137 So. 2d 800 | Miss. | 1962
This is an appeal from a final decree of the Chancery Court of the Second Judicial District of Jones County awarding appellees a money judgment for $19,273.84.
Appellees had a checking account in appellant bank. The signature card authorized only them to sign checks on it. In late December 1959, appellees learned that appellant, since July 1954, had been permitting their secretary to sign checks on the account. Of the checks so signed by her, she had made 126 of them payable to herself and had cashed or deposited them to her personal account.
Appellees learned also that appellant, since January 1958, had been permitting her to cash or deposit to her personal account checks payable to them which she was supposed to have deposited to their account. These, 24 in number, totaled more than $2,500.00.
The lower court’s decree was rendered on the Special Chancellor’s findings of fact, in which he held that the appellant bank was negligent.
The sole decisive issue in this case is whether the appellant Bank was negligent.
This cause, originally filed in the Circuit Court, was transferred to the Chancery Court and the pleadings there recast. Appellees averred in their bill of complaint that they are and have been partners doing business under the name of Hughes & Foote, engaged in activities relating to the development and production of oil, gas and minerals. Several years before 1954 they opened a checking account in the appellant bank in the name of Hughes & Foote, signing at the time the customary 'signature card which provided that only the appellee Urban B. Hughes or the appellee Alfred Foote was authorized to sign checks on the account. During the period from
One Tom McGrlothlin, who has shared office space with appellees for many years, each month delivered to the partnership his check for one-third of the office expenses. Though these checks were payable to Hughes & Foote, the appellant bank permitted Mrs. Stringer to cash 24 of them or deposit them to her individual account, in the total amount of $2,715.34. One check in the amount of $22.00 which, on its face, was not signed by anyone, was, nevertheless, paid to Mrs. Stringer.
Appellees averred that prior to July 1954, Frances Stringer had been their employee for years; that they had come to trust her implicitly and delegated to her all of the work incident to the keeping- of the books and records of the partnership; and that they did not suspect that there was any irregularity in their bank account until the last days of December 1959. Immediately upon learning of the shortage in their bank account, they notified appellant bank.
Appellant answered, admitting the existence of the bank account, the opening balance as averred by appellees, the amounts of deposits as averred by appellees,
Appellee Hughes’ testimony was to the effect that the partnership had employed Prances B. Stringer in November 1946 and that she had remained in their employ until the very last day of December 1959. Her duties were those of typist, receptionist and bookkeeper. They first discovered about January 1, 1960, that some unauthorized checks had been written and others cashed without his or Mr. Foote’s endorsement. At the time Mr. Foote was out of town, but immediately upon his return in a day or two they saw their attorney, arranged to have an audit made, and notified the President of the Commercial National Bank & Trust Company. He further testified he had no knowledge of any reputation of Frances B. Stringer for dishonesty before that time. Her normal duties were the examination of the monthly bank statements and keeping the books, writing the checks for their signatures. She had no authority whatever to sign either his name, Hughes, or Mr. Foote’s. They considered her a very efficient employee and trusted her implicitly. He had never authorized the bank to pay or cash any checks signed “Hughes & Foote by Frances B. Stringer”, or to cash any checks payable to the partnership which they sent her to the bank to deposit. He had never looked at or examined the bank statements; that he relied on Mrs. Stringer to check them, always trusting her honesty. However, there did arise this situation: That not long after Mrs. Stringer entered their employment a question concerning her morality was called to their attention; since she was from
The testimony of Mr. Foote was to the same effect as Mr. Hughes’ in regard to the efficiency of Mrs. String'er, her duties and their implicit trust in her. He had no knowledge that anything was wrong until December 29, 1959. Mrs. Stringer regularly carried the firm’s deposits to the bank. He had never told any officer or employee of the bank that Mrs. Stringer was authorized to sign checks on the partnership account or to endorse and cash checks payable to it. He related a number of positions of civic honor which Mrs. Stringer had held in recent years in which she had been entrusted by others with substantial amounts of money. She was Secretary-Treasurer of possibly two clubs. That prior to the partnership’s engaging Mrs. Stringer, Mrs. Foote, his wife, had known her for many years and had recommended her due to her family connection and her personality. He felt that they had sufficient information from his wife and from their knowledge of her family connection to warrant their employing her. He had never examined the partnership bank statements except for the first month or two immediately following her employment. She was instructed to furnish the auditor in Mr. Block’s office, the first of each year, such information as he might require in order to prepare income tax returns. In December 1959, after all of this came up, they began to search for the bank statements,
