App. Div.] Fourth Department, March, 1908. have been in the mind of the bank officers in honoring the altered check properly signed. Again, none of the forged checks had been numbered and all had been of different color from those signed by the trustees. The defendant had twice before, in August and October, delivered over these unnumbered forged checks to the agent of the defendant with adequate evidence to detect any fraud, and no suggestion had been made even of any irregularity in the account. It, therefore, had a right to assume that the balances were acceptable to the plaintiffs. The plaintiffs' account with the defendant was a large one, yet there was much variation in the balances. There were deposits elsewhere and the defendant's officers had reason to believe the estate was a large one. The dealings with the defendant warranted that belief. Where a large overdraft exists against a small depositor it might give rise to suspicion that something was wrong. A like overdraft in the account of a large depositor, if unnoted by him, should also attract attention. If, however, such a depositor who had long been a continuous and important customer of the bank should advise its officers early in the day that an account would be overdrawn during the day but would be made good before the close of banking hours, and that promise is kept, there is nothing so extraordinary as to arouse distrust. The moment it is apprised of the expected overdraft, accompanied with the statement that the overdraft will not go into the day's statement, for it will be arranged, the officers are not called upon forthwith to believe there has been crooked work. In the ordinary course of business where a check is transmitted from one bank to that of the depositor and drawer which will overdraw his account the check will not be protested until after the close of the bank for the day. The casting up will then disclose whether the check will be honored. There is no necessity of attending to this while the active work of the bank with its customers is in progress for no remittance will be made during that time. In fact, there was no overdraft, for when the balances were struck at the close of the day's business the account was good. If Kissel had appeared personally and made the same statement that was made by Hennessey no suspicion would have been aroused. [Vol. 125. Fourth Department, March, 1908. Hennessey was the man who did the active work on behalf of the plaintiffs with the bank. He represented them. They stood sponsor for him, and his acts in the line of his employment were those of the plaintiffs. He was their alter ego. I think as matter of law these facts establish quite clearly that no negligence can be charged to the defendant for the transaction on January ninth. The plaintiffs have appealed from the judgment alleging that the court erred in holding the plaintiffs were chargeable with negligence in failing to discover the condition of their account with the defendant commencing with the forged check of September tenth. The trial court in commenting to the jury upon the conduct of the plaintiffs used this expressive language: "As a matter of law they were bound before the 10th day of September to have made this examination and were bound as a matter of law to have discovered the trouble which existed with regard to their bank account. So that, as a matter of law, from that time on the plaintiffs must be held guilty of negligence. There is no escape from it. They were bound to have made the examination. They were bound to have discovered the facts prior to the 10th day of September and as they were guilty of negligence and as concededly, assuming they were guilty of negligence, their negligence caused the payment of these various later checks; as concededly, if they had notified the bank that forgery was going on, the opportunity for forgery would have ceased; as concededly therefore the bank was damaged by their negligence in as far as it paid these later checks and to the amount of these later checks there can be no recovery here on the part of the plaintiff, notwithstanding that these checks were forged, unless the defendant itself was guilty of contributory negligence." No question of the contributory negligence of the defendant after September tenth was submitted to the jury, except as to the transaction of January ninth, already discussed. I think the court was correct in this instruction to the jury. From beginning to end, it seems to me, that the fault in this whole transaction lies at the door of the plaintiffs themselves. Hennessey was their agent. Kissel, the trustee, was an experienced business man, familiar with the system of the defendant in dealing with its depositors. He knew that the items of the credits were not entered in the check book, but were returned on a separate Fourth Department, March, 1908. A. p. Div.] slip of paper. During all this time he never saw or asked for any of these slips. The notation in the pass book that the checks were returned "per list" was equivalent to itemizing them in the book itself for the plaintiffs were aware of this course of dealing. He never compared the amount of money which the check book by computation would show in the bank to the credit of the estate with that stated in the pass book. A mere glance, the slightest inspection, would have disclosed the discrepancy. The list of checks which were issued during this time was not large. It required no great effort to make the examination, and yet these trustees, it seems to me, exhibited gross carelessness. If they were taking charge of this large trust fund with any degree of diligence we would expect them to call for the check list, look over the pass book, putting forth some effort to verify the correctness of the account. They knew that the defendant had furnished ample evidence to discover any forgery and they did not avail themselves of it. I think the plaintiffs were guilty of gross negligence. The learned counsel for the plaintiffs relies upon the case of Critten v. Chemical Nat. Bank (171 N. Y. 