Bank's Liability for Check Passing Scam In California

In Arciniega v. Bank of San Bernardino (1997), Arciniega (plaintiff) operated a check-cashing business. In connection with her business, she maintained a bank account with the defendant Bank of San Bernardino, N.A. (defendant bank). In October of 1986, she was the victim of a bogus check-passing scam perpetrated by El Faro Construction Co. (El Faro). The scam commenced when El Faro opened a checking account with defendant bank. El Faro presented to plaintiff what appeared to be payroll checks to cash. Plaintiff called defendant bank to verify that there were sufficient funds in El Faro's account to cover the checks. When told the funds were on hand, plaintiff cashed and deposited the checks with defendant bank that same day. After this procedure was established, El Faro sprung its deception on plaintiff. That occurred when plaintiff cashed checks received from El Faro after a call was made to defendant bank and confirmation was given that El Faro had an adequate balance to cover the checks. Although plaintiff deposited the checks with defendant bank the same day, someone appeared and withdrew all funds from El Faro's account, just before defendant bank's 6:00 p.m. closing. When defendant bank discovered that there were insufficient funds to cover the checks, it debited plaintiff's account and returned the checks. Plaintiff demanded that the aggregate amount of the checks, $ 7,353.37, be credited to her account. Defendant bank refused and suit was filed. Plaintiff employed the services of the law firm of Brunick and Pyle to file suit against defendant bank. on October 9, 1987, suit No. 1 (Suit 1) was filed, in which plaintiff alleged her damages to be $ 7,353.37, reflecting the amount of the returned checks. Suit 1 was dismissed without prejudice on or about April 18, 1988, and for some time the fact of the dismissal was unknown to plaintiff. When plaintiff discovered the unauthorized dismissal, she brought a second action (Suit 2), for legal malpractice action, filed on January 3, 1992, against her former attorneys. In it she sought damages of $ 137,543 premised on nonspecific, boilerplate allegations of fraud and deceit and infliction of emotional distress. A first amended complaint was filed which increased the alleged damages to $ 265,498.53. on September 15, 1993, the malpractice action was settled for $ 60,000 and then dismissed, with no indication of whether it was with or without prejudice. On appeal, the court nonetheless concluded that it was with prejudice "because plaintiff does not contend otherwise. . . ." (Arciniega, supra, 52 Cal. App. 4th at p. 216, fn. 1.) With new counsel, on April 24, 1991, plaintiff instituted a new action (Suit 3) against defendant bank regarding the checks. But this time she alleged that as "a legal result" of defendant bank's refusal to pay the $ 7,353.37, plaintiff incurred $ 253,063.68 in "economic" damages. Although this action was filed before Suit 2, it remained dormant until after that action was settled. Summary judgment was entered in Suit 3 in favor of defendant bank on the ground that plaintiff's receipt of $ 60,000 in settlement of Suit 2 (the legal malpractice action) barred plaintiff from further recovery against defendant bank under the "case-within-a-case" rule. Concerned with the potential for double recovery, the trial court concluded that the settlement ". . . fully compensated [plaintiff] for any claim for the aggregate amount of the El Faro checks she may have had against defendant . . . ." (Arciniega, supra, 52 Cal. App. 4th at p. 223), and found that plaintiff provided no evidentiary material in opposition to the summary judgment to establish that her claim against the original tort feasor was "separate and apart" from her claim against her attorneys. (Id. at pp. 223-224.) Arciniega quoted at length from the defendant bank's points and authorities, which noted that the policy behind compensatory damages was to compensate fully the plaintiff for all loss suffered, but not to place the plaintiff in a better position than she would have been if the wrong had not been committed. (Arciniega, supra, 52 Cal. App. 4th at p. 221.) The court emphasized that " 'the general theory of compensatory damages bars double the coverage for the same wrong.' " (Ibid.) It noted that when an attorney's negligence fails to press a meritorious claim, the measure of damages is the value of the claim lost. (Ibid.) The attorney thus "steps into the shoes," or is the proxy, of the original tortfeasor, the original defendant.