U.S. Fidelity & Guaranty Co. v. First Nat. Bank of S. C. of Columbia

• Decision Date: 21 July 1964
• Docket Number: No. 18241,18241
• Court: South Carolina Supreme Court
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellant, v. The FIRST NATIONAL BANK OF SOUTH CAROLINA OF COLUMBIA, Rrespondent.

Page 582

137 S.E.2d 582

244 S.C. 436

UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellant, v. The FIRST NATIONAL BANK OF SOUTH CAROLINA OF COLUMBIA, Rrespondent.

No. 18241.

Supreme Court of South Carolina.

July 21, 1964.

Roger M. Heyward, Bernard Manning, Columbia, for appellant.

Boyd, Bruton & Lumpkin, Charles W. Knowlton, Kirkman Finlay, Jr., Columbia, for respondent.

BUSSEY, Justice.

In this action appellant, as subrogee of Southern States Construction Company (hereinafter simply called the company), by virtue of having paid a claim under a fidelity bond issued to the said company covering its employees, sought to recover from the respondent (which will hereinafter be referred to simply as the bank) the amount of the claim paid by it, plus interest and costs. The defalcation of an employee of the company involved a total of twenty-six checks handled by the respondent bank and involved certain forgeries and alterations, which will hereinafter be discussed in more detail.

By consent, the action was referred to the Master in Equity for Richland County, who, after taking the evidence, concluded that appellant was entitled to, and recommended that appellant recover judgment in the amount of $306.31, on account of a check forged on the account of the company in the amount of $105.08, paid by the bank on March 3, 1961, and another like check in the amount of $201.23, paid on April 3, 1961. As to the remaining twenty-four checks, the master concluded that appellant was not entitled to recover.

Only the appellant excepted to the master's report, which, incidentally, is not in the record; nor are the exceptions of the appellant thereto included in the record. The record contains a summary of the testimony of the witnesses, ratehr than the verbatim testimony.

The master's report was confirmed in its entirety by the circuit judge. The master apparently found, and certainly the circuit judge found, as matters of fact, that the respondent bank was not negligent in connection with the remaining twenty-four checks; that the company was extremely negligent in various particulars, and that the loss or losses were caused or brought about by the negligence of the company. This appeal is from the order of the circuit judge confirming the master's report.

With respect to three of the checks involved, appellant abandoned its contentions, so that on appeal there are involved twenty-one checks in the total amount, according to appellant's brief, of $7,584.34. Additionally involved is the question of whether the appellant is entitled to interest on such amount or amounts as the bank may be liable for.

The exceptions of the appellant are thirty-two in number, occupying more than eleven pages in the printed record. Some of them are broken down into as many as seven subheadings and some fail to comply with Section 6 of Rule 4 of the Supreme Court. In addition, appellant's 84 page brief states the questions involved as being nine in number, and then fails to comply with Section 3 of Rule 8 in that the several headings fail to refer to the specific exception or exceptions alleged to raise the questions being considered therein. Compliance with the last cited rule is always important, and particularly so in a case where, as here, there are such numerous exceptions, some of them not properly framed, and such a copious brief. Failure to comply therewith places an undue burden on this court in studying the exceptions and the briefs in order to determine what issues, if any, are properly before the court on appeal. In this case we would be fully justified in dismissing the entire appeal for failure to comply with the last cited rule, but refrain from doing so because no previous decision has come to our attention wherein this court has passed upon the effect of failure to comply with Section 3 of Rule 8.

While the appellant's contentions are numerous, it concedes that a depositor may be estopped by negligent conduct from recovering against a bank which would otherwise be liable for honoring forged or altered checks. It asserts, however, that in order for a bank to avoid liability on the basis of estoppel, it is incumbent upon the bank to affirmatively show that it exercised due diligence, was free of negligence, and not only that the depositor was negligent, but that depositor's negligence was the proximate cause of the payment of the checks and resultant damage. In support of this contention appellant cites, inter alia, 9 C.J.S. Banks and Banking § 356, p. 730; 10 Am.Jur.2d 490, Banks, Section 519; and Hair v. Winnsboro Bank, 103 S.C. 343, 88 S.E. 26, where this court approved the trial judge's charge as being a proper and full statement of the applicable law, which charge is reported in the South Carolina Reports, but not in the South Eastern Reporter. Also cited is the case of Carroll v. South Carolina National Bank, 211 S.C. 406, 45 S.E.2d 729.

