263 F. 778 | E.D. Pa. | 1920
From the plaintiffs’ statement of claim and the affidavit of defense, the relevant facts for the purposes of this rule may be stated as follows:
The plaintiffs are engaged at Boston in the purchase and sale of commercial paper. The plaintiffs in 1910 opened a Philadelphia office, and placed one M. T. Snyder in charge as their Philadelphia agent for the sale of commercial paper in Philadelphia and vicinity. On March 22, 1910, the plaintiffs opened an account with the Merchants’ National Bank of Philadelphia, which was subsequently merged, into the First National Bank of Philadelphia, the"’ defendant, and the defendant took over this account. The account was opened and always stood in the name of Weil, Farrell & Co., and when it was opened they filed with the bank a power of attorney which authorized Snyder to draw upon the account, but in no event in excess of $1,000 at any one time, and to manage and make settlement of the account. Snyder continued to make deposits in and draw checks upon the account within the limitations of the power of attorney until the month of April, 1915. On April 25, 1915, the account showed, a balance in favor of the plaintiffs of $89.09. The plaintiffs, during the whole period of the transactions in question, had an account with the Girard National Bank of Philadelphia, and up to April 25, 1915, their agent, Snyder, deposited the proceeds of the sales by him of commercial paper in the Girard National Bank; the plaintiffs drawing direct on that account from their Boston office.
Part of the said amount thus drawn out by him was deposited with the Girard National Bank to the plaintiffs’ credit and part used for his speculative account. The sales of notes from which the funds used in the speculative account were derived were not reported by Snyder to plaintiffs for a few days, and, in order to cover his transactions, he would take the proceeds derived from later sales of paper and deposit them with the Girard National Bank, and report the deposit as the proceeds of earlier sales of paper. In this way he would always be a few days ahead with the sales of paper, and for these few days would have the use of the money collected. The items deposited with the Girard National Bank did not coincide with the advices Snyder had given the plaintiffs by telegraph of his sales, and, in order to cover up such discrepancies, the plan Snyder carried out was as follows:
He would deposit checks representing the proceeds of later sales, adding a check either on the defendant bank or some other bank, in which he had a private account, to make up the necessary total, and would hand the officer of the bank two deposit slips, one setting out the items deposited and the total and the other setting out merely the total. The latter, purporting to be a duplicate of the former, was stamped and initialed by the receiving teller and handed back to Snyder, who would then enter on it false items representing the sales concerning which he had advised plaintiff, and forward the deposit slip to them along with his report giving the details of each item of sale.'
During the whole period from April, 1910, to May 23, 1917, excepting for the first month, the plaintiffs had no knowledge that the account with the defendant bank was being used by Snyder, and 'regarded it as a dormant and inactive account, but did not so inform the defendant. On the latter date, through a request by letter from the defendant for confirmation of Snyder’s action in having paper belonging to the plaintiffs carried by the bank on option, one of the plaintiffs went to Philadelphia and learned of the condition of affairs.
A recapitulation of the figures upon which the plaintiffs’ claim is based is as follows:
*781 Amount to the credit of account on April 26, 1915.............$ 89.09
Deposits between April 26, 1915, and May 24, 1917, inclusive.... 3,254,015.03 $3,254,104.12
"Withdrawals by Snyder.
(a) Checks in excess of $1,000 which reached Weil, Farrell & Co. by deposits in their account in the Girard National Bank................. $2,803,052.18
(b) Checks for less than $1,000 which reached Weil, Farrell & Co. by deposits in their account in the Girard National Bank........ 27,042.61
(c) Check to take up duebill for notes purchased by defendant on option to return and option exercised................................. 17,500.00
(d) Checks' to take up paper on option to other banks and option exercised................ 101,938.38
(e) Checks to take up drafts deposited to plaintiffs’ credit in the Girard National Bank.... 51,741.18
(f) Checks in amounts not exceeding $1,000...... 34,304.20
(g) Chock to take up due bill for notes purchased by defendant on option to return and option exercised ................................. 5,000.00
<h) Charge against defendant’s account upon delivery to the plaintiffs by the defendant of notes aggregating $80,000 sold under option by Snyder to the defendant to take up credit to the plaintiffs in the bank to that amount upon delivery of the said notes to the plaintiffs ...................................... 30,023.61
Total ............................... . 3,160,602.16
Which, deducted from the total deposits, leaves a difference of.. $ 93,501.96
The difference of $93,501.96 which is the amount for which the plaintiffs sue is made up as follows:
Thirty-five checks, each in excess of $1,000, drawn either to Snyder’s personal order or to the order of cashiei'’s checks, or New York drafts, or the Pennsylvania Company, all for his personal use .......................................................... $92,750.00
Balance admitted by the defendant to be on hand May 24, 1917____ 751.96
Total....................................................$93,501.96
The plaintiffs received the benefit of all other items of charge in the above recapitulation, either through deposits in the Girard National Bank or through return of the paper represented by the charges.
