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.

A rehearing was granted for the reason that we have come to the conclusion that the question should not be decided solely upon the effect of the statute of limitations, but upon the question as to whether or not, at the time of the attempted seizure of respondent's bank account under the so-called Bankers' Lien Statute (Civ.Code, § 3054), appellant could have proceeded to judgment upon its claim against respondent.

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 $1,306.91. 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 June 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 at the time appellant exercised its purported right to seize the account of plaintiff in satisfaction of the balance due on the note, it had no right of action to a set-off. The right of the bank to thus proceed against the deposit of a customer “is more accurately a right of set-off, for it rests upon, and is co-extensive with, the right to set-off as to mutual demands”. 7 Am.Jur.Sec. 629.

On April 29, 1937, pursuant to a motion duly noticed and made, the superior court of the city and county of San Francisco made and entered its order dismissing said last mentioned action, for failure to serve and return summons within three years from the date of the filing of the action, as provided in section 581a of the Code of Civil Procedure. Said order also found that defendant had not been absent from the state during said time. Section 581a of the Code of Civil Procedure reads as follows: “No action heretofore or hereafter commenced shall be further prosecuted, and no further proceedings shall be had therein, and all actions heretofore or hereafter commenced must be dismissed by the court in which the same shall have been commenced, on its own motion, or on motion of any party interested therein, whether named in the complaint as a party or not, unless summons shall have issued within one year, and all such actions must be in like manner dismissed, unless the summons shall be served and return thereon made within three years after the commencement of said action. But all such actions may be prosecuted, if appearance has been made by the defendant or defendants, within said three years in the same manner as if summons had been issued and served; provided, that, except in actions to partition or to recover possession of, or to enforce a lien upon, or to determine conflicting claims to, real or personal property, no dismissal shall be had under this section as to any defendant because of the failure to serve summons on him during his absence from the State, or while he has secreted himself within the State to prevent the service of summons on him. All actions, heretofore or hereafter commenced, must be dismissed by the court in which the same may be pending, on its own motion, or on the motion of any party interested therein, if summons has been served, and no answer has been filed, if plaintiff fails, or has failed, to have judgment entered within three years after service of summons.”

The action was filed June 15, 1933, and the bank account of plaintiff was seized by appellant to satisfy its lien on July 13, 1937, more than four years thereafter. No summons had ever been served on plaintiff during said time, nor had any service been made at the time of the dismissal of the action on April 21, 1938, nearly five years after the action was filed.

The section of the Code of Civil Procedure above quoted has remained the same since 1907. After that date the following rulings have been made in respect thereto. “In 1889 subdivision 7 was added to section 581 of the Code of Civil Procedure. Stats.1889, p. 398. The effect of the subdivision, which, as amended (Stats.1895, p. 31), was in substance re-enacted in 1907 as section 581a (Stats.1907, p. 712), was to make it mandatory upon the court to dismiss where the summons had not been issued within one year, or served and returned within three years. Vrooman v. Li Po Tai, 113 Cal. 302, 45 P. 470; Swortfiguer v. White, 141 Cal. 576, 75 P. 172.” Witter v. Phelps, 163 Cal. 655, 656, 657, 126 P. 593. In the case of Caldwell v. Regents etc., 23 Cal.App. 29–33, 136 P. 731, 732, it is said: “By section 581a of the Code of Civil Procedure it is made mandatory upon the court to dismiss an action in which summons has not been served and return thereon made within three years after the commencement of such action. Bernard v. Parmelee, 6 Cal.App. 537, 545, 92 P. 658, and cases therein cited.” And further, as stated in Pearson v. Superior Court, 122 Cal.App. 571–575, 10 P.2d 489, 490: “Upon this state of facts the petitioner's right to a peremptory writ of mandate stands uncontestable. As the owner, or the one entitled to the possession, of the boat, he is a party beneficially interested in the dismissal of the action brought to foreclose a mortgage upon the boat. Section 581a, Code of Civil Procedure, provides that unless the summons shall be served and return thereon made within three years after the commencement of the action, the action must be dismissed on the court's own motion ‘or on motion of any party interested therein, whether named in the complaint as a party or not.’ Because of the failure to make return of summons within the three-year period, the trial court lost jurisdiction of the case on the very day that period expired, that is, lost jurisdiction to make any other order than a dismissal of the action. 9 Cal.Jur., pp. 533, 534; Swortfiguer v. White, 141 Cal. 576, 579, 75 P. 172; Vrooman v. Li Po Tai, 113 Cal. 302, 304, 305, 45 P. 470; Davis v. Superior Court, 184 Cal. 691, 694, 195 P. 390; Modoc Land Co. v. Superior Court, 128 Cal. 255, 256, 60 P. 848; Donner v. Superior Court, 82 Cal.App. 165, 168, 255 P. 272, where additional cases are cited. In Swortfiguer v. White, supra, it is said on page 579, of 141 Cal., 75 P. 172, 173: ‘There having been no service and return made of the summons within three years from the commencement of the action, or appearance within that time by any of the defendants, that action was practically put an end to, and it was the imperative duty of the court to have dismissed it at the expiration of three years from its commencement. * The court below thereupon lost all jurisdiction over the cause.’

