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Loucks v. Albuquerque National Bank

Citation. Loucks v. Albuquerque Nat’l Bank, 76 N.M. 735, 1966-NMSC-176, 418 P.2d 191, 3 U.C.C. Rep. Serv. (Callaghan) 709 (N.M. 1966)
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Brief Fact Summary.

Vice-president of the defendant withdrew virtually all of the funds from the business account of a partnership to satisfy an outstanding indebtedness of one of the partners. Several checks written by a partnership were dishonored due to the defendant’s withdrawal. Plaintiffs appeal claiming that the trial court erred in taking certain questions of damages away from the jury.

Synopsis of Rule of Law.

A bank is liability for any damages caused from the wrongful dishonor of checks and liability is limited to those damages proximately caused by the wrongful dishonor and includes any consequential damages proximately caused.


The plaintiff-appellants, Richard A. Loucks and Del Martinez (the “plaintiffs”) were business partners in the name of L & M Paint and Body Shop in Albuquerque, New Mexico. Prior to March 1962, Martinez operated a business under the name Del’s Paint and Body Shop. Martinez did his banking with defendant bank Albuquerque National Bank (the “defendant”) and dealt with Mr. Kopp, the vice-president of the bank. In February 1962, Martinez borrowed $500 from the defendant and deposited it into his bank account. On March 15, 1962, the plaintiffs formed a partnership in the name of L & M Paint and Body Shop. They opened a business bank account with the defendant and deposited $620. Two payments were made on the note for the $500 Martinez borrowed from the defendant. The payments were made with checks drawn on the plaintiff’s business bank account. Eventually, Martinez failed to make payments on the note and the defendant sued for recovery. On March 14, 1963, the amount remaini ng on the note was $402. Mr. Kopp wrote to L & M on behalf of the defendant stating that the business account had been charged the remaining $402 owed by Martinez. The following Monday, both plaintiffs met with Mr. Kopp to explain that the $402 was the personal indebtedness of Martinez rather than a partnership obligation. Mr. Kopp failed to re-credit the business account and with a remaining balance of $3.66, the account was closed. The defendant failed honor nine or ten checks written in the month of March that would have been honored had the defendant not debited the business account $402. A jury awarded the plaintiffs $402, but the plaintiffs appealed claiming the trial court erred in taking from the jury certain questions regarding damages.


Was the trial court proper in taking from the jury the questions of punitive damages, damages to business reputation and credit, and personal injury damages a result of the wrongful dishonor of checks by the defendant?


The case was reversed and remanded for a new trial solely upon the questions of whether the partnership credit and reputation was damaged as a result of the dishonor of the checks. The UCC was adopted in New Mexico and Section: 4-402 states that if a bank wrongfully dishonors a check, then the bank “is liable to its customer.” Section 4-402 limits liability to those damages proximately caused by the wrongful dishonor and includes any consequential damages proximately caused. If the wrongful dishonor is a result of a mistake, the damages are limited to actual damages proved. The court found that “customer” for purposes of this case is the partnership and a partnership is a separate legal entity and may sue or be sued in the partnership name. Therefore, the partnership was a customer and any damages that resulted from the dishonor of checks belonged to the partnership and not to the individual partners. Yes. The trial court was correct in holding that the jury need not hear the issue of personal injury damages. In regards to the personal injuries sustained by Loucks, the court held that the damages “claimed by Mr. Loucks as a result of the ulcer, which allegedly resulted from the wrongful acts of the defendants, are not consequential damages proximately caused by the wrongful dishonor as contemplated by 4-402.” The trial court was also proper in its dismissal of Louck’s claim for loss of income as a result missed work days due to his ulcer. No substantial evidence was offered to support the claim and the partnership had no legally enforceable rights to recover on behalf of a partner. No. No duty was owed to Loucks personally as a result of the debtor-creditor relationship between the bank and the partnership. The court held that question of whether the business’ reputation and credit was ruined should have been submitted to the jury to determine. The plaintiffs submitted enough evidence to make it questionable whether the partnership suffered damage to their reputation and credit and the amount of such damages should be determined by a jury. Yes. The court was correct in taking the claim of punitive damages from the jury. Punitive or exemplary damages may be awarded only when the conduct by the wrongdoer was “maliciously intentional, fraudulent, oppressive, or committed recklessly or with a wonton disregard of the plaintiffs’ rights.” An inappropriate remark or two made by Mr. Kopp as claimed by the plaintiffs was not sufficient enough upon which an award of punitive damages could have properly been made.


If a tortious act had been committed by the defendant which proximately resulted in the ulcer that inflicted Loucks, the right to recover for those damages would be on Loucks. “An action for damages resulting from a tort can only be sustained by the person directly injured thereby, and not by one claiming to have suffered collateral or resulting injuries.”

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