Opinion
06-06-1904
FARRY v. FARMERS' & MECHANICS' BANK OF MATAWAN.
Peter Bentley and R. V. Lindabury, for complainant. C. L. Corbin, for defendant.
Bill by Edward Farry against the Farmers' & Mechanics' Bank of Matawan. Decree for defendant.
Peter Bentley and R. V. Lindabury, for complainant.
C. L. Corbin, for defendant.
EMERY, V. C. This is a bill by a depositor against the defendant, with whom he kept an account, from September, 1892, to November, 1900, for an account of his entire transactions with the bank. Except from May 20, 1898, to March 10, 1899, during which period he made no deposits, the account was a very active one; the charges against his account aggregating several thousand during the time. Complainant had passbooks of his account covering the entire time, and during the first year (1893) the account was balanced nine times, and vouchers to the number of 732 returned, according to the passbooks. In 1894 the accounts were stated twice, and 104 vouchers returned; in 1895, six times, and 630 vouchers returned; and twice during this year, in the balancing of the accounts and return of the passbook and vouchers, the account was stated to be overdrawn—on August 7, 1895, for $143.74, and on October 11, 1895, for $6.89. In 1896 the passbook was written up four times, 1,111 vouchers returned, and the account shown to be overdrawn on December 5, 1896, for $295.40. In 1897 the passbook was written up twice— once on June 22d, when 660 vouchers were returned, and an overdraft of $28.06 was shown, and once on December 21, 1897, when 999 vouchors were returned, and a balance of only $7.76 was shown. On March 2, 1898, 93 vouchers were returned, and a balance of only $1.90 to complainant's credit was shown. On May 10, 1898, the complainant's exact balance appears to have been drawn out, and after that date two deposits were made, against which charges of the same amount were subsequently made—the last charge, June 2, 1898, for $493.08, balancing the entire account. From this latter date until March 11, 1899, there were no further deposits or payments on either side until March 11, 1899, when the account was reopened, and continued until November 13, 1900, when the complainant's balance, as appeared by his passbook, was $1.14.
During the entire period covered by the accounts, no objection appears to have been made by complainant to any of the accounts as stated in the passbooks, or that any of the charges were improperly made, because vouchers for them were not returned. It also appears that during the whole of this account it was the custom of the clerk having charge of the return of the vouchers for the bank to indicate by a ring mark on the passbook a charge for which no voucher was returned. This was done, as the clerk states, for the purpose of calling the depositor's attention to the charge, in order that, if incorrect, he might report at the bank; and a few of such charges for a small aggregate amount—about $100—appeared in these passbooks, and were never objected to. Complainant now claims that during the entire running of the account he has been improperly charged with items for which there were no vouchers, and that these items aggregate over $5,000. Under ordinary circumstances, a passbook written up by a banker and delivered to a depositor, together with the vouchers, will be treated as an account stated, if retained by the depositor without objection after a reasonable time for examination—Morse, Banks & Banking (2d Ed.) § 291, etc.; 3 A. & E. Ency. Law (2d Ed.) p. 840; Delaynes v. Noble, 2 Atk. 252 (Lord Hardwicke, 1741); Leather Man. Bk. v. Morgan, 117 U. S. 96, 6 Sup. Ct. 657, 29 L. Ed. 811—and the account can only be opened on the principles applied to stated accounts.