“Applying the rule of the foregoing decisions to the case at hand we must hold that because of the failure to comply with the provisions of section 581a, Code of Civil Procedure, the trial court lost jurisdiction over that cause on the date when the three-year period expired and that the entry of the judgment in favor of plaintiff upon a return of summons made four years after the commencement of the action was void upon the face of the record for want of jurisdiction; that the trial court then had jurisdiction in that proceeding to do nothing but dismiss the action upon its own motion or upon the motion of a party beneficially interested therein, and that the right of appeal from the order denying petitioner's motion to dismiss is not a speedy nor an adequate remedy. This was so held in Davis v. Superior Court, 184 Cal., 691, 696, 195 P. 390.”

It would thus appear that when the bank took over the deposit, the court in which the action against plaintiff was pending had no jurisdiction other than to dismiss the action; and it had therefore lost its right of setoff.

It is contended by appellant that an amendment to this law in 1907 altered the rule existing prior to that date in respect to the showing necessary to invoke it. This amendment reads as follows: “provided, that, except in actions to partition or to recover possession of, or to enforce a lien upon, or to determine conflicting claims to, real or personal property, no dismissal shall be had under this section as to any defendant because of the failure to serve summons on him during his absence from the State, or while he has secreted himself within the State to prevent the service of summons on him.”

It is contended that mere lapse of time, which formerly barred all further action, does not now have that effect, owing to the fact that the court must retain jurisdiction thereafter to determine whether or not the defendant, during the three-year period, or any part thereof, was absent from the State or concealed himself to avoid service.

We do not deem it necessary to decide the above question, though it would appear that the cases cited, supra, all construed the statute in its present form, and none of them made any change in the rule to the effect that mere lapse of time ousted the court of all jurisdiction except the power to dismiss the action. We are of the opinion that the judgment of dismissal, although entered after the date of the attempted offset was, in effect, a judicial determination that upon the latter date all right to proceed further with the action had been lost by appellant. By that judgment the court said that no service had been made of the summons within three years after the commencement of the action,—that is, during the period from June 15, 1933, to June 15, 1936,—and that during said time the defendant was not absent from the state, nor had he secreted himself to prevent the service of summons upon him. This follows from the presumptions which are indulged in to support a judgment collaterally attacked. “It will be presumed in such a case that the court had jurisdiction both of the subject matter and of the person, and all that was necessary to give the court jurisdiction to render the particular judgment were duly found.” 34 C.J., p. 538. As the attempted right of offset by appellant was exercised almost four years after the action was commenced, its right to proceed further with the action was then barred. The statute specifically provides that it shall not thereafter be “further prosecuted”. The bank, having no legal recourse against plaintiff, had for that reason lost all right to enforce a lien under the provisions of section 3054 of the Civil Code.

In view of the foregoing, it becomes unnecessary to discuss the effect of the statute of limitations. If, at the time of the attempted offset, the bank could proceed no further in the pending action against respondent, the same result would follow as in a case where the action is barred by the statute of limitations.

Taking up the appeal by plaintiff, it is contended by him that he is entitled to damages which, under the stipulation above mentioned, are limited to $150. We believe that the trial court correctly held that such damages are not justified by the evidence. The court allowed interest on the amount due from the date the check was refused payment by the bank. The complaint alleges: “That the said plaintiff has suffered damages in the destruction of his credit and financial standing, and injury to his reputation in the sum of Three Thousand Dollars ($3000.00).” The agreed statement of facts states that plaintiff was unable to purchase cows for his dairy business because of the action of the bank, but there is no evidence of the amount of any damage or loss, and the matter is left to conjecture and speculation, save and except that the damages awarded, if any, shall not exceed $150. It is further agreed that the bank acted upon the advice of counsel in the belief that it had the right of setoff. Where the failure by a bank to honor a check is due to mistake or error, and without malice, none but actual damages shall be allowed; consequently, exemplary damages, also claimed under the complaint, are not all allowable. Section 3320, Civ.Code.

The judgment is affirmed. Plaintiff-respondent to recover costs on appeal.

Mr. Justice TUTTLE delivered the opinion of the court.

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