' was allowed to recover substantial damages for wrongful dishonor without proof of actual injury. An analysis of instruction no. 23 is in order, and does not present a task of any difficulty. The instruction consists of but two separate paragraphs. The first paragraph, a single sentence, properly advised the jury that the plaintiff was claiming damages for loss of its credit and business as a result of the wrongful dishonors. Surely this first paragraph presents no problem to anyone. The second paragraph is in two connected sentences. The first merely told the jury in language almost identical to that used in the Court's opinion that the plaintiff, for the wrongful dishonors and harm to its credit and business standing, was not required to prove any particular amount of damage. No other construction is possible. Substantial damages are not mentioned. Equally unmentioned is any language therein which would have told the jury that plaintiff was entitled to recover substantial damages for a wrongful dishonor without being required to prove actual injury. The trader rule and its presumption of substantial damages simply was not utilized, nor even mentioned. Something has to be said for the capabilities of the trial judge who presided at this jury trial, and it cannot be gainsaid but that he could have given an instruction embodying that presumption had he decided so to do, or had such an instruction been requested. The balance of the second paragraph of instruction 23 simply told the jury that if the bank wanted to minimize the damage award by showing that the plaintiff had not in fact had its business and credit standing damaged (injury), it could do so and bore the burden of presenting evidence on that score. Here again was no language which gave the plaintiff the benefit of the trader rule. The jury was instructed that the plaintiff bore the burden of proving injury to his credit and business standing, and that he did not have to introduce evidence to establish the amount of damages in dollars and cents. This is exactly what the Court's opinion declares should be done on a new trial. And, although the Court fails to give such directions, it should also be saying that on a retrial the bank is entitled to present evidence, as it did here, that plaintiff's business and credit standing was not injured by the wrongful dishonors. Totally overlooked in the Court's opinion is the fact that neither party submitted an instruction on the trader's rule, and none was given. Totally overlooked by the Court is the fact that the parties and the trial court were all conversant with the Court's statement in Piedmont, and with Piedmont's reliance on White & Summers. But, above all that, the Court overlooks the singular fact that notwithstanding Piedmont and its probable application to this case, the plaintiff did not at trial rely on the presumption of the trader's rule, but it was the defendant who went into trial possessed of (what now turns out to be) the strange notion that that which the Court said in Piedmont was the law in Idaho, as it apparently is in all jurisdictions. Reflective of the parties' theories of cases and any involvement of the trader rule are the brief opening statements of counsel prior to the taking of any evidence. Counsel for plaintiff explained to the jury that plaintiff's evidence would show injury caused by the dishonors which injury manifested itself in the suspension of his line of credit with the Farmers and Merchants Bank in the Spokane Valley. Counsel for the bank responded with an acknowledgment that it is true as plaintiff said that Farmers and Merchants Bank, a Washington bank, at which the plaintiff corporation, Yacht Club Sales and Service, was banking, learned of the return of one or two of these checks. It is also true that Farmers and Merchants Bank, after this time, altered Mr. Harris's credit terms. In fact, the evidence will show that at the time that these checks were returned, he had approximately a $75,000 line of credit. The evidence will further show that Farmers and Merchants Bank doubled his credit line after we returned these checks, within a three week period after we returned these checks.  As mentioned much earlier in this opinion, it is on the basis of this last statement, that the bank in its brief in this Court contends that the plaintiff cannot be said to have established any injury flowing from the wrongful dishonors. At this point, however, the statement signifies the bank's understanding that it was assuming the obligation of attempting to bring forth evidence with which to establish to the jury's satisfaction that no injury was caused by the dishonors, and thus, in accordance with instruction no. 24, which it requested, the plaintiff could recover only nominal damages. It is not possible to review the requested instructions, the opening statements, and the given instructions, without coming to the conclusion that