FRANKINI v. BANK OF AMERICA NAT. TRUST & SAVINGS ASS'N.*
This is an action brought to recover from the defendant bank the aggregate amount of a number of forged checks which were charged to the account of plaintiff. The trial court directed the jury to bring in a verdict in favor of the bank on those checks cashed during the months of November and December, 1931, and January of 1932, and such a verdict was rendered.
On checks cashed during the month of February, 1932, the issues were submitted to the jury, and a verdict found for defendant. The judgment was that plaintiff take nothing by reason of the action. Thereafter, the court granted a motion for new trial as to the verdict found by the jury with respect to the February checks, on the ground of insufficiency of the evidence. Plaintiff now appeals from the judgment resulting from the directed verdict, and defendant appeals from the order granting the motion for new trial.
There is a little dispute as to the material facts of the case. The plaintiff, Louis Frankini, was a depositor in defendant bank, and had been such for many years prior to the commencement of the action. In the year 1928, at the request of the bank, plaintiff signed and delivered to the bank the following agreement:
“AUTHORIZATION TO MAIL STATEMENT AND VOUCHERS. Louis Frankini name of account. To Bank of Italy National Trust and Savings Association. You are hereby requested and authorized to send by mail not registered the statement of the deposit account of the undersigned, together with all canceled checks pertaining to it, unless otherwise directed herein, to the undersigned at the following address: In consideration of your compliance with this request, the undersigned promises to notify you of any error, and to make any claim for credit or refund within ten days after the expiration of the time covered by this statement. This request and authorization is to remain in force and effect until revoked in writing. Signed: Louis Frankini, 5208 Folsom Boulevard.” (Italics ours.)
Pursuant to said contract defendant mailed to plaintiff monthly written statements of his account, together with canceled checks paid during the months of November and December, 1931, and January of 1932. Plaintiff admitted the receipt of each of the three monthly statements in due course of mail, and further admitted that he placed said statements, unopened, in his desk drawer, where they remained until his bookkeeper called for them in the early part of February, 1932. His testimony was to the effect that if he had examined the statements he would have discovered the forgeries.
During the months of November and December, 1931, and January, and the first ten days of February, 1932, the defendant bank accepted a number of checks drawn upon it, on which the name of plaintiff was forged as maker. These checks were all made out by William Rose, a former employee of plaintiff, to employees and former employees of plaintiff, and said William Rose forged the names of these employees on the endorsements. The defendant debited the defendant's commercial account with the amount of the forged checks in the sum of $1,345, and plaintiff seeks to recover that amount. These forged checks were forty-nine in number. Five of them totaling $130, were cashed during the month of November, 1931. Ten, amounting to $290, were cashed during the month of December, 1931. Twenty-one, amounting to $560, were cashed during the month of January, 1932. Thirteen, amounting to $365, were cashed during the month of February, 1932. On February 10, 1932, plaintiff first discovered the errors arising out of the forgeries, which appeared in these statements, and on that date he notified the bank of such discovery.
This case, upon practically the same facts, was before this court on appeal, the decision being filed March 6, 1936, and reported in 12 Cal.App.2d 298, 55 P.2d 232. We there held that the trial court erred in directing a verdict for defendant with respect to the forged checks for the months of January and February, 1931. We expressly refrained from passing upon the legality of the contract mentioned above.
