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Wells Fargo Bank, N.A v. Fsi

June 29, 2011

WELLS FARGO BANK, N.A., PLAINTIFF, CROSS-DEFENDANT AND APPELLANT,
v.
FSI, FINANCIAL SOLUTIONS, INC., DEFENDANT, CROSS-COMPLAINANT AND RESPONDENT.



Appeal from a judgment of the Superior Court of Orange County, Gregory H. Lewis, Judge. (Super. Ct. No. 30-2008-00112895)

The opinion of the court was delivered by: Ikola, J.

CERTIFIED FOR PUBLICATION

OPINION

Reversed.

FSI, Financial Solutions, Inc. (FSI) deposited a $90,000 check into its account at Wells Fargo Bank, N.A. (Wells Fargo). Ultimately, the check was dishonored by the third party payor bank because the account upon which the check was drawn had been closed months earlier. In the interim, FSI transferred most of the $90,000 out of its account to pay off pre-existing debts. Wells Fargo charged back the remaining funds in FSI's account after discovering the check had been dishonored. Wells Fargo and FSI then sued each other pursuant to various causes of action. In a bench trial, the trial court entered judgment in favor of FSI on a promissory estoppel theory, finding FSI was entitled to the $90,000 because of misrepresentations by Wells Fargo to FSI about the status of the check during processing.

We reverse. Although substantial evidence supports a conclusion Wells Fargo acted negligently (in its delayed processing of the check and in representations to FSI concerning the status of the check), substantial evidence does not support a conclusion FSI was harmed to the extent reflected in the judgment.

FACTS

Undisputed Facts

The parties submitted a joint statement of stipulated facts in advance of the bench trial, from which we set forth the material quoted in this section.

"FSI opened its checking account . . . with Wells Fargo bank (the 'Account') on March 29, 2006." "The check which is the subject of this litigation[] was issued on November 10, 2006, made payable to FSI in the amount of $90,000 and was drawn by Bay Capital Corp. on an account at an Arizona branch of Bank One/J.P. Morgan Chase ('J.P. Morgan Chase') (the 'Check')."

"FSI first deposited the Check to the Account on November 30, 2006." "The Check was returned by J.P. Morgan Chase unpaid because of non-sufficient funds." "FSI again deposited the Check to the Account on December 27, 2006." "The Check was again returned by J.P. Morgan Chase unpaid because of non-sufficient funds on January 2, 2007."

"Thereafter, on March 22, 2007, FSI sued the maker of the Check, Bay Capital Corp., and that suit was dismissed without any recovery by FSI."

"On November 21, 2007, the day before the Thanksgiving Day holiday, FSI again deposited the Check to the Account by an ATM [(automated teller machine)] transaction."*fn1 "The Check as deposited to the Account [on] November 21, 2007 was a 'legal copy' of the original check."*fn2 "On November 23, 2007, Wells Fargo sent notice to FSI of a hold on the Check, which advised FSI in writing that $89,900 of funds from the $90,000 November 21, 2007 deposit to the Account would not be available until November 26, 2007."

"On November 26, 2007, FSI transferred[:] $50,000 from the Account to the Wells Fargo account of W. & Z. Development Corp."; "$20,273.92 from the Account to pay down a credit line FSI had with Wells Fargo"; and "$10,000 from the Account to pay down two credit cards it maintained with Wells Fargo."

"As of November 26, 2007, the Check had not yet been forwarded for presentment to J.P. Morgan Chase." "Wells Fargo forwarded the Check for presentment to J.P. Morgan Chase via the Federal Reserve Clearing House on November 29, 2007." "The Check was presented to J.P. Morgan Chase on December 3, 2007." "J.P. Morgan Chase returned the Check to the Federal Reserve clearing house on December 4, 2007." "Wells Fargo received a return advice and the Check from the Federal Reserve clearing house on December 5, 2007." "The Check when returned to Wells Fargo bank by J.P. Morgan Chase, unpaid, on December 5, 2007, was marked 'unable to locate account.'" "The J.P. Morgan account, against which the Check had been drawn, had been closed since March, 2007."

"On December 5, 2007 Wells Fargo charged back the Account $90,000 which ultimately resulted in the $28,926.37 balance in the Account being paid to Wells Fargo and the Account having a negative balance of $62,764.73 as of January 31, 2008."*fn3 "On and after December 6, 2007 Wells Fargo Bank rejected payment on several checks and electronic transactions written or initiated by FSI on the Account in the total sum of $18,355.58 and charged $748.00 for their return."

Pleadings

Wells Fargo sued FSI on October 6, 2008, alleging the following causes of action: (1) overdrafts (breach of contract); (2) money had and received; (3) indebtedness; and (4) unjust enrichment. Wells Fargo alleged FSI was subject to an account agreement Wells Fargo attached to the complaint, which FSI breached by failing to pay for amounts owed as a result of the dishonored $90,000 check.

FSI filed a cross-complaint, alleging the following causes of action: (1) violation of California Uniform Commercial Code section 4214; (2) material misrepresentation; (3) negligent misrepresentation; and (4) promissory estoppel. The court ...


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