National Dredging Co. v. President, Directors and Co., of Farmers Bank of State of Delaware

• Citation: 22 Del. 580,69 A. 607
• Court: United States State Supreme Court of Delaware
• Decision Date: 06 May 1908
• Parties: NATIONAL DREDGING COMPANY, plaintiff below, appellant, v. THE PRESIDENT, DIRECTORS AND COMPANY OF THE FARMERS BANK OF THE STATE OF DELAWARE, defendant below, respondent

69 A. 607

22 Del. 580

NATIONAL DREDGING COMPANY, plaintiff below, appellant, v. THE PRESIDENT, DIRECTORS AND COMPANY OF THE FARMERS BANK OF THE STATE OF DELAWARE, defendant below, respondent

Supreme Court of Delaware

May 6, 1908

Supreme Court adjourned, January Term, 1908.

Writ of Error.

The judgment is reversed, and case remanded.

Anthony Higgins and William S. Hilles for plaintiff.

Herbert H. Ward and Henry Ridgely, Jr. for respondent.

NICHOLSON CHANCELLOR, and GRUBB and PENNEWILL, J. J., sitting.

OPINION

NICHOLSON, CH.

This was an action of assumpsit in the Superior Court for New Castle County, brought by the National Dredging Company plaintiff in error, as plaintiff below, against the Farmers' Bank to recover an alleged balance of account.

The plaintiff's bill of particulars contained an itemized list of the deposits made by the plaintiff with the defendant, subject to check, from February, 1897, to April 2 1903, amounting in the aggregate to one million, nine hundred and fifty-one thousand, eight hundred and twenty-three dollars and forty-two cents ($ 1,951,823.42), and a list of checks alleged by the plaintiff to be wrongfully charged by the defendant to the account of the plaintiff within the same period, amounting in the aggregate to thirty-one thousand, five hundred and six dollars and eighty-six cents ($ 31,506.86).

A motion for a nonsuit was submitted by counsel for the defendant at the close of the plaintiff's testimony and was granted by a majority of the Court. Counsel for the plaintiff refused to take a nonsuit, and a majority of the Court thereupon directed the jury to return a verdict for the defendant.

SPRUANCE, J., delivered a dissenting opinion, saying in conclusion, "with proper instructions from the Court as to the law, I believe that a more just and satisfactory result would be reached by the verdict of the jury, than by the determination of both facts and law by the Court."

The assignment of errors was as follows:--

"1. That the Court erred in directing the jury to return a verdict for the defendant in the above stated cause.

"2. That upon the refusal of the plaintiff to accept a nonsuit in the above entitled cause, the Court erred in charging the jury as follows:

'For the reasons which the majority of the Court gave in their decision to grant a nonsuit in this case, we direct you to return a verdict for the defendant.'

"3. That the Court erred in not submitting to the jury, under the testimony adduced on the part of the plaintiff, and contained in the Bill of Exceptions, the question as to whether the defendant was indebted to the plaintiff in the said action."

Obviously, it will be necessary to consider the evidence in detail, in order to arrive at a correct understanding of the question presented to this Court, but a general preliminary outline of the facts in the case may be best given by quoting from the opinion of the learned Chief Justice in the Court below, as follows:

"In disposing of this motion for a nonsuit we will first briefly summarize the facts disclosed by the testimony of the plaintiff.

"The National Dredging Company, the plaintiff, is a corporation of the State of Delaware, and during the time covered by this suit, was engaged in operations and in work in different parts of the United States, involving the expenditure of large sums of money. The Farmers' Bank at Wilmington, the defendant, is also a corporation of this State engaged in the banking business; and during the time above named was the depository and banker for the said company.

"The chief place of business and office of the company was in the City of Wilmington; as was also the banking house of the defendant.

"From February 23, 1897, to January 14, 1903, the company had on deposit with the bank subject to check a large sum of money, amounting to nearly two millions of dollars. This amount has been properly paid out by the bank upon checks of the company, except the sum of thirty thousand eight hundred and thirty-one dollars and fifty-two cents. This amount the company claims was wrongfully paid by the bank upon altered or forged checks, which are one hundred and fourteen in number, and extend from July 7, 1897, the date of the first, to December 17, 1902, the date of the last of the disputed checks, as disclosed by the plaintiff's bill of particulars.

