Nicholson, Ch.,
delivering the opinion of the Court:
This was an action of assumpsit in the Superior Court for New Castle County, brought by the National Dredging Company, plaintiff in error, as plaintiff below, against the Farmers’ Bank to recover an alleged balance of account.
The plaintiff's bill of particulars contained an itemized list of the deposits made by the plaintiff with the defendant, subject to check, from February, 1897, to April 2, 1903, amounting in the aggregate to one million, nine hundred and fifty-one thousand, eight hundred and twenty-three dollars and forty-two cents ($1,951,823.42), and a list of checks alleged by the plaintiff to be wrongfully charged by the defendant to the account of the plaintiff within the same period, amounting in the aggregate to thirty-one thousand, five hundred and six dollars and eighty-six cents ($31,506.86).
A motion for a nonsuit was submitted by counsel for the defendant at the close of the plaintiff's testimony and was granted by a majority of the Court. Counsel for the plaintiff refused to take a nonsuit, and a majority of the Court thereupon directed the jury to return a verdict for the defendant.
Spruance, J., delivered a dissenting opinion, saying in conclusion, “with proper instructions from the Court as to the law, [584]*584I believe that a more just and satisfactory result would be reached by the verdict of the jury, than by the determination of both facts and law by the Court.”
The assignment of errors was as follows:—
“1. That the Court erred in directing the jury to return a verdict for the defendant in the above stated cause.
“2. That upon the refusal of the plaintiff to accept a non-suit in the above entitled cause, the Court erred in charging the jury as follows:
‘For the reasons which the majority of the Court gave in their decision to grant a nonsuit in this case, we direct you to return a verdict for the defendant.’
“3. That the Court erred in not submitting to the jury, under the testimony adduced on the part of the plaintiff, and contained in the Bill of Exceptions, the question as to whether the defendant was indebted to the plaintiff in the said action.”
Obviously, it will be necessary' to consider the evidence in detail, in order to arrive at a correct understanding of the question presented to this Court, but a general preliminary outline of the facts in the case may be best given by quoting from the opinion of the learned Chief Justice in the Court below, as follows:
“In disposing of this motion for a nonsuit we will first briefly summarize the facts disclosed by the testimony of the plaintiff.
“The National Dredging Company, the plaintiff, is a corporation of the State of Delaware, and during the time covered by this suit, was engaged in operations and in work in different parts of the United States, involving the expenditure of large sums of money. The Farmers’ Bank at Wilmington, the defendant, is also a corporation of this State engaged in the banking business; and during the time above named was the depository and banker for the said company.
“The chief place of business and office of the company was in the City of Wilmington; as was also the banking house of the defendant.
[585]*585“From February 23, 1897, to January 14, 1903, the company had on deposit with the bank subject to check a large sum of money, amounting to nearly two millions of dollars. This amount has been properly paid out by the bank upon checks of the company, except the sum of thirty thousand eight hundred and thirty-one dollars and fifty-two cents. This amount the company claims was wrongfully paid by the bank upon altered or forged checks, which are one hundred and fourteen in number, and extend from July 7, 1897, the date of the first, to December 17, 1902, the date of the last of the disputed checks, as disclosed by the plaintiff’s bill of particulars.
“The money of the company was deposited from time to time in the bank by William H. Churchman, who was the secretory of the company, in charge of its office and its representative in this city. All such deposits were entered upon the bank pass books of the company, which book the compan}! kept. The money so deposited was paid out only upon checks signed by the treasurer, who was George G. Barker. The pass book was written up and settlements made, and the company’s balance in the bank ascertained, twelve times during the period covered by this controversy, as follows, viz., June 14, August 28 and December 22, 1897; August 6, 1898; August 4, 1899; August 11 and November 8, 1900; June 9, March 1, November 11 and December 11, 1901; and January 14, 1903.
“At each one of these settlements the checks theretofore paid by the bank were surrendered and delivered with the pass book to William H. Churchman, and remained in the possession of the company up to the commencement of this action. The first two of the disputed checks, dated respectively July 7 and August 8, 1897, were so delivered in the second settlement of August 28, 1897. Like deliveries of the disputed checks were so made in each of the succeeding settlements and so remained in the possession of the company.
“All the disputed checks were signed by the treasurer George G. Barker. The alterations or forgeries consisted in [586]*586drawing two lines through the words ‘the order of,’ before the name of the payee in each check, and in writing after the name of the payee the words ‘or bearer.’ It is alleged that these alterations were made after the checks were signed, and without authority. The handwriting in the body of all the checks, except six, is that of William H. Churchman, the secretary of the company. The remaining six are either in his handwriting or in that of some one in the office under him.
