KRUGER v. WELLS FARGO BANK

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Court of Appeal, First District, Division 2, California.

Jean KRUGER, Individually and on behalf of all others similarly situated, Plaintiff and Appellant, v. WELLS FARGO BANK, a California corporation, Defendant and Respondent.

Civ. 30141.

Decided: March 20, 1973

Wong, Siedman & Lee, Jack Siedman, San Francisco, for plaintiff and appellant. Brobeck, Phleger & Harrison, Kirtley M. Thiesmeyer, San Francisco, for defendant and respondent.

In this class action for declaratory and injunctive relief, plaintiff Jean Kruger, a depositor of respondent bank, appeals from the trial court's order sustaining respondent's demurrer without leave to amend and the ensuing judgment of dismissal.

The undisputed facts, as alleged in the complaint, reveal that appellant had a checking account as well as a Master Charge account with respondent bank. On October 21, 1970 respondent seized all the funds, totaling $87.68, in appellant's checking account and served upon her a notice that her Master Charge account was delinquent and the funds were being taken under a ‘Banker's Lien.’ Appellant further alleged that all the funds in her checking account were derived from unemployment and disability insurance benefits. Relying on the exemptions provided in Code of Civil Procedure, sections 690.175 and 690.18, and Unemployment Insurance Code, section 1342, appellant demanded the restoration of the funds seized. Her demand, however, was refused. Thereupon appellant brought this action to which respondent filed a demurrer claiming that (1) the complaint failed to state facts sufficient to constitute a cause of action; (2) there was a misjoinder of parties; (3) the court had no subject matter jurisdiction in the action; and (4) the complaint was uncertain. Respondent's demurrer was sustained without leave to amend on the first three grounds.

Constitutionality of Seizure

Relying on Sniadach v. Family Finance Corp. (1969) 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349, and the California cases following Sniadach (especially Randone v. Appellate Department (1971) 5 Cal.3d 536, 96 Cal.Rptr. 709, 488 P.2d 13, and Blair v. Pitchess (1971) 5 Cal.3d 258, 96 Cal.Rptr. 42, 486 P.2d 1242), FN2 appellant contends that the Banker's Lien under which her funds were seized is unconstitutional because it allows deprivation of property without prior notice and hearing; moreover it fails to limit its operation to specific categories of property and to extraordinary circumstances in which a summary seizure might be justified. Appellant's position is well taken.

In Sniadach v. Family Finance Corp., supra, the United States Supreme Court held that a Wisconsin prejudgment wage garnishment statute violated a debtor's right to due process because it sanctioned the taking of his property without prior notice and hearing. The California Supreme Court applied the Sniadach holding not only to the California wage garnishment statutes (McCallop v. Carberry (1970) 1 Cal.3d 903, 83 Cal.Rptr. 666, 464 P.2d 122; Cline v. Credit Bureau of Santa Clara Valley (1970) 1 Cal.3d 908, 83 Cal.Rptr. 669, 464 P.2d 125) but also to the claim and delivery procedures (Code Civ. Proc., §§ 509–521) which permitted prejudgment replevin prior to notice and hearing (Blair v. Pitchess, supra).

Quite recently, in striking down the constitutionality of the attachment of a checking account under Code of Civil Procedure, section 537, subdivision (1) (‘attachment statute’), our Supreme Court concluded that rather than creating a special constitutional rule for wages, the Sniadach opinion returned the entire domain of prejudgment remedies to the longstanding procedural due process principle which dictates that, except in extraordinary circumstances, an individual may not be deprived of property without notice and hearing (Randone, supra 5 Cal.3d at p. 547, 96 Cal.Rptr. 709, 488 P.2d 13). In reaching its conclusion, the court in Randone emphatically pointed out that the attachment statute fails to limit its operation to certain categories of property owned by a defendant, e. g., to non-necessities or to real estate, but instead permits the attachment of any property of a defendant. In addition, the statute does not require a creditor to prove, or even allege, any special circumstances requiring the immediate attachment of defendant's property in the specific case. Moreover, no judicial officer scrutinizes the papers, and neither notice of the proposed attachment nor opportunity to contest it before the issuance of writ is afforded to the debtor (Randone, at 5 Cal.3d p. 544, 96 Cal.Rptr. 709, 488 P.2d 13).

When the Banker's Lien FN2 is viewed in light of the foregoing precepts, it becomes evident that it suffers from the same constitutional infirmities as the attachment statute. It authorizes the deprivation of a debtor's property without prior notice and hearing and without the safeguard of any judicial or official proceeding; it is not limited to the non-necessities of the debtor; nor is it narrowly drawn to confine the deprivation to those extraordinary circumstances in which a state or creditor interest of overriding significance might justify summary procedures. It follows, therefore, that the Banker's Lien in its present form is unconstitutional.