The president of the appellant bank testified on its behalf in effect that after the discovery that Mrs. Stringer had been signing checks on Hughes & Foote, he had several conversations with appellees, who had told him that they had so trusted her that neither of them had ever looked at any of their books or bank statements or anything of that kind. It was his recollection that at one of the conferences which he had with them early in 1960 they had told him that they had known of an
Appellant’s president explained that when a check is offered for deposit to the credit of the named payee who has an account in appellant bank, some notation is usually made on the back of the check to show to whose account such check is credited; that it is not important whether this notation be an actual endorsement by the named payee or whether the named payee’s name is written by an employee or whether the teller puts a rubber stamp on it reciting simply that it is to be credited to the account of the within payee. In some instances if a check is tendered to a teller for deposit to the account of the payee, the teller may request the person tendering such check to endorse it or to write the name of the named payee. He stated that simply because a clerk or secretary frequently brings her employer’s checks to.-the bank for deposit to her employer’s account and has written on the back of them the name of the employer, the teller should not infer that such employee is authorized to draw on the employer’s account. The appellant bank had about seven tellers in 1954, four of
The president did not know whether or not any effort had been made to locate the particular bookkeeper who was handling appellees’ account in 1954. His tellers and his bookkeeping department should be guided by signature cards and not by inferences. The appellant
Woodie Rogers, for the appellant, testified he is a certified public accountant of many years’ experience and a partner in F. J. Block & Company. He annually prepared the partners’ tax returns from their books, consisting of their ledger and journal, but saw nothing-on the face of the books to indicate that anything was irregular. He did not check the books against the original checks, nor did he make an examination of the bank statements. When he was engaged in January 1960 to make an examination of the partnership’s affairs, he went back as far as 1947. He found that no entries for the year 1959 had been made in the journal or ledger. He found a minor discrepancy in the books in June of 1947. The next discrepancy did not appear until two years thereafter. He found that the books, the check stubs and the cancelled checks all differed from each other. He found, in each year from 1954 on, fewer proper payroll checks issued to Frances Stringer and signed either by Foote or Hughes than she was entitled to receive. Occasionally purely fictitious checks were written and at other times checks would be overstated. in the books. In addition to checks which had been signed by Mrs. Stringer payable to herself, she had written other checks in payment of legitimate office expenses. It was impossible for him to tell on his yearly examination of the ledger and journal that there were any defalcations going on, as they appeared on the surface to be in perfect order. The only way in which the irregularities could have been discovered was to compare the journal and ledger entries with the actual checks. He customarily examined the partnership’s withholding and social security tax reports which were prepared by Mrs. Stringer, and they showed her monthly salary to be'$200.00 gross. There was nothing in the journal or
Mrs. Mamie Lou Hemington testified for appellant she was employed for the past eleven years by appellant as its collections and exchange teller. She was shown Exhibits 26 and 27 to the cross examination of Mr. Foote. These are copies of drafts on which she had made a notation that they were approved by Mr. Foote by phone by Frances Stringer. She explained that as a matter of fact she didn’t just ask Mrs. Stringer whether she should pay the drafts, but mailed a notice to Hughes & Foote, and Mrs. Stringer subsequently phoned her and said that Mr. Foote said to charge the drafts to the Hughes & Foote account. She understood that she was carrying out the instruction of' Mr. Foote and was not honoring the drafts merely on the authority of Mrs. Stringer, who she considered was simply communicating over the telephone the instruction given the bank by Mr. Foote.
