• Bank's Claim for Unjust Enrichment Governed By Three-Year Statute of Limitations
  • October 24, 2008 | Author: Robert J. Stumpf
  • Law Firm: Sheppard, Mullin, Richter & Hampton LLP - San Francisco Office
  • Question: Is a bank's claim against its borrower for unjust enrichment arising out of the borrower's nonpayment of a promissory note governed by the four-year statue of limitations for breach of written contract?

    Answer: No, according to the Fourth District Court of Appeal, Division One, in Federal Deposit Insurance Corporation v. Richard K. Dintino (D051447), decided October 2, 2008.

    In this case, the plaintiff bank mistakenly executed and recorded a full reconveyance of a deed of trust securing a home loan.  Thereafter, the borrower sold the property, retained the sale proceeds, and made no further payments.  The bank sued the borrower for breach of contract, money lent, and unjust enrichment.

    The trial court ruled in the bank's favor on the unjust enrichment claim, ruling that the three-year statute of limitations under Code of Civil Procedure section 338, subd. (d) applied rather than the four-year statute for breach of a written contract.

    The court of appeal agreed the three-year statute applied, reasoning that the bank's cause of action for unjust enrichment was "based on its mistaken request for recordation of the Reconveyance is not based on, and does not arise out of, a written contract (i.e., the Note), but rather is based on an obligation implied by law because of the equities in the circumstances of this case." 

    In addition, the court reversed the trial court's denial of the borrower's motion for an award of attorney's fees he incurred in successfully defending against the bank's breach of contract claim.  According to the court of appeal, the trial court could not consider the bank's success on its noncontract causes of action (including unjust enrichment) in making its determination of which party, if any, prevailed on the contract cause of action.