Stanford Law School - Robert Crown Law Library

Filed 8/10/09

IN THE SUPREME COURT OF CALIFORNIA

IMPERIAL MERCHANT
SERVICES, INC.
Plaintiff and Appellant,
S163577
v.
9th Cir. No. 07-15976
BRANDY G. HUNT,
N.D.Cal. No.
Defendant and Appellant.
CV-06-07795-MJJ

Civil Code section 17191 permits a payee seeking to recover on a
dishonored check to collect a service charge, or treble the amount of the
dishonored check if certain statutory requirements are met. Section 3287 governs
the award of prejudgment interest on damages. We granted a request by the
United States Court of Appeals for the Ninth Circuit (Cal. Rules of Court, rule
8.548) to decide a question of California law: whether a debt collector recovering
on a dishonored check may recover both a service charge under section 1719 and
prejudgment interest under section 3287.
We conclude that the statutory damages prescribed in section 1719 are
exclusive in the sense that a debt collector who recovers a service charge pursuant
to section 1719 may not also recover prejudgment interest under section 3287.

1
All further statutory references are to the Civil Code, unless otherwise
indicated.
1

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I. FACTUAL AND PROCEDURAL HISTORY2
On July 5, 2004, Brandy Hunt wrote a $137.15 check to Pak ‟n Save, a
supermarket operated by Safeway, Inc. (Safeway). The check was returned unpaid
due to insufficient funds. Safeway referred the matter to Imperial Merchant
Services, Inc., doing business as Check Recovery Systems (CRS) for collection.
CRS then mailed Hunt two collection demands. The second letter
demanded payment of the check amount, a $35 service fee under section 1719,
and $7.26 in interest under section 3287, for a total of $179.41.
Hunt filed a voluntary petition for bankruptcy in the United States
Bankruptcy Court for the Northern District of California (the bankruptcy action).
Shortly thereafter, Hunt filed a putative class action against CRS in the United
States District Court for the Northern District of California seeking damages under
the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) (the FDCPA
action). Hunt asserted that CRS‟s demand for a section 1719 service fee precluded
CRS from seeking interest on the amount of the unpaid check. Hunt alleged that
CRS thus violated the FDCPA by demanding interest to which it was not entitled
under California law.3

2
The facts and procedural discussion are taken largely from the United
States District Court opinion in a related class action filed by Brandy G. Hunt.
(Hunt v. Check Recovery Systems, Inc. (N.D.Cal. 2007) 478 F.Supp.2d 1157 (Hunt
I).)
3
The district court consolidated Hunt‟s action with another case against CRS
filed by Brian Castillo. (Hunt I, supra, 478 F.Supp.2d at p. 1158.) The
consolidated action specifically alleged that CRS used false, deceptive or
misleading representations in violation of 15 United States Code section 1692e;
falsely represented the character, amount, or legal status of a debt in violation of
15 United States Code section 1692e(2)(A); used unfair or unconscionable means
to collect or attempt to collect a debt in violation of 15 United States Code section
1692f; and exceeded the amount expressly permitted by law in violation of 15
United States Code section 1692f(1). (Hunt I, supra, 478 F.Supp.2d at pp. 1158-
1159.) We refer to the plaintiffs in the FDCPA action collectively as “Hunt.”
2

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On December 16, 2005, CRS filed a claim in the bankruptcy action for
$250, a sum intended to cover the amount of the unpaid check, a $35 service fee
and interest. On October 31, 2006, the bankruptcy court filed a judgment of
nondischargeability (the bankruptcy judgment) in favor of CRS in the amount of
$614.45, consisting of $172.15 for the amount of the check and the service fee and
$442.30 in costs, but nothing for interest payments. The bankruptcy court
concluded that because CRS was awarded a service fee under section 1719, it was
not entitled to interest under section 3287. CRS filed an appeal from the
bankruptcy judgment in the district court.
Meanwhile, in the FDCPA action, Hunt and CRS filed cross-motions for
summary judgment on the question of whether CRS, having demanded payment of
a service fee under section 1719, was additionally entitled to interest under section
3287. In a published opinion filed on March 21, 2007, the district court (Jenkins,
J.) held that California law precluded CRS‟s demand for interest and that its
demand letters thus violated United States Code sections 1692e(2)(A) and
1692f(1). (Hunt I, supra, 478 F.Supp.2d at p. 1169.) Accordingly, the district
court granted Hunt‟s motion for summary judgment in part (as to the causes of
action based on these provisions of the FDCPA) and denied CRS‟s summary
judgment motion. The court also denied CRS‟s request to enter partial summary
judgment (Fed. Rules Civ. Proc., rule 54(b), 28 U.S.C.) or to certify the case for
immediate appeal (28 U.S.C. § 1292(b)).
While the summary judgment motions in the FDCPA action were pending,
CRS‟s appeal from the judgment in the bankruptcy action was transferred to Judge
Jenkins. On May 17, 2007, the district court affirmed the bankruptcy action
judgment “for the reasons stated in the opinion of this Court issued in [the FDCPA
action].”
3

