Leather Manufacturers' Bank v. Morgan,
117 U.S. 96 (1886)

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U.S. Supreme Court

Leather Manufacturers' Bank v. Morgan, 117 U.S. 96 (1886)

Leather Manufacturers' Bank v. Morgan

Argued November 3, 1885

Decided March 1, 1886

117 U.S. 96


A depositor in a bank, who sends his pass book to be written up and receives it back with entries of credits and debits and his paid checks as vouchers for the latter, is bound personally or by an authorized agent, and with due diligence, to examine the pass book and vouchers, and to report to the bank without unreasonable delay any errors which may be discovered in them, and if he fails to do so, and if the bank is thereby misled to its prejudice,

Page 117 U. S. 97

he cannot afterwards dispute the correctness of the balance shown by the pass book.

If a depositor in a bank delegates to a clerk the examination of his written up pass book and paid checks returned therewith as vouchers, without proper supervision of the clerk's conduct in the examination, he does not so discharge his duty to the bank as to protect himself from loss if it turns out that without his knowledge, the clerk committed forgery in raising the amounts of some of those checks, and thereby misled the bank to its prejudice, in spite of due care on the part of its officers.

In this case, it was held that the question whether the depositor exercised in regard to such examination the degree of care required of him in the circumstances disclosed by the evidence, including the relations of the parties, and the established usages of business, and the question whether the endorsement of a particular check was, under the evidence, an endorsement in blank or one for deposit to the credit of the depositor, were for the jury to determine under proper instructions as to the law.

This was an action commenced by defendants in error, as plaintiffs below, against the bank, to recover an alleged balance of account. The facts are thus stated by the court.

The defendants in error, subjects of the Queen of Great Britain and partners under the name of Ashburner & Co., brought this action to recover a balance alleged to be due on a deposit account opened at the Leather Manufacturers' National Bank of New York City in the name of "Wm. B. Cooper, Junior, agent for Ashburner & Co." The main dispute is as to the right of the depositor to question the account rendered by the bank so far as it charges him with certain checks which he signed, but which, before payment, were materially altered by his clerk without his knowledge or assent. The claim of the plaintiffs is that after deducting all payments to them, or for their use, there was due to them, April 8, 1851, the sum of $9,996.35, for which they ask judgment. They also ask judgment, upon a second cause of action, for the sum of $280.97, the amount of a check which, it is contended, was endorsed specifically for deposit to the credit of their agent, and was not placed to his credit. The bank denies its liability upon either cause of action, except for the sum of $141.91, which, it contends, is the entire balance due to the plaintiffs on March 22, 1851.

Page 117 U. S. 98

Numerous requests for instructions in behalf of the bank were denied, and, under the order of the court, the jury returned a verdict, upon which judgment was entered in favor of the plaintiffs for the sum of $10,741.09. To this action of the court exception was duly taken, and the bank brings the case here for review. The record contains a large amount of testimony, the details of which cannot well be embodied in this opinion, but the more important facts and circumstances which the evidence tended to establish, and upon which the decision of the case must turn, are those which will be now stated.

1. One Berlin entered the service of Cooper on the first day of January, 1878, when about seventeen years of age. He and his family were well known to his employer. From that date until March, 1881, as confidential clerk, he had the entire management of Cooper's office, kept his books, and had full charge of the account which Cooper, as agent of Ashburner & Co., kept with the defendant. With the knowledge and under the direction of Cooper, he filled up all checks drawn upon that account, entering on the stub of the check book the date and amount of each check, the name of the payee, and the purpose for which it was drawn. He states in his deposition that he was well known to the teller of the defendant bank and as the representative of Mr. Cooper.

2. Pursuant to Cooper's instructions or in the regular course of business, he filled up certain checks between September 11, 1880, and February 13, 1881, which, being signed by his employer and delivered to him, were altered by him before they were taken from the office. The alterations were by erasure and by rewriting the body of the checks, and were made, he states, "with great care, and could not be detected without very careful scrutiny or a very close examination." The teller of the bank testifies that the checks when presented by Berlin were always carefully examined by him as to signature, amount, date, and endorsement, and that there was nothing about them to excite suspicion, or to suggest alteration or erasure. Upon the checks so altered, Berlin received from the bank the "full raised amount," out of which he paid to Cooper

Page 117 U. S. 99

or to his use the several amounts for which they were originally drawn, and appropriated the balance to the discharge of gambling debts which he had contracted. The entries in the check book were made by Berlin, and were correct, but he "forced the footings of the stubs" by making false additions equal to the increase of the altered checks.

