CALISTOGA NAT BANK v. CALISTOGA VINEYARD CO (1935)

The defendants have appealed from a judgment which was rendered against them in a suit on a promissory note. It is claimed the court erred in refusing to allow the defendants a credit on the note in the amount of $850, which is the aggregate sum of seven alleged forged checks which were paid by the bank and charged against the defendants' account therein. The court found that the seven questioned checks were forged, and that they were charged against the account of the defendants, but held that an action against the bank, on that account, was barred by the provisions of section 340, subd. 3, of the Code of Civil Procedure.

The plaintiff is a corporation doing a banking business in Napa county, with its principal place of business at Calistoga. For several years prior to the commencement of this action the defendants, Bianchi and Forni, were engaged as an association in operating a vineyard business in Napa county under the name of Calistoga Vineyard Company, Limited. The evidence indicates that on December 29, 1930, after paying the seven forged checks which are in dispute, the account of the defendants with the plaintiff bank showed a credit of $3,481.55. The bank then held the defendants' promissory note, dated March 24, 1930, for $4,000, payable on demand, upon which there remained unpaid the sum of $1,200 and interest at the rate of 7 per cent. per annum from December 8, 1932. February 8, 1932, the bank notified the defendants in writing that there was due on their note the sum of $1,500 and accumulated interest, and requested their prompt payment thereof. March 2, 1932, the bank again notified the defendants that there was still due on the note the sum of $1,500 and accumulated interest, and once more requested their prompt payment of the same. Subsequently the bank charged the defendants' account with the sum of $300 and the accrued interest on the note, crediting the promissory note with that amount. April 25, 1932, the bank notified the defendants to that effect, again urging the prompt payment of the balance due on the note. The defendants received monthly statements of their account from the bank. December 19, 1930, they received a statement showing a balance to their credit of the sum of $5,360.54. The statement contained a list of thirty-four checks which had been paid and charged to the account during the preceding month. The defendants received another statement of their account on December 31, 1930. It showed a balance of $9,883.66 to their credit. Eighty checks were listed in the last-mentioned statement and charged to their account. The following month another statement was received showing a balance of $3,481.55 to the defendants' credit after charging their account with the payment of thirteen checks. These three statements were introduced in evidence. The bank statements of November and December, 1930, contained seven checks aggregating the sum of $850, which the defendants discovered, within a few days thereafter, were forged and cashed from their account by their clerk Bower. The bank was promptly notified of the payment of these forged checks. The defendant Forni testified that he was the only member of the firm authorized to draw checks against their association account; that their stubs contained no evidence of the drawing of these seven checks and that he did not draw them, but that they had been forged. Mr. Harold Bower, who was an accountant in the office of the California Vineyard Company in 1930, testified that he withdrew in the latter months of that year from the defendants' account in the bank the sum of $850 without authorization therefor; that this sum was procured by means of several checks ranging in amount from $75 to $200 each. He admitted that he had been previously charged with “forgery and peculations.” He testified that these seven checks were paid to him at the bank; that they were drawn in the name of the Calistoga Vineyard Company, by either Forni or Bianchi, but he refused to say that he forged or signed their names to the checks. He said in that regard: “I refuse to state under oath whether C. B. Forni actually signed those checks or whether I forged his name on them.” Bower was discharged from his employment with the defendants January 5, 1931. Mr. Forni testified that he became aware of the forgeries January 3, 1931. On the following Monday Forni went to the bank and talked with Mr. Westover, the vice president and cashier thereof, about the payment of the forged checks. This defendant testified that Mr. Westover then said “he didn't know just what the bank's attitude would be toward * * * these forged checks”; that Westover then urged him to pay their note, and said “the minute we were ready to take care of this $4,000.00 note, that he would take the other matter into consideration.” Periodically thereafter until December, 1932, the bank charged the defendants' account with payments of interest due on their promissory note and credited the sums to the note, informing them in writing of each transaction. No objection was ever made to these payments of interest. February 15, 1933, the president of the bank wrote the following letter to the defendants regarding the payment of the note and the forged checks:

“In connection with your loan. At the time you called at my house with regard to this matter about a month ago you advised, on leaving, that you would take the matter up again soon. We have not heard anything further since that time.

