Second District, Division Eight So Rules In Forged Check Case.
Code of Civil Procedure section 998 offers made to two or more parties, contingent on all parties’ acceptance and unapportioned, is generally not valid. This happens to be the general case because the offerees do not know with certainty what they have been asked to accept. See, e.g., Barella v. Exchange Bank, 84 Cal.App.4th 793, 799 (2000). However, the next case illustrates there is an important exception to the general rule that crops us fairly frequently.
L&B Real Estate v. Wells Fargo Bank, N.A., Case No. B191120 (2d Dist., Div. 8 June 23, 2008) (unpublished) involved two plaintiffs—a limited partnership and its general partner—suing Wells Fargo for paying more than $774,000 in forged checks drawn on two limited partnership accounts. The forgeries were the mastermind of limited partnership’s office manager, who embezzled about $1.6 million over a 3-year time span. Judgment was entered after Referee Richard C. Neal (a retired appellate justice) found that the claims were barred by Commercial Code section 4406, the provision generally precluding recovery on forgeries where an account holder fails to promptly examine statements and report irregularities. Referee awarded bank certain expert witness fees based on plaintiffs’ rejection of a section 998 offer of $100,000 that obviously beat the zero judgment against plaintiffs. Plaintiffs challenged the validity of the 998 offer based on the general rule that multiple plaintiff offers are a “no go.” Wrong, the Second District, Division Eight panel concluded, in a 3-0 decision penned by Presiding Justice Cooper.
The appellate court observed that recent cases have recognized an exception to the general rule—where plaintiffs have a unity of interest such that there is a single, indivisible injury. (See, e.g., Weinberg v. Safeco Ins. Co. of America, 114 Cal.App.4th 1075, 1087 (2004); Vick v. DaCorsi, 110 Cal.App.4th 206, 208, 212 (2003).) In the case she was reviewing on the panel’s behalf, Presiding Justice Cooper had no difficulty concluding that limited partnership and general partner had “single and indivisible” interests, with general partner having no interest in the action whatsoever except to the extent account holder (the limited partnership) recovered something. Based on this determination, the Court of Appeal proceeded to affirm the award of over $36,000 in expert witness fees that were shifted as an exposure to plaintiffs under the successful 998 offer.
(BLOG SIDE OBSERVATION—Even though uncitable, this opinion does have an excellent discussion of Commercial Code section 4406, especially the geographical boundaries of the “ordinary care” exception to the statutory provision.)