May-Li Barki, M.D., Inc. v. Liberty Bank & Trust, Co.

May-Li Barki, M.D., Inc. v. Liberty Bank & Trust, Co.
1999 OK 87
20 P.3d 135
70 OBJ 3149
Case Number: 89902
Decided: 10/26/1999
Modified: 01/23/2001
Rehearing Denied: January 23, 2001 (72 OBJ 251)
Supreme Court of Oklahoma

MAY-LI BARKI, M.D., INC., an Oklahoma Professional Corporation, Plaintiff-Appellee,
v.
LIBERTY BANK AND TRUST COMPANY, a national banking association, Defendant-Appellant.

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION 2

¶0 May-Li Barki, M.D. is an Oklahoma City gynecologist and obstetrician. Dr. Barki wrote fifty-seven checks totaling $385,639.90 between 1985 and 1988 to Capitol Federal Savings Bank on an account at defendant Liberty Bank and Trust Company, from which her taxes were to be paid. The account was in the name of Dr. Barki's professional corporation, May-Li Barki, M.D., Inc. Dr. Barki delivered the checks to her accountant, Gary Reed, who without Dr. Barki's knowledge or consent absconded with them by endorsing them to an account in his own name in Capitol Federal rather than to Capitol Federal itself. Capitol Federal deposited Dr. Barki's checks to Reed's account and then endorsed them and presented them to Liberty for payment via the Federal Home Loan Bank. Liberty honored the checks. Later, Capitol Federal failed. When Dr. Barki discovered what Reed had done, in 1991, she sued Liberty for the loss. The trial court granted summary judgment for Liberty but the Court of Civil Appeals, Division 1, reversed, holding, ". . . as a matter of law that the checks in controversy in this appeal were not properly payable. . ." but that Liberty would have the chance to try to establish affirmative defenses on remand. Following remand and after a four-day jury trial Dr. Barki obtained a verdict and judgment against Liberty for the full amount sued for, $385,639.90. Liberty appealed and the Court of Civil Appeals, Division 2, reversed the verdict and judgment that had been entered in Dr. Barki's favor and held that Liberty was entitled to prevail as a matter of law under

CERTIORARI GRANTED, COURT OF CIVIL APPEALS OPINION VACATED, JUDGMENT OF THE TRIAL COURT AFFIRMED.

Jared D. Giddens, Thomas J. Blalock, Bryan J. Wells, SELF, GIDDENS, & LEES, INC., Oklahoma City, Oklahoma, for Appellee.

John J. Love, Oklahoma City, Oklahoma, for Appellant.

Watt, Justice,

[20 P.3d 137]

¶1 Between February 1985 and August 1988 plaintiff, May-Li Barki, M.D., an obstetrician and gynecologist, wrote fifty-seven checks totaling $385,639.90 on her corporate [20 P.3d 138] account in defendant Liberty Bank and Trust Company to Capitol Federal Savings Bank. Dr. Barki's accountant, Gary Reed, was to see that these checks were deposited to Dr. Barki's credit in a tax deposit account to be used to pay Dr. Barki's taxes. Unbeknownst to Dr. Barki, Reed fraudulently endorsed each check not to Capitol Federal for Dr. Barki's credit, but to an account of his own in Capitol Federal.

¶2 Capitol Federal credited Reed's account and endorsed each check with its own endorsement. It is undisputed that Capitol Federal's endorsement of each check served to warrant its title to each check. Liberty then paid each check, relying on Capitol Federal's endorsement.

¶3 Dr. Barki did not discover Reed's defalcations until 1991. By that time Capitol Federal had failed and Dr. Barki made demand upon Liberty to make good her losses, which Liberty declined to do. Dr. Barki then brought suit against Liberty in the District Court of Oklahoma County claiming that the checks that Liberty had honored were not properly payable under the Uniform Commercial Code.

We conclude as a matter of law that the checks in controversy in this appeal were not properly payable, for which Liberty is strictly liable unless it is relieved of liability by the claimed affirmative defenses. [Footnote omitted.]

¶4 In Barki I, the Court of Civil Appeals remanded the matter to the trial court with directions to the trial court to determine whether Dr. Barki's own negligence had contributed to her loss and thus barred her from recovery, under

¶5 In Barki II, Division 2 of the Court of Civil Appeals held that Liberty was entitled to prevail as a matter of law under

¶6ISSUES

We answer "yes" to each question.

DISCUSSION

I.

¶7 Liberty insists that it is entitled to prevail under

¶8 In Barki I, the Court of Civil Appeals dealt with this issue, holding Dr. Barki's checks to Capitol Federal were not properly payable because Reed had not endorsed them to the payee. In Barki I the court relied on the reasoning of the West Virginia Supreme Court in O'Mara Enterprises, Inc. v. People's Bank of Weirton, 187 W.Va. 591, 420 S.E.2d 727 (1992).

