Okla. Stat. tit. 12A § 4-402
Okla. Stat. tit. 12A, § 4-402
Oklahoma Code Comment
1. Sub section 4 402(a) clarifies that dishonor of a properly payable item is wrongful dishonor. Nonetheless, the bank may dishonor any item drawn on insufficient funds, unless it has agreed otherwise. Dishonor is defined in Article 3 Section 3-502 .
The language of section 4-402(a) rejects the reasoning of Johnson v. Grant Square Bank & Trust Co., 634 P.2d 1324 (Okla. Ct. App. 1981), which held that dishonor was wrongful because the bank stamped the wrong reason for dishonor on the face of the resumed check Wrongful dishonor occurs only if a properly payable item drawn on sufficient funds is dishonored. If the item is not properly payable, then there can be no wrongful dishonor under section 4-402 .
2. Sub section 4-402(b) strongly rejects the old "trader" rule by specifically limiting the bank's liability for wrongful dishonor to actual damages proved. Commercial National Bank v. Latham, 29 Okla. 88,116 P. 197 (1911), an early Oklahoma case to the contrary, is thus rejected along with certain language in Everett v. First National Bank of Geary, 188 Okla. 402, 109 P.2d 824 (1941) (stating that "some presumptions of nominal damages or even substantial damages are indulged from proof of the wrongful dishonor).
This Section provides that a bank is obligated to pay consequential damages the drawer may suffer as a result of wrongful dishonor. It may be possible, however, to eliminate the right to recover consequential damages by agreement under some circumstances. Under Section 4-103 , the prohibition on varying damage provisions in Article 4 is limited to damages resulting from a lack of good faith or failure to exercise ordinary care. The panics may, therefore, provide by agreement that the bank will not be liable for consequential damages if the wrongful dishonor does not result from a lack of good faith or ordinary care. For example, a bank may, in good faith, mistakenly conclude that the signature on a check is not genuine and reject it. So long as the bank exercised ordinary care in inspecting the signature, the bank's liability could be limited by agreement, even though the dishonor was technically wrongful. Under Section 1-102 , the panics by agreement may set standards to measure good faith and ordinary care for example, the panics could agree to adopt the reasonable notice and foreseeability requirements of Hadley v. Baxendale, 156 Eng. Rep. 145 (1854), as a limitation on consequential damage. This is consistent with the companion provisions of UCC Articles 3 and 4A. See UCC §§ 3-411, 4A-305 and Comment 2, and 4A-501(a); F. Miller & A. Harrell, THE LAW OF MODERN PAYMENT SYSTEMS AND NOTES 1 10.04[1][c] (2d ed. 1992).
The impact on Shaw v. Union Bank & Trust Co., 640 P.2d 953 (Okla. 1981), is less clear. In Shaw, punitive damages were recovered for a wrongful dishonor. Shaw relied heavily on Commercial National Bank v. Latham, 29 Okla. 88, 116 P. 197 (1911), in holding that wrongful dishonor is both a breach of contract and "a tortious breach of a status-based duty of care," and "[w]ith regard to the depositor's remedies and to his theories of recovery, the pre-Code body of Oklahoma precedent remains unaffected and continues in force." Shaw, 640 P.2d at 957-58. Article 4 does not specify that wrongful dishonor is a breach of contract, and even though it limits any recovery to actual damages proved, it does not limit consequential damages by contractual measure but by the ton concept of proximate causation. It would seem alternative theories of recovery are displaced by Section 4-402, pursuant to Section 1-103 and sub section 1-106(1) , and that the cause of action is for breach of the statutory duty. Punitive damages are not allowed under Section 4-402 . But if, on the facts, other Oklahoma law would allow punitive damages, then they should be recoverable pursuant to Section 1-106 and that other law. See Shaw, and Smith v. Citizens State Bank of Hugo, 732 P.2d 911 (Okla. Ct. App. 1986).
3. Several courts have specifically rejected claims that the status of a bank creates special duties towards its customers. See Copesky v. Superior Court (San Diego Nat'l Bank), 229 Cal. App. 3d 678, 280 Cal. Rptr. 338 (1991) (repudiating its prior decision to the contrary in Commercial Cotton Co. v. United Calif. Bank, 163 Cal. App. 3d 511, 209 Cal. Rptr. 551(1985)), Price v. Wells Fargo Bank, 213 Cal. App. 3d 465, 261 Cal. Rptr. 735 (1989) (also rejecting Commercial Cotton ); Peterson Dev. Co. v. Torrey Pines Sank, 233 Cal. App. 3d 103, 284 Cal. Rptr. 367 (1991) (bank-customer relationship is a typical arm's length one); Richland Nat'l Bank & Trust v. Swenson, 249 Mont. 410, 816 P.2d 1045 (1991) (bank-customer relationship is that of debtor and creditor and is not fiduciary in nature). Recent Oklahoma cases also may generally deny a fiduciary relationship. See Rodgers v. Tecumseh Bank, 756 P.2d 1223 (Okla. 1988); Frontier Fed Sav. & Loan Ass'n v. Commercial Bang N.A., 806 P.2d 1140 (Okla. Ct. App. 1990). See also CarolIyn S. Smith, Allis-Chalmers v. Lueck: The United States Supreme Court Rejects Tort Liability for Breach of Good Faith, 43 CONSUMER FIN. L.Q. REP. 258 (1989). Note, however, that the holder of a dishonored item has no right of action against the payor bank for wrongful dishonor under Section 4-402 .
4. Official Comment 2 raises, but does not decide, the question of which measure of damages, the one in this Section or the one in sub section 4A-404(a) , governs when a check is dishonored because the paying institution wrongfully fails to credit a customer's account with a wire transfer. However, as a general policy, the considerations giving rise to the rule of sub section 4A-404(a) strongly suggest that it should be applied.