Opinion
NOT TO BE PUBLISHED
APPEAL from the judgment of the Superior Court of San Diego County No. GIC827351, Patricia A.Y. Cowett, Judge. Reversed.
AARON, J.
I.
INTRODUCTION
San Diego National Bank (SDNB) appeals from a July 10, 2006 judgment in which the trial court awarded Rosalinda Courtney prejudgment interest at a rate of 10 percent on the principal held in an account maintained at SDNB. The court awarded prejudgment interest because SDNB failed to deposit the principal amount with the court upon filing an interpleader action pursuant to Code of Civil Procedure section 386, subdivision (c).
Further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Courtney was the beneficiary of a bank account her father maintained at SDNB. In the months prior to and after her father's death, a number of individuals and organizations made claims to some or all of the funds in the account. SDNB filed an action in interpleader, naming as defendants all of the parties who had made a claim to the money in the account, including Courtney. Courtney filed a cross-complaint against SDNB in which she alleged breach of trust, breach of fiduciary duty, and negligence, and sought declaratory relief to establish that she was the rightful owner of the funds in the account. After the other parties dropped out of the action for various reasons, Courtney remained as the sole claimant to the funds in the account. SDNB then paid Courtney the principal that was in the account at the time her father died, plus the interest that had accrued on the account in the interim.
The court subsequently held a trial on Courtney's cross-complaint against SDNB. The court ruled in SDNB's favor, except as to prejudgment interest. On that issue, the court determined that Courtney was entitled to interest at the legal rate of 10 percent. Because SDNB had paid Courtney some interest on the principal, the court awarded Courtney the difference between the 10 percent interest figure and the amount of interest SDNB had already paid Courtney. The court based its award of prejudgment interest on the fact that SDNB had not deposited the principal amount with the court upon filing the interpleader action, as it could have pursuant to section 386, subdivision (c).
We conclude that the trial court erred in awarding Courtney prejudgment interest in the absence of an underlying judgment in Courtney's favor. We further conclude that we need not remand the matter to the trial court for further consideration of Courtney's claim for interest, because Courtney waived her claim to additional prejudgment interest when she accepted SDNB's payment of the full principal amount plus the interest accrued on the account. We therefore reverse the judgment and direct the trial court to enter a new judgment in favor of SDNB on Courtney's cross-complaint.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background
In June 1993, Normando Zubia, a citizen of Argentina, opened several bank accounts with International Savings Bank, including the savings account at issue in this case (Savings Account). Zubia designated Courtney as the sole beneficiary of the Savings Account.
SDNB subsequently acquired International Savings Bank's accounts, including Zubia's Savings Account. The Savings Account accrued a contractual rate of interest on the $100,000 principal, on a monthly basis.
The transaction history for the Savings Account was consistent for much of the account's existence. Generally, the interest earned on the principal was automatically transferred to Zubia's checking account each month. Zubia would often contact the bank prior to performing any transactions, in order to alert the bank about his intended actions.
In 2003, unusual activities began to take place with respect to Zubia's accounts at SDNB. SDNB's Mission Valley branch received wire transfer requests seeking the transfer of money from Zubia's accounts to locations SDNB had not previously associated with Zubia. SDNB also noticed checks being drawn from Zubia's accounts that did not appear to be for Zubia's benefit. Because of the unusual nature of these transactions, SDNB initiated an investigation.
In the course of its investigation, SDNB spoke with an attorney at Luce, Forward, Hamilton & Scripps LLP (Luce Forward) who claimed to represent Zubia. SDNB also spoke with one of Zubia's daughters, Olivia Ramie, and attempted, apparently unsuccessfully, to contact Zubia himself.
SDNB learned from the Luce Forward attorney that Zubia was in failing health in Argentina, and that he and his family were looking for a way "to transfer control of his accounts to someone who could better manage those accounts" in order to pay for his maintenance and medical bills in Argentina. Ramie told SDNB that Zubia might be being abused or held against his will. During this time, SDNB received several requests from Rita Mansueto, an individual who had been identified to SDNB as Zubia's caregiver in Argentina, to exercise power of attorney over Zubia's funds.
Based on the information SDNB gathered, in July 2003, SDNB filed a suspicious activity report regarding Zubia's accounts with the Financial Crimes Enforcement Network (FinCEN).
Although it is not defined in the record, we take judicial notice of the existence of the FinCEN, a unit of the United States Department of Treasury. FinCEN is identified as "a network, a means of bringing people and information together to fight the complex problem of money laundering." (http://www.fincen.gov/af_overview.html as of November 6, 2007.)