¶9 The facts the West Virginia court considered were, as the Court of Civil Appeals observed, "strikingly similar" to those in this case. There, as here, a third party endorsed checks payable to a bank for deposit to the third party's own account in that bank, not to the payee bank itself. The payee bank then endorsed the checks for payment by the payor bank, despite the fact that the checks had not been endorsed in accordance with the maker's instructions. The court held that this failure made the checks non-negotiable and that the bank's own later endorsement did not serve to revive the negotiability of the checks. Based on its conclusion that the checks became non-negotiable when the third party presented them to the payee bank for deposit to his own account, the West Virginia court concluded:

It is axiomatic that absent negotiability, there is no transfer of rights to the funds represented by the commercial instrument. Since the checks were not negotiable because of non-compliance with UCC provisions regarding endorsement, the rights to the funds represented by the checks at issue were never transferred to the Bank. The Bank, therefore, became only a possessor of the checks and not a holder.

The Court of Civil Appeals's holding in Barki I is the law of the case and binding on the parties and is, therefore, not subject to review in this appeal. Shoemaker v. Estate of Freeman,

¶10 Section 3-405(1) applies only to "An endorsement by any person in the name of a [20 P.3d 140] named payee." [Emphasis added.] Although the court in Barki I left open the issue of the availability to Liberty of § 3-405(1) as a defense, the effect of the Barki I court's holding is to render § 3-405(1) inapplicable. Liberty's argument that Reed's endorsement was in the name of the named payee is both contrary to the record and to the holding of the Court of Civil Appeals in Barki I. The trial court, therefore, correctly held that there was no defense available to Liberty under

II.

¶11 Liberty argues that Dr. Barki's claims against it are barred by the statute of limitations because Dr. Barki asserted them more than three years after she wrote the checks. Dr. Barki claims that the statute of limitations did not start to run until she had demanded repayment and Liberty had refused because her cause of action did not arise until that time. Dr. Barki relies on Allied Fidelity Insurance Company v. Bank of Oklahoma, N.A.,

¶12 Liberty seeks to distinguish Allied by claiming that while the instrument at issue there was a certificate of deposit, which was not a negotiable instrument, Dr. Barki's checks were negotiable. We reject Liberty's claim on this score because the Court of Civil Appeals expressly held in Barki I that Dr. Barki's checks were non-negotiable when Liberty received them from Capitol Federal. As noted in part I, Liberty is bound by the law of the case doctrine so its contention that Dr. Barki's checks were negotiable must fail, as must its attempt to distinguish Allied. The trial court, therefore, correctly held that Dr. Barki's cause of action against Liberty was not barred by the statute of limitations.

III.

¶13 The issue before the Barki II jury was whether Dr. Barki had negligently failed to request copies of her checks, which Liberty had retained as a result of its depository agreement with Dr. Barki. The terms of this agreement were contained on a signature card signed by Dr. Barki in 1982. That 1982 depository agreement did not purport to bind Dr. Barki to any subsequent changes in the agreement when mailed to her by Liberty. No new agreement between Dr. Barki and Liberty was executed until 1990, a date after the losses at issue here had taken place. Nevertheless, Liberty claims that the trial court erred in excluding purported changes in the depository agreement that Liberty had mailed to Dr. Barki in 1985.

¶14 We hold that the trial court did not abuse its discretion when it excluded the 1985 mailings from evidence. Liberty did not show that Dr. Barki was bound by those mailings. Further, Liberty failed to demonstrate that the exclusion of those mailings was so substantial that it represented a miscarriage of justice or constituted a substantial violation of Liberty's rights. "The trial court is permitted broad discretion in determining the relevance of evidence. Decisions regarding relevance of evidence and its alleged prejudice to the other party will not be overturned absent an abuse of discretion." Mills v. Grotheer,

¶15 Liberty also claims that the 1985 mailings would have shown its custom of making checks available to customers. But Liberty called three employee witnesses to establish its customs and practices. Under such circumstances, Liberty's claim that the exclusion from evidence of the 1985 agreements from evidence was reversible error must fail. A trial court has broad discretion in deciding whether evidence should be [20 P.3d 141] admitted. The exclusion of cumulative evidence does not constitute reversible error. Bryce v. Maples,

IV.

¶16 Finally, Liberty argues that the trial court committed reversible error in refusing to change the order of trial and allow Liberty, the defendant, to proceed first. Liberty bases its contention on the fact that the court in Barki I held that Liberty would be strictly liable unless it was relieved of liability by establishing its affirmative defenses. Liberty's contention must fail because the trial court's decision to refuse to change the order of proof was within its discretion and Liberty made no showing that the trial court's failure to allow it to present its evidence out of order was prejudicial to it. "A trial court may allow the introduction of evidence out of its proper order, within his discretion, and, where not prejudicial to the offeror's adversary; but a refusal to do so, is not ordinarily error." Layton v. Purcell,

¶17 CERTIORARI GRANTED, COURT OF CIVIL APPEALS OPINION VACATED, JUDGMENT OF THE TRIAL COURT AFFIRMED.