"The money of the company was deposited from time to time in the bank by William H. Churchman, who was the secretary of the company, in charge of its office and its representative in this city. All such deposits were entered upon the bank pass books of the company, which book the company kept. The money so deposited was paid out only upon checks signed by the treasurer, who was George G. Barker. The pass book was written up and settlements made, and the company's balance in the bank ascertained, twelve times during the period covered by this controversy, as follows, viz., June 14, August 28 and December 22, 1897; August 6, 1898; August 4, 1899; August 11 and November 8, 1900; June 9, March 1, November 11 and December 11, 1901; and January 14, 1903.

"At each one of these settlements the checks theretofore paid by the bank were surrendered and delivered with the pass book to William H. Churchman, and remained in the possession of the company up to the commencement of this action. The first two of the disputed checks, dated respectively July 7 and August 8, 1897, were so delivered in the second settlement of August 28, 1897. Like deliveries of the disputed checks were so made in each of the succeeding settlements and so remained in the possession of the company.

"All the disputed checks were signed by the treasurer George G. Barker. The alterations or forgeries consisted in drawing two lines through the words 'the order of,' before the name of the payee in each check, and in writing after the name of the payee the words 'or bearer.' It is alleged that these alterations were made after the checks were signed, and without authority. The handwriting in the body of all the checks, except six, is that of William H. Churchman, the secretary of the company. The remaining six are either in his handwriting or in that of some one in the office under him.

"The method of the company in paying its bills seems to have been this: the secretary, William H. Churchman, received the bills, filled out the checks, and sent them to George G. Barker, the treasurer, wherever he might be from time to time. The checks were signed by the treasurer and returned to Churchman for distribution among the creditors.

"With respect to this bank account, the evidence shows that William H. Churchman, the secretary, made the deposits; kept the bank book at the office of the company in this city; had the book settled from time to time; received the checks surrendered by the bank at such settlements. It is proved that all the money paid out by the bank on these altered checks was paid to the said William H. Churchman, personally, who was not only the Secretary of the company, but under the by-laws of the company, in the absence of the president and vice president, acted as president.

"The company claims that the alterations of those checks were so manifest upon the face of the check itself, by reason of the different ink used, the manner and place of the additions to the checks and the character of the same, that the bank was grossly negligent in paying them. The company claims, therefore, that it is entitled to recover in this action, even though there may have been negligence on its part in not sooner discovering and notifying the bank of the alterations."

The bank claims, on the other hand, that the course of conduct and the business methods of Barker, the president and treasurer of the plaintiff company (depositor), in connection with the transactions in controversy, as disclosed by the testimony of the plaintiff, constituted such gross negligence and so misled the bank as to relieve the defendant from all responsibility from the loss occasioned by its payment of the altered checks to Churchman.

This defense is formulated by counsel in the three following paragraphs:--

"First. Our first point is therefore that plaintiff cannot recover because its prior or original negligence occasioned the loss in question.

"Second. Our second point is therefore that plaintiff was guilty of gross negligence subsequent to the payment of the several checks in question by the bank.

"Third. Our next contention is that the acts and conduct of plaintiff company warranted defendant bank in believing that William H. Churchman was authorized to make the alterations appearing on the checks in controversy."

There is no question of fraud or intentional misconduct on the part of either the plaintiff or defendant, but in order to determine which of the parties to the suit must bear the loss resulting from the crime of William H. Churchman, it is, of course, necessary for the issues of negligence, which are presented, to be decided; and the question for this Court to determine is whether it was proper for the Court below, under the evidence before it, to withdraw the case from the jury.

In the absence of either prior or subsequent negligence or misleading conduct on the part of a depositor, a bank or banker cannot charge the depositor with any payments, except such as are made in conformity with his orders, for the relation of a bank and its depositors is one simply of debtor and creditor, and it matters not what care is exercised and what precautions are taken by the bank, no payment made otherwise can be charged against the depositor, even though it be made in consequence of forgeries so skilfully executed as to deceive the most expert, or by false pretenses so adroit and...