Leather Manufacturers' National Bank v. Morgan

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, 1881, the sum of $9,996.38, for which they ask judgmemt. 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 indorsed 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, 1881. 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 17 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 indorsement, 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, 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:

NO. OF DATE OF

CHECK. CHECK. CHARACTER OF ALTERATION.

8,356 Sept. 11, 1880. Check to cash or bearer, raised from $90 to $500.

8,377 Sept. 28, 1880. Check to cash or bearer, raised from $10 to $400.

8,424 Oct. 30, 1880. Check to cash or bearer, raised from $105 to $405.

8,431 Nov'r 3, 1880. Check to cash or bearer, raised from $17.25

to $600.25.

8,468 Nov'r 26, 1880. Check to cash or bearer, raised from $10 to $1,000.

8,480 Dec. 10, 1880. Check to order of Marston & Son, raised from $7.75      to $700.25, and the words "or bearer"

written in after payee's name.

8,492 Dec. 18, 1880. Check to order of C. H. Clayton, raised from

$15 to $1,500, and words "or bearer"

written in after payee's name.

8,498 Dec. 24, 1880. Check to cash or bearer, raised from $80 to $600.

8,501 Dec. 28, 1880. Check to order of W. S. Daland, raised from $24.08      to $1,000, Daland's name erased, and that

of Julius Brandies inserted, and the words

"or bearer" written in after payee's name.

8,504 Dec. 31, 1880. Check to cash or bearer, raised from $80 to $400.

8,508 Jan'y 5, 1881. Check to cash or bearer, raised from $10 to $2,000.

8,518 Jan'y 14, 1881. Check to order of Charles G. Hanks, raised from      $33.60 to $1,100, words "or bearer (duty)"

written in after payee's name and "14th"

erased

and "27th" written over it.

8,550 Feb'y 13, 1881. Check to order of W. S. Daland, raised from $17.72      to $100.72, and words "or C. Clifford Berlin"

written in after payee's name,

and date changed to February "14."

(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 $10,821.64, $4,568.68, and $5,566.61. Upon 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 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 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. of time and frequent handling, the 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.

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

''Chas. M. Da Costa and Noel B. Sanborn'', for plaintiff in error.

J. M. Bowers, for defendants in error.

[Argument of Counsel from pages 102-105 intentionally omitted]

HARLAN, J.