¶18 SUMMERS, C.J., HARGRAVE, V.C.J., LAVENDER, OPALA, and WATT, JJ. - concur.

¶19 KAUGER, J. - not participating

FOOTNOTES

Pay to the Order of Capitol Federal Savings Bank, Oklahoma City, OK For Deposit Only Gary Reed Accounting Service Capitol Federal Savings Bank

In January 1987 Reed changed the name of his Capitol Federal account to "Lincoln Nat'l Management Corp." but the account number remained the same.

As against its customer, a bank may charge against the account any item which is otherwise properly payable from that account . . .

Any person who by his negligence substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee's or payor's business.

. . .

SUPPLEMENTAL OPINION ON REHEARING'S

OPALA, J.

¶1 The Bank complains on rehearing that the court's certiorari pronouncement overlooked an issue that stands unresolved. We are urged to now reach for review an alleged error in nisi prius determination of the prejudgment interest's amount. Because, for the reasons to be stated, we hold that the issue tendered for resolution on rehearing was not before the court and is hence barred from our consideration by the Bank's failure timely to press it by certiorari petition, rehearing is denied. The procedural tangle the case unfolds at this stage calls for a supplemental opinion that should provide valuable guidance for the bench and bar upon (a) the strictures of § 994

I
THE PERTINENT ANATOMY OF CONTROVERSY NOW AT ISSUE

¶2 The appeal in this case

II
THE BANK INVITED THE PREJUDGMENT INTEREST ISSUE'S EXCLUSION FROM COCA'S OPINION BY PREMATURELY PROCURING A § 994 CERTIFICATION OF THE NISI PRIUS ORDER THAT WAS NOT YET FIT TO BE ADVANCED FOR APPELLATE REVIEW

¶3 The procedural tangle unveiled on rehearing began when the law firm initially representing the Bank secured the trial judge's § 994 certification for an order that had not yet advanced to judgment stage (upon the claim in contest).

¶4 In short, the certified order is not a judgment. Its obligation is not adjudged in a sum certain.

¶5 The Bank's error in prematurely securing a § 994 certification (in advance of the judgment on the physician's claim) was the culprit responsible for the presently unfolded procedural tangle. Neither the three affected courts nor the two litigants involved timely discovered the infirmity occasioned by the prematurely, and hence impermissibly, certified order.

III
THE PREJUDGMENT INTEREST ISSUE NOW PRESSED ON REHEARING WAS NOT BEFORE THIS COURT ON ITS CERTIORARI REVIEW OF THE COCA OPINION. THIS IS SO BECAUSE THE BANK HAD FAILED TO PRESERVE IT FOR CORRECTIVE RELIEF BY TIMELY BRINGING A PETITION FOR CERTIORARI TO REVERSE COCA'S DENIAL OF THE BANK'S CRITICAL MOTION IN ORDER TO PREVENT THE SUPPLEMENTAL PRONG OF ITS APPEAL FROM BECOMING FINALLY TERMINATED.

¶6 COCA's denial of the Bank's motion (for leave to supplement the record and to brief the prejudgment interest issue) was the functional equivalent of the supplemental petition's dismissal. The motion's denial terminated all proceedings for prosecution of issues tendered by that (second) petition in error. It effectively barred the Bank from proceeding further on the second prong of its appeal.

¶7 The Bank contends on rehearing that the court should have reviewed the dismissal as one of the issues standing before it on certiorari. We disagree. The teachings of Hough v. Leonard

¶8 The Bank's sole claim to review of the dismissal is its cryptic statement in the response to the physician's certiorari petition. The statement calls the court's attention to what it references as the pending prejudgment-interest issue. That issue was then no longer pending. It was dead, having been finally extinguished by COCA's dismissal of the supplemental petition in error and by the Bank's failure timely to bring certiorari for review of that error . The review the Bank seeks today should have been sought by [20 P.3d 144] pressing the COCA error (in the dismissal) through its own certiorari quest.¶9 Generally no relief can be granted from a nisi prius judgment to an appellee who did not counterappeal. But no counterappeal is necessary to argue that, in spite of errors committed at nisi prius, the judgment is nonetheless impervious to reversal because it is correct in result.

IV
SUMMARY

¶10 COCA's post-opinion denial order dismissed that prong of the Bank's appeal which was sought to be prosecuted by supplemental petition in error. Hough v. Leonard will not preserve that dismissal for this court's sua sponte review as part of the physician-initiated certiorari. The Bank's own certiorari petition was a conditio sine qua non

¶11 In short, the Bank's rehearing petition addresses itself to an issue that was not before this court in the physician-triggered certiorari proceeding. REHEARING DENIED.

¶12 HARGRAVE, C.J., WATT, V.C.J., HODGES, LAVENDER and OPALA, JJ., concur;

¶13 SUMMERS, J., dissents;

¶14 KAUGER and WINCHESTER, JJ., not participating;

¶15 BOUDREAU, J., disqualified.

FOOTNOTES