Summary
In Fourth Central Trust Co. v. Rowe (1930), 122 Ohio St. 1, the Supreme Court stated that the burden was not on the person asserting forgery but was on the bank to prove that a withdrawal was not based upon forgery.
Summary of this case from R.C. Olmstead, Inc. v. GBS Corp.Opinion
No. 21789
Decided February 19, 1930.
Banks and banking — Savings deposit paid upon forged signature — Burden of proof upon bank pleading affirmative defense of payment — Passbook rules and regulations constitute enforceable contract, when — Burden on bank to show good faith and reasonable care — In making payment upon presentation of pass book.
1. In an action brought by a depositor against a savings bank to recover money deposited, the bank admitting receiving the deposit but averring that the same was "withdrawn by the order" of the depositor, which order is claimed to be a forgery, such defense of payment is an affirmative one, and the burden of proof is upon the party claiming it, to-wit, the bank.
2. The reasonable rules and regulations adopted by a savings bank and printed in its pass book, signed and agreed to by a depositor, form a contract between the bank and the depositor, and each is bound thereby unless such rules and regulations are contrary to some positive rule of law or are against public policy.
3. Where the rules and regulations of a savings bank, which are agreed to by a depositor, provide "in all cases the payment upon presentation of a deposit book shall be a discharge to the company for the amount paid," such bank is not exonerated from the exercise of good faith and reasonable care in the payment of such depositor's funds upon the presentation of a pass book and a purported order for such payment, and the burden is on the bank to show such good faith and reasonable care. ( Hough Avenue Savings Banking Co. v. Andersson, 78 Ohio St. 341, approved and followed.)
ERROR to the Court of Appeals of Hamilton county.
This is an action to reverse the Court of Appeals of Hamilton county. The controversy arises by reason of the payment by the Fourth Central Trust Company, hereinafter referred to as the bank, of what is claimed to be a forged check upon a savings account. The pleadings in the court of common pleas are as follows:
By the petition it is averred that the defendant in error, Alvin H. Rowe, was the duly appointed administrator of Carrie Thorp, deceased, and that said Carrie Thorp in her lifetime was a depositor in the plaintiff in error's bank; that at the time of her death, April 29, 1925, she had on deposit the sum of $784.77; and that on June 14, 1926, the defendant in error, as administrator aforesaid, demanded payment of the said sum, which the bank refused to make, wherefore said administrator prayed judgment for said amount, with interest from the date of demand.
The answer filed by the plantiff in error, the Fourth Central Trust Company, a corporation under the laws of Ohio, admitted the appointment of the administrator; admitted that said Carrie Thorp in her lifetime was a depositor in said bank; that at the commencement of business on April 29, 1925, said Carrie Thorp had on deposit with it the sum of $784.77; but averred that during banking hours on said 29th of April, 1925, said sum was withdrawn by the order of said Carrie Thorp; and further it is admitted by the answer that the defendant in error, as administrator, demanded payment of the sum of $784.77 and that the bank refused to pay said sum; but it is averred that, at the time of the presentment of the order by the plaintiff below, there were no funds to the credit of said account, and there follows a general denial.
For a second defense the defendant company says that prior to April 29, 1925, plaintiff's intestate, who gave her name as Carrie Thorp, became a depositor in its savings department; that she received a passbook containing certain rules and regulations, to which she agreed in writing. Among these rules were the following:
"4. Deposits and the interest thereon may be withdrawn by the depositor in person, or by written order, but in either case the pass book must be presented that such payments may be entered therein.
"5. As the officers of the company may be unable to identify every depositor, the company will not be responsible for loss sustained where a depositor has not given notice of his or her book being stolen or lost, if such book be paid in whole or in part on presentation.
"6. In all cases the payment upon presentation of a deposit book shall be a discharge to the company for the amount paid."
The defendant bank further says that on April 29, 1925, one Paul Thorp, husband of said Carrie Thorp, presented the written order of said Carrie Thorp on said savings bank account No. 21309, payable to his own order, for said sum of $784.77, being the full amount then to the credit of said savings account, duly indorsed by him as payee thereof, accompanied by said savings deposit book No. 21309, and that this defendant paid the same to said Paul Thorp by crediting the full amount thereof, at his direction and request, to a new savings account then opened by him in his own name with the defendant bank; that no further deposits were made to the said account by or on behalf of Carrie Thorp.
To this answer a reply was filed, which avers that Carrie Thorp died prior to the commencement of banking hours on April 29, 1925, and that the check or order alleged in the answer of the defendant to have been presented to it by Paul Thorp, her husband, was forged by him, and that said Paul Thorp had no legal right to or property in the passbook of Carrie Thorp in said defendant bank.
