Farmers & Merchants Bank of Long Beach v. Bank of America

This action arose out of a dispute between Farmers and Merchants Bank of Long Beach (hereinafter called Farmers and Merchants) and Bank of America National Trust and Savings Association (hereinafter called Bank of America) with respect to whether each of the banks properly returned a set of checks to each other before midnight of the next business day after receipt, as required by former section 1013 of the Financial Code. Farmers and Merchants filed an action for declaratory relief naming Bank of America in the complaint’s first count and Peerless Insurance Company, its bonding company, in the second count.

The Bank of America appealed from the judgment against it, and Farmers and Merchants filed a protective cross-appeal against Peerless Insurance Company (hereinafter called Peerless) to provide for the possibility that the appellate court might reverse the judgment against Bank of America. Peerless is a corporation which undertook to hold Farmers and Merchants harmless in an amount not exceeding $1,000,000 for loss of property through larceny, theft or false pretenses.

This litigation arose as a result of a check kiting scheme perpetrated against both the Bank of…