“The method of the company in paying its bills seems to have been this: the secretary, William H. Churchman, received the bills, filled out the checks, and sent them to George G. Barker, the treasurer, wherever he might be from time to time. The checks were signed by the treasurer and returned to Churchman for distribution among the creditors.
“With respect to this bank account,the evidence shows that William H. Churchman, the secretary, made the deposits; kept the bank book at the office of the company in this city; had the book settled from time to time; received the checks surrendered by the bank at such settlements. It is proved that all the money paid out by the bank on these altered checks was paid to the said William H. Churchman, personally, who was not only the Secretary of the company, but under the by-laws of the company, in the absence of the president and vice president, acted as president.
“The company claims that the alterations of those checks were so manifest upon the face of the check itself, by reason of the different ink used, the manner and place of the additions to the checks and the character of the same, that the bank was grossly negligent in paying them. The company claims, therefore, that it is entitled to recover in this action, even though there may have been negligence on its part in not sooner discovering and notifying the bank of the alterations.”
The bank claims, on the other hand, that the course of conduct and the business methods of Barker, the president and treasurer of the plaintiff company (depositor), in connection [587]
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Nicholson, Ch.,
delivering the opinion of the Court:
This was an action of assumpsit in the Superior Court for New Castle County, brought by the National Dredging Company, plaintiff in error, as plaintiff below, against the Farmers’ Bank to recover an alleged balance of account.
The plaintiff's bill of particulars contained an itemized list of the deposits made by the plaintiff with the defendant, subject to check, from February, 1897, to April 2, 1903, amounting in the aggregate to one million, nine hundred and fifty-one thousand, eight hundred and twenty-three dollars and forty-two cents ($1,951,823.42), and a list of checks alleged by the plaintiff to be wrongfully charged by the defendant to the account of the plaintiff within the same period, amounting in the aggregate to thirty-one thousand, five hundred and six dollars and eighty-six cents ($31,506.86).
A motion for a nonsuit was submitted by counsel for the defendant at the close of the plaintiff's testimony and was granted by a majority of the Court. Counsel for the plaintiff refused to take a nonsuit, and a majority of the Court thereupon directed the jury to return a verdict for the defendant.
Spruance, J., delivered a dissenting opinion, saying in conclusion, “with proper instructions from the Court as to the law, [584]*584I believe that a more just and satisfactory result would be reached by the verdict of the jury, than by the determination of both facts and law by the Court.”
The assignment of errors was as follows:—
“1. That the Court erred in directing the jury to return a verdict for the defendant in the above stated cause.
“2. That upon the refusal of the plaintiff to accept a non-suit in the above entitled cause, the Court erred in charging the jury as follows:
‘For the reasons which the majority of the Court gave in their decision to grant a nonsuit in this case, we direct you to return a verdict for the defendant.’
“3. That the Court erred in not submitting to the jury, under the testimony adduced on the part of the plaintiff, and contained in the Bill of Exceptions, the question as to whether the defendant was indebted to the plaintiff in the said action.”
Obviously, it will be necessary' to consider the evidence in detail, in order to arrive at a correct understanding of the question presented to this Court, but a general preliminary outline of the facts in the case may be best given by quoting from the opinion of the learned Chief Justice in the Court below, as follows:
“In disposing of this motion for a nonsuit we will first briefly summarize the facts disclosed by the testimony of the plaintiff.
“The National Dredging Company, the plaintiff, is a corporation of the State of Delaware, and during the time covered by this suit, was engaged in operations and in work in different parts of the United States, involving the expenditure of large sums of money. The Farmers’ Bank at Wilmington, the defendant, is also a corporation of this State engaged in the banking business; and during the time above named was the depository and banker for the said company.
“The chief place of business and office of the company was in the City of Wilmington; as was also the banking house of the defendant.
[585]*585“From February 23, 1897, to January 14, 1903, the company had on deposit with the bank subject to check a large sum of money, amounting to nearly two millions of dollars. This amount has been properly paid out by the bank upon checks of the company, except the sum of thirty thousand eight hundred and thirty-one dollars and fifty-two cents. This amount the company claims was wrongfully paid by the bank upon altered or forged checks, which are one hundred and fourteen in number, and extend from July 7, 1897, the date of the first, to December 17, 1902, the date of the last of the disputed checks, as disclosed by the plaintiff’s bill of particulars.