“We now insist that this note be taken care of as it is long past due. If there is some adjustment, legally, due you gentlemen on account of that supposed forgery we will take that up as a separate matter and are perfectly willing to consider it in every angle from the legal standpoint. The note, however, was a separate obligation to be paid long ago. * * *”

Mr. Rocca, the president of the bank, testified that he was present and overheard the conversation between Forni and Westover on the Monday following January 3, 1931. He testified that Westover told him, “Forni says that Bower has forged some checks on the Vineyard Company's account.” When Rocca asked where the checks were, Forni replied that they seemed to be lost. The president said that he heard no conversation regarding the payment of the defendants' note and that he did not hear Forni make any claim against the bank for the repayment of the amount of the forged checks. Rocca said he had never heard of the defendants making any claim against the bank for the payment of the forged checks until they came to his home for that purpose the first Sunday in January, 1933. In reply to their demand, which was then made, the letter of Mr. Rocca which is heretofore quoted was written to them.

Suit was commenced in April, 1933, on the defendants' promissory note to collect the balance of $1,200 and interest which was due thereon. The defendants answered the complaint, admitting the execution of the $4,000 note, and the payment of $2,800 on account thereof, but affirmatively alleged, as a matter of defense, that the bank had wrongfully paid and charged to their account seven forged checks aggregating the sum of $850 which, on January 5, 1931, Mr. Westover, the vice president, agreed to credit on the defendants' note, but failed to do so; that the defendants, relying on that promise, failed to commence an action against the bank to recover the sum of money paid on the forged checks within the statutory period of time allowed therefor, but that the plaintiff was estopped by its conduct from setting up the statute of limitations on the last-mentioned suit.

The cause was tried by the court sitting without a jury. Findings were adopted favorable to the plaintiff in which the court held that the seven checks aggregating the sum of $850 were forged and that they were paid by the bank and charged to the account of the defendants therein, but that suit against the bank, on that account, was barred by the provisions of section 340, subdivision 3, of the Code of Civil Procedure. Judgment was thereupon rendered for the unpaid portion of the promissory note in the sum of $1,200 together with interest thereon from December 8, 1932, at the rate of 7 per cent. per annum. From this judgment the defendants have appealed.

There is ample evidence to support the finding that the seven checks aggregating the sum of $850 were forged, and that they were paid by the bank and the sum thereof was charged to the account of the defendants.

We are also of the opinion there is ample evidence to support the finding of the court “that it is not true that on January 5, 1931, or at any other time, the plaintiff promised or agreed to credit the amount of said (forged) checks or any amounts to the defendants, * * * or * * * that the question of said forgeries would be taken into consideration at such time thereafter as the defendants should tender payment of the balance of said promissory note.” While the officers of the bank admit that their attention was called to the fact that forged checks aggregating the sum of $850 had been paid and charged to the account of the defendants, it is asserted the defendants did not demand a return of that money, and that the officers of the bank did not agree to credit that sum to the promissory note. Mr. Forni says that Mr. Westover merely told him that the bank would “consider” their claim when the note was paid. This is not a promise to credit the defendants with that sum of money on their promissory note. Frank Piner, the cashier of the plaintiff bank, testified regarding the alleged agreement of Mr. Westover to take into consideration the adjusting of the seven forged checks when the defendants' note was satisfied, that he was present on January 5, 1931, and heard the conversation between Forni and Westover, and he said that: “I never heard Mr. Westover make any statement that he would take these checks into consideration when they paid their note.” The president, Mr. Rocca, in the only written instrument which was received in evidence regarding the alleged promise to credit the amount of the forged checks to the defendants' note, clearly states that the bank “will take that matter up as a separate matter.” He concludes his letter by saying, “The note, however, was a separate obligation.” This amounts to a denial that the bank agreed to credit the amount of the forged checks on the note, and supports the court's finding to the effect that the bank did not agree to credit the defendants' note with the amount of the forged checks.