In the present case, vouchers for the payments were returned by the bank to the depositor, with the passbooks, and an examination of the passbooks in connection with the vouchers, if made at the time, would have disclosed any charges without vouchers, and the question of the propriety of such charges could have been settled while the transaction was recent. The circumstances that complainant's account several times appeared to be overdrawn when his passbook was returned was also a matter which specially imposed on him the duty of immediate examination of his account. And while an account stated under these circumstances may undoubtedly be questioned for fraud or mistake, not only must the burden of proving the fraud or mistake be upon the complainant, but inasmuch as the particular charge upon which fraud or mistake is based in this case is the absence of any voucher for the charge, and these vouchers have been for years in the possession of plaintiff, and the bank has lost control of the evidence on which it was entitled to rely, proof of the impropriety of the charge should be clear and satisfactory. Complainant's silence when he ought to have spoken may fairly be taken as a waiver of objections to any charge which he does not now, by his proofs, clearly show ought not to have been made against his account. An instance showing the application of these principles to the case occurs in reference to the first account stated in his passbook, January 31, 1893, when 56 vouchers were returned. Complainant at first produced only 49 of these, and, in his bill of particulars, claimed to charge the bank with several items, four of which,amounting to about $1,000, were claimed to have been improperly charged against his account before this time. It was shown by defendant's proofs that all of these items were notes of a firm of E. Farry & Co., of which complainant was a member, and that these notes were, as the cashier of the bank says, charged to complainant's account by his direction. Complainant, on rebuttal, swears that he does not remember any such direction, but the vouchers are now produced by him as being among the vouchers of E. Farry & Co. The passbook of complainant itself shows that on December 12, 1802, the small balance due to the firm on the bank's books was transferred to the credit of complainant's account, and complainant must have known in January, 1803, that the notes were not paid by E. Farry & Co., but by himself. After defendant had, from its correspondence and records other than the vouchers, been able to establish on the hearing that these amounts were charged to complainant's account for these notes of E. Farry & Co., the complainant subsequently produced the notes. The failure to produce them before is explained as due to the supposition that a note of Farry & Co. was not a proper voucher against complainant. This explanation is, of course, altogether inadequate, for the present inquiry relates to the opening of stated accounts, because of the absence of proper vouchers at the time, and the special burden on the complainant on this hearing is to produce the vouchers which at the time were claimed to be proper. One of the difficulties in this case, in relation to now going over the accounts in the passbook, with the vouchers produced by complainant, arises from the fact that, owing to the manner in which the accounts were kept, it is often difficult at this lapse of time to identify a particular charge in the passbook as covered by a particular voucher now produced. Complainant's account was often overdrawn, and items or memoranda were carried in the cash drawer, sometimes for weeks, until a deposit sufficient to make the account good was made, when all of the items would be charged together. This same method of charging in bulk several items was followed in other cases, but the fact that this method was followed by the parties made it all the more obligatory on complainant to examing his vouchers and passbook promptly. On the return of the vouchers, each of the separate items was counted separately, and the voucher therefor returned, with a slip showing how the aggregate charge was made up. Complainant's principal claim is that items thus making part of a bulk charge were again charged separately, and the question is whether this has been satisfactorily made out. There can be no doubt, 1 think, that in the disposition of this case the court must proceed upon the basis that the accounts in the passbook, with the vouchers returned, were stated accounts, and that they cannot now be opened, except to the extent that complainant can clearly show fraud or mistake as to specified items. Brown v. Van Dyke, 8 N. J. Eq. 793, 802, 55 Am. Dec. 250 (Err. & App. 1853). On this view of the case, the complainant, under an order of the court made before the hearing, delivered to the defendant a bill of particulars or schedule of the items claimed to have been improperly charged against his account during the entire period, and comprising 62 items, aggregating nearly $0,000, for which it was claimed that no vouchers were returned, and the question is, has his case been made out as to any of the items? Twenty-one of these, aggregating about $2,500, were charges against his account mainly for notes and checks of third persons (and protest fees thereon) discounted or deposited with the bank for collection, and which after protest were, as the bank officers now testify, returned at once to complainant, in order that he might proceed against the parties liable. On the deposit or discount of these notes and checks, complainant's account was credited with the respective amounts, and, on their protest was charged therewith, and with the protest fees, and at the statement of the accounts a memorandum slip of each charge was returned with the other vouchers for the period covered by the account stated. What has become of the notes does not appear, but manifestly the charges must stand.