Respondent seeks to argue on appeal that the funds in question were not seized by virtue of the Banker's Lien but rather through the assertion of the bank's equitable right of setoff. Since we are reviewing a ruling on a demurrer, however, we are limited to an examination of the allegations of the complaint. As we have pointed out, plaintiff alleges only that the seizure was pursuant to the Banker's Lien Act. The issue of setoff not having been raised by the pleadings is not properly before this court. We, therefore, do not reach the question of the constitutionality of setoff procedures (see Bichel Optical Lab., Inc. v. Marquette Nat. Bank of Mpls. (D.Minn.1971) 336 F.Supp. 1368).

Propriety of Class Action

Although appellant has proceeded by way of a class action, pursuant to Code of Civil Procedure, section 382, the determination of unconstitutionality of the Banker's Lien Act renders it inapplicable to anyone and everyone. Accordingly, the class action issue has become moot.

Jurisdiction Over the Subject Matter

The ruling on the third ground of demurrer that the court lacked jurisdiction over the subject matter cannot be upheld.

It seems beyond dispute that appellant properly sought injunctive relief in the superior court (see 1 Witkin, Cal.Procedure (2d ed.) at p. 404) based on Code of Civil Procedure, section 526, FN3 either under subdivision 1 to enjoin respondent from continued seizure of her funds in the checking account and/or under subdivision 6 to avoid the multiplicity of suits by each member of the class. Her action for declaratory relief was likewise proper. Code of Civil Procedure, section 1060, provides in part that any person interested under a contract, or who desires a declaration of his rights or duties with respect to another, or in respect to, in, over or upon property may, in cases of actual controversy relating to the legal right and duties of the respective parties, bring an action in the superior court.

In the case at bench there was a valid contract—i. e., the checking account, between appellant and respondent with respect to which there was an actual controversy between the parties, namely the right to the funds in said checking account. It requires no further elaboration that, absent rescission by an authorized party, an alleged or actual breach does not terminate the contract. Additionally, a dispute with regard to the rights and duties of the parties relating to property, namely the funds in appellant's checking account, was alleged. It follows, therefore, that by virtue of the express provision of the declaratory relief statute the superior court had subject matter jurisdiction over the case regardless of the amount in controversy.

For the foregoing reasons the judgment below must be, and is, reversed.

FOOTNOTES

FN1. Both Randone and Blair were decided after the trial court's ruling below. Our reversal of the judgment, therefore, is compelled by those later decisions and is not generated by any thought that the trial court should be held to a standard of clairvoyance.Furthermore, while this case is governed by their mandate, we note that the broad sweep of Randone, Blair, and similar decisions has given rise to temporary legislation ‘In an attempt to correct the imbalance between the rights of debtors and creditors' (Trost, Revival of Pre-Judgment Remedies in California: The New Attachment and Claim and Delivery Statutes (Jan.–Feb. 1973) 48 Cal.State Bar J. 26. 28)..  FN1. Both Randone and Blair were decided after the trial court's ruling below. Our reversal of the judgment, therefore, is compelled by those later decisions and is not generated by any thought that the trial court should be held to a standard of clairvoyance.Furthermore, while this case is governed by their mandate, we note that the broad sweep of Randone, Blair, and similar decisions has given rise to temporary legislation ‘In an attempt to correct the imbalance between the rights of debtors and creditors' (Trost, Revival of Pre-Judgment Remedies in California: The New Attachment and Claim and Delivery Statutes (Jan.–Feb. 1973) 48 Cal.State Bar J. 26. 28).

FN2. Banker's Lien (Civ.Code, § 3054) provides that ‘A banker has a general lien, dependent on possession, upon all property in his hands belonging to a customer, for the balance due to him from such customer in the course of the business.’ (Emphasis added.).  FN2. Banker's Lien (Civ.Code, § 3054) provides that ‘A banker has a general lien, dependent on possession, upon all property in his hands belonging to a customer, for the balance due to him from such customer in the course of the business.’ (Emphasis added.)

FN3. Code of Civil Procedure, section 526, provides that ‘An injunction may be granted in the following cases:‘1. When it appears by the complaint that the plaintiff is entitled to the relief demanded, and such relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually; . . .‘6. Where the restraint is necessary to prevent a multiplicity of judicial proceedings; . . .’ (Emphasis added.).  FN3. Code of Civil Procedure, section 526, provides that ‘An injunction may be granted in the following cases:‘1. When it appears by the complaint that the plaintiff is entitled to the relief demanded, and such relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually; . . .‘6. Where the restraint is necessary to prevent a multiplicity of judicial proceedings; . . .’ (Emphasis added.)

KANE, Associate Justice.

TAYLOR, P. J., and ROUSE, J., concur.

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