It is admitted that the evidence in this case is identical with that in the former case, with one exception, which is pointed out by respondent, who states that the record now shows that the statement of plaintiff's account for the month of January, 1932, was for the period ending January 29th, instead of January 31st—the date which we assumed to be correct on the former appeal. This statement of the evidence appears to be correct. The decision in the former case holds that there was sufficient evidence of negligence on the part of the bank in cashing the forged checks to make out a case for the jury, and that plaintiff was not, as a matter of law, himself negligent. We now take that to be the law of the case before us. In that connection, however, we deem it proper to point out a few of the facts in the record which would support a finding of negligence on the part of the bank. During the four-month period involved, the bank cashed forty-nine forged checks drawn on the account of the plaintiff. Each of these contained two forged signatures, the signature of plaintiff as maker, and the endorsed signature of the payee. It appears that plaintiff had maintained an account in the bank for many years prior to these transactions, and his signature card had been on file with the bank during that time. This original card is before us in the record, together with the forged checks. Having carefully examined these exhibits, we are satisfied that the jury would have been justified in finding that if the bank had compared the genuine signatures with the forged signatures of plaintiff at any time, they would have rejected the forged checks. For illustration, in making the final “s” on his given name, plaintiff used the conventional method of completing that letter with a short line to the right leading from the bottom of the letter. In none of the forty-nine forged checks do we find that line. It is entirely omitted. We do not purport to detail all the facts which would support a finding of negligence, but merely refer to this one which is so apparent and obvious. While ordinarily commercial practice may not permit a teller in a bank to constantly make such comparisons, it is certainly the duty of the employee to acquaint himself with the signature of the customer; otherwise, the latter would have no protection whatever against forgeries.
Taking up first the appeal of plaintiff, it is contended that the court erred in directing a verdict for the defendant. Respondent seeks to uphold the directed verdict covering the checks cashed during the months of November and December, 1931, and January, 1932, upon two grounds: First: That the failure of the plaintiff to notify the bank, within a reasonable time, of any error or forgeries, gave rise to an account stated between the parties; and, second: That plaintiff was bound by the terms of the contract to give such notice within ten days “after the expiration of the time covered by this statement”, and having failed to give such notice, he had no recourse whatever against the bank. Conceding that there is sufficient evidence of negligence on the part of the bank, it is nevertheless contended by the respondent that the two defenses mentioned above are so conclusively proven that the jury had no alternative but to sustain them, and that as a matter of law, no other verdict was reasonably possible. If this contention is correct, the action of the trial court in directing a verdict should be sustained. “The question as to whether a bank is guilty of negligence in paying a forged check drawn upon the account of a depositor therein is usually one for the determination of the jury after the actual payment of a forged check has been established. So, also, the question as to whether a depositor has exercised due care in promptly examining his passbook, paid checks or a statement of his account is for the decision of the jury. Leather Mfg. Nat. Bank v. Morgan, 117 U.S. 96, 6 S.Ct. 657, 29 L.Ed. 811. It is error to withdraw the case from the jury if there is any substantial evidence to support the liability of the bank therefor. The well-established rule with respect to the liability of a bank for the payment of a forged check from the account of a depositor therein is expressed in the case of Union Tool Co. v. Farmers' & Mechanics' Nat. Bank of Los Angeles, 192 Cal. 40, at page 46, 218 P. 424, 426, 28 A.L.R. 1417, as follows: ‘It is a well-settled general rule that as between a bank and its depositor the bank is only warranted in paying out the money of the depositor on his genuine order and in accordance therewith. If payments be made on a forged check, with no attendant circumstances sufficient to create an equitable estoppel as against the depositor, or there has been no prior negligence by the depositor contributory to the payment of the check, no degree of care on the part of the bank will excuse it from liability.’ We may not say as a matter of law that the plaintiff was guilty of negligence which contributed to a justifiable payment of the forged checks by the bank merely because he left his blank checks, green ink and protectograph on his desk in his private office in his home. He may not be deemed to have reasonably anticipated that some thief and forger would procure a skeleton key and unlawfully enter his home in his absence to obtain these means of forging the checks. At least that question of negligence was for the determination of the jury. The authorities appear to hold that when the bank is guilty of negligence in the payment of a forged check, in the absence of an agreement to the contrary, it may be liable for the payment of a forged check even though the depositor has neglected to promptly examine his passbook or statement of account so as to discover the error. It is said in that regard in the case of Glassell Dev. Co. v. Citizens' Nat. Bank of Los Angeles, 191 Cal. 375, at page 380, 216 P. 1012, 1014, 28 A.L.R. 1427: ‘The weight of authority, and perhaps of reason, supports the view that when a depositor's passbook has been written up and returned to him with canceled checks which have been charged to his account, it is his duty to examine such checks within a reasonable time, and if they disclose forgeries or alterations to report them to the bank, failing in which he cannot, if his failure results in detriment to the bank, dispute the correctness of payments thereafter made by it on similar checks. * This rule, however, assumes that the bank itself has not been guilty of negligence in making the payment, for when by the exercise of proper care it could have discovered the alteration or forgery, it must bear the loss notwithstanding that the depositor failed in his duty to examine the accounts.’ ” Frankini v. Bank of America etc., 12 Cal.App.2d 298, 55 P.2d 232, 234. “If it (the bank) was negligent; if its officers are found to have failed to exercise due and reasonable care in detecting the forgery or fraud, then the subsequent negligence of the depositor, his failure to perform his duty in examining his pass-book and vouchers with reasonable care, and to report to the bank, in a reasonable time, any errors or mistakes, would constitute no defense.” 7 Am.Jur., p. 371, par. 516, citing numerous authorities. Summarizing briefly the rule as it pertains to the contentions here, it appears that though one is bound under the law to use diligence in examining his account after it is received from the bank, he is nevertheless excused from performing such duty if in fact the bank has failed to use ordinary care in detecting the forged signatures.
Taking up the defense of account stated, it appears without question that such defense is here predicated upon the silence and acquiescence of the customer, under the rule that if the account is sent to the debtor and he does not object to it within a reasonable time, his acquiescence will be taken as an admission that the account is truly stated. 1 Cal.Jur. p. 197. But, as we have seen, mere acquiescence is no defense where there is evidence of actual negligence on the part of the bank. This rule, if logically applied, would seem to be broad enough to cover any conduct of the customer in respect to failure to examine accounts, which conduct amounts to mere acquiescence, and hence would apply to the defense of accounts stated under the facts here. The basis of such defense is the mere passive conduct on the part of the customer, and we see no reason why the rule laid down in the Glassell Case, above stated, should not, with equal force and logic, be applied to the defense of mere acquiescence, no matter what form it may take.
It follows that a defense based upon the theory of accounts stated, where acquiescence alone is relied upon, is not in itself such an absolute defense to this action as to preclude the jury from passing upon the question of the negligence of the defendant. Furthermore, whether or not the defendant examined the account within a reasonable time, and reported any errors in the same, was a question for the jury. We cannot say as a matter of law that an account stated was proven.
We now consider the second defense: That of the written contract quoted above, where the plaintiff agrees to make any objection to the account “within ten days after the expiration of the time covered by the statement”. This is the equivalent to a ten-day limitation on the assertion of a right—the right to object to the statement. The time within which an action can be commenced is fixed by statute in this case as one year. Sec. 340, subd. 3, Code Civ.Proc. “It is a well-settled proposition of law that the parties to a contract may stipulate therein for a period of limitation, shorter than that fixed by the statute of limitations, and that such stipulation violates no principle of public policy, provided the period fixed be not so unreasonable as to show imposition or undue advantage in some way.” (Italics ours.) Beeson v. Schloss, 183 Cal. 618, 622, 192 P. 292, 294, citing numerous authorities. Unreasonableness depends not alone upon the words of the contract, but also upon the particular facts of the case. 37 C.J. p. 728, par. 45. In our former opinion, while not deciding this question we characterized the terms of this contract as “harsh”. It is a matter of common knowledge that in this state the banking business is conducted, through branches or affiliates, by a relatively small number of corporations. It can be reasonably conceived that in certain cities and counties a single banking institution would afford the only banking facilities. In such a case the prospective customer would be compelled to sign such an agreement if he wished to open an account. It cannot be said that under such circumstances he is a free agent in making such an agreement, in the same sense that he would be if he were executing an ordinary business contract. The situation would be somewhat analogous to the execution of a policy of insurance where the rule of interpretation is thus stated: “It is to be remembered that contracts of this sort are to be interpreted in the light of the fact that they are drawn in the insurance companies, and are rarely, if ever, understood by the people who pay the premiums. Coniglio v. Connecticut Fire Ins. Co., 180 Cal. 596, 599, 182 P. 275, 5 A.L.R. 805, citing numerous authorities. For the foregoing reasons we believe it to be the duty of the court to carefully scrutinize agreements of the character here involved, particularly with reference to the matter of reasonability.