the trader rule was not involved in the trial of this controversy. That is not to say that it could not have been. It is to say that the plaintiff did not rely upon any presumption of substantial damages which attends to the wrongful dishonor of business checks, but went about the business of proving that there was in fact injury to its credit and business and reputation. It is to say that the bank attempted to disprove any such injury by the introduction of testimony that plaintiff's line of credit was in fact increased, thereby disproving any such claimed injury, and damages to be assessed therefor. Simply put, the Court's conclusion that instruction no. 23 interjected the trader rule into the case, and to the bank's prejudice, is highly fallacious. And that it did not do so is easily discernible from the record with which we are presented. I am not at all able to believe that the Court sincerely entertains the opinion that, notwithstanding the instructions taken as a whole, the final sentence in instruction no. 23 could be taken by any of the jurors as placing on the bank the burden of persuading the jury. Seldom is the burden of proving a negative placed upon a party, and it wasn't done in this case. But that is not to say that the burden of proof, meaning the burden of producing evidence, might not shift to a party in view of the effect of a presumption. This Court has heretofore dealt with the distinctions between the terms burden of proof, burden of persuasion, and burden of producing evidence, this last mentioned sometimes being referred to as the burden of going forward. In the recent case of Keenan v. Brooks, 100 Idaho 823, 606 P.2d 473 (1980), the specially concurring opinion of Bistline, J., with Donaldson, C.J., concurring, pointed out that the term burden of proof subsumes two distinct procedural problems, and may be in reference to the burden of persuasion, or the burden of producing evidence. 100 Idaho at 827, 606 P.2d at 477. In that opinion it was further noted that, although the term `burden of proof' can be used interchangeably with the other two terms because it incorporates them both, such use often leads to confusion. Id. Note was also there taken of the comment of Professor Bell, Handbook of Evidence for the Idaho Lawyer, 215-17 (2d ed. 1972), While the bulk of the decisions in Idaho treat the two burdens as one and fail to make the differentiation ... [i]t would seem that a careful demarcation between the two burdens would make the Idaho decisions of greater value as guides to the lower courts. Id. Today's opinion by the Court adds to the bulk which fail to observe the distinction. The Court's shortcoming in this regard is inexcusable where the bank's brief well serves to remind of the distinction. The bank, after stating that it did introduce evidence to show that plaintiff's credit and business standing were not injured, having reference to testimony that Farmers and Merchants Bank increased plaintiff's credit line from $75,000 to $150,000 some three weeks after the alleged wrongful dishonor of the checks, then urges: This evidence is sufficient to overcome any presumption and therefore the burden of proof (burden of producing evidence) is on the plaintiff, together with the burden of persuasion. The bank thus demonstrates an acute awareness of the proper terminology, and its proper application, which should be remarked on where Keenan v. Brooks, supra , was not announced until some seventeen months after the bank filed its brief in this case. [2] Had the plaintiff here relied on the presumption which does attend the trader rule, the bank would be absolutely correct in its belief that it was then necessary for it to introduce evidence to overcome the presumption  which is to say that the presumption, if relied upon, would have cast upon the bank the duty of coming forward with enough evidence to overcome it, following which the burden of producing evidence would become plaintiff's, and the plaintiff in any event would also have to carry the burden of persuasion in order to carry the day. However correct the bank is in its theory, the plaintiff did not stand on the presumption, but did initially come forward with evidence which, should the jury have chosen to accept it, as was the right of the jury, did establish injury to plaintiff's credit and business reputation  notwithstanding the evidence adduced by the bank under its contention that such showed no injury. The main point is simply that although the bank candidly shows an awareness of the distinctions which attach to the broad term burden of proof, the Court remains blind thereto, insisting that the last few words of instruction no. 23 placed the burden of proof (by which it must mean persuasion) on the bank  notwithstanding that the other instructions, and all of the instructions taken as a whole show that the jury was instructed in this case that it was the plaintiff who