Among other things, the court in his general charge instructed the jury as follows:
"Now to restate the issues again: The court charges you that the burden in this case is upon the plaintiff to prove by a preponderance of the evidence that this instrument was a forgery, and if you decide it was a forgery at the time it was presented at the bank, did the teller or the agent of the bank have some reasonable ground to have his suspicion excited, or that there was an imputation of bad faith by reason of the conduct or actions of Dr. Thorp, or anything else which would excite suspicion in the mind, or cause an imputation of bad faith in the mind of any reasonable man, engaged in the banking business."
The trial court also charged that the regulations of a savings bank for withdrawing deposits, if properly made known to the depositor, constituted a part of a contract between said depositor and the bank, and that "a stipulation between a savings bank and a depositor that his deposit may be paid to any one presenting his book does not relieve the bank from the duty of exercising good faith and reasonable care. So that, in this case, in order to justify the payment, the bank of course was obliged to exercise and use reasonable care under all the circumstances." The trial court further charged that "in this case the bank, in presenting a defense of justification, must assume the burden of proving by a preponderance of the evidence that there were no facts or circumstances tending to excite suspicion nor imputation of bad faith or fraud at the time the money was transferred from the account of the decedent to an account of her husband, applying the same rule as to the preponderance of the evidence, and the definition thereof, which we have given you as applying to the plaintiff herein."
Upon submission to the jury, a general verdict was returned in favor of the defendant bank. Motion for new trial was overruled, and error prosecuted to the Court of Appeals, which court reversed the judgment of the trial court for error in its general charge to the jury "and in failing to charge that the rule is that the burden of justifying payment of a check or draft is on the bank, and if paid out on a forged check, the sole defense under the Ohio rule would be evidence showing action or conduct on the part of the plaintiff creating an estoppel." A new trial was granted, and the cause remanded for further proceedings according to law. Error is now prosecuted in this court to reverse such judgment.
Mr. William J. Rielly, for plaintiff in error.
Mr. W.B. Mente, for defendant in error.
Out of the pleadings and the evidence arose two issues in this case: First, was the so-called order of Carrie Thorp, presented by her husband to the bank, and upon which the balance was paid to him, a forgery? Second, even though such order may have been a forgery, was the payment of the balance, upon presentation of the passbook by the husband, together with the purported order, such a payment as under its rule 6 would justify the bank in the payment, provided it used good faith and reasonable care in the premises?
The record discloses that upon the first issue, to wit, as to whether or not the check of Carrie Thorp presented by the husband was a forgery, the trial court put the burden of proof upon the plaintiff below, and in this we think the trial court erred. The claim of the bank in its first defense was that of payment; and it is well established that such defense is an affirmative one, and that the burden to show the same is upon the party claiming it, which in this case would be the bank. People's Bank Savings Co. v. Cereguti, 92 Ohio St. 525, 112 N.E. 1086, affirming 4 Ohio App. 1, 21 C. C. (N.S.), 38, 25 C. D., 393; 7 Corpus Juris, page 756, Section 568; Chicago Savings Bank v. Block, 126 Ill. App. 128; Cushman v. Illinois Starch Co., 79 Ill. App. 281; Harmon v. Old Detroit Nat. Bank, 153 Mich. 73, 116 N.W. 617, 17 L.R.A. (N.S.), 514, 126 Am. St. Rep., 467; Leff v. Security Bank of New York, 93 Misc. Rep., 139, 157 N.Y. S., 92; Noah v. Bowery Savings Bank, 225 N.Y. 284, 122 N.E. 235.
The second defense of the bank was to the effect that, under the rules and regulations contained in the passbook and agreed to by the depositor, it was provided that "in all cases the payment upon presentation of a deposit book shall be a discharge to the company for the amount paid." The bank claimed in addition that it had exercised good faith and reasonable care in the premises in making such payment, and hence was not liable.
The case of Hough Ave. Savings Banking Co. v. Andersson, 78 Ohio St. 341, 85 N.E. 498, 18 L.R.A. (N.S.), 431, 125 Am. St. Rep., 707, 14 Ann. Cas., 479, is authority for the proposition that "when in such case the bank makes payment on presentation of the deposit book or pass book, not to the depositor in person, but upon what purports to be a written order by him and which turns out to be a forgery, the bank is at least bound to act in good faith and to exercise reasonable care with the view to avoid payment to a person who is not lawfully entitled to receive payment; and, if in such case it does not so act in good faith and exercise reasonable care, it will be liable to pay again to the rightful owner of the deposit."
Applying the principle therein stated, if the record should disclose by the preponderance of all the evidence that the bank did act in good faith, and did exercise reasonable care in making the payment under such circumstances, in the light of its rule 6, "In all cases the payment upon presentation of a deposit book shall be a discharge to the company for the amount paid," which rule the depositor had accepted and agreed to in writing, the bank would be absolved from paying the second time, and was entitled to a verdict upon that issue, provided no error prejudicial to depositor intervened.