On August 11, 2003, SDNB received a document purportedly executed by Zubia giving Manueto power of attorney over all of his accounts at SDNB. Zubia died on November 14, 2003. On January 26, 2004, SDNB received a letter from Luce Forward requesting that SDNB not release any funds from Zubia's accounts without first obtaining Luce Forward's authorization. At around that time, SDNB received a copy of Zubia's death certificate. SDNB confirmed Zubia's death in early 2004.
According to testimony by a representative of SDNB, the content of the January 2004 Luce Forward letter suggested that Luce Forward was not aware of Zubia's death at the time the letter was written.
After Zubia's death, Courtney inquired of SDNB about the availability of the funds in the Savings Account, asserting her status as beneficiary of the account. Courtney did not attempt to withdraw the funds from the Savings Account. Because a number of claims had been made on Zubia's accounts, SDNB consulted with legal counsel regarding how it should deal with the funds in the accounts, including the Savings Account.
B. Procedural background
1. SDNB's complaint in interpleader
On March 22, 2004, SDNB filed a complaint in interpleader. The complaint named as defendants all potential claimants to Zubia's various accounts, including some defendants who were living in Argentina. The parties who originally made claims to the funds in the Savings Account included Luce, Forward, Hamilton & Scripps LLP (attorney lien), Mansueto (power of attorney), and Courtney (account beneficiary).
On January 13, 2005, Courtney filed a cross-complaint against SDNB in which she alleged causes of action for breach of trust, breach of fiduciary duty, and negligence, and sought declaratory relief in the form of establishment of a Totten trust.
"A Totten trust account 'basically allows a decedent to make a testamentary disposition of cash assets without going through the formalities of drawing up a will.' [Citation.]" (Estate of Allen (1993) 12 Cal.App.4th 1762, 1766.)
By letter dated January 18, 2005, counsel for SDNB informed the court of its attempts to properly serve the Argentine defendants pursuant to the requirements of the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents. Counsel also indicated that the Argentina Ministry of Justice had advised him that "it could take several months before the Argentine authorities perfect service." The record is silent as to when service of the Argentine defendants was effectuated.
On June 22, 2005, Luce Forward released any and all liens against Zubia's accounts, including the Savings Account. Luce Forward was dismissed from the interpleader action on July 15, 2005.
On July 22, 2005, SDNB requested entry of default against Mansueto because she had failed to appear or to respond to the complaint. The clerk entered a default against Mansueto that same day.
The dismissal of Luce Forward and the default against Mansueto left Courtney as the only remaining claimant to the Savings Account. On August 17, 2005, approximately three weeks after the court entered the default against Mansueto, SDNB sent Courtney a check in the amount of $103,049.79, which was the total balance remaining in the Savings Account. This amount included all interest that had accrued on the account between October 10, 2003 and August 18, 2005.
Upon receiving the check, Courtney paid her attorney and applied the remaining proceeds toward new certificates of deposit.
Courtney did not dismiss her cross-complaint against SDNB. On January 27, 2006, the court conducted a one-day bench trial on Courtney's cross-complaint. During trial, Courtney dismissed her causes of action for breach of trust and breach of fiduciary duty. Courtney also moved to conform the complaint to proof, seeking to amend her request for declaratory relief to allege instead a claim for breach of contract. The trial court granted the motion.
In response to SDNB's request for a statement of decision, the trial court issued a statement of decision orally on the record. The trial court concluded, "[E]ven though I think that there was no actual lien, there was no actual change of beneficiary, I do think that there was no negligence on the part of the bank in doing what they did [in filing an interpleader action]. [¶] And, frankly, I think that – now looking very carefully at the 386 section, I think the interpleader action was appropriate in view of the multiple claims that may be made." The court continued, "But I do think that in order to preclude the payment of additional interest on the monies, they need to be actually deposited pursuant to that interpleader action to cut it off. Because otherwise you could have cut off and maybe had two weeks of interest that would amount to next to nothing that might be owed to the defendant/cross-complaint [sic]. But since the deposit of the money really never happened, I think we do have to figure out the difference in ten percent interest between the time when she actually received it and, I would say, the earliest date it was reasonable to expect an interpleader action, which I'm willing to say is March 1st."