carried the burden of proving the wrongful dishonors and resultant injury to the plaintiff's credit and business reputation. Relating backward in time to immediately after the trial, we gain additional insight into the presentation of the bank's theories of the case over that provided by the opening statement of the bank's counsel and the brief filed in this Court. In a brief submitted to the trial court, the bank argued there much as it does in this Court, evidencing its understanding all along that the burden of proof referred to in instruction no. 23 had to do with the presumption, with the burden of proof (going forward with evidence to overcome the presumption) falling on the bank which wrongfully dishonors its customer's checks: The Court instructed the jury (Instruction No. 23) that the plaintiff was not required to prove any particular amount of damage or harm to its credit and business standing, and that defendant has the burden of proving that the plaintiff has not had its business and credit standing damaged. [3] The basis of this instruction appears to be the dicta in First Piedmont Bank & Trust Company v. Doyle, 97 Idaho 700, 551 P.2d 1336 (1976), wherein the court, citing White & Summers, Uniform Commercial Code (2nd Ed. 1972) § 17-4, p. 573, stated that the burden of proof of lack of damage or loss is on the bank when it dishonors a customer's check. However, White & Summers were quoting from the case of American Fletcher National Bank & Trust Company v. Flick [146 Ind. App. 122], 252 N.E.2d 839 (Ind. App. 1969). A copy of that opinion is in the appendix hereto commencing with page 1. A reading of that case makes it clear that only a presumption of some harm to a customer's credit and business standing is present until evidence to the contrary is produced. The reason for the presumption is to prevent a directed verdict against the plaintiff on the issue of harm. Once evidence to the contrary is introduced, the reason for the presumption ceases to exist. Thus, when using the words `burden of proof' in this context, the court means the burden of producing evidence, and not the burden of persuasion.  I have supplied the emphasis. Counsel are at liberty to, and do argue the court's instructions in making final summations. Counsel for the bank, who so full well knew the meaning of burden of proof as used in the last sentence of instruction no. 23, certainly were free to explain that instruction to the jury if the doing of such was thought to be necessary. Clearly the bank knew what was being referred to in instruction no. 23. Yet, so far as can be found from the record, the bank at the instructions conference did not register any thought that the instruction might not be all that clear to lay jurors, nor does it appear that the bank requested or offered any instruction which would further explain to the jury that the burden of proof referred to in instruction no. 23 as it applied to the bank had to do only with the bank's obligation to come forward with evidence if the plaintiff's evidence did not make out a prima facie case, and/or if the plaintiff had no evidence, or did not choose to present any evidence, and was content to stand on the presumption. As pointed out, although it is quite apparent that the bank's case theory was that it needed to bring in sufficient evidence to overcome the presumption, the plaintiff did not take that tack, and there is not in the record an instruction given or requested dealing with the presumption of substantial damages which the trader rule applies to wrongful dishonors. There is no sound basis whatever for the Court's stance that the trial court instructed the jury on the trader rule, and there exists no reason in this case to cast out the White & Summers analysis of § 4-402 set forth in Piedmont. In reversing the district court judgment based on a jury verdict on the slim grounds stated that instruction no. 23 may have confused the jury, the Court seems oblivious of past opinions touching on the subject of questioned jury instructions. As recently as eight months ago, where at stake were not dollars and cents, but three years of prison time, the Court in response to a contention that the instruction given on the issue of self-defense was almost identical to one earlier rejected by the Court, said: Instructions must be interpreted in their context and not read in isolated sentences ... While the instruction is perhaps, not a model, it is not ambiguous, misleading or erroneous. State v. Griffiths, 101 Idaho 163, 610 P.2d 522 (1980). In Archer v. Shields, 91 Idaho 861, 434 P.2d 79 (1967), the Court stated that admitted errors in instructing would be held non-prejudical where the evidence presented abundantly justified the verdict. The Court there quoted at length from Tarr v. Oregon Short Line R.R. Co., 14 Idaho 192, 93 P. 957 (1908), concluding with the statement that although a certain instruction should not have been given, `we are equally satisfied in this case that the appellant has not been prejudiced or injured or damaged on account of the instruction, and we are unwilling to reverse the judgment for that reason.' Thus because of the verdict rendered by the jury the errors in instructions and admissibility of evidence claimed by the appellant are deemed non-prejudicial and nonreversible. Archer v. Shields, 91 Idaho at 868-69, 434 P.2d at 86, 87.