It is of course well established that savings banks are authorized to make reasonable rules and regulations relative to the transaction of their business with the depositors, and that such rules and regulations, accepted and agreed to by the depositor, form a contract, provided such rules and regulations are not against public policy or any positive law. However, the bank cannot relieve itself of responsibility to the extent that it may carelessly or negligently pay to one who has come into possession of the passbook, but must exercise good faith and reasonable care in making payments upon presentation of the passbook. This is usually a question for the jury. See Zuplkoff v. Charleston National Bank, 77 W. Va. 621, 88 S.E. 116, and cases cited in the opinion; Morse on Banking (6th Ed.), vol. 2, pages 1294, 1295, Section 620 (b), and cases cited; 7 Corpus Juris, page 869, Section 918, and cases cited; also Langdale v. Citizens' Bank of Savannah, 121 Ga. 105, 48 S.E. 708, 69 L.R.A., 341, 104 Am. St. Rep., 94, 2 Ann. Cas., 257; 5 A. L. R., 1205, and cases cited; Kelley v. Buffalo Savings Bank, 180 N.Y., 171, 72 N.E. 995, 69 L.R.A., 317, 324, 333, 105 Am. St. Rep., 731, 732 (note); Wasilauskas v. Brookline Savings Bank, 259 Mass. 215, 156 N.E. 34, 52 A. L. R., 758; Noah v. Bowery Savings Bank, supra.
This second issue as to whether or not the bank exercised good faith and reasonable care was submitted to the jury under instructions that were not prejudicial to the depositor. There was some evidence in the record tending to support this claim of the bank in this behalf, to wit, that it had compared the signature of the order presented and the signature card containing the genuine signature of the depositor, and that the signature of the order was believed to be genuine; that the husband, who presented the passbook, had been with the wife in the bank on previous occasions when withdrawals were made which were valid. These circumstances tended to support the bank's position. The jury were to determine whether the bank exercised good faith and reasonable care in the premises, in making the payment to the husband upon presentation of the passbook and the purported order.
The verdict was a general one in favor of the bank. There were no interrogatories submitted to the jury to answer. We do not know whether the verdict was based upon the first issue, to wit, as to whether or not the order in question was a forgery, and the jury found that it was not a forgery but genuine, in which event the verdict would have to be for the bank; or whether the verdict was based upon the second issue, to wit, that the bank exercised good faith and reasonable care and in the light of its rule 6, above quoted, constituting a part of the contract between the depositor and the bank, the bank was justified in the payment of the order in question; or whether the verdict was based upon both issues.
If either of these issues were submitted to the jury without error, and there was evidence tending to support the same, then, under the rule in Sites v. Haverstick, 23 Ohio St. 626, followed in numerous cases, such verdict should not be set aside. Tod v. Wick Brothers Co., 36 Ohio St. 370-389; Beecher v. Dunlap, 52 Ohio St. 64, 38 N.E. 795; Gartner v. Corwine, 57 Ohio St. 246, 48 N.E. 945; McAllister v. Hartzell, 60 Ohio St. 69, 53 N.E. 715; State, ex rel. Lattanner, v. Hills, 94 Ohio St. 171, 113 N.E. 1045, L.R.A., 1917B, 684; Jones v. Erie Rd. Co., 106 Ohio St. 408, 140 N.E. 366; Ochsner, Admr., v. Cincinnati Traction Co., 107 Ohio St. 33, 140 N.E. 644; Hubert v. Kessler, Trustee, 108 Ohio St. 584, 142 N.E. 38.
We find the second issue was submitted to the jury without error prejudicial to the plaintiff below, and there is evidence tending to support the same; hence the verdict being general for the bank should not be disturbed.
The rule announced by the Court of Appeals, that "the burden of justifying payment of a check or draft is on the bank, and if paid out on a forged check the sole defense under the Ohio rule would be evidence showing action or conduct on the part of the plaintiff creating an estoppel," is doubtless correct in a proper case, but inapplicable here, because it ignores the effect of the rules and regulations assented to by the depositor, constituting a contract between them, which amounted to a good defense, provided the bank exercised good faith and reasonable care. In ordinary commercial accounts or savings accounts, in the absence of such rules and regulations assented to by the depositor as appear in this case, we would be disposed to concur in the rule as announced by the Court of Appeals.
In the light of this record, for the reasons stated, we are compelled to reverse the judgment of the Court of Appeals and affirm the judgment of the common pleas court.
Judgment reversed.
MARSHALL, C.J., KINKADE, ROBINSON, JONES, MATTHIAS and ALLEN, JJ., concur.