3. The numbers and dates of the altered checks, and the nature of the several alterations, are as follows:


4. Cooper's pass book was written up at the bank October 7, 1880, November 19, 1880, and January 18, 1881, and a balance struck, showing to his credit on those dates, respectively, $10,821.64, $4,568.68, and $5,566.61. Upon each occasion, the book was returned with all checks that had been paid subsequent to the previous balancing, including the altered checks. Across the face of the pass book, on the first balancing, was

Page 117 U. S. 100

written "62 vouchers returned," on the second, "79 vouchers returned," and on the last. "66 vouchers returned." Each time the pass book was returned with the vouchers, Berlin destroyed such of the checks in the lot as he had altered. He remembers to have shown the rest of the vouchers to Cooper on the balancing of October 7, 1880, but does not remember of pursuing that course on the other occasions.

5. Berlin states that Cooper "was in the habit of examining his checkbook from time to time." It is clear that the latter knew of these balancings, for he testifies that his account with the bank

"was balanced from time to time, which was done by the bank writing up the pass book, and returning the checks that had been paid by it; that when the pass book was so returned, it went to the clerk Berlin, who then balanced the check book, that being one of the duties imposed upon him; that the witness took no part in such balancings, but Berlin generally showed him the vouchers that were returned, because he used to like to look at them, but he never gave Berlin any particular instructions so to do; that he was in the habit of looking over his checkbook, and kept track of the balance, which, during the months of August, September, November, and December, 1880, and January, 1881, he understood to be about $10,000, and that when he asked Berlin as to the balance, his answer agreed with about what he supposed was in the bank.' He also knew the object of such balancings; for he testifies 'that he had been a dealer with the defendant bank for upwards of eighteen years, and that he knew that it was its custom, as well as the custom of all banks, to balance at intervals the pass books of its depositors, and to return the same when balanced, accompanied by the checks drawn by the depositor and charged to the account, as the vouchers of the bank for such payments."

6. Cooper states that the forgeries were discovered by him "about the first or second day of March, 1881." Berlin having stayed away from the office for a day, he compared his pass book with the stubs of the check book, and ascertained that a certain number of checks appearing on the stubs were not charged against him in his pass book, and did not appear

Page 117 U. S. 101

to have been returned by the bank, while others, which appeared on the pass book to have been charged against and returned to him, did not appear, by the stub of the check book, to have ever been drawn. He

"thereupon sent his pass book to the bank to be balanced, and it was balanced on March 2, 1881, and among the vouchers then returned were the aforesaid checks 8,518 and 8,550, which had been altered from their original amounts."

This, he states, was the first knowledge he had of the forgeries. After receiving the last balancing, he

"then notified the bank that his clerk had absconded, and that alterations had taken place, and requested them not to pay any more of his checks the bodies of which were filled up in the handwriting of his clerk Berlin."

Whether this notification was given as soon as he saw those two checks or on the same day or after the expiration of several days the record does not show.

7. Cooper admits that if on any of the several balancings he had made such examination of his check book and pass book as was done on March 1, 1881, he would have "easily discovered" that his account had been charged with altered checks, and that for the previous five or ten years, he knew of various means adopted by bankers and merchants to prevent the raising or alteration of checks, but he had not employed or used any of them. Upon one occasion, the date not given, he discovered, by adding up the "footings of the check book," an error, and spoke to Berlin about it. The latter having replied that it was very seldom he was caught in a mistake, Cooper believed him and looked no further into the matter.

Cooper did not surrender the altered checks, except 8,518 and 8,550, because they had been destroyed by his clerk. The teller states that the latter one came through the clearing house, while the former was not, when paid, in the condition in which it appeared to be alteration, he said, was now apparent.

It was upon this state of case substantially that the circuit court instructed the jury to find for the plaintiffs upon both causes of action.

Page 117 U. S. 102

Judgment was entered accordingly, and the bank sued out this writ of error to review it.

Page 117 U. S. 105

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