As pointed out above in Part A, the plaintiff at trial undertook to prove injury to his credit and business reputation just as though he were seeking damages for a wrongful dishonor which was made by mistake. Such being so, anything written in this case about the trader's rule would be mere dicta  other than for the Court's false premise that the trial court did give the plaintiff the benefit of the trader's rule. But the Court has created the issue, has passed on it, has thrust its sword into Piedmont, and it becomes necessary to consider whether the Court there was in such grievous error when it rendered that now much-maligned statement: In White and Summers, Uniform Commercial Code (2nd ed. 1972), § 17-4, p. 573, it is noted that the burden of proof of lack of damage or loss is on the bank when it dishonors a customer's check. The rationale therefore is stated `the primary reason for the recognition of this presumption is that wrongful dishonor renders the existence of some harm to the customer's credit and business standing so probable that it makes legal sense to assume the existence of such harm unless and until the adversary comes forward with some evidence to the contrary.' (Emphasis supplied). Piedmont, 97 Idaho at 703, 551 P.2d at 1339. As counsel for the bank have pointed out both in the court below and here, the White & Summers' statement by those authors was directly attributable to American Fletcher National Bank & Trust co. v. Flick, 146 Ind. App. 122, 252 N.E.2d 839 (1969). The complete paragraph from that case as set forth in White & Summers, is: [W]hen a bank wrongfully dishonors its customer's business check there arises a presumption that the customer's credit and business standing is thereby harmed. The function of this presumption is to remove from the customer the duty of going forward with the evidence on this particular injury or harm and thereby avoid a directed verdict against him if evidence on the issue is not produced. The primary reason for the recognition of this presumption is that a wrongful dishonor renders the existence of some harm to the customer's credit and business standing so probable that it makes legal sense to assume the existence of such harm unless and until the adversary comes forward with some evidence to the contrary. (emphasis original) White & Summers, supra § 17-4 at 674. Viewing side-by-side the quoted excerpt from Piedmont and the quoted excerpt where White & Summers quoted American Fletcher National Bank v. Flick, any problem with the Piedmont language is that it omitted the first two sentences of the quote in White & Summers, paraphrasing the same into saying that in White & Summers it is noted that the burden of proof of lack of damage or loss is on the bank when it dishonors a customer's check. American Fletcher National Bank v. Flick did not say that the burden of proof of lack of damage was on the bank, but did say that the presumption of injury or harm removes from the customer the burden of going forward with evidence. American Fletcher National Bank v. Flick, further says, as was carried forward in the Piedmont excerpt, that the presumption exists unless and until the adversary comes forward with some evidence to the contrary. This has all been pointed out by counsel for the bank, leaving me at a complete loss to understand why the Court's opinion chooses to ignore it. The paraphrasing of the Piedmont opinion was unfortunate in not making the nice distinction between the burden of persuasion and the burden of going forward  both of which are encompassed in the more broad term, burden of proof. But even so, that should not have been any obstacle to the Court where it had theretofore recognized the distinction in Cole-Collister Fire Protection District v. City of Boise, supra and Harman v. Northwestern Mutual Life Insurance Co., supra . Where the quoted language in the Piedmont excerpt referred not once, but twice, to the shifting of the burden of going forward with the evidence, clearly those who concurred in that opinion (and all did) cannot with any grace say today that burden of proof as used in Piedmont meant burden of persuasion. So viewed, the statement in Piedmont is not susceptible to challenge, and it ill behooves the Court to strike it down. Nothing in the U.C.C. mandates such action, and reason and common sense require at least the application of that presumption, when relied upon by a bank's customer whose checks have been wrongfully dishonored.