The court entered judgment on July 10, 2006. On SDNB's complaint in interpleader, the court entered judgment against Mansueto and discharged SDNB from any claim Mansueto may have had to the Savings Account. As to Courtney's cross-complaint against SDNB, the judgment states:
"With respect to the cross-claims of Rosalinda Natividad Courtney against San Diego National Bank, the Court finds that Rosalinda Natividad Courtney is entitled to recover interest in the amount of $11,905.67 from San Diego National Bank, based on the failure of San Diego National Bank to deposit the subject funds of the interpleader complaint with the Court, as is authorized under Code of Civil Procedure section 386(c).
"Defendant/Cross-Complainant Rosalinda Natividad Courtney shall have judgment against Plaintiff/Cross-defendant San Diego National Bank in the amount of $11,905.67."
A notice of entry of judgment was filed on July 14, 2006. SDNB filed a timely notice of appeal on September 11, 2006.
III.
DISCUSSION
A. The trial court erred in awarding Courtney prejudgment interest
The trial court appears to have mistakenly presumed that because SDNB did not deposit the amount at issue in the interpleader action, SDNB was presumptively liable to Courtney for prejudgment interest. The court reached this conclusion despite the fact that there was no judgment on which the prejudgment interest award could be based.
1. Section 386, subdivision (c) does not create a right to prejudgment interest
In awarding Courtney prejudgment interest at the legal rate of 10 percent, the trial court stated: "[T]he Court finds that Rosalinda Natividad Courtney is entitled to recover interest in the amount of $11,905.67 from San Diego National Bank, based on the failure of San Diego National Bank to deposit the subject funds of the interpleader complaint with the Court, as is authorized under Code of Civil Procedure section 386(c)." (Italics added.) According to this statement, the trial court awarded Courtney prejudgment interest pursuant to section 386, subdivision (c), a provision that relates to interpleader actions. However, section 386, subdivision (c) does not authorize the award of prejudgment interest.
Subdivision (c) of section 386 is part of the statutory scheme that governs interpleader actions. Section 386, subdivision (b) authorizes a party "against whom double or multiple claims are made, or may be made, by two or more persons which are such that they may give rise to double or multiple liability," to institute an interpleader action. Subdivision (c) relates specifically to the property at issue in an interpleader action. That section provides: "Any amount which a plaintiff or cross-complainant admits to be payable may be deposited by him with the clerk of the court at the time of the filing of the complaint or cross-complaint in interpleader without first obtaining an order of the court therefor. Any interest on amounts deposited and any right to damages for detention of property so delivered, or its value, shall cease to accrue after the date of such deposit or delivery." (§ 386, subd. (c).)
The trial court apparently relied on this section in concluding that SDNB owed Courtney prejudgment interest because SDNB did not deposit the principal with the court, but instead, maintained it at the bank. When SDNB's counsel attempted to highlight the fact that section 386, subdivision (c) uses the word "may," rather than "shall," thereby indicating that the section does not require that the property at issue be deposited with the court, the court responded, "But in order to be relieved of the interest, I think you have to [deposit the amount in question with the court]." The court later reiterated this interpretation of the statutory provision, stating: "But I do think that in order to preclude the payment of additional interest on the monies, they need to be actually deposited pursuant to that interpleader action to cut it off."
The court's statements demonstrate that the court presumed that the right to prejudgment interest exists whenever an interpleading plaintiff or cross-complainant does not deposit the property at issue with the court. However, that is not the case. The relevant language in section 386, subdivision (c) does not create an independent right to receive interest simply because the interpleading plaintiff or cross-complainant does not deposit the property in question with the court. Rather, the language insulates a plaintiff or cross-plaintiff who does deposit the amount in question from having to pay interest that would otherwise be due. To the extent the trial court interpreted section 386, subdivision (c) to independently authorize an award of prejudgment interest, the court erred.
2. There was no independent basis for the award of prejudgment interest
Implicitly acknowledging that there must be some statutory basis for the award of prejudgment interest other than section 386, subdivision (c), Courtney contends on appeal that the trial court impliedly found that SDNB breached its contractual obligation to Courtney, as a third party beneficiary of the account. Civil Code section 3287 authorizes the recovery of prejudgment interest when a breach has been established:
"(a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. . . .
"(b) Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed."
Civil Code section 3289 identifies the rate of interest that is to be applied to a breach of contract: "(a) Any legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation. [¶] (b) If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach." The trial court apparently relied on this section of the Civil Code in determining that SDNB owed Courtney prejudgment interest at the rate of 10 percent.