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CRS appealed the district court‟s judgment in the bankruptcy action,
denying interest, to the United States Court of Appeals for the Ninth Circuit. On
May 12, 2008, the Ninth Circuit requested that this court decide the purely legal
issue of whether, under California law, a debt collector may recover both section
1719 damages and section 3287 prejudgment interest on a dishonored check.
(Imperial Merchant Services, Inc. v. Hunt (9th Cir. 2008) 528 F.3d 1129
(Hunt II).) On July 16, 2008, we granted that request.
II. DISCUSSION
CRS claims that section 1719 and its legislative history do not prohibit the
collection of both interest and the statutory service charge for a dishonored check.
On the other hand, Hunt contends that the rules of statutory construction and the
legislative history of section 1719 preclude collection of both amounts. As
explained below, we agree with Hunt.
A. Section 1719
Section 1719 sets forth the procedures for collecting on dishonored checks.
Subdivision (a)(1) of that section provides: “Notwithstanding any penal sanctions
that may apply, any person who passes a check on insufficient funds shall be liable
to the payee for the amount of the check and a service charge payable to the payee
for an amount not to exceed twenty-five dollars ($25) for the first check passed on
insufficient funds and an amount not to exceed thirty-five dollars ($35) for each
subsequent check to that payee passed on insufficient funds.”
If the payee sends the check writer a certified letter seeking the amount due
on a dishonored check, the debtor has 30 days from the date the written demand
was mailed to pay the amount of the check, the statutory service charge, and the
cost of mailing the written demand for payment. (§ 1719, subd. (a)(2).)4 Failure

4
Section 1719, subdivision (a)(2), provides: “Notwithstanding any penal
sanctions that may apply, any person who passes a check on insufficient funds
4

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to comply with subdivision (a)(2) renders the check writer liable for treble the
amount of the outstanding balance on the check (the face value of the check minus
any partial payments made within this 30-day window), which shall not be less
than $100 or more than $1,500. (Ibid.) If a check writer is liable for treble
damages, he is not required to pay the statutory service charge or the cost of
mailing the written demand. (Ibid.)
Section 1719 is silent regarding the availability of prejudgment interest in
addition to the fixed service charge. The federal court opinions that have
addressed this issue have unanimously held that a debt collector is limited to the
remedies explicitly prescribed in section 1719, which do not include prejudgment
interest. (Hunt I, supra, 478 F.Supp.2d at p. 1171; Palmer v. Stassinos (N.D.Cal.
2004) 348 F.Supp.2d 1070, 1083 (Stassinos I); Palmer v. Stassinos (N.D.Cal.
2005) 419 F.Supp.2d 1151, 1153 (Stassinos II); Irwin v. Mascott (N.D.Cal. 2000)
112 F.Supp.2d 937, 947-948, 955; Irwin v. Mascott (9th Cir. 2004) 370 F.3d 924,
927-928. Of these five opinions, however, only two, Hunt I and Stassinos I,

shall be liable to the payee for damages equal to treble the amount of the check if a
written demand for payment is mailed by certified mail to the person who had
passed a check on insufficient funds and the written demand informs this person of
(A) the provisions of this section, (B) the amount of the check, and (C) the amount
of the service charge payable to the payee. The person who had passed a check on
insufficient funds shall have 30 days from the date the written demand was mailed
to pay the amount of the check, the amount of the service charge payable to the
payee, and the costs to mail the written demand for payment. If this person fails to
pay in full the amount of the check, the service charge payable to the payee, and
the costs to mail the written demand within this period, this person shall then be
liable instead for the amount of the check, minus any partial payments made
toward the amount of the check or the service charge within 30 days of the written
demand, and damages equal to treble that amount, which shall not be less than one
hundred dollars ($100) nor more than one thousand five hundred dollars ($1,500).
When a person becomes liable for treble damages for a check that is the subject of
a written demand, that person shall no longer be liable for any service charge for
that check and any costs to mail the written demand.”
5

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explored in depth the issue presented here, i.e., whether a debt collector may
recover both prejudgment interest under section 32875 and the service charge
under section 1719. It appears that no California court has spoken on this issue.
Because this contention involves a question of statutory construction, our
review is de novo. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24
Cal.4th 415, 432.) Under settled canons of statutory construction, in construing a
statute we ascertain the Legislature's intent in order to effectuate the law's purpose.
(Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379,
1386.) We must look to the statute's words and give them “their usual and
ordinary meaning.” (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 601.) “The
statute's plain meaning controls the court's interpretation unless its words are
ambiguous.” (Green v. State of California (2007) 42 Cal.4th 254, 260; see also
Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 567.) “If the
statutory language permits more than one reasonable interpretation, courts may
consider other aids, such as the statute‟s purpose, legislative history, and public
policy.” (Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004)
34 Cal.4th 733, 737.)
Because section 1719 says nothing about the availability of interest in light
of the service charge and treble damage provisions, the plain meaning rule
provides no assistance. (See Stassinos I, supra, 348 F.Supp.2d at p. 1078.) We

5
Section 3287, subdivision (a), states, “Every person who is entitled to
recover damages certain, or capable of being made certain by calculation, and the
right to recover which is vested in him upon a particular day, is entitled also to
recover interest thereon from that day, except during such time as the debtor is
prevented by law, or by the act of the creditor from paying the debt. This section is
applicable to recovery of damages and interest from any such debtor, including the
state or any county, city, city and county, municipal corporation, public district,
public agency, or any political subdivision of the state.”
6

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therefore address, in turn, the statutory construction and legislative history of
section 1719.
B. Statutory Construction and Legislative History of Section 1719
1. Statutory Construction
Where more than one statutory construction is arguably possible, our
“policy has long been to favor the construction that leads to the more reasonable
result.” (Webster v. Superior Court (1988) 46 Cal.3d 338, 343.) This policy
derives largely from the presumption that the Legislature intends reasonable
results consistent with the apparent purpose of the legislation. (Harris v. Capital
Growth Investors XIV (1991) 52 Cal.3d 1142, 1165-1166.) Thus, our task is to
select the construction that comports most closely with the Legislature's apparent
intent, with a view to promoting rather than defeating the statutes‟ general
purpose, and to avoid a construction that would lead to unreasonable, impractical,
or arbitrary results. (People v. Jenkins (1995) 10 Cal.4th 234, 246; People v.
Simon (1995) 9 Cal.4th 493, 517; Fields v. Eu (1976) 18 Cal.3d 322, 328.)
Like the other courts that have addressed this issue, we begin our statutory
construction by focusing on subdivisions (a), (h), and (k) of section 1719. As
noted above, subdivision (a)(1) and (2) provides for fixed statutory damages and,
alternatively, treble damages where the statutory requirements are met,
“[n]otwithstanding any penal sanctions that may apply.” (§ 1719, subd. (a)(1) and
(2).) Subdivision (h) states that “[t]he requirements of this section in regard to
remedies are mandatory upon a court.” (§ 1719, subd. (h).) Subdivision (k) states,
in relevant part, that “[n]othing in this section is intended to condition, curtail, or
otherwise prejudice the rights, claims, remedies, and defenses under Division 3
(commencing with Section 3101) of the Commercial Code of a drawer, payee,
7