The defendant avers in its affidavit of defense that from August, 1912, to May, 1917, monthly statements of account were rendered by the defendant to the plaintiffs and delivered to the plaintiffs’ agent, Snyder, under the authority and direction contained in the power of attorney; these monthly statements being accompanied by all the canceled checks of the plaintiffs drawn on and paid by the defendant during the preceding month, including all the checks mentioned in the statement of claim.
It is averred that these statements of account, with the checks and vouchers, did not actually reach the plaintiffs, being held and retained by Snyder in plaintiffs’ Philadelphia office, or destroyed by him, but
It is further averred as a ground of defense that the plaintiffs failed and neglected to fulfill their duty in examining the accounts, canceled checks, and vouchers; that by reason of their neglect to examine the monthly statement the plaintiffs in law acquiesced in the account, waived the limitation of the power of attorney, modified the terms in that respect, and estopped themselves to assert against the defendant the right to repudiate the honoring and charging of checks which were honored subsequent to the rendition of the first monthly account, showing checks honored in excess of $1,000.
The defendant also set up several grounds upon which it is contended the plaintiffs, through thfeir neglect to perform duties imposed upon them by law, failed to acquaint themselves with facts which would have put them upon such notice that Snyder’s methods of using the account through which the loss was caused would have been discovered by them.
It is averred that the plaintiffs opened the account as a petty cash account; that, shortly after it was opened, they regarded it as a dormant and inactive account, but never notified the defendant bank to that effect, or closed the account; that the fact that the account was left open made it possible for Snyder to manipulate it for his purposes, resulting in the loss; that Snyder caused to be deposited to the credit of the account every month checks drawn by the plaintiffs to his personal order upon the Girard National Bank, which were in due course returned by the Girard National Bank to the plaintiffs; that as these checks were individually indorsed by Snyder and showed that they were deposited by him and credited by the defendant bank to the plaintiffs’ account, plaintiffs were in law informed by this indorsement that Snyder .was using the account in the defendant bank, and the plaintiffs made no objection thereto, although they regarded the account as dormant and inactive; that plaintiffs made no examination of any books or papers in Snyder’s ofiice from the time he was employed in March, 1910, until the discovery of his speculations in May, 1917; that they did not have any accountant malte any investigation or report upon Snyder’s business transactions, but relied solely upon the daily letters of advice sent by Snyder to their Boston office, and upon the duplicate deposit slips of the Girard National Bank sent with the daily letters; that the duplicate deposit slips of the Girard National Bank in a great many cases showed that the items of deposit were written 'over, across, and on top of the stamp of the receiving
The above defenses arc set up as general defenses to the whole claim and will be considered prior to passing upon the specific defenses as to certain of the items included among the 35 checks, aggregating $92,750, composing most of the balance which the plaintiffs claim is due them.
“The position of the court upon the latter question was based upon the terms of ¡he power of attorney of Weil, Farrell & Go. to M. P. Snyder, authorizing Mm to draw cheeks against their account in the defendant bank, ‘in no event to draw in excess of one thousand dollars at any one time,’ giving him full authority to manage and make settlement of the said account, giving him full authority as their general agent in all business with the defendant bank, and authorizing Mm to do all lawful acts for effecting the premises. The account was opened with the defendant bank, and accepted by it with notice of all the terms of the power of attorney.