From the above testimony as outlined the learned special chancellor’s finding of fact was to the effect that long prior to July 1, 1954, the partnership of Hughes & Foote opened a checking account in the partnership name and at that time executed and delivered to the bank a signature card on the form provided by the bank, which authorized the disbursement and withdrawal of partnership funds from their checking account signed in the name of the partnership by either Hrban B. Hughes or Alfred Foote, and that the signature card was left with the bank at the time it was executed and the account opened, and has remained in the custody of the bank continuously since that time. He further
The sole and decisive issue in this case is whether the bank was negligent in cashing the checks on the unauthorized signature “Hughes & Foote by Frances B. Stringer”. The negligence in such matter where an employee exceeds her authority in signing checks was decided in 1933 by this Court in the case of Deer Island Fish & Oyster Co. v. First National Bank of Biloxi, 166 Miss. 162, 146 So. 116, which held: “Of course, it is quite well settled, and the general rule is, that a bank pays money upon a forged or unauthorized check at its
“Therefore, it was a question of fact for the jury as to whether or not the bank was negligent in paying-forged checks. If the jury so found, then the defense of want of diligence on the part of the depositor would be foreclosed, and under the prevailing rule, undoubtedly correct, the bank would be liable and should suffer the loss * * *.
“* * * A depositor’s failure to examine his checks within a reasonable time, according- to the circumstances of his particular business, and the loss occasioned to the bank by such failure, makes the depositor liable for the amount of the checks or forgeries paid by the bank, where it is shown that the bank was not negligent * * *.
“* * * A depositor may intrust this duty to a competent, honest bookkeeper, or to an employee whom he, in good faith, believes to be honest and competent. There are authorities which hold that the action and knowledge of a dishonest employee is at once imputed to his principal. This view, in our judgment, is at war with the .general rule and would operate to relieve the bank of any responsibility, and discharge it from the rigor of the rule that a bank pays out the money of its depositors on forged instruments at its peril. We cannot subscribe to this doctrine; it destroys the rule which is wholesome. It has been thought that a bank engaging in the business of depositing and paying out money on checks and other exchange is equipped to discover forgeries and to safely preserve its depositors’ money * * *.
“We conclude that when a bank is free from negligence in the first instance, it becomes and is the duty of the depositor within a reasonable time to make an examination of his statement of account and cancelled checks and vouchers supporting same, or, in good faith,*269 to have said examination made by a competent and honest employee, who he believes to be snch * * *.
“* * * ^ the case at bar the question of the bank’s negligence vel non should be submitted to the jury, and the right of the bank to avail itself of the defense of negligence on the part of the depositor should only be accorded in the event the jury should find as a fact that the bank was not negligent * *
This case is in accord with the general rule. In 7 Am. Jur., Banks, Sec. 516, p. 371, it is said: “Consequently, in every case where suit is brought by a depositor to recover from a bank money deposited by him, which the bank has paid out otherwise than in conformity with his orders, and the bank sets up the defense that it is nevertheless entitled to charge the depositor with such payments because of conduct of the depositor subsequent to such payment, the preliminary question to be determined is whether the bank was or was not guilty of negligence in making the payments. If it was negligent, if its officers are found to have failed to exercise due and reasonable care in detecting the forgery or fraud, then the subsequent negligence of the depositor, his failure to perform his duty in examining his passbook and vouchers with reasonable care and to report to the bank in a reasonable time any errors or mistakes, will constitute no defense.”
In First National Bank of Philadelphia v. Farrell, (C.C.A 3d), 272 Fed. 371, 16 A. L. R. 651, the appellant bank was sued for having honored checks drawn by an agent in amounts exceeding the sum for which he, was authorized to sign checks. The court, after referring to the general rule regarding examination of passbooks and the statements by a depositor, said: “But the general rule arising from the examination of pass book or statements by the depositor himself, and the variation of the rule arising from the examination of them by his authorized agent, involve in practically every reported
“We are of opinion that the learned trial judge made no mistake of law in holding the bank liable for honoring checks beyond the authority which the plaintiff depositors had conferred upon it.”
We feel that the learned chancellor was eminently correct in his findings and that the appellant was negligent, and this neglig’ence began at the time the first check was signed by the employee and never communicated it to either of the appellees. The case is therefore affirmed.
Affirmed.