Opinion
C.A. No. 03A-09-002 JTV.
Submitted: January 16, 2004.
Decided: April 29, 2004.
Upon Consideration of Appellant's Appeal From Decision of the Court of Common Pleas
AFFIRMEDKathleen M. Jenning, Esq., Oberly, Jenning Rhondunda, Wilmington, Delaware and Daniel S. Bernheim, 3rd, Esq., Silverman, Bernheim Vogel, Philadelphia, Pennsylvania. Attorneys for Defendant-Below, Appellant.
John S. Grady, Esq., Grady Hampton, Dover, Delaware. Attorney for Plaintiff-Below Appellee.
ORDER
Upon consideration of the parties' briefs and the record of the case, it appears that:
1. This is an appeal from the Court of Common Pleas. After a trial, that court entered judgment in favor of the plaintiff-appellee, Rowland D. Scott (?plaintiff"), against the defendant-appellant, Mellon Bank ("Mellon"), in the amount of $7,459. 50, plus interest and costs, for unauthorized withdrawals which an individual named Kimberly Steele made from the plaintiff's savings account.
2. Briefly, the facts as found by the trial court are as follows. In March 1999, the plaintiff deposited over $10,000 in a savings account at Mellon. His was the only authorized signature for withdrawals from the account. The plaintiff was disabled due to a work-related accident and could not drive. For this reason, after making the $10,000 deposit, he sent his girlfriend, Kimberly Steele, to make additional deposits into the account. He never gave her authority to make withdrawals from the account. However, Ms. Steele did withdraw money from the account on May 13, 17, and 18, and June 3, 17, and 23 by presenting the bank with the plaintiff's driver's license, his social security number, and documents upon which she had forged his signature. She withdrew a total of $7,779. Mellon normally sends its account holders a bank statement by the third or fourth day of each month showing the previous month's transactions. At some point the plaintiff noticed that he was not receiving his monthly bank statement for the account. In June 1999 he contacted Mellon and asked for one. He was informed that one had just gone out but that the bank would send another. In very late July or early August, the plaintiff discovered that Ms. Steele might be forging his name on financial documents with other financial institutions. He contacted the branch manager at Mellon Bank to see if Steele had withdrawn any money from his savings account. This led to the plaintiff's discovery that Ms. Steele had, without his authorization, withdrawn $7,779 from the account.
The trial court's judgment was for less because Ms. Steele had reimbursed the plaintiff a small amount of the money taken.
3. When addressing appeals from the Court of Common Pleas, the court sits as an intermediate appellate court. As such, its function is the same as that of the Supreme Court. Therefore, the court's role is to "correct errors of law and to review the factual findings of the court below to determine if they are sufficiently supported by the record and are the product of an orderly and logical deductive process." Appellate courts are bound by findings of fact made by the trial court that are supported by substantial evidence on the record, and are the product of an orderly and logically deductive process. If substantial evidence exists for a finding of fact, this Court must accept that ruling, as it must not make its own factual conclusions, weigh evidence, or make credibility determinations. Errors of law are reviewed de novo.
State v. Richards, 1998 Del. Super. LEXIS 454.
Baker v. Connell, 488 A.2d 1303 (Del. 1985).
State v. Huss, 1993 Del. Super. LEXIS 481, at *2 citing Levitt v. Bouvier, 287 A.2d 671, 673 (Del. 1972).
Shahan v. Landing, 643 A.2d 1357 (Del. 1994); Downs v. State, 570 A.2d 1142, 1144 (Del. 1990).
Johnson v. Chrysler, 213 A.2d 64 (Del. 1965).
Downs, 570 A.2d at 1144.
4. Mellon contends that (1) the trial court's conclusion that Ms. Steele did not have authority to make withdrawals from the plaintiff's account is improper and in direct contravention of clear evidence that she had actual or apparent authority to make withdrawals, (2) that the trial court committed error by not finding that the plaintiff failed to exercise ordinary care which substantially contributed to Ms. Steele's forgeries, so as to preclude him from asserting the forgeries under 6 Del. C. § 3-406, and (3) that the trial court committed error by not finding that the plaintiff is precluded by 6 Del. C. § 4-406 from asserting the forgeries because he failed to notify Mellon of the withdrawals of which he complains within a reasonable time after having an opportunity to examine his bank statement.