“So Car as any negligence of the plaintiffs connected with the examination of the monthly statements of account is concerned, the court therefore hold that the duty of the depositor to the bank was fixed by the terms of the power of attorney, which constituted the contract between the parties, and the question of negligence upon the part of the plaintiffs in failing to object to the acts.of the defendant in honoring checks in excess of $1,000 did not arise; the defendant being estopped by its acceptance of the account with full notice to deny the authority of Snyder to pass upon the correctness of the monthly settlements.
“In the cases cited by the defendant, where the duty was held to be incumbent upon the principal to examine the accounts, and the principal was charged with notice of what appeared therein, and was held negligent, if he failed to object to an alleged wrongful payment, the clerk or agent who Was performing that duty for the depositor was acting under a delegation of authority of which the bank had no notice, in wMeh it had not acquiesced, and by which it was not bound.
*784 “In the present case, the authority to manage and make settlement of the account was delegated to Snyder, with full knowledge of the bank and with its acquiescence. Hence the court was of1 the opinion that, as between the bank and dépositor, there was no duty to the bank upon the part of the depositor to examine and settle the accounts, except through the attorney in whom the authority was vested through the power of attorney under the terms of which it accepted the account.
“Moreover, the court was of the opinion tha't there was no presumption or evidence that notice to Snyder was notice to the plaintiffs, since he was the wrongdoer who was committing the fraud upon his principal. ‘The presumption that the agent informed his principal of that which his duty and the interests of his principal required him to communicate does not arise where the agent acts or makes declarations not in execution of any duty that he owes to the principal, nor within any authority possessed by him, but to subserve simply his own personal ends or to commit some fraud against the principal. In such cases the principal is not bound by the acts or declarations of the agent unless it be proved that he had at the time actual notice of them, or having received notice of them, failed to disavow what was assumed to be said and done in his behalf.’ See American Surety Co. v. Pauly, 170' U. S., at page 156,18 Sup. Ct. 563, 42 B. Ed. 987, in which the subject is discussed and the authorities exhaustively reviewed by Mr. Justice Harlan in delivering the opinion of the Supreme Court.”
While the Pauly Case did not involve the question of the duty of a depositor to examine his accounts, the excerpt from the opinion of Mr. Justice Piarían is a clear and succinct statement of the lack of presumption of notice to the principal of facts within the knowledge of an agent, who is concealing to his own advantage facts of which the principal would otherwise be presumed to have notice. Where the question has arisen in cases in which an obligation has been placed upon the principal to have the examination of the bank’s periodical statements of depositor’s account made by some competent person, it has usually arisen where forged checks have been returned with the bank’s statements. It may require care and skill upon the part of the bank’s officials to detect a forgery, and if it is shown that, in the exercise of care and skill, the forgery could have been discovered by the bank, but that the bank was negligent in failing to exercise such care and skill, then neglect upon the part of the depositor to examine the statement and checks does not preclude the depositor’s recovery. Leather Manufacturers’ National Bank v. Morgan, 117 U. S. 96, 6 Sup. Ct. 657, 29 L. Ed. 811.
In that case Mr. Justice Harlan said, in discussing forgeries:
“Of course, if tbe defendant’s [bank’s] officers, before paying tbe altered checks, could by proper care and skill have detected tbe forgeries, then it cannot receive a credit for tbe amount of those checks, even if tbe depositor omitted all examination of bis account.”
And in discussing limitation upon the authority of an agent he said:
“In Manufacturers’ Nat. Bank v. Barnes [65 Ill. 69, 16 Am. Rep. 576] tbe Supreme Court of Illinois, while expressing its approval of the decision in Weisser v. Denison [10 N. Y. 68, 61 Am. Dec. 731], shows that the bank was itself guilty of negligence in paying checks drawn by the depositor’s clerk; for it had in its possession, placed there by the depositor, written evidence that the authority of the clerk to draw checks against the depositor’s account was. restricted to a designated period, which had expired when the checks there in dispute were paid.”
