The California Court of Appeals, Second Appellate District, recently held that the statute of limitations applicable to actions "by a depositor against a bank for the payment of a forged or raised check" does not apply to allegations brought by a borrower with respect to her home equity line of credit.
A copy of the opinion is available at:
A borrower sued her HELOC lender, alleging various causes of action in connection with a retailer's cashing of allegedly forged checks. These checks were drawn on the borrower's home equity line of credit ("HELOC") account.
The lender demurred on the grounds that the action was time barred. The lower court agreed with the lender, finding that the one-year statute of limitations provided for by California Code of Civ. Proc. Sec. 340(c) applied. The borrower appealed.
As you may recall, California Code of Civ. Proc. Sec. 340(c) ("Sec. 340") governs "actions by a depositor against a bank for the payment of a forged or raised check." It applies a one-year statute of limitations to such actions.
On appeal, the borrower argued that the one-year time limit did not apply to her, because she was a loan customer with a HELOC account, and not a depositor. The appellate court agreed. It observed that the account at issue here is "not a deposit account"; rather, the lender is a creditor to the borrower. Because the legislature used the word "depositor" in Sec. 340 rather than, for example, "customer," the Court reasoned that there is "no valid basis" to assume that the legislature intended the statute of limitations to apply to non-depositors.
The lender argued that Sec. 340 ought to be "harmonized" with California Uniform Commercial Code Sec. 4406, as both statutes concern similar subject matter. The UCC code section uses the word "customer" in lieu of "depositor." The Court disagreed, noting that the UCC sections cited were not part of the same statutory scheme as Sec. 340. Specifically, the Court observed that California Commercial Code Sec. 4406 is not a statute of limitation, but an "issue-preclusion statute."
Therefore, the Court held that the 1-year statute of limitations in Sec. 340 "is not applicable to this action," and consequently reversed the decision of the lower court to grant the lender's demurrer.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
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Email: RWutscher@mtwllp.com
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