5. In support of its contentions, Mellon offers various facts, circumstances and arguments. I summarize them as follows: the trial court's finding that the plaintiff never gave Steele authority to make withdrawals and its findings that the plaintiff bore no responsibility for delegating certain banking responsibilities to Steele and failing to monitor his own account are inconsistent with the record; the trial court misapplied fundamental precepts of the Uniform Commercial Code, which seeks to place the risk of loss upon the party with the most contact with the wrongdoer; the trial court ignored the undisputed fact that Steele was authorized to and did withdraw cash from the plaintiff's account and that on May 17 some of the funds were used by Steele to purchase a money order to pay the plaintiff's mortgage; on the May 17 occasion and other of the occasions in issue, Ms. Steele's driver's license number was included in documentation of the transaction; the trial court totally ignored (without opining as to credibility) uncontested testimony that a bank teller, Marietta Ridgeway, called the plaintiff and confirmed Steele's authority to make withdraws; as a former employee of Mellon, Ms. Ridgeway has no personal stake in the case; the trial judge had no reason to question Ridgeway's credibility and made no finding that she fabricated the above-mentioned telephone call; unless the trial court concluded that Ms. Ridgeway totally fabricated a detailed conversation in which she learned of a work related accident of the plaintiff, verbal authority was undeniably given; such conduct is totally inconsistent with an unauthorized transaction; one does not misappropriate another person's money, identify themselves as the tortfeasor, assist the bank in obtaining telephone verification and then use the money to pay the mortgage of the person from whom the money is purportedly being stolen, and that to the contrary, this is indisputable evidence that the transaction was authorized; Steele had actual or apparent authority from the plaintiff to make the withdrawals in issue; there are letters authorizing the transactions (although the plaintiff claims they are forgeries); there are numerous inconsistencies in the plaintiff's testimony but none in the testimony of Ms. Ridgeway; the plaintiff also maintained a checking account at PNC Bank, N.A. from which he paid some of his household expenses; Steele, age 20, resided with the plaintiff, age 34; Ms. Steele, although she worked at Dover Downs, did not contribute toward household expenses; expenses such as the mortgage, utilities and food were paid by the plaintiff, or more accurately, paid with funds from his accounts; the plaintiff authorized Steele to conduct banking transactions on his behalf; the plaintiff provided Steele with access to his PNC and Mellon accounts, admitted that he gave Steele permission to make deposits to his account, and provided her with access to his account number and checks he wished to have deposited; Steele accompanied the plaintiff to Mellon to open the account and Steele appeared numerous times at Mellon to conduct banking transactions on the account, most of which, but not all, were handled by Ms. Ridgeway; three deposits were made to the Mellon savings account after the $10,000 deposit, each by Steele, and that in the course of these deposits, Steele not only presented checks from Liberty Mutual for credit, but also extracted cash withdraws; the plaintiff has never contested Steele's authority to make the cash withdrawals as just mentioned; during the period of June 3, June 16 and June 23, when unauthorized withdrawals were allegedly made, Steele was also making deposits and cash withdrawals which were undisputably authorized; even if the withdrawals were unauthorized, the plaintiff's own negligence was a substantial factor which led to the forgeries and, accordingly, he is precluded from asserting a claim against the bank, or bears some comparative fault; to hold that the plaintiff is totally blameless under these circumstances ignores the duties of a depositor as outlined in the Uniform Commercial Code; the plaintiff testified that he routinely recorded his transactions in his own reconciliation book but never cross referenced his records with the monthly statements sent to his attention; the plaintiff testified he did not verify statements because he "wasn't really thinking that good"; the plaintiff claimed not to have received bank statements, but that that was of no concern; the plaintiff claimed to have called the bank about missing statements, but did nothing to obtain them; the plaintiff was aware of his duty to review bank statements and report discrepancies but completely neglected the obligation to do so; after the plaintiff accused Steele of taking the $7,779 through unauthorized withdrawals, he twice appeared at the bank with her and was seen with her at a shopping mall; although the plaintiff claimed to have demanded that Steele leave his home after her alleged misconduct was discovered in early August, she was seen at his home four months later; the trial court ignored testimony clearly establishing that Steele was authorized