The present case is as strong against the defendant as though the checks had been known to the bank to be forgeries, and they had delivered the statements and checks to the one known to it to be the wrongdoer, with knowledge that the depositor relied upon him to inform them that the latter were forgeries. When a check of Snyder’s in excess of his authority to draw was presented to the* bank, with knowledge that Snyder was to pass upon the monthly settlements and knowledge that the check was unauthorized, it was not relieved of responsibility for its own negligence by the failure of the plaintiffs to examine the monthly statements. Through the bank’s acceptance of the account under the power of attorney, and in view of the fact that the plaintiffs had no knowledge of what Snyder was doing, the delivery of the monthly statements to the person whom the defendant knew was to make settlement of the accounts cannot be held to constitute notice to the plaintiffs of the facts shown by the monthly statements of account and the canceled checks, nor acquiescence in the honoring and charging of the checks, nor waiver of the limitation of the power of attorney, nor modification of the power of attorney as contended by the defendant, nor was their failure and neglect to examine the accounts, checks, and vouchers such negligence as to constitute acquiescence, waiver, and modification.
The primary and proximate cause of the loss through Snyder’s wrongdoing was the failure and neglect of the bank to observe the limitation upon his drawing power. In the present state of the pleadings the fact that the plaintiffs had opened a petty cash account, that shortly after it was opened they regarded it as dormant and inactive, but never notified the defendant bank to that effect, nor closed the account, is not material to the issue. There is no averment in the affidavit of defense that the plaintiffs had instructed Snyder to discontinue the use of the account, nor that they had instructed him
At the time when the account between plaintiffs and defendant was closed, and Snyder’s defalcations were discovered, he withdrew from his account with Ristine & Co. the balance then to his credit, amounting to $1,021.98, and paid it to the plaintiffs, and, on April 19, 1917, Snyder drew against his personal account with the Pennsylvania Com-. pany a check in the sum of $2,446.87 and deposited it to the credit of the plaintiffs in the Girard National Bank of Philadelphia. Of the
If Snyder paid to the defendant $3,468.85 out of his own moneys, and not out of the deposits in the defendant hank, the plaintiffs are entitled to appropriate that amount in ease of any losses they may have had through Snyder’s embezzlement, whether through checks in excess of or not in excess of $1,000. It appears that the loss of the plaintiffs exceeds the sum claimed from the defendant by $2,500, and the plaintiffs are therefore entitled to appropriate what Snyder repaid them up to $2,500 to their relief for that much of their loss. The difference between $2,500 and $3,468.85, to wit, $968.85, it is admitted, should be deducted from their claim.
The defendant claims that the plaintiffs suffered no loss by reason of the honoring of these three checks, and the corresponding charge made by defendant bank against plaintiffs’ account, for the reason that credit to the amount of each of the checks was given by the defendant bank to plaintiffs, based upon the said deposits. The relations of the parties may be somewhat clarified if we lay aside for the moment the rather confusing array of figures representing the plaintiffs’ account with the defendant, the statements of sums of which the plaintiffs got the benefit, and charges and credits which have no real bearing on the controversy, except to show how the balance is made up.
It therefore may be well to illustrate by reducing the situation to its simplest terms by means of a supposititious case: Suppose Snyder had deposited money to plaintiffs’ account with the defendant bank to the extent of $10,000. Against this deposit suppose he had drawn
The plaintiffs are suing, and are entitled to recover, as a creditor of the bank a balance which they deposited, and which they claim should be in the bank and which the bank has paid out upon checks which are not the checks of the plaintiffs, because they are contrary to the authority given to the bank for honoring checks. They are not suing to recover anything beyond their whole loss, and so far as their loss is caused by honoring unauthorized checks they are entitled to recover up to- that amount.
The defense based uppn the transactions in relation to the three checks, aggregating $8,300, is not, in my opinion, sustainable. Shipman v. Bank, 126 N. Y. 318, 27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821. Neither is the defense good as to the deposits for which the defendant claims credit, aggregating $35,385.06 of cash and checks which were not plaintiffs’, but Snyder’s, money.
On the whole, the defenses as to specific items, with the exception of the item of $968.85, in my opinion leave out of consideration the basis of the present suit, which is in assumpsit upon the implied promise of the defendant to pay to the plaintiffs the balance of its deposit without that balance being diminished through the charge against the
The actual loss is shown to he the sum of....................... $93,501.96
Less balance of amounts repaid by Snyder....................... 968.85
Leaving a balance due the plaintiffs of........................... 892,533.11
The rule is made absolute for the said sum of $92,533.11, with interest from October 15, 1919.
