Opinion
November 8, 1918.
Henry B. Hammond of counsel [ R. E.J. O'Gorman, attorneys], for the appellant.
Samuel Saltzman, for the respondent.
This appeal presents the question of the liability of a savings bank to a depositor for payments out of the account to an imposter who had wrongfully obtained the passbook and forged drafts upon the account.
In 1904 the plaintiff opened four accounts in the defendant bank as general guardian of each of her four children and deposited $833 in each account. The Illinois Surety Company was the surety upon the guardian's bond, which fact was known by the defendant. For its own protection the surety company required the plaintiff to leave the four passbooks in its custody. The plaintiff was an illiterate woman, unable to sign her name, and consequently all that the bank had upon its signature card was her cross mark and certain information that would serve to identify the plaintiff. This appeal concerns only the account of the plaintiff as guardian for her son Myer, No. 473218. From 1904 to 1915 there were practically no withdrawals from this account except the interest, which was drawn as it accrued. Whenever the plaintiff made a withdrawal the surety company had a clerk accompany her to the bank with the passbook. Plaintiff signed the interest draft by making a cross mark and the execution of the instrument was attested by the certificate of a notary or commissioner of deeds. These drafts for interest were either stamped "approved" by the surety company or a letter approving the withdrawal signed by the surety company was delivered to the defendant bank. Thus the bank had ample notice, not only from the fact that this was a guardian's trust account but also from long-continued course of dealing, that withdrawals from this account required some authorization from the surety company. For some reason not disclosed the bank failed to make any notation upon the signature card showing that withdrawals required the approval of the surety company. On August 26, 1915, an order for $150 on this account was presented to the bank by a person other than the plaintiff. There was a cross mark signature on the order purporting to be acknowledged before a commissioner of deeds. There was stamped on the order the approval of the surety company and the order was indorsed with the name of one W.S. Winans. This order was paid to the person who presented it, who also exhibited to the bank the passbook. On October 27, 1915, another order for the same amount was paid to a person other than the plaintiff under similar circumstances. On January 5, 1916, a third order, accompanied by the passbook, was presented to the bank to pay to bearer $115.85 by some person other than the plaintiff. Attached to the order was a certificate purporting to be that of a commissioner of deeds, certifying that the cross mark was made and acknowledged by the plaintiff. Although this third order bore no stamp of approval by the surety company and was not indorsed, the bank paid same without any inquiry. The account was finally closed on July 5, 1916, by a payment to a person other than the plaintiff of $395.50 upon the presentation of an order purporting to be signed by the plaintiff by her cross mark and purporting to be acknowledged before a commissioner of deeds and bearing the indorsement of said Winans. The order did not call for any specific sum but for the "balance of account." Although the passbook was presented as usual, there was no approval of the surety company stamped upon the order and no letter from the surety company authorizing the withdrawal. This was also paid by the bank without inquiry.
The question involved is whether the defendant bank was negligent in making these payments. The learned Appellate Term has considered all four payments in the same category, giving no weight to the essential difference in the facts, whereas each withdrawal should be considered in the light of its own peculiar facts. The ground assigned by the Appellate Term for holding the defendant liable was that in view of the circumstances "reasonable care in the protection of the depositor required the defendant savings bank to avail itself of the sixty days' clause to make proper inquiry as to whether such withdrawal was made by authority of the plaintiff." The provisions of the Banking Law (Consol. Laws, chap. 2 [Laws of 1914, chap. 369], § 248, as amd. by Laws of 1916, chap. 164) giving the bank the privilege of suspending payments for sixty days was not designed for and has no relation to making inquiries concerning the authority of persons making withdrawals from accounts in the bank. That was enacted for the protection of banks in times of panic and financial stress. It would be a great hardship upon depositors if a savings bank could arbitrarily take sixty days to investigate the genuineness of the depositor's signature.
Whether the bank used ordinary care and diligence is a question of law when the facts are conclusive and undisputed, and is a question of fact when they are debatable and conflicting. ( Allen v. Williamsburgh Savings Bank, 69 N.Y. 314, 322.) Upon the undisputed facts surrounding the first two withdrawals, made by a person presenting the passbook and having the approval of the surety company stamped upon the order, and there being attached to the order a certificate of a commissioner of deeds, regular upon its face, certifying that the cross mark signature was made and acknowledged by the plaintiff, there is no basis for a finding of negligence on the part of the bank. "It would be utterly impracticable to do business if each application for a withdrawal of money had to be delayed until a searching inquiry could be made as to the regularity of the transaction." ( Kelley v. Buffalo Savings Bank, 180 N.Y. 171, 178.)
As to the two subsequent withdrawals, the situation is quite different. Knowing, as the bank did, that this was a guardian's trust account, that the guardian was under bond, that the surety company had possession of the passbook, and that the course of dealing was that withdrawals were made upon the authorization or approval of the surety company, ordinary care required some inquiry where the usual circumstances were departed from and the commission of a fraud was so easy. The mere fact that the employees of the bank who cashed the last two orders were not the ones who had cashed the preceding ones, and who, therefore, were unfamiliar with the course of dealing requiring the approval of the surety company, does not excuse the defendant. Had the officials of the bank made a notation on the signature card when the account was opened, showing that withdrawals required the approval of the surety company, a precaution that ordinary prudence dictated, it would have been at once apparent to any paying teller of the bank that these unauthenticated orders were on their face irregular. No elaborate investigation was necessary in order to discharge the duty of ordinary care. A mere inquiry of the surety company by telephone would have disclosed the fact that the passbook had been purloined and that the withdrawals were unauthorized.
The bank contends that it was entitled as a matter of law to rely on the certificate of the commissioner of deeds. This certificate was some evidence that the draft was actually signed by the depositor, but of course it was not conclusive. In ordinary cases it would be very persuasive proof of the exercise of ordinary care, when it appeared that the bank paid in reliance upon a sealed certificate of a commissioner of deeds or notary public, but not so in a case such as this where the account was not only a trust account but was bonded and the course of dealing was to require the approval of the surety. The circumstances attending the payment of the final order were especially calculated to awaken suspicion, for the order not only was peculiar in that it called for a "balance of account," but at the same time the same person presented similar orders drawing out the balance of each of the three other trust accounts. Any experienced paying teller of a bank should have known that the closing out of these four guardian's accounts at the same time, in favor of an unidentified person other than the guardian and without any authorization from the surety company, required some inquiry. The mere fact that on April 29, 1916, the plaintiff as guardian of another son withdrew seventy-five dollars from that account upon an order not bearing the stamped approval of the surety company is not sufficient to rebut the inference of negligence clearly to be drawn from the course of dealing with the account involved in this action.
It follows that the determination appealed from be modified by directing that the judgment be modified by reducing the amount recovered by the sum of $300, representing the first two drafts, and as modified affirmed, with costs on this appeal to the appellant.
CLARKE, P.J., DOWLING, SMITH and PAGE, JJ., concurred.
Determination modified as directed in opinion and as modified affirmed, with costs to the appellant. Order to be settled on notice.