Grow v. Prudential Trust Co.

• Decision Date: 26 May 1924
• Citation: 249 Mass. 325,144 N.E. 93
• Parties: GROW v. PRUDENTIAL TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

249 Mass. 325

144 N.E. 93

GROW

v.PRUDENTIAL TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 26, 1924.

Report from Superior Court, Suffolk County; Marcus Morton, Judge.

Action of contract by Louis Grow, doing business under the name of United Motors of New England, against the Prudential Trust Company, to recover deposits withdrawn by forged checks. Verdict for plaintiff on report. Judgment for plaintiff on verdict.

J. C. Johnston, of Boston, for plaintiff.

J. E. Hannigan, of Boston, for defendant.

BRALEY, J.

The only evidence before the jury was an auditor's report, in which he finds that the defendant, which held funds of the plaintiff on deposit, paid out of those funds $13,410 on checks to which the plaintiff's signature had been forged by one Joseph F. Minon. The judge, subject to the exceptions of the defendant, ordered a verdict for the plaintiff, and at the request of the parties ‘reported the case to the full court for determination.’

[1][2] It is well settled that the defendant was bound to know the signature of its depositors, and payment of a forged check, either over the counter or through a clearing house, could not be charged against the plaintiff, if he was wholly free from neglect or default in connection with the management or supervision of his business, which contributed to the fraud practiced upon the defendant. Greenfield Savings Bank v. Stowell, 123 Mass. 196, 25 Am. Rep. 67;Mackintosh v. Eliot National Bank, 123 Mass. 393;Murphy v. Metropolitan National Bank, 191 Mass. 159, 162, 163, 77 N. E. 693,114 Am. St. Rep. 595;Jordan, Marsh Co. v. National Shawmut Bank, 201 Mass. 397, 405, 87 N. E. 740,22 L. R. A. (N. S.) 250;Welsh v. German-American Bank, 73 N. Y. 424, 29 Am. Rep. 175;Seaboard National Bank v. Bank of America, 193 N. Y. 26, 85 N. E. 829,22 L. R. A. (N. S.) 499;Armstrong v. Pomeroy National Bank, 46 Ohio St. 512, 22 N. E. 866, L. R. A. 625,15 Am. St. Rep. 655. See Dedham National Bank v. Everett National Bank, 177 Mass. 392, 395, 59 N. E. 62,83 Am. St. Rep. 286. And the burden of proof was on the defendant who offered no evidence, to show that the plaintiff was guilty of such negligence as to preclude recovery. Murphy v. Metropolitan National Bank, supra.

[3][4] The auditor's report was prima facie evidence, on which judgment could be entered in accordance with his conclusion. G. L. c. 231, § 56. It is true that where subordinate facts and findings are reported, a jury may draw inferences of fact different from the inferences drawn by the auditor, and return a verdict different from the result reached by him. But the case at bar is submitted to us at the request of the parties on the question whether the auditor's report alone requested a verdict for the plaintiff. Inferences of fact which could reasonably be drawn from the evidence in favor of his general conclusion will be presumed to have been so drawn by him, and, if they are sufficient to sustain his final conclusion, judgment will be rendered accordingly. The court under such circumstances will not reverse his findings, unless the facts found by him require it as matter of law. Peru Steel & Iron Co. v. Whipple File & Steel Manuf. Co., 109 Mass. 464, 466.

The facts found and stated in the report are substantially as follows:

The plaintiff for many years had been engaged in the business of buying and selling second hand automobiles under the name of the United Motors of New England, with a place of business in Boston. He was a man of little education, but with much executive and business ability, and his business increased rapidly. In 1919 he desired to reorganize his bookkeeping system upon a scientific basis and decided to employ an accountant. He made inquiry of a reputable automobile house in Boston, long established and of high standing, who recommended and introduced one Joseph F. Minon, and the plaintiff employed him to make his income tax report in 1919, to audit his books, and to devise and inaugurate a bookkeeping system, and ‘look after the plaintiff's books every week or two for one year.’

Minon at that time was treasurer, manager and holder of all but 2 shares of the capital stock of the Tileston-Livermore Company, dealing in paper, the capital stock of which he had recently purchased under an agreement requiring substantial payments of cash by him to Livermore within the next few months. The Tileston-Livermore Company carried an account with the National Grand Bank of Marblehead, which cleared its checks through the Merchants' National Bank of Boston. The Tileston-Livermore Company had no dealings with the plaintiff.

The reorganization of the bookkeeping system and the opening of a new set of books by Minon did not require all his time. While conducting this work he had access to, and necessarily used not only the account books, but the check books, pass books, and checks of the plaintiff showing his financial dealings with the defendant. Minon as the plaintiff's authorized agent, with the plaintiff's full knowledge and consent, received from the defendant the monthly statements of its account with the plaintiff and the checks returned by it to the plaintiff.

On one occasion a woman, bookkeeper of the plaintiff, observed Minon tearing a sheet of three checks from the back of the plaintiff's current check book, whereupon Minon volunteered the information that he was taking them to use as samples in ordering a new check book. The plaintiff had constant knowledge of all the details of his business, went to the store every day, and hired all the employees, but knew nothing about bookkeeping, and did not personally compare the bank statements. Returned checks, or check stubs with each other or with the account books. He intrusted this work to Minon, in whom he believed and had explicit confidence and on whom he relied. The plaintiff's only employee other than Minon during the time in question, who had access to the check books and account books was a bookkeeper, who had charge of and kept the plaintiff's books under Minon's supervision. Minon undertook such comparison between the check stubs and the checks with the assistance of the bookkeeper. He read the checks and the figures, and she checked them upon the stubs. The plaintiff endeavored to keep in close touch with his daily balance by taking the figures Minon gave him as the balance at the end of each month and carrying them forward.

On or about February 12, 1920, the defendant notified the plaintiff's bookkeeper that plaintiff's account was overdrawn. The bookkeeper notified the plaintiff, and he went personally to the defendant, demanded and received his checks which had been paid during the portion of that month which had then expired. Among these checks were two checks aggregating to $2,625, on which the plaintiff's name had been forged, which had been deposited to the credit of Tileston-Livermore Company in the National Grand Bank and collected from the defendant through the Merchants' National Bank of Boston. The defendant gave the plaintiff credit for these checks. It returned them through the Merchants' National Bank to the National Grand Bank, and in return received credit therefor, and the National Grand Bank delivered them to Minon, and the next morning the amount was repaid by the Tileston-Livermore Company. The treasurer of the defendant, who qualified as an expert, testified that in his opinion the body of each check...