Crawford v. West Side Bank

• Decision Date: 06 October 1885
• Citation: 2 N.E. 881,100 N.Y. 50
• Parties: CRAWFORD v. WEST SIDE BANK.
• Court: New York Court of Appeals Court of Appeals

100 N.Y. 50

2 N.E. 881

CRAWFORD

v.WEST SIDE BANK.¹

Court of Appeals of New York.

Filed October 6, 1885.

OPINION TEXT STARTS HEREALTERED DATE IN CHECK-BANK LIABLE FOR PAYING IT.

The plaintiff, on the twentieth of April, intending to be absent from his place of business for a few days, drew his check on the defendant, dated April 22d, for $700, payable to his clerk, to pay wages due employes, April 22d, in case he did not return to attend to it. The clerk altered the date to the 21st, drew the funds on that day, and absconded. Held, that the check, by reason of the alteration in the date, was never a valid instrument for any purpose, and conferred no authority on the bank to pay the amount, and that the bank had no right to charge the check against plaintiff's account.

John C. Shaw, for the West Side Bank.

D. M. Porter, for respondent, George Crawford.

RUGER, C. J.

The relation existing between a bank and its depositor is, in a strict sense, that of debtor and creditor; but in discharging its obligation as a debtor the bank must do so subject to the rules obtaining between principal and agent. In disbursing the customer's funds it can pay them only in the usual course of business, and in conformity to his directions. In debiting his account it is not entitled to charge any payments except those made at the time when, to the person whom, and for the amount authorized by him. Wheeler v. Guild, 20 Pick. 545; Daniel, Neg. Inst. § 1818. It receives the depositor's funds upon the condition of disbursing them according to his order, and upon an accounting is liable for all such sums deposited as it has paid without receiving valid direction to make. The bank is, from necessity, responsible for any omission to discover the original terms and conditions of a check once properly drawn upon it, because at the time of payment it is the only party interested in protecting its integrity who has the opportunity of inspection, and it therefore owes the duty to its depositors of guarding the fund intrusted to it from spoliation. This liability arises although an alteration of a material part of his order has been effected, even though it be done so skillfully as to defy detection by examination. Daniel, Neg. Inst. § 1660. This follows from the fact that, after it is put in circulation, it passes beyond the reach of its maker, and he has no opportunity, until after it has filled its office, of inspecting it, and protecting himself from the loss occasioned by a fraudulent alteration. This opportunity the banker has, and he is responsible for any want of vigilance in detecting the alteration of an order after it has once been correctly drawn, with its blank places properly filled up, and is put in circulation by the maker.

The responsibility of the banker, however, for the exercise of such vigilance is confined to the maker alone. So far as other parties through whose hands an altered check passes are concerned, they have the same opportunity for detecting fraudulent alterations in the body of the check that the banker has, and as to them, after payment, he is responsible only for the genuineness of the maker's signature. Bank of Commerce v. Union Bank, 3 N. Y. 230. The principle stated in White v. Continental Bank, 64 N. Y. 316;Marine Nat. Bank v. National City Bank, 59 N. Y. 67; and kindred cases, that the drawees of a check or bill are held to a knowledge of the signature only of their correspondents, the drawers, and not for a want of knowledge of the genuineness of the body of the instrument, applies only as between them and such other parties as have equal opportunity of inspection, and equal means for determining the existence of an alteration. Such parties take the paper relying solely upon the reputed responsibility of their transferrers and the other parties to it, and its apparent genuineness, and they therefore deal in it at their peril. They have no duty to perform in respect to it except that of guardingtheir own interests, and in buying and transferring it to others they take the risk of loss occurring from fraudulent alterations.

The questions arising on such paper between drawee and drawer, however, always relate to what the one has authorized the other to do. They are not questions of negligence or of liability of parties upon commercial paper, but are those of authority solely. In this view it has been held when the check of a depositor was fraudulently altered from £3 to £>>200 after issue, and was paid by the bank at the latter amount, that the bank was entitled to charge only £3 to the depositor. Hall v. Fuller, 5 Barn & C. 750. BAILEY, J., said: ‘If the banker unfortunately pays money belonging to the customer upon an order not genuine, he must suffer, and to justify the payment he must show that the order was genuine, not in signature only, but in every respect.’

The question of negligence cannot arise unless the depositor has, in drawing his check, left blanks unfilled, or by some affirmative act of negligence has facilitated the commission of a fraud by those into whose hands the check may come. Young v. Grote, 4 Bing. 253; Daniel, Neg. Inst. § 1659.

The theory that a party who makes and issues commercial paper, properly and carefully drawn to express the liability which he intends to assume, is chargeable with negligence on account of the criminal act of another in altering it after its issue, would render him an insurer against such act, and is repugnant to justice and reason.

In the present case the plaintiff, on the twentieth of April, intending to be absent from his place of business for a few days, drew his check on the defendant, dated April 22d, for $700, payable to his clerk, one Morgan, for the purpose of enabling him to obtain funds to pay wages becoming due to the drawer's employes on the 22d. The check was left in the drawer's check-book, in his safe, with directions to Morgan, who had a key to the safe, to take the check on the 22d, draw...