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assignee, or holder . . . in connection with the enforcement of this section.”
(§ 1719, subd. (k).)
Hunt argues that the Legislature‟s enumeration in section 1719, subdivision
(k), of other remedies that coexist with subdivision (a)(1) and (2) impliedly
excludes other remedies not specified therein. Hunt bases her argument on the
rule of statutory construction expressio unius est exclusio alterius, or “to express
or include one thing implies the exclusion of the other.” (Black‟s Law Dict. (8th
ed. 2004) p. 620, col. 2.) “ „Under the maxim of statutory construction, expressio
unius est exclusio alterius, if exemptions are specified in a statute, [courts] may
not imply additional exemptions unless there is a clear legislative intent to the
contrary. [Citation.]‟ ” (Rojas v. Superior Court (2004) 33 Cal.4th 407, 424.)
Hunt‟s reading of the statute effectively limits a debt collector to three remedies:
(1) those expressly provided for in section 1719, (2) California criminal law, and
(3) division 3 of the California Uniform Commercial Code, governing negotiable
instruments. None of these remedies provides for the collection of prejudgment
interest in this case.
On the other hand, CRS contends that the Legislature‟s addition of
subdivision (k) does not imply that the remedies prescribed in section 1719 are
exclusive. Instead, we should read section 1719 together with the rest of the Civil
Code, which generally permits the recovery of interest on all debts. It is a “well-
settled rule[] of statutory construction that, if possible, the codes are to be read
together and blended into each other as though there was but a single statute
[citations], and that the existence of a particular statute does not negate the effect
of a general statute . . . .” (Lara v. Board of Supervisors (1976) 59 Cal.App.3d
399, 408-409.) CRS argues that “[w]here . . . [multiple] codes are to be construed,
they „must be regarded as blending into each other and forming a single statute.‟
[Citation.] Accordingly, they „must be read together and so construed as to give
8

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effect, when possible, to all the provisions thereof.‟ ” (Tripp v. Swoap (1976) 17
Cal.3d 671, 679, disapproved on another ground in Frink v. Prod (1982) 31 Cal.3d
166, 180.)
CRS urges us to read section 1719 with sections 3302 and 3287,
subdivision (a), as though they were “but a single statute.” (Lara v. Board of
Supervisors, supra, 59 Cal.App.3d at p. 408.) Section 3302 provides that “[t]he
detriment caused by the breach of an obligation to pay money only, is deemed to
be the amount due by the terms of the obligation, with interest thereon.” (§ 3302.)
Section 3287, subdivision (a), provides in relevant part that “[e]very person who is
entitled to recover damages certain, or capable of being made certain by
calculation, and the right to recover which is vested in him upon a particular day,
is entitled also to recover interest thereon from that day . . . .” Reading section
1719 together with sections 3302 and 3287, subdivision (a), CRS claims that it is
legally entitled to interest payments in addition to section 1719‟s fixed statutory
fee as a matter of California law.
However, CRS‟s argument that section 1719 should be read with the rest of
the Civil Code would render subdivision (k)‟s express exemption superfluous. If
the Legislature had intended that all other civil remedies remained available to a
payee seeking section 1719 damages, there would have been no need to include a
provision to single out remedies pursuant to division 3 of the California Uniform
Commercial Code. “Statutes must be interpreted, if possible, to give each word
some operative effect.” (Walters v. Metropolitan Educational Enterprises, Inc.
(1997) 519 U.S. 202, 209.) “We do not presume that the Legislature performs idle
acts, nor do we construe statutory provisions so as to render them superfluous.”
(Shoemaker v. Myers (1990) 52 Cal.3d 1, 22.) Thus, the fact that the Legislature
expressly designated specific damage remedies while omitting others, such as
9