At the outset we might state that in our opinion the ten-day period, in itself, is not an unreasonable limitation. The contract, here, however, involves an element which we believe renders it unreasonable. This is the period of time from which the ten-day limitation is to run. It is fixed at “the expiration of the time covered by the statement”, and not from the date of mailing or the receipt of such statement. It will be noted that the bank does not actually agree to mail or deliver the statement at all, although such duty might possibly be inferred. The result is that if the bank mailed the statement several days after the expiration of the time covered by it, the ten days would be cut down accordingly,—in fact, the bank could practically eliminate the time within which the customer might object to the account, and still be within the terms of the contract. This is an entirely different matter from that presented in the case relied upon by respondent, Los Angeles Investment Co. v. Home Savings Bank, 180 Cal. 601. 182 P. 293, 5 A.L.R. 1193. An agreement of similar import was there before the court, but it provided that the bank account should be examined by the customer and objection made thereto “within ten days after receipt thereof”. Under that contract, if the customer were absent from his home, and the statement was mailed to his home, the ten days would not begin to run until he returned, and actually received it. The Supreme Court did not pass upon the reasonableness of the contract; it had no occasion to do so. It was held ineffective because it had never been signed or assented to by the customer. We do not hold, however, that the form of agreement in that case is unreasonable, as it appears to us to meet the objection we have pointed out here. The court did, however, characterize such a contract as a “trap for the unwary”. This expression is particularly applicable to the instant case, because the card which contained the agreement is headed, in large type: “AUTHORIZATION TO MAIL STATEMENTS AND VOUCHERS”—a highly misleading statement which undoubtedly led to the failure of plaintiff to read the entire agreement. He testified that, prior to signing the authorization to mail, his attention was not called to the ten-day limitation language in it; that he thought that the card was but an identification of signature and a request to mail statements, and that he was never furnished a copy of it. The foregoing testimony is uncontradicted. For the reasons given, we hold that the contract in question was so unreasonable as to render it void and ineffective for any purpose.
Summarizing the entire matter with reference to the appeal of plaintiff, it appears that there is in the record sufficient evidence of negligence on the part of the bank in cashing the forged checks, to justify a finding by the jury to that effect; that neither of the two defenses, based on the accounts stated and the contract between the parties, was established to the extent that they, or either of them, absolutely precluded the jury from considering the negligence of the plaintiff, and therefore, the court was not, by reason of the proof of such defenses, justified in instructing the jury to find for the defendant.
Taking up the appeal by defendant from the order granting the motion for new trial, it appears that such motion was granted upon the ground that the evidence was insufficient to sustain the verdict. “The rule is well established that the granting or denying a new trial on the ground that the evidence is insufficient to justify the verdict, where there is a substantial conflict in the evidence, rests so fully in the discretion of the trial court that its action is conclusive upon this court, unless it appears that there has been an abuse of discretion. [Italics ours.]” Springer v. Pacific Fruit Exchange, 92 Cal.App. 732, 734, 268 P. 951, 952.
What we have said upon the appeal by plaintiff is equally applicable on this appeal. There was evidence which would justify a finding by the jury to the effect that defendant was guilty of negligence. The defenses set up did not conclusively negative such negligence. It was still a question for the jury. If the trial court was not satisfied with the sufficiency of the evidence to sustain a verdict, it had the right to grant a new trial, in the exercise of a sound discretion. We cannot say that such discretion was here abused.
That portion of the judgment resulting from the directed verdict is reversed. The order granting a motion for new trial on the other issues is affirmed. Plaintiff to recover costs on appeal.
Mr. Justice TUTTLE delivered the opinion of the court.
We concur: PULLEN, P.J.; THOMPSON, J.