## Facts

- Del Martinez previously banked with Albuquerque National Bank and dealt with its vice president, W. J. Kopp.
- Martinez borrowed $500 from the bank on an installment note; the proceeds were deposited into his prior business account.
- Martinez and Richard A. Loucks later formed L & M Paint and Body Shop, opened a partnership checking account at the bank, and required both partners’ signatures for withdrawals.
- Two $50 payments on Martinez’s personal note (or renewals) were made by checks drawn on the partnership account.
- Martinez renewed his personal debt with another installment note and became delinquent; the bank sued him on the personal obligation.
- Without partnership authorization, the bank debited $402 from the partnership account to apply it to Martinez’s personal debt, leaving a minimal balance.
- The bank then dishonored nine or ten partnership checks that would have been paid absent the debit.
- The partners demanded the bank re-credit the account and explained the debt was personal to Martinez; the bank refused.
- The partnership offered evidence that the dishonors harmed its business credit and reputation, including refusals to accept its checks and denials of credit.

## Issues

1. Whether a bank that wrongfully dishonors checks is liable only for direct loss, or also for consequential damages proximately caused by the dishonor, including injury to business credit and reputation.
2. Whether the trial court erred by taking from the jury the claim for damages to the partnership’s credit and business reputation after evidence of such harm was introduced.

## Decision

- The Supreme Court affirmed recovery of the $402 wrongfully debited from the partnership account.
- The Court held that wrongful dishonor can support recovery of consequential damages proximately caused by the dishonor, including harm to business credit and reputation.
- The Court ruled the trial court erred by removing from the jury the question whether the partnership’s credit and reputation were damaged by the dishonors and, if so, the amount.
- The Court reversed in part and remanded for a new trial limited to damages for injury to the partnership’s credit and reputation proximately caused by the dishonors.

## Legal Principles

- A bank that wrongfully dishonors a customer’s checks is liable for damages proximately caused by the dishonor.
- Recoverable damages may include consequential commercial harms, such as injury to a business’s credit standing and reputation, when supported by evidence and causation.
- When there is evidence from which a reasonable jury could find proximate reputational or credit harm from wrongful dishonor, the existence and amount of that damage are questions for the jury.
- Remand may be limited to a discrete damages issue where liability for the underlying debit is resolved and only the scope of consequential damages remains for determination.

## Conclusion

The court held that wrongful dishonor can expose a bank to consequential damages proximately caused by the dishonor, including harm to a partnership’s credit and reputation, and ordered a new trial limited to determining whether such harm occurred and the amount of resulting damages.


Loucks v. Albuquerque Nat'l Bank, 418 P.2d 191 (N.M. 1966)