First Nat. Bank Of Richmond v. Richmond Electric Co

• Decision Date: 07 November 1907
• Parties: FIRST NAT. BANK OF RICHMOND. v. RICHMOND ELECTRIC CO.
• Court: Virginia Supreme Court

106 Va. 347

56 S.E. 152

FIRST NAT. BANK OF RICHMOND.

v.RICHMOND ELECTRIC CO.

Supreme Court of Appeals of Virginia.

Jan.17, 1907.

1. Banks and Banking — Functions and Dealings — Deposits — Pass Books — Duty of Depositor.

A bank depositor is bound to examine within a reasonable time and with ordinary care the account rendered in the pass book and vouchers returned to him by the bank and to report any errors discovered without unreasonable delay.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 443.]

2. Same—Actions—Question foe Jury.

In an action against a bank to recover a balance of a deposit, evidence held to present a question for the jury whether the depositor exercised reasonable care and diligence in examining the pass book and vouchers returned to him by the bank each month.

3. Same—Notice to Agent.

Where a bank depositor made no examinations of its pass book and vouchers returned to it each month, except such as were made together with its cashier, who had forged checks each month, the depositor was charged with such knowledge as its cashier had in making the examination of the bank book and the inspection of the vouchers.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 444; vol. 40, Principal and Agent, § 689.]

Error to Circuit Court of City of Richmond.

Action by the Richmond Electric Company against the First National Bank of Richmond. From a judgment in favor of plaintiff, defendant brings error. Reversed and remanded.

Geo. Bryan and A. W. Patterson, for plaintiff in error.

Leake & Carter and W. B. Tennant, for defendant in error.

HARRISON, J. The electric company, plaintiff, kept an active account with the defendant bank, and this action is to recover a balance of deposit alleged to be due it from the bank. This alleged balance was brought about by the bank having paid a number of checks, the amount of which had been raised after being signed by the plaintiff.

It appears that the plaintiff had in its employ a clerk named Woodall. Once a week the electric company issued its check for a sum sufficient to cover its weekly pay roll, payable "to the order of pay roll." Its clerk and cashier, Woodall, presented these checks to the bank for payment. In July, 1903, the plaintiff discovered that Woodall had, since December, 1901, a period of about 18 months, been defrauding it by raising 26 of these pay-roll checks by the sum of $100 each. Upon this discovery Woodall became a fugitive from justice and has not since been apprehended. The bank resisted a demand upon it for the amount of these fraudulent alterations, upon the ground that the account of the electric company with it had been settled monthly during the 18 months, its pass book written up, and the fraudulently altered checks returned with the book, and no report of the fraud had ever been made to the bank. Inquiry developed the fact that, after being returned Woodall had destroyed all of the altered checks except two, which had not been returned by the bank at the time of his flight It further appears that Woodall, in order to conceal his fraud, would make false additions of the checks given, on the stubs of the plaintiff's check book, thereby making the aggregate there shown correspond with the pass book. Such examination of its pass book as was made by the plaintiff consisted of the president of the company, together with Woodall, comparing at times the pass book with the stubs of the check book. In doing this Woodall would sometimes hold the pass book and sometimes the check book, while the president would hold the other, thus enabling Woodall to call out In either case from the book held by him the figures so as to make the amount correspond with the book held by the president In this way, every time the examination took place, the pass book as balanced and the check book were made to agree. It further appears that the fraud could have been instantly discovered by verifying the additions made by Woodall on the stubs of the check book, or by the president looking at both the pass book and the check book on any one of the occasions when the examination was made by Woodall and himself together.

That banks, in their relations with depositors, are held to a rigid responsibility, is a proposition established by practically an unbroken current of authority. National Bank v. Nolting, 94 Va. 263, 26 S. E_v 826. Some of the earlier cases seemed to go to the extent of holding that a depositor was under no duty to the bank to examine periodical statements of his account, with the vouchers, and give notice to the bank within a reasonable time of errors discovered therein. Modern adjudications, however, of the highest authority, do not sanction this broad proposition. Bank v. Morgan, 117 U. S. 96. 6 Sup. Ct. 657, 29 L. Ed. 811; Bank of Birmingham v. Allen, 100 Ala. 476, 14 South. 335, 27 L. R A. 426, 46 Am. St. Rep. 80; Dana v. Bank, 132 Mass. 156; Myers v. Bank, 193 Pa. 1, 44 Atl. 280, 74 Am. St Rep. 672; Scanlon-Gipson Co. v. Bank, 90 Minn. 478, 97 N. W. 380. The facts in most of the cases cited are very similar to those in the case at bar, in some of them almost identical.

Mr. Justice Harlan, delivering the opinion of the Supreme Court in Bank v. Morgan, supra, says: "The court below, as shown by its opinion, proceeded upon the ground that Cooper was under no duty whatever to the bank to examine his pass book and the vouchers returned with It, in order to ascertain whether his account was correctly kept. For this reason, it is contended, the bank, even if without fault itself, has no legal cause of complaint although it may havebeen misled to its prejudice by the failure of the depositor to give timely notice of the fact—which, by ordinary diligence, he might have discovered on the occasion of the several balancings of the account—that the checks in question had been fraudulently altered. This view of his obligations does not seem to the court to be consistent with the relations of the parties, or with principles of justice." This learned jurist further says: "While it is true that the relation of a bank and its depositor is one simply of debtor and creditor, and that the depositor is not chargeable with any payments except such as are made in conformity with his orders, it is within common knowledge that the object of a pass book is to inform the depositor from time to time of the condition of his account as It appears upon the books of the bank. It not only enables him to discover errors to his prejudice, but supplies evidence in his favor in the event of litigation or dispute with the bank. In this way it operates to protect him against the carelessness or fraud of the bank. The sending of his pass book to be written up and returned with the vouchers is therefore, in effect, a demand to know what the bank claims to be the state of his account. And the return of the book, with the vouchers, is the answer to that demand, and. in effect. Imports a request by the bank that the depositor will, in proper time, examine the account so rendered, and either sanction or repudiate it. * * * The depositor cannot, therefore, without injustice to...