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prejudgment interest, reflects that it intended the prescribed remedies to be
exclusive.
2. Legislative History
An analysis of section 1719‟s evolution, general pattern of amendment, and
the reasoning behind those amendments further reveals the Legislature‟s intent to
limit recovery of damages to those explicitly prescribed in the statute.
a. The 1983 enactment
The Legislature enacted section 1719 in 1983. (Stats. 1983, ch. 522, § 1, p.
2269.) As enacted, section 1719 provided that if a check were dishonored, the
check writer would be liable for the amount of the check plus “damages of treble
the amount so owing” (no less than $100 but no more than $500) if the check
writer failed to pay the check amount within 30 days of a written demand letter
from the payee sent via certified mail. The purpose of the bill was “to provide a
cost effective means for small businesses to collect unpaid accounts, and to deter
bad check writing.” (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 1226
(1983-1984 Reg. Sess.) as amended May 3, 1983, p. 2.) This legislative reference
to the bill as a “cost effective” measure was a recognition of the then-existing
barriers to debt collection on bad checks. “Bad checks written for small amounts
do not often justify either expensive criminal enforcement or the time the small
business owner would need to devote to appear in court in order to collect on the
debt.” (Ibid.) By authorizing treble damages in section 1719, the Legislature
effectively incentivized small businesses to collect on dishonored checks written
for small amounts.
b. The 1995 amendments
In 1995, the Legislature amended section 1719 in two respects that are
relevant here: it increased the treble damages cap from $500 to $1,500 in
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subdivision (a) and added subdivision (h), which makes section 1719 remedies
binding on the courts. (Stats. 1995, ch. 134, § 1, pp. 526-527, 529.)
Subdivision (h) of section 1719 codified the decision in Mughrabi v. Suzuki
(1988) 197 Cal.App.3d 1212. (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d
reading analysis of Assem. Bill No. 522 (1995-1996 Reg. Sess.) as amended June
22, 1995, p. 2.) In Mughrabi, the Court of Appeal reversed a trial court‟s decision
to withhold treble damages despite the merchant‟s compliance with section 1719.
The court observed that “[t]he manifest purpose of section 1719 is to discourage
the issuance of bank checks, drafts or orders when the maker‟s funds are
insufficient. By increasing the stakes for a defendant, it serves as a statutory
incentive to refrain from the writing of bad checks.” (Mughrabi, supra, 197
Cal.App.3d at p. 1215.) The court held that, because the “unambiguous” language
of section 1719 mandated the imposition of treble damages whenever the statutory
requirements were met, the trial court had no discretion in the matter and was
required to grant the merchant‟s request for treble damages. (Mughrabi, at p.
1215.)
c. The 1996 amendments
In 1996, the Legislature moved the treble damages provision to subdivision
(a)(2) of section 1719 and added a service charge provision under subdivision
(a)(1), which allowed the payee of a bad check to collect a fixed-amount service
charge of $25 or $35 in addition to the face amount of the check. (Stats. 1996, ch.
1000, § 1, pp. 5895-5896.) The addition of a fixed statutory service charge was in
response to Newman v. Checkrite California, Inc. (E.D.Cal. 1995) 912 F.Supp.
1354 (Newman). (See Assem. floor analysis of Assem. Bill No. 2643 (1995-1996
Reg. Sess.) as amended Aug. 20, 1996, p. 2 (Assembly floor analysis of Assembly
Bill No. 2643).)
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In Newman, the court held that a merchant who seeks to collect a
dishonored check and demands that the debtor pay a service charge must prove the
amount of the service charge is “commercially reasonable” under section 2710 of
the California Uniform Commercial Code.6 (Newman, supra, 912 F.Supp. at p.
1368.) After Newman, merchants expressed concern about the onerous burden of
having to prove the reasonableness of a statutory service fee every time a check
was dishonored. (See Assembly floor analysis of Assembly Bill No. 2643, supra,
at p. 2.) Moreover, Newman appeared to be in tension with California court
opinions that, in other contexts, did not require merchants to prove in each case the
“commercial reasonableness” of charges and fees because of the impracticability,
difficulty, and expense of proving actual damages. (Assembly floor analysis of
Assembly Bill No. 2643, p. 2.) Accordingly, the Legislature added the provisions
of subdivision (a)(1) to include a fixed service charge designed to “represent a
reasonable endeavor to fix the probable loss resulting to the merchant . . . .”7
(Ibid.) The Legislature further amended subdivision (a)(2) to provide that the
service charge could not be collected in the event that treble damages were
recoverable. (§ 1719, subd. (a)(2).)
The Legislature in 1996 also added subdivisions (i) and (k). Subdivision
(i) states: “The assignee of the payee or a holder of the check may demand,

6
California Uniform Commercial Code section 2710 provides: “Incidental
damages to an aggrieved seller include any commercially reasonable charges,
expenses or commissions incurred in stopping delivery, in the transportation, care
and custody of goods after the buyers' breach, in connection with return or resale
of the goods or otherwise resulting from the breach.” (Cal. U. Com. Code,
§ 2710.)
7
The Legislature set the maximum statutory fixed penalty at $35 “based
upon a survey of [California Retailers Association] members and because the
United States Supreme Court imposes a $35 charge for anyone bouncing a check
payable to it.” (Assembly floor analysis of Assembly Bill No. 2643, supra, at p. 2;
see U.S. Supreme Ct. Rules, rule 38(e).)
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recover, or enforce the service charge, damages, and costs specified in this section
to the same extent as the original payee.” (§ 1719, subd. (i).) Although the
legislative history is silent as to the reasons behind the addition of subdivision (i),
it appears to have been largely driven by the Newman decision as well. In
Newman, the court left unresolved the issue of whether an assignee of a bad check
debt (e.g., a debt collection agency) may collect service charges under the statute
to the same extent as the original payee. (Newman, supra, 912 F.Supp at p. 1368.)
The Legislature responded to that question in the affirmative by adding
subdivision (i).
As noted above, subdivision (k) provides that the rights, claims, remedies,
and defenses under division 3 of the California Uniform Commercial Code remain
in full effect notwithstanding any of the provisions of section 1719. (§ 1719, subd.
(k).) While the legislative history is also silent as to the reasons for the addition
of subdivision (k), the Legislature appears to have been at least partially motivated
by Cohen v. Disner (1995) 36 Cal.App.4th 855 (Cohen). In Cohen, plaintiffs
argued that because former section 1719 articulated only a “stop payment”
defense, defendants who had written dishonored checks were precluded from
asserting other defenses for negotiable instruments otherwise available under
division 3 of the California Uniform Commercial Code (Cal. U. Com. Code,
§ 3101 et seq.). (Cohen, supra, 36 Cal.App.4th at p. 859.) The court disagreed,
and concluded that “the maker of a dishonored check may raise defenses under the
[California Uniform Commercial Code] to establish that [a] check is
unenforceable.” (Id. at p. 857.) Shortly after Cohen, the Legislature added
subdivision (k).
As explained below, the legislative evolution and the reasoning behind
section 1719‟s amendments confirm that the Legislature intended that the statute
serve as an exclusive damage scheme for the collection of dishonored checks.
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First, the statutory scheme expressly provides for the collection of the face
amount of the check and civil remedies of either (1) a service charge and mailing
fees where a check writer pays within the 30-day period or (2) treble damages but
no service charge or mailing costs where the check writer does not timely pay. It
does not provide for the additional collection of interest. “As California and
federal courts decided important issues regarding the construction of section 1719,
the Legislature acted to incorporate those provisions into the statute. These
inclusions demonstrate that the Legislature intends that section 1719 represent the
sole recovery mechanism for bad debt collectors and that courts should not look
beyond the statute unless failing to do so would result in an absurd interpretation.”
(Stassinos I, supra, 348 F.Supp.2d at p. 1083.)
We cannot conclude that the denial of prejudgment interest is an absurd
result. The Legislature authorized fixed service charges so that merchants would
be compensated for losses flowing from a dishonored check without having to
prove actual damages. Thus, the service charge was intended to be a reasonable
substitute for actual, short-term damages, including interest. (See Assembly floor
analysis of Assembly Bill No. 2643, supra, at p. 2 [referring to the statutory fee as
a representation of “actual damage incurred” and a “reasonable endeavor to fix . . .
probable loss”].) If the check writer refuses to pay within the 30-day window
period, treble damages are recoverable instead of the statutory service charge.
Such recovery “suggests that the treble damage provision is intended to cover all
losses suffered as a result of the bad check.” (Stassinos I, supra, 348 F.Supp.2d at
p. 1082, italics added; see Hunt I, supra, 478 F.Supp.2d at p. 1166.) The recovery
of the statutory remedies and the additional collection of prejudgment interest
would therefore constitute impermissible double recovery. (Cf. Greater
Westchester Homeowners Assoc. v. City of Los Angeles (1979) 26 Cal.3d 86, 103.)
14

