BANK OF DELAWARE, a banking corporation of the State of Delaware, Defendant Appellant,
UNION WHOLESALE COMPANY, a corporation of the State of Delaware, Plaintiff Appellee.
[57 Del. 532] William Prickett, Jr., of Prickett & Prickett, Wilmington, for the defendant below, appellant.
Thomas J. Healy, Jr., of Metten, Healy & Collins, Wilmington, for the plaintiff below, appellee.
TERRY, C. J., CAREY, J., and SHORT, V. C. (specially assigned).
SHORT, Vice Chancellor:
This is an appeal from an order of the Superior Court setting aside the verdict of a jury in favor of the defendant and entering judgment for the plaintiff. The facts are fully set forth in the opinion of the court below. See Union Wholesale Company v. Bank of Delaware, Del.Super., 190 A.2d 761. We do, however, find that the statement of facts in the trial court's opinion is inaccurate in one important particular, and since that court's ultimate holding was predicated in a material degree upon the erroneous fact stated, we feel impelled to correct the error and consider the case in the light of the facts supported by the record.
Briefly stated, plaintiff below (Union), a bank depositor, brought suit against defendant below (Bank) to recover money
paid out on checks forged by an employee of Union. The checks, being six in number, were cashed by the forger in branches of the Bank. They total $7900. Three of the checks were returned to Union with the Bank's monthly statement in September 1958, two with the October 1958 statement and the last with the November[57 Del. 533] 1958 statement.  The Bank admitted liability with respect to the first three checks totalling $3900, but contended that as to the remaining three Union's negligence in failing to examine the statements and cancelled checks was the proximate cause of Union's loss. In stating the facts, the court below said:
'It seems further desirable to point out that the Bank, when it opened accounts, always required duplicate signature cards of authorized signatories on checks, one of which cards was kept at the Main Office and the other at the Branch (there were 5 such branches) where the account was opened; that when a check is presented to a bank teller for cashing the teller has the duplicate signature card for verification and it is always available to the Bank's bookkeeping department to verify the signature before depositor's account is charged with payment of the check. It developed that signature cards were not maintained at all branches. The chief teller of the Bank testified that tellers are instructed to be careful about paying checks, in large amounts, and that they could always go to an officer to have a signature on a check verified. It was made to appear that no teller who cashed the forged checks ever verified the signatures with the signature cards or consulted an officer for verification of the signatures on these forged checks.'
We find from an examination of the record that the procedure followed by the Bank in paying checks and verifying signatures is not accurately stated by the above quotation. That statement tends to indicate that it was the duty of the Bank's tellers to verify signatures on checks, and that for this purpose they had available duplicate signature cards. To the contrary, the record establishes[57 Del. 534] that duplicate signature cards were not available at the Bank's branch offices where the checks were cashed, and that the duty of tellers in cashing checks was to be assured only that the check was regular on its face, that sufficient funds were deposited to the account on which it was drawn, and that the payee or last endorser was known or identified. The duty to verify the signature of the maker of a check was that of the bookkeeping department which, after the close of business on each day, checked the signatures of markers before an account was charged with payment. In concluding that the Bank's own testimony established negligence in the payment of the three checks in issue, the trial court relied in a substantial degree upon the failure of the tellers to exercise duties which were not cast upon them by the Bank's customary procedure.
The Bank introduced evidence of its custom in paying checks and verifying signatures. It did not, however, offer any testimony as to the manner in which the checks here involved were handled by its bookkeeping department. It did not call the employees whose duty it was to verify signatures on these checks to test their recollection, if any. Neither did they offer any explanation for their failure to call such employees. The Bank relied in the court below, as it does here, on the bare proof of its custom as probative of the fact that the signatures on the checks were verified according to that custom.
The Bank cites a number of cases to the effect that evidence of habit or custom is admissible to prove what was done on a particular occasion. See Boston Lumber Co. v. Pendleton Brothers, Inc., 102 Conn. 626, 129 A. 782; Ware v. Childs, 82 Vt. 359, 73 A. 994; Moffitt v. Connecticut Co., 86 Conn. 527, 86 A. 16; Baldridge v.
Matthews, 378 Pa. 566, 106 A.2d 809. We have found no [57 Del. 535] case in this state which passes upon this question. Assuming such to be the rule in the ordinary case, we are satisfied that it is not applicable in the circumstances here presented. Where a bank pays out money of a depositor otherwise than in conformity with his orders, the bank, at the suit of the depositor, has the burden of establishing its freedom from negligence. National Dredging Co. v. Farmers' Bank, 6 Pennewill 580, 69 A. 607, 16 L.R.A.,N.S., 593. Until this burden is met by the bank its liability is not discharged. We do not think that the mere proof of the customary method of verifying signatures on checks is sufficient, in and of itself, to justify the conclusion that admittedly forged checks were verified in that manner. Nor do we feel that our view lacks the support of authority. Thus, in R. H. Kimball, Inc. v. Rhode Island Hospital Nat. Bank, 72 R.I. 144, 48 A.2d 420, the Supreme Court of Rhode Island in consideration of a similar case said: 'There was no evidence that any teller, clerk or officer ever used the plaintiff's signature card by which to verify the signature on any of these forged checks; nor is there specific evidence that any of the * * * checks was actually and individually inspected according to the bank's system.'
A case of particular interest in circumstances such as the present is Basch v. Bank of America Nat. Trust & Savings Ass'n., Cal.App.,129 P.2d 742, affirmed 22 Cal.2d 316, 139 P.2d 1. There, as here, a depositor sued his bank to recover the amount of forged checks charged to his account. The bank, as here, pleaded negligence on the part of the depositor in failing to examine monthly statements and cancelled checks. Evidence was introduced showing the bank's custom in verifying signatures. The teller of the bank's division which was charged with that duty was called as a witness. He was shown certain checks, including several which he himself had previously [57 Del. 536] honored as genuine. After examining these checks he admitted that several of them bore evidence of forgery and should not have been honored. Though this character of testimony would probably occur infrequently, the case nevertheless illustrates the point that witnesses to a transaction, though without specific recollection of its details may, even at a remote time, cast light upon it. In the present case it is quite conceivable that had the employees of the Bank whose duty it was to verify signatures ...