The 10 percent interest rate applies only if the party seeking interest is "entitled to recover damages" or is "entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated" pursuant to Civil Code section 3287. Thus, in order to be entitled to prejudgment interest at 10 percent, as the court awarded, Courtney must first be entitled to recover damages. However, the judgment reveals that the court did not award Courtney any damages on her cross-complaint.
Despite the fact that Courtney did not recover any damages on her cross-complaint, she contends, "[T]he trial court's reasoning, though implied, clearly establishes COURTNEY is the prevailing party and is entitled to an award of interest." However, the trial court's judgment did not require SDNB to pay anything other than interest. Courtney cannot bootstrap an implied finding that she was the prevailing party to an unsupported award of prejudgment interest.
There can be no award of prejudgment interest where there is no judgment in favor of the complainant on his or her complaint. It was error for the trial court to award prejudgment interest in the absence of a judgment entitling Courtney to recover damages on one or more of her claims.
B. Remand is not necessary because Courtney has waived any claim to interest by accepting payment of the principal amount
SDNB contends that Courtney waived her claim to interest when she accepted its payment of the principal and all accrued interest in the account. We agree.
Preliminarily we address Courtney's contention that SDNB should not be permitted to raise this contention on appeal because SDNB failed to raise the "waiver" issue in the trial court. Although we could invoke the forfeiture rule in these circumstances because SDNB did not raise this issue in the trial court, the interests of judicial economy weigh in favor of considering and determining the issue in this appeal. If this court did not consider SDNB's argument, we would have to remand the case to the trial court for further proceedings to correct the trial court's improper award of prejudgment interest. On remand, SDNB would be able to raise the waiver issue in the trial court. There is no need to send this case back for the trial court's consideration of this issue when the record is sufficient to allow this court to determine the issue as a matter of law. We therefore address the merits of SDNB's argument that Courtney has waived her claim to prejudgment interest.
Civil Code section 3290 limits the availability of prejudgment interest where the party seeking the interest has accepted payment of the principal at issue. That section provides: "Accepting payment of the whole principal, as such, waives all claim to interest." (Civ. Code, § 3290.)
According to SDNB, Courtney accepted payment of the principal, together with the accrued interest, when she retained SDNB's check for $103,049.79. Courtney asserts that the record does not establish that she accepted payment of the principal, but only that "the check for $103,049.79 was tendered and received." The record supports SDNB's position. The record establishes that Courtney received SDNB's check for $103,049.79, and also establishes, by inference, that she cashed the check. Courtney confirmed in her testimony that after she received the check from SDNB, she used a portion of the money to pay her attorney and invested the remainder in new certificates of deposit. This testimony establishes that Courtney accepted the payment SDNB tendered. In doing so, Courtney waived any further claim for additional prejudgment interest under the Civil Code.
Courtney suggests that Kawasho International, U.S.A., Inc. v. Lakewood Pipe Service, Inc. (1983) 152 Cal.App.3d 785 supports her contention that she has not waived her right to additional interest. Although Courtney's argument in this regard is unclear, she relies on language in Kawasho that "the [interest waiver] rule cannot be invoked . . . where the conditions of payment are such that the creditor has no opportunity to assert his claim for interest at the time of payment." (Id. at p. 796.) In citing this language, Courtney appears to suggest that she had no opportunity to assert her claim for interest at the time SDNB tendered payment of the principal. However, this is simply not the case. Courtney was litigating her claims for damages against SDNB prior to the time she accepted payment of the principal and accrued interest ─ unlike the plaintiff in Conner v. Bank of Bakersfield (1920) 183 Cal. 199, the case Kawasho cites for the proposition that the waiver rule may not be invoked "where the conditions of payment are such that the creditor has no opportunity to assert his claim for interest at the time of payment." If Courtney wanted to assert her right to interest beyond the interest that had accrued on the account, she could have refused the principal payment or she could have reserved her right to seek interest on that amount. Instead, Courtney accepted a check for the full principal amount, plus the interest that had accrued on the account during the litigation, cashed the check, and applied the funds to other things. There is no evidence that anything prevented Courtney from asserting her claim for interest, yet she did not do so. We conclude that even if Courtney were otherwise entitled to receive prejudgment interest, she has waived any claim to prejudgment interest by accepting payment of the principal and the accrued interest.
IV.
DISPOSITION
The judgment on Courtney's cross-complaint is reversed. The trial court is directed to enter judgment in favor of SDNB on Courtney's cross-complaint. SDNB is awarded costs on appeal.
WE CONCUR: HALLER, Acting P. J., O'ROURKE, J.