President of Manhattan Co. v. Lydig

Spencer, J. delivered the opinion, of the court. If the defendant’s account with the bank be considered as balanced by the officers of the bank having competent authority for that purpose, as it appears to me it must; still the cases of Vernon v. Vaudry,* and Brownell v. Brownell,† are authorities for saying, that though the whole account cannot be opened after such a lapse of time, yet that the particular items may be falsified. This case turns on the point, whether in respect to some of the false credits given to the defendant in the [388] ledger, and from thence transcribed into the defendants bank book, Brower did not act as the agent of the defendant in making the deposits ; and whether, as such, he was not enabled to commit the frauds, of which the plaintiffs complain. It is certain that the defendant did send money by Brower, at several times, to make deposits, and if it can be ascertained, that in discharge of that trust, he falsely obtained credits for the defendant beyond the amount deposited, so far I think the defendant liable. Brower was the servant of the plaintiffs, when in their employ, and in their office ; and for acts there done, the plaintiffs are answerable;* but for acts not done in execution of the authority given him by the plaintiffs, they are not chargeable. In making deposits for the defendant, Brower acted, not as the servant of the plaintiffs, but as the agent of the defendant, and the defendant would be answerable for any deficit in the deposits, in the same manner as though he himself had been guilty of a fraud in making them. The judge fairly submitted it to the jury to decide, whether the money for which credit was claimed by Lydig, had been delivered, or received into the bank. If it had, he observed, that the plaintiffs ought not to recover. This part of the charge appears to me correct. The second position stated to the jury was, that if the money had not been so received, then whether the bank used due'and proper diligence, in detecting and rectifying the frauds or mistakes of Brower, their book-keeper, in the accounts balanced and rendered to the defendant, would be a material inquiry ; and if the plaintiffs had used due diligence, the loss must be sustained by the defendant, and the verdict ought to be for the plaintiffs ; but if they had not, then the loss ought to fall on them, and the verdict ought to be for the defendant. The latter position, I think incorrect in this, that the question of due diligence was left at large to the jury, [389] without any opinion expressed by the judge, and because I perceive no grounds on which to found the charge of a want of due diligence on the part of the bank. The examinations, at the bank, by the committee of directors, were in the usual way; and the frauds practised by Brower, eluded detection, by his fabrication of a false balance sheet. It is not for the court to point out the mode banks are to pursue to detect frauds ; but if they take the usual and uniform method, adopted not only by this, but I presume by other banks, they cannot be subjected to the charge of negligence. There is no proof, that the other banking institutions pursue a different method; and I therefore think it fair to conclude, they do not. I have said, that particular errors in accounts may be inquired into, and rectified, though the whole account may not be liable to be opened, with respect to accounts kept by individuals with a bank ; but in my mind there is this exception; if the dealer’s book accompany the deposits, and the credit be then given, when the deposit is made, it becomes an original entry, and would be conclusive on the bank if, however, the book is sent to be written up afterwards, it is not an original entry, and may, be examined into. The result of my opinion is, that the jury were misdirected on the point of negligence on the part of the plaintiffs. It should not have been submitted to them as a question of fact; and, as it was so submitted, their verdict, for aught we know, turned on that point, and for that reason, there ought to be a new trial. The court are, accordingly, of opinion, that there must be a new trial, with costs to abide the event of the suit. New trial granted. Footnotes [*] 2 Atk. 119. [†] 2 Bro. C. C. 62. [*] 1 Salk. 228.