NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        APR 14 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

NAVIGATORS SPECIALTY                            No.    18-56100
INSURANCE COMPANY, a New York
Corporation,                                    D.C. No.
                                                8:17-cv-00991-JLS-KES
                Plaintiff-Appellant,

 v.                                             MEMORANDUM*

CALIFORNIA BANK AND TRUST,

                Defendant-Appellee.

                   Appeal from the United States District Court
                       for the Central District of California
                   Josephine L. Staton, District Judge, Presiding

                     Argued and Submitted February 13, 2020
                              Pasadena, California

Before: BERZON, R. NELSON, and LEE, Circuit Judges.

      This case presents the question of when a claim against a bank based on a

forged endorsement accrues under California law. The district court granted

summary judgment in favor of California Bank and Trust and dismissed the claim

as time-barred, ruling that the statute of limitations starts when the bank customer



      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
receives a copy of the bank statement. Navigators Specialty Insurance Company

appeals from that order. We reverse and remand because such a claim accrues when

the bank customer should have reasonably discovered the forged endorsement.

       Section 340(c) of the California Civil Procedure Code imposes a one-year

statute of limitations on certain actions, including those “by a depositor against a

bank for the payment of a forged or raised check, or a check that bears a forged or

unauthorized endorsement.” The plain language of section 340(c) makes clear that

a claim based on a forged check or unauthorized endorsement must be filed within

a year, but it does not specify when that claim accrues.

      California courts have held that section 340(c) “dovetails” with section

4406(f) of the California Commercial Code — at least when it involves a forged

signature on the front of the check. Chatsky & Assocs. v. Superior Court, 12 Cal.

Rptr. 3d 154, 157 (Ct. App. 2004). Section 4406(f) prevents a customer from

asserting a claim against her bank “based on a forged or unauthorized signature

unless the customer discovers and reports the matter within one year after the bank

made available a statement of account showing payment of the item.”

in turn, references section 4406(a), which requires that a bank statement

“provide information . . . sufficient to allow the customer to reasonably identify the

items paid.” Subsection (a) considers “sufficient information” to include entries

describing debits “by item number, amount, and date of payment.” The general rule


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thus is that the “one-year limitations period applies independently with respect to

each forged check and begins to run when the charge is reported to the depositor in

a regular monthly account statement.” 

. This rule

comports with California’s delayed discovery rule for fraud claims, under which a

claim accrues when the plaintiff reasonably could discover the cause of action, see

April Enters., Inc. v. KTTV, 

, 432-36 (Ct. App. 1983): A customer

who receives a bank statement (along with copies of the cashed checks) has received

all information required to be put on notice of her forged-check claim the moment

she receives the bank statement.

      The district court relied on cases involving forged signatures on the front of

the check to rule that Deacon Construction (which issued the check), and by

extension Navigators (Deacon’s insurer and subrogee), was put on inquiry notice of

a potential claim the day it received its bank statement. See, e.g., Mac v. Bank of

Am., 

, 478 (Ct. App. 1999); Simi Mgmt. Corp. v. Bank of Am.,

, 1085 (N.D. Cal. 2013); Roy Supply, Inc. v. Wells Fargo Bank,

, 311 (Ct. App. 1995).

      This case, however, does not involve forged signatures on the front of the

check, but rather forged endorsements on the back of a check. No California court

has yet addressed this issue. Importantly, both parties conceded at oral argument

that Section 4406(f) of the California Commercial Code — which the district court


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relied on to rule that the claim accrued upon receipt of the bank statement — does

not apply directly here, because that statute involves claims “based on a forged or

unauthorized signature” (i.e., a forged check, not a forged endorsement).

      As a practical matter, there is a significant difference between a forged check

and a forged endorsement. A bank customer can be reasonably expected to discover

a forged signature on the front of the check when she receives a copy of the returned

check along with the bank statement. In contrast, she presumably will not know if

there is a forged endorsement on the back of the check because an endorsement is

the payee’s signature, not hers.

      The one California case involving forged endorsements is of little help here.

In Hughes Electronics Corp. v. Citibank Delaware, a California appellate court held

that a one-year limitations period applied as opposed to Uniform Commercial

Code’s three-year limitations period. 

, 265 (Ct. App. 2004).

But the court did not address whether a claim for a forged endorsement accrues under

section 340(c) when the bank customer reasonably should have discovered the

forged endorsement (as Navigators contends) or when she received the bank

statement (as CB&T argues) because the claim was clearly time-barred under either

scenario.

      Given the absence of authority, we must “predict how the highest state court

would decide the issue using intermediate appellate court decisions, decisions from


                                         4
other jurisdictions, statutes, treatises, and restatements as guidance.” In re Bartoni-

Corsi Produce, Inc., 

, 861 (9th Cir. 1997) (citation omitted).

      The California Commercial Code sheds some light. Comment number 5 to

section 4-406 of the Uniform Commercial Code states that “Section 4-406 imposes

no duty on a customer to discover a forged indorsement.” Cal. Com. Code § 4406

cmt. 5(West 2017). As noted above, a bank customer presumably would have no

basis to determine whether an endorsement on the back of the check was forged.

The depository bank that accepts the check is in a better position to verify that the

endorsements are valid by, for example, asking to view identification. In sum, a

claim based on a forged endorsement cannot accrue upon receipt of a bank statement

when that statement would not put the customer on notice of a fraudulent

endorsement. Such a rule is in keeping with California’s delayed discovery rule for

fraud claims. See April Enters., 

, 436 (Ct. App. 1983). We

thus hold that the section 340(c) limitations period runs from the date at which the

bank customer reasonably should have discovered the forged endorsement.

      The record, however, has not been adequately developed for us to decide

whether Navigators’s claims are time barred. Nor is the record sufficient for us to

decide whether summary judgment should instead be granted in favor of Navigators,

as Navigators asks us to do.

      We reverse the district court’s order of summary judgment in favor of


                                          5
California Bank and Trust, and remand for the court to ascertain when Navigators’s

predecessor in interest reasonably should have discovered the forged endorsements.

Once the date of reasonable discovery has been established as a factual matter, the

section 340(c) limitation period shall run from that date and bar any claims not

brought within one year.

      REVERSED AND REMANDED.




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