“The money of the company was deposited from time to time in the bank by William H. Churchman, who was the secretory of the company, in charge of its office and its representative in this city. All such deposits were entered upon the bank pass books of the company, which book the compan}! kept. The money so deposited was paid out only upon checks signed by the treasurer, who was George G. Barker. The pass book was written up and settlements made, and the company’s balance in the bank ascertained, twelve times during the period covered by this controversy, as follows, viz., June 14, August 28 and December 22, 1897; August 6, 1898; August 4, 1899; August 11 and November 8, 1900; June 9, March 1, November 11 and December 11, 1901; and January 14, 1903.
“At each one of these settlements the checks theretofore paid by the bank were surrendered and delivered with the pass book to William H. Churchman, and remained in the possession of the company up to the commencement of this action. The first two of the disputed checks, dated respectively July 7 and August 8, 1897, were so delivered in the second settlement of August 28, 1897. Like deliveries of the disputed checks were so made in each of the succeeding settlements and so remained in the possession of the company.
“All the disputed checks were signed by the treasurer George G. Barker. The alterations or forgeries consisted in [586]*586drawing two lines through the words ‘the order of,’ before the name of the payee in each check, and in writing after the name of the payee the words ‘or bearer.’ It is alleged that these alterations were made after the checks were signed, and without authority. The handwriting in the body of all the checks, except six, is that of William H. Churchman, the secretary of the company. The remaining six are either in his handwriting or in that of some one in the office under him.
“The method of the company in paying its bills seems to have been this: the secretary, William H. Churchman, received the bills, filled out the checks, and sent them to George G. Barker, the treasurer, wherever he might be from time to time. The checks were signed by the treasurer and returned to Churchman for distribution among the creditors.
“With respect to this bank account,the evidence shows that William H. Churchman, the secretary, made the deposits; kept the bank book at the office of the company in this city; had the book settled from time to time; received the checks surrendered by the bank at such settlements. It is proved that all the money paid out by the bank on these altered checks was paid to the said William H. Churchman, personally, who was not only the Secretary of the company, but under the by-laws of the company, in the absence of the president and vice president, acted as president.
“The company claims that the alterations of those checks were so manifest upon the face of the check itself, by reason of the different ink used, the manner and place of the additions to the checks and the character of the same, that the bank was grossly negligent in paying them. The company claims, therefore, that it is entitled to recover in this action, even though there may have been negligence on its part in not sooner discovering and notifying the bank of the alterations.”
The bank claims, on the other hand, that the course of conduct and the business methods of Barker, the president and treasurer of the plaintiff company (depositor), in connection [587]*587with the transactions in controversy, as disclosed by the testimony of the plaintiff, constituted such gross negligence and so misled the bank as to relieve the defendant from all responsibility from the loss occasioned by its payment of the altered checks to Churchman.
This defense is formulated by counsel in the three following paragraphs:—•
“First. Our first point is therefore that plaintiff cannot recover because its prior or original negligence occasioned the loss in question.
“Second. Our second point is therefore that plaintiff was guilty of gross negligence subsequent to the payment of the several checks in question by the bank.
“Third. Our next contention is that the acts and conduct of plaintiff company warranted defendant bank in believing that William H. Churchman was authorized to make the alterations appearing on the checks in controversy.”
There is no question of fraud or intentional misconduct on the part of either the plaintiff or defendant, but in order to determine which of the parties to the suit must bear the loss resulting from the crime of William H. Churchman, it is, of course, necessary for the issues of negligence, which are presented, to be decided; and the question for this Court to determine is whether it was proper for the Court below, under the evidence before it, to withdraw the case from the jury.
In the absence of either prior or subsequent negligence or misleading conduct on the part of a depositor, a bank or banker cannot charge the depositor with any payments, except such as are made in conformity with his orders, for the relation of a bank and its depositors is one simply of debtor and creditor, and it matters not what care is exercised and what precautions are taken by the bank, no payment made otherwise can be charged against the depositor, even though it be made in consequence of forgeries so skilfully executed as to deceive the most expert, or [588]*588by false pretenses so adroit and plausible as to be likely to impose upon experienced bank officers.
These are the fundamental principles which are either formulated or implied in the discussion of every well considered case that involves the question whether upon the given state of facts it is the bank or its depositor which must bear the loss re-suiting from successful forgery and fraud. Leather Manufacturer’s Bank vs. Morgan, 117 U. S. 96, 106; Shipman vs. Bank S. N. Y., 126 N. Y. 318, 327. In the latter case the Court say, after alluding to these principles,—“These rules are so familiar and so well established and illustrated by the adjudged cases that a bare reference to them is all that is needful here. (Crawford vs. West Side Bank, 100 N. Y. 53; Aetna Nat. Bank vs. Fourth Nat. Bank, 46 id. 86; Corn Exchange Bank vs. Nassau Bank, 91 id. 80; Phoenix Bank vs. Risley, 111. U. S. 125; Bank of British North America vs. Merchants’ Nat. Bank, 91 N. Y. 106; Marine Bank vs. Fulton Bank, 2 Wallace 256; First Nat. Bank vs. Whitman, 94 U. S. 347; Citizens’ Nat. Bank vs. Importers and Traders' Bank, 119 N. Y. 195.)”