The citations from C.J.S. and American Jurisprudence fully support appellant's contention as to the proper and general rule. The Hair case is authority for the proposition that it was incumbent upon the bank to show negligence on the part of the depositor and that such negligence had caused the loss, but did not specifically deal with any affirmative showing of lack of negligence on the part of the bank. The Carroll, case, however, which dealt with the payment of a check by the bank after it had been ordered stopped, rather than a forgery or alteration, clearly tends to support appellant's contention as to what a bank must affirmatively prove in order to avoid liability where it has paid forged or altered checks. Briefly stated, appellant's exceptions assert that the essential elements of estoppel were not established by the evidence.

In a law case, findings of fact by the circuit judge are not reviewable by this court if there is any evidence whatever to support such findings. Weston v. Morgan, 162 S.C. 177, 160 S.E. 436. See also numerous cases in West's Digest, Appeal and Error, k1022. As to all factual issues passed upon by the trial judge, the question before this court is not whether the evidence would support contrary findings, but whether there is any evidence to support the findings actually made.

In the light of the foreging principles we proceed to consider the evidence in the record and the facts disclosed thereby, which are as follows:

Some time apparently during the year 1957, the exact date not appearing in the record, the company employed as a bookkeeper a woman by the name of Kietel. The two principal officers of the company were Mr. Dial and Mr. Thomas, they being the only persons authorized to sign checks for the company, each of whom could sign individually. Kietel, in addition to keeping books, prepared for issuance all, or substantially all, of the checks of the company, which were signed by either Dial or Thomas. She attended to depositing money in banks for the company; picked up all of the canceled checks, and reconciled the bank accounts, all without any supervision from Dial, Thomas or anyone else. It was a frequent practice for both Dial and Thomas to sign company checks for Kietel which were only partially filled in by Kietel.

Kietel's first defalcation, as far as the record shows, occurred on April 23, 1959, when she apparently forged the signature on a company check in the amount of $39.92. The next defalcation thereafter did not occur until September of that year. Thereafter, they occurred with increasing frequency but substantially more than half of the total loss occurred more than one year after Kietel had embarked upon her course.

Whild neither Dial nor Thomas exercised any supervision over or checked upon the bank accounts of the company, the company did have a firm of auditors who made an annual audit of the affairs of the company. Audits for the year 1959 and 1960 did not disclose the defalcations, although they totaled some $6,000 by the end of 1960. Seven of the checks here involved showed that they were examined by the auditor without discovering or reporting anything wrong.

In the spring of 1961 Kietel was discharged for incompetency, and another bookkeeper engaged by the company discovered Kietel's defalcations. The new bookkeeper commenced work in March 1961. Some several weeks after he had discovered certain discrepancies, the bank was asked for assistance by way of photostats of certain checks for use in investigation of the matter. It thus appears that neither the company nor the bank had actual knowledge of any discrepancies until approximately two years after the commencement of the defalcations.

The twenty-one checks involved on the appeal fall into several different categories. We shall first refer to three forged checks, the first thereof being a check in the amount of $39.92, paid on March 23, 1959; another in the amount of $100, paid on November 3, 1959; and still another in the amount of $134.87, paid on December 9, 1959, all of which will hereinafter again be referred to.

One of the checks involved is a check in the amount of $600, dated September 21, 1959, payable to J. E. Outlaw, a trusted employee of the company who was working out of town. Kietel occupied a house which she was renting from the said Outlaw at the rate of $60 a month. She was far in arrears with her rent and this particular check was completed when signed by Thomas and was not altered in any way. Kietel, however, wrote 'J. E. Outlaw' on the back of the check, and deposited it to his account in the Commercial Bank and Trust Company of Columbia, notifying Outlaw of the deposit and telling him that she had made the deposit to cover rent in that amount. Outlaw had no knowledge of the source of the deposit, but the record shows that Kietel had from time to time made deposits to Outlaw's account with his knowledge, and sometimes at his request. No explanation was offered by Thomas as to why he signed the check.

Another check to Outlaw, dated...