GONSALVES v. BANK OF AMERICA NAT TRUST SAVINGS ASS (1939)

This is an action to recover the amount of a bank deposit, together with interest thereon, and damages. The trial court rendered judgment for the full amount of the deposit, with interest, but disallowed the claim for damages. Defendant appeals from the judgment against it, and plaintiff appeals from that portion of the judgment which disallows damages claimed by him.

The stipulated facts are briefly as follows:

On June 18, 1929, Gonsalves and his wife executed a note to the predecessor of the bank in the amount of $5,360, payable on demand, which note was secured by a chattel mortgage. By successorship, the bank became the owner of the note, and on February 15, 1932, the security was sold and the proceeds applied on the note, leaving a balance of $2,338.60. Thereafter, the note was assigned by the bank to one H.C. Winklemen for the purpose of collection and suit, that H.C. Winklemen was the agent and trustee for the bank, and never, at any time, had any part of the beneficial interest in the note, nor the action predicated thereon. On June 15, 1933, said H.C. Winklemen filed an action on the note against Gonsalves and his wife in the superior court of the state of California, in and for the City and County of San Francisco. Service of the summons in said action was never effected on the defendants therein.

On June 23, 1937, Gonsalves had on deposit in a general commercial account with the Turlock branch of the bank, the sum of $1,308.91. At that time the bank notified him that it would not pay him this sum because of his debt to it in the sum of $2,338.60. Thereafter, and on July 13, 1937, a check signed by Gonsalves was presented for the balance of the account, payment whereof was refused by the bank, because of the claimed right to hold the deposit on account of the above note. On July 29, 1937, the present action was filed in the superior court of Stanislaus county, to recover the amount of his said deposit, and also to recover damages for the failure to pay over the same. The stipulation of facts provides that if plaintiff recovers judgment for the amount of his deposit, the damages shall be limited to $150, if the trial court should determine that damages be allowed. Thereafter, on April 21, 1938, the action of H.C. Winklemen v. Gonsalves et al., in the superior court of the city and county of San Francisco, was dismissed by the said superior court for failure to serve and return summons within three years of the filing of the action, and the San Francisco court further incorporated in its order that the defendants had not been absent from the state of California during said three years.

Appellant bank justifies its refusal to pay the check by invoking the provisions of section 3054 of the Civil Code, which reads as follows:

“Banker's lien. 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.”

The note was payable on demand, and was admittedly due upon the date when the bank refused payment upon the check drawn upon plaintiff's account.

It is the contention of plaintiff that the statute of limitations had run against the note at the time when the check was refused payment, and that the bank could not then offset the amount due upon the note against the deposit of plaintiff. The right of a bank to thus proceed against a deposit of a customer “is more accurately a right of setoff, for it rests upon, and is coextensive with, the right to setoff as to mutual demands”. 7 Am.Jur., sec. 629. “A claim barred by the Statute of Limitations is not available as a counterclaim or setoff.” 23 Cal.Jur., p. 234, sec. 12. It would therefore appear that if the statute of limitations had run against the note at the time of the presentation of the check, the act of the bank in refusing to honor the check was unlawful, as it would then have no right to setoff the deposit against the amount of said check.

Was any action on the note barred by the statute of limitations which it is conceded is the four-year period provided for in section 337, of the Code of Civil Procedure? The demand note was dated June 18, 1929. The four-year period would expire June 18, 1933. Prior to the latter date, and on June 15, 1933, the bank, through its admitted and stipulated agent and trustee, filed suit in the superior court of San Francisco to enforce collection of the note. The commencement of this action suspended the running of the statute of limitations. 16 Cal.Jur., p. 539, sec. 137. The said action was dismissed on April 21, 1938, for failure to serve and return summons within three years from the commencement of the action. Code Civ.Proc., sec. 581a. As payment was refused on the check long before the last-named date,—to-wit, on July 13, 1937,—we are of the opinion that the action was then pending, and that the statute of limitations had therefore not run against the note. The right of offset had not been lost.

Referring to the contention of respondent that since the three-year period under section 581a, had expired when the bank enforced its right of offset, the action on the note was “dead” at that time, we are unable to follow this view. It means that, without any adjudication whatever every action is automatically obliterated when the time has expired. We are of the opinion that the section quoted, even though it may be mandatory in character, merely confers a right which may or may not be enforced by the court of a litigant. Until such enforcement takes place, the statute of limitations is still suspended, and even after such adjudication, it would remain suspended until the time for appeal had expired.

The appeal of plaintiff, based on the contention that damages should have been allowed, is disposed of adversely to him for the reason that he is not entitled to recover.

The judgment is reversed, with directions to the trial court to enter judgment in conformity with this opinion.

Mr. Justice TUTTLE delivered the opinion of the court.

We concur: THOMPSON, Acting P.J.; DEIRUP, Justice pro tem.