Jackson v. Bank of America

In an action by Paul O. Jackson (plaintiff) against the Bank of America (the Bank) for rescission, fraud, and negligent misrepresentation, the Bank has appealed from a default judgment awarding plaintiff $43,016.64 in compensatory damages and $2.5 million in punitive (exemplary) damages, notwithstanding that the complaint, upon which the “prove-up” of damages was purportedly based, alleged no facts which demonstrated a monetary loss to plaintiff chargeable to any conduct by the Bank. Accordingly, we shall reverse the judgment with directions.

Synopsis of the Facts

In March 1978, plaintiff loaned Robert R. Rallo (Rallo) five municipal bonds with a combined principal value of $25,000, and Rallo used the bonds as security to obtain a 90-day $23,000 loan from the Palm Desert branch of the Bank. On March 14, 1978, plaintiff signed a security “lent collateral” agreement with the Bank, which recited, among other things, that plaintiff authorized Rallo to use the bonds, without notice to plaintiff, for security for “any present or future indebtedness” of Rallo to the Bank; that the loan of the bonds to Rallo “shall not be construed to make [plaintiff] a guarantor or surety of…