Case Name: HENRY CRAB, Appellant, v. CITIZENS' STATE BANK, Respondent
Court: Idaho Supreme Court
Jurisdiction: Idaho
Decision Date: 1912-08-31
Citations: 22 Idaho 408
Docket Number: 
Parties: HENRY CRAB, Appellant, v. CITIZENS’ STATE BANK, Respondent.
Judges: Stewart, C. J., concurs.
Reporter: Idaho Reports
Volume: 22
Pages: 408–419

Head Matter:
(August 31, 1912.)
HENRY CRAB, Appellant, v. CITIZENS’ STATE BANK, Respondent.
[126 Pac. 520.]
Bank Deposit — Payment op Unauthorized Check — Notice to Bank— Laches op Depositor — Instructions.
(Syllabus by the eourt.)
1. Evidence examined and considered, and held, that it clearly establishes the fact that the bank had notiee that the checks cashed by it were not to be paid out of the private account of appellant, and that the drawer of such checks had no authority to check on appellant’s account.
2. The principle of law established by the authorities that a depositor will be estopped by his laches in failing to promptly notify the bank of the forgery of a check which it has paid out of his account, or that such cheek was unauthorized, is not applicable to the faets of this ease, for the reason that the bank had notiee at the time it paid the cheeks that such checks were drawn without authority and were not to be paid out of the private account of the appellant Crab, but were to be paid out of the account of the Atlanta Mercantile Co., a corporation.
3. The relation existing between a bank and its depositor is that of debtor and creditor, and before the bank can charge the account of its depositor with a check drawn by someone else, it must show authority or ratification by the depositor.
4. Certain instructions given in this case examined, and held erroneous, and not applicable to the facts of the case.
Sullivan, J., dissenting.
APPEAL from the District Court of the Fourth Judicial District for Elmore County. Hon. Edward A. Walters, Judge.
. Action for debt. Judgment for defendant; plaintiff appealed.
Reversed.
Daniel McLaughlin and Perky & Crow, for Appellant.
The relation between a bank and a depositor is purely one of debtor and creditor. (State v. Thum, 6 Ida. 323, 55 Pac. 858.)
A bank is presumed to know the signature of its customers, and if it passes a forged check, it cannot, in the absence of negligence on the part of the depositor whose check it purports to be, charge the amount to his account. (5 Cyc. 544.)
If the defendant’s officers, who have been paying the altered checks, could by proper care and skill have detected the forgeries, then it could not receive the credit for the amount of those checks, even if the depositor omitted all examination of his account. (2 Morse, sec. 472; Yarborrah v. Bank Loan & Trust Co., 142 N. C. 377, 55 S. E. 296.)
•W. C. Howie and E. M. Wolfe, for Respondent.
If the bank acts honestly in the payment of checks, the depositor must do all that he can reasonably to avoid loss or injury from the payment of unauthorized checks. (Leather Mfrs. Nat. Bank v. Morgan, 117 U. S. 96, 6 Sup. Ct. 657, 29 L. ed. 811; First Nat. Bank v. Allan, 100 Ala. 476, 46 Am. St. 80, 14 So. 335, 27 L. R. A. 426; Nat. Bank of Commerce v. Tacoma Mill Co., 182 Fed. 1, 104 C. C. A. 441; Whitsett v. People’s Nat. Bank, 133 Mo. App. 81, 119 S. W. 999; Myers v. Southiuestern Nat. Bank, 193 Pa. 1, 74 Am. St. 672, 44 Atl. 280; Cunningham v. First Nat. Bank, 219 Pa. 310, 123 Am. St. 657, 68 Atl. 731; Broiun v: Lynchburg Nat. Bank, 109 Ya. 530, 17 Aun. Cas. 119, 64 S. E. 950; Israel v. State Nat. Bank, 124 La. 885, 50 So. 783; 5 Am. & Eng. Eney. of Law, 1068.)
STATEMENT OF FACTS.