219) the facts of which are materially different from those of the present case. The court, however, in that case, after an elaborate discussion of the authorities, stated that it was the duty of a depositor to exercise reasonable care in verifying the vouchers returned to him by the bank. The court say (at p. 227): "The practice of taking checks from check books and entering on the stubs left in the book the date, amount and name of the payee of the check issued has become general, not only with large commercial houses but with almost all classes of depositors in banks. The skill of the criminal has kept pace with the advance in honest arts and a forgery may be made so skillfully as to deceive not only the bank but the drawer of the check as to the genuineness of his own signature. But when a depositor has in his possession a record of the checks he has given, with dates, payees and amounts, a comparison of the return checks with that record will necessarily expose forgeries or alterations. Considering that the only ** * certain test of the genuineness of the paid check may be the record made by the depositor of the checks he has issued, it is not too much, in justice and fairness to the bank, to require him, when he has such a record, to exercise reasonable care to verify the vouchers by that record. * * * Fourth Department, March, 1908. [Vol. 125. If the depositor has by his negligence in failing to detect forgeries in his checks and give notice thereof caused loss to his bank, either by enabling the forger to repeat his fraud or by depriving the bank of an opportunity to obtain restitution, he should be responsible for the damage caused by his default, but beyond this his liability should not extend." Of like import are Leather Manufacturers' Bank v. Morgan (117 U. S. 96) and Myers v. Bank (193 Penn. St. 1). The amount which the jury were allowed to find against the defendant, dependent upon its alleged contributory negligence in the transaction of January ninth and including the subsequent forged checks, which it charged to the account of the plaintiff, was $19,534, and that sum should be deducted from the judgment. The judginent should be reversed and a new trial ordered, with costs to the defendant to abide the event, unless the plaintiffs stipulate to reduce the verdict as of the date of recovery to $3,553.33, with interest thereon from July 17, 1905; in which event the judgment as modified should be affirmed, without costs of this appeal to either party. All concurred, except MCLENNAN, P. J., and ROBSON, J., who dissented in an opinion by ROBSON, J. ROBSON, J. (dissenting): Defendant, a trust company, carried on as a part of its business that of a bank of deposit and discount. Plaintiffs are the trustees of a large estate, and opened an account with defendant in March, 1903. This was apparently an active account from its inception. Large deposits were made from time to time; and commensurately large amounts were withdrawn as the varying needs of the business of the estate required. The trustees had a trusted employee, Hennessey by name, who, as part of his duties, had charge as bookkeeper of the trustees' estate accounts, and apparently almost exclusive charge of the bank account with defendant, having custody of the pass book issued by defendant to plaintiffs, which he invariably during the period in question in this action personally presented to defendant when it was written up, and it was again returned to his hands with the vouchers, or canceled checks, when it had been balanced. Checks upon this account could be drawn by either trustee, but only on the App. Div.] Fourth Department, March, 1908. personal signature of one or the other of them. Each check so drawn was numbered, the numbers being consecutive and each check was properly entered on the corresponding stub in the check book used by the trustees. All checks actually drawn by either trustee between March 15, 1904, and July 17, 1905, were produced at the trial, and the several amounts of such checks agree with those appearing on the corresponding stubs in the check book. After crediting defendant with all the money so drawn by check of either trustee a balance remained of $52,043.73, of which defendant refused to pay $34,671.84, claiming credit for twenty-eight checks which Hennessey, the bookkeeper, had forged and uttered between May 18, 1904, and June 22, 1905. During this period Kissel, one of the trustees, seems to have had practically the entire charge of this trust account, as his cotrustee was during that time absent in Europe, except for about thirty days. All the checks forged by Hennessey apparently bore the name of the trustee Morgan. The first of these forged checks was for $400, and appears on the books of the bank as paid May 18, 1904. The pass book had last prior to that date been balanced March 15, 1904. It was next balanced August 11, 1904. Before the pass book was returned to plaintiffs, after it had been so balanced, defendant had cashed, including the first forged check, already referred to, four of Hennessey's forged checks, aggregating $3,073.33. Defendant concedes its liability to plaintiffs for this sum. Eight days after the pass book was balanced and returned, defendant cashed another of Hennessey's forged checks for $480. The next forgery was September 10, 1904. Thereafter at varying intervals Hennessey continued to utter and obtain payment on similar forged checks till May 20, 1905, which is the last date of such a check preceding the discovery by plaintiffs of the forgeries. Plaintiffs' pass book was balanced during this time, October 12, 1904; January 6, 1905, and April 26, 1905, and again June 23, 1905. When the pass book was balanced, the checks were not entered separately in the book itself, but were entered as the total amount they aggregated, with the added statement, "Less cks ret'd per list," and a list of all checks charged to the account accompanied the vouchers, returned with the pass book, each time it was balanced. The check list and the returned vouchers, of APP. DIV.- VOL. CXXV. 3 |