Brown v. Bank

• Decision Date: 10 June 1909
• Citation: 109 Va. 530,64 S.E. 950
• Parties: BROWN. v. LYNCHBURG NAT. BANK.
• Court: Virginia Supreme Court

64 S.E. 950

(109 Va. 530)

BROWN.

v.LYNCHBURG NAT. BANK.

Supreme Court of Appeals of Virginia.

June 10, 1909.

1. Banks and Banking (§ 151^*)—Relation Between Depositor and Bank—Obligation or Depositor.

A bank depositor must examine within a reasonable time and with ordinary care the account rendered in the passbook and the vouchers returned by the bank to him, and report any error discovered without unreasonable delay.

[Ed. Note.—For other cases, see Banks and Banking, Cent. Dig. §§ 300, 301, 345; Dec. Dig. § 151.*]

2. Banks and Banking (§§ 119, 138*)—Relation of Bank to Depositor—Obligations of Bank.

A bank is the debtor of the depositor and must keep careful and faithful accounts with the depositor, scrutinize checks, and exercise proper care and skill to prevent or discover fraud.

[Ed. Note.—For other cases, see Banks and Banking, Cent. Dig. §§ 289, 398-404; Dec. Dig. §§ 119, 138.*]

3. Banks and Banking (§ 112*)—Fraud op Bank Employe.

An employe of a bank in the perpetration of a fraud on a depositor is not the agent of the bank.

[Ed. Note.—For other cases, see Banks and Banking, Cent, Dig. §§ 271, 272; Dec. Dig. § 112.*]

4. Banks and Banking (§ 154*) — Misconduct of Employe—Liability of Bank to Depositor.

Whether a bank was liable to a depositor for loss resulting from the fraud of employes of the bank in making false entries against the account of the depositor, notwithstanding his failure for about three years to discover the fraud, held, under the evidence, for the jury.

[Ed. Note.—For other cases, see Banks and Banking, Dec. Dig. § 154.*]

Error to Corporation Court of Lynchburg.

Action by J. Thompson Brown against the Lynchburg National Bank. There was judgment for defendant, and plaintiff brings error. Reversed and rendered.

Harrison & Long, for plaintiff in error.

Wilson & Manson and Lee & Howard, for defendant in error.

KEITH, P. The plaintiff in error brought this action to recover a balance alleged to be due him on a deposit account by the Lynchburg National Bank of $3,006.20. The bank denied its liability, except for the sum of $139.90, which amount it tendered, and as to the residue issue was joined upon the plea of non assumpsit. The defendant in error demurred to the evidence, and, the verdict of the jury having been rendered, the court entered judgment for the defendant, and the case is before us upon a writ of error awarded Brown.

The evidence tends to prove: That the plaintiff in error had been for many years a depositor with the defendant bank; that beginning with August, 1900, and continuing until December, 1903, an employe or employes of the bank, from time to time, embezzled the funds of the bank and fraudulently entered the amounts so taken against the account of plaintiff in error. It was the custom of the bank to render monthly to plaintiff in error a statement of his account, consisting of his canceled checks for the past month, a machine-made slip, represented to contain a list of these checks, and a statement showing the totals of debits and credits, and the balance to the credit of plaintiff in error. Brown did not keep a passbook, but relied solely on these statements rendered by the bank. His examination of these statements consisted of seeing that his checks as drawn were returned to him as vouchers, that his signature to the checks was genuine, and that the checks returned corresponded with the stubs from which they were taken, and by verifying the total debits and credits. He did not check the individual checks with the items on the machine-made list of checks, but assumed that the machine-made list of checks corresponded with the checks returned with it and correctly represented his withdrawals from the bank, and he did not examine it to see if it contained any item* of charge against his account not represented by a check. In the method of examination he pursued, he discovered nothing about the statements of his account returned to him which put him upon notice of any wrongdoing until about the middle of November, 1903, when he received notice of an overcheck. He had received frequently within the past three years notices of overchecks. but had assumed that the bank was keeping his account honestly and correctly. At the time mentioned, however, November, 1903, the amount of the overcheck attracted his attention, and he called for his checks for the current month of November to be sent to him, and upon receiving them he made a critical examina-tion, checking up each check with the machine-made list of checks, and discovered that the checks returned did not correspond with that list, that the list contained more items than there were checks, and that apparently some of his checks had been used as a basis of charge against his account more than once. For example, the machine-made list of checks contained two items of $33 and two of $23.75, though he had only drawn one check for each of these amounts. He proceeded to examine his account for several years back, and discovered that false entries had been systematically made from month to month, extending from August, 1900; the false entry always corresponding in amount with some check drawn by him. The sums thus withdrawn from the funds of the bank and fraudulently charged against his account amounted, with interest, to about $3,000. The president of the bank admitted that this money had been stolen by some agent or employe of the bank.

It is difficult to conceive of a fraud more easy of detection than the one under investigation. As soon as a comparison was made by plaintiff in error between the machine-made slip and the checks which he had drawn, the fraud was discovered, and yet plaintiff in error had for three years accepted the bank's statements without question. If upon this evidence the case had been submitted to the jury, and it had found a verdict for the defendant, it could not have been disturbed.

As was said by this court in Bank of Richmond v. Richmond Electric Company, 106 Va. 347, 56 S. E. 152: "A bank depositor is under obligations to the bank to examine within a reasonable time and with ordinary care the account rendered in the passbook and the vouchers returned by the bank to him, and to report any errors discovered without unreasonable delay. The examination need not be so minute as to exclude any possibility of error, but it should be made in good faith and with ordinary diligence, and such care should be used as is required by the circumstances of the particular case."

In Leather Manufacturers' Bank v. Morgan, 117 U. S. 96, 6 Sup. Ct 657, 29 L. Ed. 811, a like doctrine is announced. In that case, "the main dispute, " said Mr. Justice Harlan, "is as to the right of the depositor to question the account rendered by the bank, so far as it charges him with certain checks which he signed, but which, before payment, were materially altered by his clerk, without his knowledge or assent." The facts of that case are as follows: Berlin was the confidential clerk of Cooper from January, 1878, to March, 1881, and had the entire management of his office, kept his books, and had full charge of Cooper's account, as agent of Ash-burner &...