Court Opinion

ID: 9726456
Source: CourtListenerOpinion
Date Created: 2023-08-26 12:51:15.204132+00
Date Added: 2024-06-11T18:25:27.506518
License: Public Domain

HERNDON, J.
I concur in the conclusion that the judgment herein must be reversed for the reason that said judgment is based entirely upon the erroneous conception of law that the liability of a drawee bank to its customer arising from its payment of negotiable instruments on forged endorsements is dependent upon the proof of damages required in a conventional action for breach of contract. However, I dissent from the conclusion that the record establishes respondent’s liability as a matter of law and that the trial court should be directed to enter judgment in favor of appellant. In my opinion, the judgment should be reversed and the cause remanded for a new trial.
In order to justify reversal with directions, the prevailing opinion adopts selected portions of the trial court’s findings of fact and conclusions of law which are favorable to appellant and some of which I regard as either erroneous or highly questionable. Especially in a case such as this which has been decided upon a completely erroneous theory or conception of the law, I submit that the reversal should operate not only to vacate the judgment but also to set at large the determination of all the legal and factual issues tendered by the pleadings and by the evidence. (Cf. 3 Witkin, Cal. Procedure (1954) Appeal, § 187, pp. 2384-2385, and decisions cited.)
Furthermore, it appears that during the trial the court below made erroneous rulings adverse to respondent’s efforts to prove that appellant intended to constitute the Cellinis as her agents in the transaction, that it was the Cellinis who supplied the names of the payees, and that the Cellinis never intended that the named payees should receive the proceeds of the five checks involved iri this case.' 1
Appellant and the Cellinis entered into a joint venture which contem-. plated the acquisition and sale of the Baywood property and a sharing of the profits therefrom. In all that they did, or purported to do, in pursuit of the purposes of this joint venture, the Cellinis in a very real sense were acting as appellant’s agents.
As the majority opinion correctly recites, the Cellinis were represented by a disbarred Illinois attorney named Abraham Teitelbaum. Each of the five cashier’s checks involved in this case bears what purports to be the endorsing signature of Liz Teitelbaum placed beneath the forged signature of the named payee. And as the majority opinion further recites: “It is clear that the transaction was rife with criminal fraud and it appears from the *893record that Cellinis and Teitelbaum, and perhaps others, have been, and are now, the subject of criminal proceedings.” The inference seems to me almost unavoidable that the Cellinis delivered the checks to the Teitelbaums pursuant to the criminal conspiracy to defraud alluded to in the majority opinion.
The evidence disclosed by the record in this case is sufficient to provide exceedingly strong support for findings (1) that appellant constituted the Cellinis as her agents in the transaction involving the purchase and the use of the cashier’s checks; (2) that the Cellinis supplied appellant with the names of the payees; and (3) that the Cellinis never intended the named payees to have any interest in the checks or their proceeds. Such findings, if made, would invoke the “fictitious payee” rule: “An indorsement by any person in the name of a named payee is effective if ... (c) An agent or employee of the maker or drawer has supplied him with the name of the payee intending the latter to have no such interest.” (Com. Code, § 3405.)
If the Cellinis, who supplied the names of the payees, were appellant’s agents and never intended that the named payees should receive the checks or the proceeds thereof, then the bank did not incur any liability when it honored them regardless of who endorsed them. This rule is not inapplicable merely by reason of the fact that the named payees were “real” persons. (Union Bank & Trust Co. v. Security-First Nat. Bank, 8 Cal.2d 303 [65 P.2d 355]; Goodyear Tire & Rubber Co. v. Wells Fargo Bank etc. Co., 1 Cal.App.2d 694 [37 P.2d 483]; Pacific Indemnity Co. v. Security First Nat. Bank, 248 Cal.App.2d 75, 88 [56 Cal.Rptr. 142].)
Commercial Code, section 4406, subdivision (4), provides that “. . . The burden of establishing the fact of such unauthorized signature or indorsement or such alteration is on the customer.” There is a serious question in my mind whether this burden is met merely by showing that the named payees did not endorse the checks or whether the customer must also show that the person who supplied the names of the payees intended that such designated persons would actually receive the checks and the proceeds thereof.
In any event, it seems clear to me that the evidence offered by respondent relating to appellant’s intent as disclosed by her business dealings with the Cellinis was relevant both to the issue whether the checks were drawn payable to fictitious payees and to the issue whether appellant is barred by her negligence under the provisions of section 3406 of the Commercial Code.
A petition for a rehearing was denied June 15, 1970. Herndon, J., was of the opinion that the petition should be granted. The petition of the defendant, cross-complainant and respondent for a hearing by the Supreme Court was denied July 16, 1970. Wright, C. J., did not participate therein.