Court Opinion

ID: 9759727
Source: CourtListenerOpinion
Date Created: 2023-08-29 00:26:15.430861+00
Date Added: 2024-06-11T07:29:04.294175
License: Public Domain

Robert S. Shafer, Special Justice, dissenting. An action by a customer against a collecting bank pursuant to Ark. Code Ann. § 4-4-215(d), standing alone, should not support a claim for punitive damages as a matter of law. Even if punitive damages were recoverable in a case such as this, I would hold that the evidence is insufficient to submit the claim for punitive damages to the jury. Accordingly, I respectfully dissent from the Court’s remand of the punitive damages claim for trial. I further would address the issue of attorney’s fees and hold that the trial court abused its discretion under Ark. Code Ann. § 16-22-308 in awarding a fee of only $335 for the services of Gordon’s attorney. The Court held in Gordon v. Planters & Merchants Bancshares, Inc., 310 Ark. 11, 14, 832 S.W.2d 492 (1992), that § 4-4-215(d) of the UCC provides a strict liability cause of action. Thus, if a customer of a collecting bank proves that the bank has received final setdement for an item, the bank is accountable for the full amount of the item, without regard to fault. Under Arkansas law, a claim for punitive damages is a remedy, not an independent cause of action. It depends upon proof of an intentional tort, or in some cases, breach of contract coupled with tortious conduct, together with proof of malice or an intentional course of conduct for the purpose of causing harm. AMI Civil 3rd 2217. In short, there must be fault in regard to the underlying cause of action (and not mere negligence, but intentional and willful conduct) and fault in regard to what the law calls “malice,” or the evil disposition or purpose of causing harm to another. Since this case was tried solely on the basis of a strict liability cause of action, Gordon should not be permitted to pursue his claim for punitive damages. Even assuming that § 4-4-215(d) has not displaced the common law with regard to the conduct in question, which is an issue the parties have not raised, no cause of action which may support a claim for punitive damages was pleaded in this case or argued in the first appeal. See Ark. Code Ann. § 4-1-103. There is no suggestion that an intentional tort cause of action was tried by consent of the parties and there was no request at trial to amend the pleadings to conform to such proof. Gordon alleged in his complaint that the bank’s actions were malicious and taken in bad faith, but the mere allegation of malice does not state a cause of action, nor does every intentional act open the door to the imposition of punitive damages. McClellan v. Brown, 276 Ark. 28, 632 S.W.2d 406 (1982). Gordon compares his statutory UCC claim to conversion, but the fact remains that he chose not to plead conversion. If he had done so, he would have been required to prove an ownership or possessory interest in the item in dispute, a check made payable to “Gordon Wallace Farms,” not to Gordon individually, and that Wallace’s conduct was in violation of Gordon’s right. Reed v. Hamilton, 315 Ark. 56, 59, 864 S.W.2d 845 (1993); Giroir v. MBank Dallas, N.A., 676 F.Supp. 915, 919 (E.D.Ark. 1987). Gordon was not required to offer such proof under § 4-4-215(d), because recovery under that provision lies in favor of any customer of the collecting bank. Assuming that Gordon could have presented a prima facie case of conversion, his proof on the claim would have been different than the record now before the Court. Moreover, even proof of conversion would not automatically have entitled Gordon to submit a request for punitive damages to the jury. As the Court stated in City National Bank v. Goodwin, 301 Ark. 182, 188, 783 S.W.2d 335 (1990): Punitive damages are not recoverable in a conversion action simply because the defendant intentionally exercised control or dominion over the plaintiff’s property. Simply put, the act of conversion in itself will not support an award of punitive damages. Instead, the plaintiff must show that the defendant intentionally exercised control or dominion over the plaintiff’s property for the purpose of violating his right to the property or for the purpose of causing damages. The majority errs in excusing Gordon’s failure to assert a claim for conversion, or some other intentional tort which might support a request for punitive damages, while permitting him to tack evidence of malice and bad faith onto his strict liability cause of action under § 4-4-215(d). The