It is also clear (as a general principle, and in the absence of negligence on the part of the depositor) that when the erasure of the words “or order” or “the order of” and the insertion of the words “or bearer” in a check without the authority of the depositor making it, results in its payment by the depositor’s bank to a person other than the payee, such payment is not payment to the payee—is not payment in conformity with the orders of the depositor, and therefore the depositor cannot be charged with it.
This rule is familiar and obvious, but reference may be had to a couple, of Massachusetts cases directly in point. Belknap, et al. vs. National Bank of North America, 100 Mass. 376, 381; Dana vs. National Bank of the Republic, 132 id. 157.
There is one other well settled principle, a statement of which seems necessary in order to supplement the two already set forth, and as tending to shorten and facilitate the discussion of [589]*589the disputed questions before us, which have been so ably and exhaustively argued by the eminent counsel engaged in this cause. It is stated by Justice Harlan, as follows:—
“While it is true that the relation of a bank and its depositor is one simply of debtor and creditor, (Phoenix Bank v. Risley, 111 U. S. 125, 127,) and that the depositor is not chargeable with any payments except such as are made in conformity with his orders, it is within common knowledge that the object of a pass-book is to inform the depositor from time to time of the condition of his account as it appears upon the books of the bank. It not only enables him to discover errors to his prejudice, but supplies evidence in his favor in the event of litigation or dispute with the bank. In this way it operates to protect him against the carelessness or fraud of the bank. The sending of his pass-book to be written up and returned with the vouchers, is, therefore, in effect, a demand to know what the bank claims to be the state of his account. And the return of the book, with the vouchers, is the answer to that demand, and, in effect, imports a request by the bank that the depositor will, in proper time, examine the account so rendered, and either sanction or repudiate it. In Devaynes v. Noble, 1 Meriv. 530, 535, it appeared that the course of dealing between banker and customer, in London, was the subject of inquiry in the High Court of Chancery as early as 1815. The report of the master stated among other things, that for the purpose of having the pass-book ‘made up by the bankers from their own books of account, the customer returns it to them from time to time as he thinks fit; and, the proper entries being made by them up to the day on which it is left for that purpose, they deliver it again to the customer, who thereupon examines it, and if there appears any error or omission, brings or sends it back to be rectified; or, if not, his silence is regarded as an admission that the entries are correct.’ This report is quite as applicable to the existing usages of this country as it was to the usages of business in London at the time it was made. The depositor cannot, [590]*590therefore, without injustice to the bank, omit all examination of his account, when thus rendered at his request. His failure to make it or to have it made, within a reasonable time after opportunity given for that purpose, is inconsistent with the object for which he obtains and uses .a pass-book.” Leather Manufacturers’ Bank v. Morgan, 117 U. S. 96, 106—7.
The majority of the Court below based its peremptory instructions to the jury to return a verdict for the defendant upon the assumption that the company plaintiff had failed to perform this duty, and was thereby guilty of subsequent negligence, the effect of which was to defeat its right to recover from the bank. The Chief Justice said:—
“The payment of these alleged altered checks by the bank commenced in June 1897, and continued until December, 1902. The checks are 114 in number. They were regularly charged against the account of the company by the bank, and the amounts so charged with the altered checks themselves as vouchers were returned to the company in ten separate settlements during that period of time. With such evidence in its possession no examination of the accounts and vouchers was made or attempted to be made by the company, until after the death of Churchman, the secretary, in January, 1903.
“It seems therefore to a majority of the Court under the circumstances of this case, that the negligence of the plaintiff company was so gross, as to defeat its right to recover in this suit as a matter of law, and that we would not be justified in submitting the facts to be determined by the jury.”
Boyce, J., concurring, concludes as follows:
“This case as it now stands before us (the plaintiff having disregarded its duty to the bank for upwards of five years) has passed beyond the stage in the transactions between the plaintiff and the bank where the alleged negligence of the bank in the payment of the altered checks might be a question of fact for the jury, had the plaintiff exercised reasonable diligence both [591]*591to discover the alterations and consequent forgeries of the checks in question and to give notice thereof to the bank.”
Assuming that the Court below was correct in thus determining the fact of subsequent negligence on the part of the plaintiff company (depositor), it still remains for us to consider whether it was also correct in its determination of the legal effect of such negligence.