to make withdrawals on the plaintiff's behalf; the trial court's holding is inconsistent with fundamental principles of the Uniform Commercial Code that the person with the most contact with the wrongdoer stands in the best position to prevent a fraud and thus should bear responsibility and risk of loss; the plaintiff's true complaint was not Ms. Steele's lack of authority to access his account, but, rather, her use of some of the funds thereafter; the plaintiff's decision to place Steele in a position of trust and confidence was an election for which he should, at a minimum, bear some responsibility; not only did Steele have authority to transact business for the plaintiff on the Mellon savings account, but also had authority to do so with respect to the plaintiff's PNC account; once the plaintiff placed her in a position of trust, he can not look to his bank to assure that she does not breach her fiduciary responsibilities; although Delaware has not adopted the Uniform Fiduciaries Act, much of it has been incorporated into Delaware's Uniform Commercial Code ( 6 Del. C. § 3-307); among the principles adopted are those that place the risk of loss with the one who places his trust in a fiduciary; unless a bank has actual knowledge that a fiduciary is breaching his authority, the bank is not bound to inquire into the authenticity of a fiduciary's activities; having cloaked Ms. Steele with authority to conduct his banking, the plaintiff should not hold Mellon Bank liable for her subsequent misappropriation; since the plaintiff placed Steele in a position of trust and responsibility with his bank account, it is inconsistent with modern jurisprudence not to place the risk of loss upon the plaintiff; the plaintiff's responsibility is analogous to that of an employer under 6 Del C. § 3-405 where an employer entrusts an employee with banking authority; as between the bank and the plaintiff, the plaintiff was in a far better authority to have avoided the fraud; and under the facts and circumstances the evidence does not support the trial court's conclusion that a reasonable period within which the plaintiff should have examined his bank statement and notified the bank extended to the end of the 30 day maximum period allowed by 6 Del. C. § 4-406.
6. Ms. Ridgeway's testimony that she called a person who identified himself as the plaintiff, gave appropriate answers to questions and authorized withdrawals at Ms. Steele's request, is opposed by the plaintiff's testimony that he did not participate in any such telephone conversation and gave no such authorization. It is apparent that the trial court resolved this conflict in the evidence in favor of the plaintiff. The plaintiff's denial that he participated in such a telephone call is substantial evidence from which the trial court, as the trier of fact, could properly conclude that no such authorization was given.
7. Despite Mellon's vigorous arguments to the contrary, there is ample evidence in the record to support the trial court's findings that Ms. Steele had no authority to withdraw $7,779 from the plaintiff's savings account and that she did so by forging his signature. Mellon contends that the trial court ignored undisputed evidence that Ms. Steele was authorized to withdraw funds from the plaintiff's savings account. The record shows at most that when she went to deposit checks of modest amounts, she was authorized to deposit them in part and cash them in part. There is no substantial evidence that the plaintiff authorized Ms. Steele to withdrawal funds from his savings account. Mellon's contention that she did have such authority is without merit.
8. There is nothing inherently wrong with a person's allowing another person to make deposits on his behalf, especially where, as here, the account holder has a physical disability which makes it difficult for him to go to the bank himself. In doing so, the account holder necessarily discloses basic information about his account. Nothing in the record suggests that the plaintiff had any reason to believe that Ms. Steele would forge his signature to invade his savings account. On the record of this case, the trial court's finding that there was no negligence on the part of the plaintiff which contributed to Ms. Steele's forgeries is supported by substantial evidence.
9. The plaintiff may have received a statement of his account sometime during the first week of June. That statement would have shown the May withdrawals. The final withdrawal was made June 23. 6 Del. C. § 4-406(d) imposes a duty upon an account holder to notify the bank of an unauthorized transaction on his account "after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account." In this case, the last unauthorized transaction occurred two or three weeks after the plaintiff might have received the May statement. I see no basis upon which to disturb the trial court's finding that all of the transactions occurred before the plaintiff had been afforded a reasonable time to examine his statement and notify the bank.
10. I have considered all of Mellon's contentions and find them to be without merit.
11. The judgment of the Court of Common Pleas is affirmed.