majority recognizes that punitive damages are expressly prohibited in UCC cases “except as specifically provided in this subtitle or by other rule of law.” Ark. Code Ann. § 4-1-106(1). In holding that § 4-4-215(d) may support an award of punitive damages, without requiring a plaintiff to plead and prove an independent tort, the majority has overlooked the force of the prohibition imposed by the legislature in § 4-1-106(1). The majority looks elsewhere for specific authority for punitive damages, but without success. Ark. Code Ann. § 4-4-103, cited by the majority, refers to the possibility that a plaintiff may recover damages “suffered as a proximate consequence” of a defendant’s breach of the UCC, when bad faith is also present. Since punitive damages are imposed to punish and to deter egregious conduct and not as a proximate consequence of a defendant’s acts, § 4-4-103 is not a specific provision in the UCC for punitive damages and thus is inapplicable to § 4-1-106(1). The majority cites City National Bank v. Goodwin, supra, in which the Court held that punitive damages were recoverable in a wrongful dishonor case against a payor bank pursuant to Ark. Code Ann. § 4-4-402, provided that the dishonor was willful and not merely “mistaken.” At the time Goodwin was decided, § 4-4-402 limited a payor bank’s liability for wrongful dishonor to actual damages “when the dishonor occurs through mistake.” The Goodwin Court construed “mistake” as a “wrongful dishonor made in good faith,” so that the limitation to actual damages applied only in such circumstances, and not when the dishonor was willful. In the case before it, the Court ruled that punitive damages were not recoverable because there was no evidence of a deliberate and willful dishonor by the defendant bank. One year after Goodwin, the legislature amended § 4-4-402, designating the then-existing statutory text as subparagraph (b) and deleting the words “when the dishonor occurs through mistake.” The effect of this amendment was to make the limitation to actual damages in the statute unconditional. The majority recognizes that there is no longer any statutory basis in § 4-4-402(b) for the rule regarding punitive damages announced in Goodwin, but the majority states that Goodwin is still competent authority for rejecting a “narrow approach” to damages under the UCC. This construction of Goodwin accords too little deference to the legislature, which plainly intended by its amendment to eliminate the option of punitive damages in wrongful dishonor cases. The legislative response to Goodwin should guide the majority in holding that the option of punitive damages should not be read into § 4-4-215(d). The majority relies upon the duty of good faith in Ark. Code Ann. § 4-1-203. However, the official comment to § 4-1-203 states that this section “does not support an independent cause of action for failure to perform or enforce in good faith.” Furthermore, the UCC elsewhere implicitly limits damages for bad faith to damages “suffered as a proximate consequence” thereof, which does not include punitive damages. Ark. Code Ann. § 4-4-103(e). The loss of Goodwin as competent authority for an award of punitive damages under chapter four of the UCC, together with the fact that Gordon did not plead an independent tort, indicates that the claim for punitive damages in this case is unsupported by the UCC or by any “other rule of law,” as required by § 4-1-106(1). But even if punitive damages were recoverable in law in a case such as this, the evidence presented by Gordon, viewed in the light most favorable to him, does not show any malice or conscious wrongdoing on the part of the bank’s employee and agent, Wallace. Granted that Wallace acted intentionally, there is no proof that his purpose was other than to “roll back” the transaction so that the respective rights of the former partners in the check to “Gordon Wallace Farms” could be determined. After the charge-back, neither Gordon nor Wallace retained any of the proceeds of the check. Such damage to Gordon is hardly malicious. Wallace’s conduct, while wrongful under the statute, is not the type of conduct that the civil law punishes with exemplary damages. See McClellan v. Brown, 276 Ark. at 31-32. Indeed, this case presents nothing more than a simple commercial dispute, which § 4-4-215(d) remedies by making the collecting bank’s duty and liability in these circumstances as straightforward and clear as possible. See Ark. Code Ann. § 4-l-102(2)(a). Special Justice K. LeAnne Daniel joins this dissent.