This action was brought by the plaintiff in the court below to recover $561.06, as a balance due on the deposit that the plaintiff had with the defendant bank. Plaintiff was the president and general manager of the Atlanta Mercantile Co., a corporation, and had been such officer since the organization of the corporation. - This corporation was engaged in the mercantile business at Atlanta in Elmore county. The appellant owned the controlling interest in the corporation. The company had been doing its banking business with the defendant bank, and appellant had also been doing an individual banking business with the same institution. He was carrying the two accounts in the bank. About the 1st of January, 1908, the appellant, as president and general manager of the Atlanta Mercantile Co., and acting for such company, entere'd into a written contract with one William Brothers, whereby it was agreed that Brothers should take the management and control of the corporation and conduct its business and devote his sole time and attention to the business and affairs of the corporation, and maintain its assets at the value then invoiced at $13,738, and that for his services he should have one-half the net profits of the corporation. Appellant thereupon left for California and did not return until sometime in the following April. When appellant left he had a personal and individual account with the respondent bank, and the corporation also had an account at the same bank. Brothers issued checks from time to time in the course of his business, which were paid by the bank. The first checks issued seem to have been- on the printed form made specifically for the Atlanta Mercantile Co., with the company’s name already printed on the checks ready
for the signature of the president or manager. In issuing these cheeks Brothers signed appellant’s name, but made no attempt to imitate the signature of appellant, and the bank all the time knew that the signature was not made by appellant Crabb, but was written by Brothers. After this form of cheek was exhausted, Brothers began using the ordinary check, to which he did not sign the Atlanta Mercantile Co.’s name, but simply signed the name of Henry Crabb. These cheeks were still paid and charged to the Atlanta Mercantile Co. account. Later on, that account apparently ran low, and the bank paid some $600 worth of these checks and charged them to the individual account of Crab. In the meanwhile, Crab was. in California and was cheeking against his personal account until he had reduced it to the sum of $561.06. Brothers testifies that he was at the bank at one time and told the cashier that he must not pay any of the checks which he (Brothers) issued out of Crab’s individual account, for the reason that he had no authority to check against that account. The written contract between the parties gave Brothers no authority to check on Crab’s account and was not an agreement or contract between Crab and Brothers, but rather between the corporation and Brothers. This agreement, however, says nothing about the signing of names or issuing of cheeks for any purpose or on any account. Brothers says he understood that he had full authority to do any business in Crab’s name, although he told the bank that he had no authority to check on Crab’s personal account. Brothers testifies that immediately after Crab returned from California he told him that some cheeks had been issued against his individual account. It is quite clear, however, from the record that Crab did not discover that-his individual account was over-checked until after he came to Boise and had issued a check and sent it to Mountainhome and the cheek had been presented and refused payment. He then returned to Mountainhome and Atlanta, and he and Brothers went over the account to discover what had become of his individual deposit.
The court gave the following instructions, to which appellant objected and excepted:
“6. If you find from the evidence that the plaintiff in this case deposited with the defendant bank in the name of Henry Crab the sum of $2,828.25, and that $561.06 of that account was paid out upon checks issued in the name of Henry Crab but in fact signed by William Brothers, and that the proceeds of said cheeks paid claims against the Atlanta Mercantile Co., of which Henry Crab was president and general manager and had the power to cheek against this account, and you further find that the said Henry Crab discovered that the said cheeks had been charged up against his account which were in payment of the Atlanta Mercantile Company’s claims and that after learning of it he ha.d the power and ability to issue checks against the Atlanta Mercantile Co.’s account to replace this amount, but failed and neglected to do so, that such failure and neglect would release the defendant bank from any further obligation and he would be unable to recover in this action.”
”7. If you'find from the evidence that the $561.06 on which this suit is brought was in fact paid out of the Henry Crab account by the bank on checks signed in the name of Henry Crabb, but by his manager, and you further find that said manager was not authorized to sign the name of Henry Crab to checks on his individual account, but if you further find that the said Henry Crab discovered that these checks had been signed by Brothers and at the time he did so learn he had money in the Atlanta Mercantile Company account, it was his duty to check back from the company account to his own, instead of holding the bank in damages.
“It is a depositor’s duty to do all in his power to save the bank harmless where money has been paid on unauthorized checks.
”8. In this case the bank admits that plaintiff deposited with it $2,828.25, and claims that it has paid the said sum and $63.36 more, back to Mr. Crab, either directly, on his own signed checks, or on checks signed in his name by his manager and for the use and benefit of Mr. Crab, and if you find that it was so paid back, you should find for the defendant.”

Opinion:
AILSHIE, J.
(After stating the facts.) — It is clear that Brothers had no authority to cheek against appellant's private account, and it is equally clear that the bank knew appellant's name had been signed to the cheeks by Brothers, and that these checks were in fact intended to be drawn against the account of the Atlanta Mercantile Co.
The principle of law contended for by respondent and supported by Leather Mfrs. Nat. Bank v. Morgan, 117 U. S. 96, 6 Sup. Ct. 657, 29 L. ed. 811, First National Bank of Birmingham, v. Allen, 100 Ala. 476, 46 Am. St. 80, 14 So. 335, 27 L. R. A. 426, National Bank of Commerce v. Tacoma Mill Co., 182 Fed. 1, 104 C. C. A. 441, Myers v. Southwestern National Bank, 193 Pa, 1, 74 Am. St. 672, 44 Atl. 280, and 5 Am. & Eng. Ency.'of Law, 1068, is not applicable to the facts of this case. No element of laches is shown here, and no grounds appear for invoking the doctrine of estoppel against appellant. (2 Morse on Banking, sec. 472.) The bank already had notice that these checks should not be paid from Crab's account. On the other hand, Crab appears to have notified the bank as soon as the bank declined to pay his personal checks and notified him that his private account was overdrawn.
The relation existing between a bank and its depositor is that of debtor and creditor (State v. Thum, 6 Ida. 323, 55 Pac. 858; Morse on Banking, sec. 289), and before a bank can charge the account of its depositor with a cheek drawn by someone else, it must show authority or ratification from the depositor.
Instructions 6, 7, and 8 were erroneous, and not applicable to the facts of this case. They undoubtedly misled the jury to the prejudice of appellant.
The judgment is reversed and a new trial is granted. Costs awarded in favor of appellant.
Stewart, C. J., concurs.