The appellants, however, contend that the court erred in precluding them from introducing further evidence to the effect that the conduct of the plaintiff caused them to forbear the commencement of an action to recover from the bank the $850 paid from their account on the forged checks. We are of the opinion the appellants are mistaken in that regard. Only two rulings of the court are complained of. The following question was propounded to the defendant Forni by counsel for the appellant: “Q. I will ask you, Mr. Forni, if you wrote and signed your name to any checks or withdrawals of those items on or about those dates?” To this question the plaintiff's attorney objected on the ground that the claim for reimbursement of $850 paid from the defendants' account upon the forged checks was barred by the provisions of section 340, subd. 3, of the Code of Civil Procedure. The court reserved its ruling on that objection. Assuming, however, that the appellants were thereby precluded from eliciting the direct answer to that question by the witness, the excluded answer is harmless for the reason that the same witness subsequently stated that the seven checks were forged by Mr. Bower. The question merely called for the reply that Forni signed none of those checks and that they were therefore forged. Mr. Rocca, the president of the bank, subsequently admitted that he overheard the conversation between Westover and Forni in which the former said: “Forni says that Bower has forged some checks on the Vineyard Company's account.” The judge of the court asked the witness Forni the following question: “Mr. Forni, you state that in January of 1931, you first discovered the forgeries?” to which he answered, “Yes sir.” The defendants were not precluded from attempting to prove their theory that the plaintiff agreed to credit the amount of the forged checks toward the payment of their note. The court asked Mr. Forni: “Now he (Westover) then told you that he would offset the amount of this, of these checks against the amount on your note?” An objection to this question was overruled, and the witness replied, “Yes sir.” Forni further testified in that regard: “We talked upon the question of the $850.00 being overdrawn, by checks not signed by us.” Defendants' counsel then asked Forni, “What did he (Rocca) say?” To this question the objection last mentioned was renewed. The court, however, overruled the objection and permitted a full examination of the witness on that subject. Moreover, the court found in favor of the defendants to the effect that the checks in question were forged and that they had been charged to the defendants' account.

The only other ruling complained of by the appellants occurred as follows: The defendants' attorney said, “I would like to ask Mr. Forni one further question, * * * if at any time prior to the institution of this suit you filed any action or took any legal proceedings to collect the $850.00, the amount of the forgery?” An objection to this question, on the ground that “the record would be the best evidence” of a failure to commence such an action, was sustained. Assuming, without so deciding, that the reply to that question would have been competent evidence, the ruling was harmless, for the reason that the court determined that the plaintiff did not agree to credit the amount of the forged checks on the defendants' note. It follows that if no such agreement was made by the plaintiff, it would be immaterial in this action whether or not defendants commenced a suit to recover the amount charged against their account for the payment of the forged checks. Moreover, the defendants' answer alleged that they did not commence such an action.

Assuming that the finding of the court is sufficiently supported by the evidence to the effect that the plaintiff did not agree with the defendants to credit their note with the amount of $850 deducted from their account in payment of the forged checks, the defendants are not entitled to a set off against the unpaid amount of their note, for the reason that their action against the plaintiff to recover that sum was barred by the provisions of section 340, subdivision 3, of the Code of Civil Procedure. That section provides that an action “by a depositor against a bank for the payment of a forged or raised check” must be commenced within one year. Union Tool Co. v. Farmers' & Merchants' National Bank of L. A., 192 Cal. 40, 218 P. 424, 28 A. L. R. 1417; Glassell Dev. Co. v. Citizens' Nat. Bank of L. A., 191 Cal. 375, 216 P. 1012, 28 A.L.R. 1427. In the present case, it is conceded that the defendants had knowledge of the forgeries January 5, 1931, and yet they failed to institute an action to recover the amount wrongfully paid by the bank from their account, within the statutory limitation prescribed therefor. Not until they set up in their answer the alleged agreement to credit that amount on their promissory note, did they make that claim, according to the findings which were adopted in this case. Since the defendants failed to establish their claim that the plaintiff agreed to credit their note with the amount of the forged checks which were paid, that defense is barred by the statute of limitations, and the plaintiff is not estopped from urging the statute as a bar to their defense.

The judgment is affirmed.

THOMPSON, Justice.

We concur: PULLEN, P. J.; PLUMMER, J.