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Second, as discussed above, the Legislature implicitly precluded other civil
remedies by expressly singling out division 3 of the California Uniform
Commercial Code as an alternative civil remedy. (§ 1719, subd. (k).) When the
Legislature added subdivision (k) to section 1719, it included “rights, claims, [and]
remedies” under division 3 of the California Uniform Commercial Code in
addition to that code‟s defenses in a section 1719 dispute that were at the heart of
the Cohen decision. (Cohen, supra, 36 Cal.App.4th at p. 859.) Division 3 does
not authorize the collection of prejudgment interest on a negotiable instrument
unless the instrument itself otherwise provides for it. (Cal. U. Com. Code, § 3112,
subd. (a)(1).) Were we to accept CRS‟s argument that all other civil remedies
remain available to a payee or assignee seeking section 1719 damages, we would
render the “rights, claims, [and] remedies” language of subdivision (k)
superfluous. We decline to do so.
Finally, the addition of subdivision (i), which extended section 1719 rights
to assignees, reflects that section 1719 is not only intended to be the exclusive
remedy for bad check collections but one that replaces previously existing forms
of relief. Treble damages are punitive in nature (Hoban v. Ryan (1900) 130 Cal.
96, 99) and punitive damages generally inure only to the person damaged.
(People v. Superior Court (1973) 9 Cal.3d 283, 287.) “As here, when the statute
requires the court to grant recovery to a party not traditionally entitled to such
recovery [i.e., an assignee], the Legislature has effectively conveyed its intention
to replace previous forms of recovery with the statutory remedy provided. If the
statutory remedy replaces previous forms of recovery, permitting interest on the
amount of the check would result in double recovery.” (Stassinos I, supra, 348
F.Supp.2d at p. 1083.)
We note that a merchant or other payee has the option of bypassing section
1719, if it deems the service charge to be inadequate, and of suing on the
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underlying obligation instead. Section 3310, subdivision (b)(3), contained in
division 3 of the California Uniform Commercial Code, allows a merchant or
other payee to enforce either the instrument or the obligation.8 Thus, a payee who
accepts a check for goods or services that is later dishonored may enforce the
instrument, i.e., the returned check, by availing itself of the section 1719 statutory
remedies. Alternatively, a payee may choose to enforce the obligation and seek
damages, including prejudgment interest (§ 3302), based on breach of the
agreement to pay for goods or services. (See, e.g., Ballard v. Equifax Check
Services, Inc. (E.D.Cal. 1998) 27 F.Supp.2d 1201, 1206 (Ballard); Abels v. JBC
Legal Group, Inc. (N.D.Cal. 2006) 434 F.Supp.2d 763, 766 (Abels).)9
C. CRS’s Other Claims
1. Currie
Relying on Currie v. Workers’ Comp. Appeals Bd. (2001) 24 Cal.4th 1109
(Currie), CRS argues that absent a specific legislative statement to the contrary,

8
California Uniform Commercial Code section 3310, subdivision (b)(3),
provides in pertinent part: “[I]f the check or note is dishonored and the obligee of
the obligation for which the instrument was taken is the person entitled to enforce
the instrument, the obligee may enforce either the instrument or the obligation. In
the case of an instrument of a third person which is negotiated to the obligee by
the obligor, discharge of the obligor on the instrument also discharges the
obligation.”
9
Hunt argues that CRS, as a debt collector, is only the holder of the check,
does not have the same set of rights as a merchant seller, and is not entitled to
prejudgment interest on the underlying obligation. (Ballard, supra, 27 F.Supp.2d
at pp. 1206-1207 [debt collection agency was the “holder” of the check, not the
obligee, and thus not entitled to enforce the underlying obligation].) On the other
hand, CRS argues that the record shows that Safeway assigned it all of its rights,
including those to damages for breach of contract or performance of the
obligation. (Abels, supra, 434 F.Supp.2d at pp. 765-766.) However, we need not
resolve that issue in this case. Regardless of the scope of the assignment, neither
Safeway nor CRS is permitted to collect both prejudgment interest and the
statutory service charge, because the demand for payment was made under section
1719.
16