As to the remaining forty-one items claimed to have been improperly charged, examination in detail was made at the hearing. One or two are for clerical errors in casting up the accounts, and a few items, aggregating about $54.66, are for five items marked in the passbooks with a ring to indicate, as above stated, that no vouchers were returned, while for seven items, aggregating $366.66, although vouchers appear to have been returned with the passbook, defendant cannot give at this time any further explanation. One of these latter items was a charge of $250, June 28, 1897. For the balance of the items, defendant is able, from its books and records still in its possession, to explain the charges, and show the propriety of them, or the claim upon which it was based, and for none of the items included in his particulars, outside of the clerical errors and the "ring" charges, has the complainant, in my judgment, succeeded in falsifying the account.
Before the commencement of the suit, and when the defendant's attention was called to the complainant's account by him, the account was examined by the bank, and a credit of $200 made, for the purpose of covering any overcharges or errors in the account. So far as the present examination has disclosed, this amount was more than sufficient to cover these items. This amount of $200 placed to complainant's credit, and after he was notified of the credit, was drawn upon by him, and all drawn out before the filing of the bill.
Complainant produced at the hearingvouchers corresponding in number, or claimed to correspond to the number, of those appearing by the passbook to have been returned between certain dates of the account (from December 12, 1892, to March 2, 1898), and testifies that these were all the vouchers received; and it is claimed that, inasmuch as the charges in the passbooks and ledger account for this period exceed the amount of the same number of vouchers now produced, the difference must represent the balance due complainant on the whole account. The effort was made by complainant's expert accountant to apply the vouchers produced to the items of charge in the passbooks, and the bill of particulars above referred to was intended to include items on the passbooks for which no vouchers were found. But the examination disclosed that the vouchers for many of these charges—such as the charges (about 20) for protested notes and checks of third persons, and for several notes of E. Parry & Co. paid early in 1893—were computed in the passbook as among the vouchers returned. The notes were returned to complainant, and a memorandum charge of the cashier was the voucher. These items were not charged twice, as complainant's brief insists. For many other payments charged in the passbook for which no vouchers are now produced, the clerk who had charge of the return of the vouchers testifies that they were returned; and, in order to make up the number of the vouchers returned on the passbook for the period therein indicated, it is necessary that these missing vouchers should be counted. The credibility of the clerk's evidence as to the return of the vouchers was not, in my judgment, impeached by the evidence relied on for that purpose.
It is insisted upon the part of the defendant that no such exact coincidence really exists between the number of vouchers now produced and the number charged upon the passbooks as returned, and that the apparent coincidence is a forced one, and this contention seems to me to be well founded. But assuming that the coincidence does now exist, I think it is clear, under all the evidence as to these accounts, that a coincidence of this character cannot be considered as any safe or reasonable basis for now charging the defendant, as on the entire account, with the difference between the charges and the vouchers produced. In view of complainant's laches and negligence in the matter of questioning the account, the defendant has the right to stand on each of these statements of account, with a return of vouchers, as a stated and settled account, and to be protected against any reopening of the accounts, except as to the particular item clearly shown to have been charged by fraud or mistake.
At the hearing the further defense was made that inquiry into any of the accounts stated which were rendered more than six years before the filing of the bill was barred by the statute of limitations. The demand of complainant is one which is in its nature a legal demand, and the jurisdiction of this court arises only from the complication of the accounts and the right to discovery. The claim is one arising under the concurrent jurisdiction of the court, and therefore, under the general rule, the statute of limitations is applicable here as well as at law. Smith's Adm'r v. Wood, 42 N. J. Eq. 563, 569, 7 Atl. 881, affirmed on appeal 44 N. J. Eq. 603, 17 Atl. 1104 (Err. & App. 1888); Agens v. Agens (1892) 50 N. J. Eq. 566, 571, 25 Atl. 707; Condit v. Bigalow (1903) 64 N. J. Eq. 504, 514, 54 Atl. 160. At law the claim would be barred. Union Bank v. Knapp (1825) 3 Pick. 96, 15 Am. Dec. 181. No fraud having been proved in this case, I am inclined to think that the bar of the statute applies, but inasmuch as, at the hearing, evidence was taken and counsel were heard as to the whole account, I have considered the case on all the items claimed to have been improperly charged, although beyond the time covered by the statute. I will advise a decree dismissing the bill.