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section 3287 prejudgment interest is permitted in addition to the fixed damages
under section 1719. Currie is distinguishable in several critical respects.
The issue in Currie was whether an employee was entitled to prejudgment
interest in an award for backpay under Labor Code section 132a, which makes it
unlawful to wrongfully deny an employee reinstatement because of an industrial
injury. (Currie, supra, 24 Cal.4th at p. 1111.) We held that nothing in Labor
Code section 132a expressly or impliedly precludes prejudgment interest. (Currie,
24 Cal.4th at p. 1116.) Because the Legislature was silent as to the availability of
prejudgment interest, we determined that the intent of Labor Code section 132a
was to make employee victims of discrimination whole, at least to the extent of
their lost wages. (Currie, 24 Cal.4th at p. 1117.) We reasoned that “without
prejudgment interest the backpay remedy may lose a significant portion of its
value, and the employee left less than fully „reimburse[d]‟ (§ 132a, par. (1)) for his
or her lost wages.” (Currie, 24 Cal.4th at p. 1117.) Accordingly, we concluded
that “the [Workers‟ Compensation Appeals Board] may and must, when the
criteria of Civil Code section 3287 are met, add to its awards reimbursing
employees for lost wages and work benefits interest from the dates such wages
and benefits would have become due had the employer not acted in violation of
[Labor Code] section 132a.” (Currie, 24 Cal.4th at p. 1119.)
Unlike the statute at issue in Currie, the legislative history and structure of
section 1719 implicitly preclude an award of prejudgment interest. Additionally,
whereas the employee in Currie would not have been made whole if the statutory
remedy were considered to be exclusive, CRS has made no similar showing. In
contrast to the employee in Currie, a payee of a dishonored check is presumably
made whole by the service charge or treble damages. If a payee deems the service
charge to be inadequate, it may seek damages for breach of the underlying
obligation, including prejudgment interest.
17

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2. Orloff
Relying on Orloff v. Los Angeles Turf Club Inc. (1947) 30 Cal.2d 110
(Orloff), CRS contends that we should not strictly construe section 1719 to
preclude other preexisting statutory remedies, such as prejudgment interest under
section 3287. As with Currie, Orloff is distinguishable.
In Orloff, the plaintiff, an African-American, was twice ejected from the
Los Angeles Turf Club without cause. (Orloff, supra, 30 Cal.2d at pp. 110-111.)
The plaintiff filed suit under civil rights statutes, including former section 53,
which at that time made it unlawful for a place of public amusement to deny
admission to an individual on account of race, and former section 54, which
provided a remedy of $100 plus compensatory damages for a violation of former
section 53. (Orloff, supra, 30 Cal.2d at pp. 111-112; see now § 51 et seq.) The
plaintiff sought injunctive relief in addition to section 54 damages. (Orloff, supra,
30 Cal.2d at pp. 110-111.) The defendant invoked a rule of statutory construction,
arguing that because section 53 was then a new statutory right unknown at
common law, it should be strictly construed such that the remedy under former
section 54 be deemed exclusive. (Orloff, supra, 30 Cal.2d at p. 112.)
We determined that this rule of construction should not be applied
mechanically, and that the applicable statutory provisions should be “ „liberally
construed with a view to effect its objects and to promote justice.‟ ” (Orloff,
supra, 30 Cal.2d at p. 113, quoting § 4.) We reasoned that an important factor in
determining whether a statute should be strictly construed “is the adequacy of the
remedy provided by the statute.” (Orloff, supra, 30 Cal.2d at p. 113.) Because the
relief provided by the statute was “plainly inadequate . . . in a case of this
character” (id. at p. 114), we held that the plaintiff was entitled to additional
injunctive relief (id. at pp. 116-117).
18

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Without deciding whether the right embodied in section 1719 is one that
existed at common law, the instant case is distinguishable from Orloff in at least
two critical respects. First, in Orloff, the defendant‟s assertion that the Legislature
intended former section 54 to be exclusive rested only on “an assumption . . . that
other remedies are excluded, or the drawing of an inference to that effect by
reason of some rule of statutory construction.” (Orloff, supra, 30 Cal.2d at p.
113.) In contrast, here, the legislative history and statutory construction of 1719
support the inference that the Legislature intended that the statutory damages
prescribed in section 1719 be exclusive. Second, whereas the former section 54
remedy in Orloff was “plainly inadequate” in light of the underlying conduct, CRS
has not shown that the remedies prescribed in section 1719 are likewise
inadequate.
3. Inconsistent Remedies
Finally, CRS argues that if prejudgment interest cannot be awarded under
section 1719, then attorney fees under section 1717.5 cannot be awarded either. In
Stassinos II, supra, 419 F.Supp.2d 1151, the court stated in dicta that its decision
in Stassinos I was not intended to address or preclude recovery of “attorney's fees,
post-judgment interest and contractual damages.” (Stassinos II, at p. 1153.) CRS
asserts that if section 1719 remedies are truly exclusive, then a party that avails
itself of section 1719 should not be able to recover attorney fees. It further argues
that because the Legislature could not have intended to withhold attorney fees
from the prevailing party in a section 1719 dispute, section 1719 remedies cannot
be exclusive.
However, the only issue here is the availability of prejudgment interest. In
any event, section 1717.5 is inapplicable. It provides for such fees only in contract
actions based on a “book account. ” (§ 1717.5, subd. (a).) A “book account is a
19

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detailed statement of debit/credit transactions kept by a creditor in the regular
course of business, and in a reasonably permanent manner.” (Reigelsperger v.
Siller (2007) 40 Cal.4th 574, 579, fn. 5, citing Code Civ. Proc., § 337a.) A
check — a document created by the payor/debtor — is not a record entered in the
creditor‟s regular course of business. (See Robin v. Smith (1955) 132 Cal.App.2d
288, 290-291 [drawn checks did not establish existence of book account between
payor and payee].) Thus, section 1717.5 does not provide for recovery of attorney
fees by the payee of a dishonored check proceeding under section 1719.
Moreover, once a judgment is obtained, postjudgment interest is expressly
authorized by statute, regardless of the underlying cause of action. (Code Civ.
Proc., § 685.010.)10 Hence, an award of postjudgment interest is in no way
inconsistent with a section 1719 service charge that does not include prejudgment
interest.
III. DISPOSITION
Accordingly, we hold that the statutory damages prescribed in section 1719
are exclusive; a payee who recovers a service charge pursuant to section 1719 may
not also recover prejudgment interest under section 3287.
CHIN, J.
WE CONCUR:

GEORGE, C.J.
KENNARD, J.
BAXTER, J.
WERDEGAR, J.
MORENO, J.
CORRIGAN, J.

10
Code of Civil Procedure section 685.010, subdivision (a), provides that
“Interest accrues at the rate of 10 percent per annum on the principal amount of a
money judgment remaining unsatisfied.”
20

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See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Imperial Merchant Services v. Hunt
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding XXX on certification pursuant to rule 8.548, Cal. Rules of Court
Review Granted
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S163577
Date Filed: August 10, 2009
__________________________________________________________________________________

Court:

County:
Judge:

__________________________________________________________________________________

Attorneys for Appellant:

Law Offices of Clark Garen and Clark Garen for Plaintiff and Appellant.

Hefner, Stark & Marois and Ronald H. Sargis for California Association of Collectors, Inc., as Amici
Curiae on behalf of Plaintiff and Appellant.

__________________________________________________________________________________

Attorneys for Respondent:

Paul Arons; The Berg Law Group, Irving L. Berg; Horwitz, Horwitz & Associates and O. Randolph Bragg
III for Defendant and Appellant.

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Counsel who argued in Supreme Court (not intended for publication with opinion):

Clark Garen
Law Offices of Clark Garen
P. O. Box 1790
Palm Springs, CA 92263
(760) 323-4901

Ronald H. Sargis
Hefner, Stark & Marois
2150 River Plaza Drive, Suite 450
Sacramento, CA 95833
(916) 925-6620

Paul Arons
685 Spring Street, #104
Friday Harbor, WA 98250
(360) 378-6496

---

Request under California Rules of Court, rule 8.548, that this court decide questions of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: "May a debt collector recovering on a dishonored check impose both a service charge under Civil Code section 1719 and prejudgment interest under Civil Code section 3287?"

Opinion Information

Date:	Citation:	Docket Number:	Category:	Status:
Mon, 08/10/2009	47 Cal. 4th 381, 212 P.3d 736, 97 Cal. Rptr. 3d 464	S163577	Question of Law - Civil	opinion issued

Opinion Authors
Opinion	Justice Ming W. Chin
Concur	Chief Justice Ronald M. George, Justice Carlos R. Moreno, Justice Carol A. Corrigan, Justice Joyce L. Kennard, Justice Kathryn M. Werdegar, Justice Marvin R. Baxter

Disposition
Aug 10 2009	Opinion filed

Dockets
May 13 2008	Request to answer question of state law filed By United States Court of Appeals for the Ninth Circuit, San Francisco
May 15 2008	Received: General Docket
May 20 2008	Received: letter, dated May 19, 2008, from Ronald H. Sargis, counsel for the California Association of Collectors, Inc., as Amicus Curiae; AND: a) 11 copies of Amicus Brief in Support of Appellant Imperial Merchant Services Inc. for Reversal; b) 11 copies of Exhibits in Support of Amicus Brief.
May 21 2008	Received: letter dated 5/19/08, from atty Clark Garen, counsel for plaintiff and appellant Imperial Merchant Services dba Check Recovery Systems; AND: a) 10 copies of Appellant's Opening Brief; b) 10 copies of Appellant's Excerpts of the Record; c) 10 copies of Appellant's Reply Brief.
Jun 3 2008	Received: Letter from Clark Garen, dated May 30, 2008, asking the court to accept the request to certify the question, by Clark Garen, counsel *** CRC 8.25(b)
Jun 4 2008	Received: Received 10 copies of Corrected Brief of Plaintiff-Appellee on June 4, 2008, by O. Randolph Bragg, Counsel
Jun 4 2008	Received: Received 10 copies of Appellee's Supplemental Excerpt of Record on June 4, 2008, by O. Randolph Bragg, counsel
Jun 11 2008	Received: Letter from counsel for appellant, dated June 10, 2008, opposing the letter submitted by Clark Garen on June 3, 2008. by Paul Arons, Counsel
Jul 16 2008	Request for certification granted The request, made pursuant to California Rules of Court, rule 8.548 (a)(2), that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit, is granted. For the purposes of briefing and oral argument, plaintiff Imperial Merchant Services, Inc., a California Corporation doing business as Check Recovery Services, is deemed petitioner in this court. (Cal. Rules of Court, rule 8.520(a)(6).) Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.
Jul 16 2008	Letter sent to: counsel re: "Certification of Interested Entities." The completed form and eight copies should be returned to this Court within 15 days.
Jul 31 2008	Certification of interested entities or persons filed Imperial Merchant Services, Inc., Plaintiff and Appellant. Clark Garen, counsel
Aug 4 2008	Opening brief on the merits filed Appellant Imperial Merchant Services ~Attorney Clark Garen
Aug 6 2008	Certification of interested entities or persons filed Brandy Hunt, appellant by Irving L. Berg, counsel
Sep 4 2008	Answer brief on the merits filed Brandy Hunt, respondent, - CRC 8.25(b) by Paul Arons, Counsel
Sep 23 2008	Received: oversize Reply brief/merits Appellant Imperial Merchant Services ~Attorney Clark Garen
Sep 26 2008	Application to file over-length brief filed Appellant Imperial Merchant Services ~Attorney Clark Garen
Oct 1 2008	Reply brief filed (case fully briefed) Appellant, Imperial Merchant Services by counsel, Clark Garen filed with permission.
Oct 15 2008	Received application to file Amicus Curiae Brief California Association of Collectors, Inc., Amicus Curiae in support of appellant Imperial Merchant Services, Inc. Ronald H. Sargis, counsel Note: Amicus Biref and Appendix are each under separate cover
Oct 15 2008	Received: application to file appendix in support of amicus curiae brief California Association of Collectors, Inc., Defendant and Appellant. Ronald H. Sargis, counsel
Oct 24 2008	Permission to file amicus curiae brief granted The application of California Association of Collector's, Inc. for permission to file an amicus curiae brief and an appendix in support of Imperial Merchant Services, Inc. is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Oct 24 2008	Amicus curiae brief filed and Appendix filed. California Association of Collector's, Inc., amicus curiae in support of Imperial Merchant Services, Inc. Ronald H. Sargis, counsel
Nov 14 2008	Response to amicus curiae brief filed Brandy Hunt, Defendant and Appellant. Paul Arons, counsel (CRC, rule 8.25(b) - UPS Next Day Air)
Dec 9 2008	Change of contact information filed for: Irving L. Berg counsel for appellant..
Apr 22 2009	Case ordered on calendar to be argued Thursday, May 28, 2009, at 9:00 a.m., in San Francisco
May 4 2009	Application filed Application to divide oral argument time filed by Clark Garen, counsel for appellant Imperial Merchant Services; asking to share 15 minutes of time with amicus curiae California Association of Collectors, Inc.
May 13 2009	Order filed The request of counsel for appellant Imperial Merchant Services, Inc. in the above-referenced cause to allow two counsel to argue on behalf of appellant at oral argument is hereby granted. The request of appellant to allocate to amicus curiae California Association of Collectors 15 minutes of appellant's 30-minute allotted time for oral argument is granted. The request to reserve 5 minutes of both appellant's and amicus curiae's argument time for rebuttal by each party is granted.
May 28 2009	Cause argued and submitted
Aug 7 2009	Notice of forthcoming opinion posted To be filed Monday, August 10, 2009 @ 10 a.m.
Aug 10 2009	Opinion filed Majority Opinion By: Chin, J. -----joined by: George, C.J., Kennard, Baxter, Werdegar, Moreno and Corrigan, JJ. We hold that the statutory damages prescribed in section 1719 are exclusive; a payee who recovers a service charge pursuant to section 1719 may not also recover prejudgment interest under section 3287.

Briefs
Aug 4 2008	Opening brief on the merits filed Appellant Imperial Merchant Services ~Attorney Clark Garen
Sep 4 2008	Answer brief on the merits filed Brandy Hunt, respondent, - CRC 8.25(b) by Paul Arons, Counsel
Oct 1 2008	Reply brief filed (case fully briefed) Appellant, Imperial Merchant Services
Oct 24 2008	Amicus curiae brief filed and Appendix filed.
Nov 14 2008	Response to amicus curiae brief filed Brandy Hunt, Defendant and Appellant. Paul Arons, counsel (CRC, rule 8.25(b) - UPS Next Day Air)

If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website

Nov 2, 2009 Annotated by Ashley Nutter	In 2004, Defendant wrote a check to a grocery store that was returned unpaid due to insufficient funds. The grocery store referred the matter to Plaintiff for collection, at which point Plaintiff mailed Defendant collection demands for the check amount, a $35 service fee under section 1719 of the California Civil Code, and interest on the unpaid check under section 3287. After Defendant filed a voluntary petition for bankruptcy, she filed a putative class action against Plaintiff in the Northern District of California, asserting that Plaintiff’s demand for a section 1719 service fee precluded demand for interest under section 3278. Plaintiff filed a claim in Defendant’s bankruptcy action for the amount of the unpaid check, the service fee, and interest. The bankruptcy court awarded Plaintiff an amount to cover the unpaid check, service fee, and costs, but held that Plaintiff was not entitled to interest under section 3287. The district court subsequently granted summary judgment in part for Defendant, holding that California law precludes Plaintiff’s demand for interest in addition to a service fee and thus violated United States Code sections 1692e(2)(A) and 1692f(1), affirming the bankruptcy action judgment. Upon Plaintiff’s appeal, the Ninth Circuit requested that the Supreme Court of California decide whether, under California law, a debt collector may recover both section 1719 damages and section 3287 prejudgment interest on a dishonored check. The California Supreme Court held that recover of section 1719 damages precludes collection of section 3287 prejudgment interest.
Nov 2, 2009 Annotated by Ashley Nutter	Supreme Court held that “a payee who recovers a service charge pursuant to section 1719 may not also recover prejudgment interest under section 3287.” The Court based this holding on a statutory construction aiming to achieve the most reasonable result, consistent with the Legislature’s intent and the statute’s general purpose. The Court concluded that the legislative history indicated the Legislature’s intent that section 1719 serve as an exclusive damage scheme for bad debt collection. First, the statute explicitly describes those remedies available and excludes interest. The statute was amended at various points to address certain provisions that arose in court, indicating the Legislature’s intent for the statute to be a complete recovery mechanism. Second, the service charge was established to expediently compensate merchants, and thus was intended to substitute for interest and other recovery mechanisms. Finally, the Legislature implicitly precluded other civil remedies by expressly singling out division 3 of the California UCC as an alternative remedy. The Court thus concluded that the “statutory damages prescribed in section 1719 are exclusive.”