The T. B. Clark Company, Appellant, v. Mount Morris Bank, Respondent

The T. B. Clark Company, Appellant, v. Mount Morris Bank, Respondent. Bank — refusal of, to pay the check of one having a deposit sufficient to meet it — when only nominal damages can he recovered, — what is legal malice. "Where a bank refuses to pay, on presentation, a check and note drawn by a depositor, although it has in its hands funds of the depositor sufficient for that purpose, the depositor may maintain an action against the bank either in tort or for the breach of the contract. If he sues in tort without alleging or proving special damages, and it appears that the failure of the bank to pay the check and note was due to the error of a new bookkeeper who was taking the place of the regular bookkeeper during the latter’s illness, and that, as soon as the mistake was discovered, the bank wrote explanatory letters to the holders of the check and note, the depositor is only entitled to recover nominal damages. Substantial damages can be awarded in such ,an action only when the bank is guilty of express or implied malice, i. e., where the- bank, in refusing payment, acts willfully, without just cause or excuse or with improper motives. Hatch, J., dissented. Appeal by the plaintiff, The T. B. Clark Company, from a judgment .of the Supreme' Court in favor of the plaintiff, for nominal damages, entered in the office of the clerk of the county of New York on the 14th day of February, 1903, upon the verdict of a jury rendered by direction of the court, and also from an' order entered in said clerk’s office on the 24th day of February, 1903, denying the plaintiff’s motion for 'a new trial made upon the minutes. The action is brought to recover damages claimed. to have been sustained by the plaintiff because of the defendant’s failure, to pay on presentation a check for $57.38 and a note for $116.42, although upon both occasions the plaintiff had to its credit sufficient funds for that purpose. In the case of the note the complaint alleged that it was presented and dishonored upon two occasions, but no proof of any second presentation or dishonor was made upon the trial. The complaint then alleged that these acts “ were occasioned by the gross negligence and mismanagement of the defendant and its willful, wrongful acts as above set forth, and-through no fault or wrongdoing of this plaintiff, but whereby the plaintiff has suffered grievous loss and damage to its credit and business standing, to plaintiff’s damage Ten thousand ($10,000) dollars.” It was admitted in the answer and on the trial that the defendant had neglected and refused to pay the check and note, although the plaintiff had sufficient funds for that purpose in the bank ; but it was also averred and shown that the failure to pay the check and the note was the result of a bookkeeper’s mistake, it appearing that the regular bookkeeper was sick and that a new bookkeeper who was put in his place and was not familiar with the accounts was responsible for the error. It further appeared that the defendant, "upon its attention being called to the mistakes, rectified them so far •as was practicable by paying the check and note and by writing letters of explanation when the errors were discovered to the holders of the check and the note. The plaintiff’s witness testified that lie told the vice-president of the bank that the first letter of explanation sent was satisfactory, and that when the plaintiff learned of the ¡second mistake he asked for “ the same class of letter ” to be written, which was done. These letters and the check and note are in evidence, and therefrom it appears that the check was dated March 3, 1900, and that the letter of the bank referring to it and dated March 12, 1900, states that the check was returned on the seventh instant, and the error on the books which caused its return had been adjusted. The note was dated December 15, 1899, for three months, ■due March 15, 1900, and the letter relating to.it is dated March 24, 1900, directed to Chicago, 111., and states that the note due March fifteenth was returned through a bookkeeper’s error. At the close of the plaintiff’s case the court directed a verdict for six cents damages, and the plaintiff thereupon made a motion for a new trials which was denied and exception taken, and from the order denying such motion, as well as from the judgment entered on the verdict directed -by the court, the plaintiff appeals. Edmund T. Oldham, for the appellant.. James J. Allen, for the respondent. [MAJORITY — - O’Brien,. J.:] - O’Brien,. J.: ■ The single question presented upon this appeal is whether or not the plaintiff upon the proof can recover.substantial damages. The appellant insists that when a depositor in á bank with sufficient funds draws checks or notes on such bank, which are refused payment on the ground that the depositor has no funds, the depositor, in an action brought against the bank, is not limited to the actual pecuniary damage alleged' and proved, bat in addition is entitled to recover, general or substantial damages. Here the plaintiff neither alleged nor proved any special damage, but insists that it is’entitled to general damages upon the ground that this is in effect an action for slander of plaintiff’s financial credit, and that the conduct of the defendant as proved is equivalent to proof “ that the defendant on several occasions and to several people, willfully and maliciously spoke of and concerning the plaintiff the false and defamatory words as follows : He draws checks oh • a bank when he has not sufficient funds to meet them.” The insistence is that these words are slanderous per se, and, as the charges were admittedly false, malice will be presumed, and the plaintiff is, therefore, entitled to recover substantial damages. Apart from the question as to whether a corporation can commit slander (Odgers Lib. & Sland. 368), and conceding that there is some similarity between actions for slander and actions against a bank for wrongfully refusing .payment of a check or note, the actions are not the same; and as the character of an action such as this has been frequently defined and discussed, it is safer to follow the decisions, rather thamenter a new field of inquiry. In Burroughs v. Tradesmen's Nat. Bank (87 Hun, 6) it is said : “ The contract which the law implies between a bank and its depositor is that the bank will hold the funds and pay them out according to the order of the depositor. A failure in the performance of the duty which the law thus imposes upon the bank constitutes a breach of the contract which the law implies and renders the bank legally liable either in tort or upon contract.” At the trial, on defendant’s motion, the plaintiff elected to treat this action “ as one in tort and not upon contract, and as founded upon malice and not upon negligence.” As to the distinction to be observed as to the rule of damages between an action brought for the breach of a contract and one founded upon tort, we need add nothing to what was said by this court in Davis v. Standard National Bank (50 App. Div. 210), where the subject is fully discussed and the authorities- collated. Therein the awarding of general damages was sustained, but it was because the bank intentionally, and with full knowledge of what it was doing, dishonored its depositor’s checks, and in the opinion of this court it was said: “ Whenever the wrongful act is done intentionally, without just cause or excuse, a legal inference of malice arises therefrom.” It is the presence of malice express or implied which in such cases determines the damages that may be awarded, and it is only, therefore, where it appears that the bank in refusing payment of checks acts willfully, without just cause or excuse, or with improper motives, that legal malice will be implied. This subject of legal malice will be found treated at some length in the American and English Encyclopaedia of Law (Yol. 19 [2d ed.], p. 623), and also in the first edition (Yol. 11, p. 6). Without passing upon the question of whether the allegations of the complaint are sufficient to charge the defendant with legal malice, it is sufficient to say that upon the proof, it appearing beyond dispute that the failure of the bank to pay the note and check was not intentional, but was due to a mistake, there was no evidence from which legal malice could be implied, and, therefore, a basis for an award of general damages is wanting. A mistake which is excusable cannot constitute legal malice, for the element of conscious wrongdoing, or recklessness, or gross carelessness, is absent. There was no attempt to disprove the explanation offered by the bank to plaintiff’s officers that the occurrence was due to a mistake of a new bookkeeper; and it would appear that the plaintiff accepted that explanation- as true, as did the court in disposing of the case. The letters, moreover, tended to support, if support were necessary, the view that the failure to pay plaintiff’s paper was. inadvertent, and not intentional, and that as soon as the mistakes were called to the attention of the bank it did what it could to remedy them. We have not overlooked the allegation of the complaint wherein it is averred that after the dishonor of the note the defendant was-informed thereof, “ and - the defendant then and there begged the plaintiff to overlook the occurrence, and requested that the note be again presented. Thereupon plaintiff caused the said note to be again duly presented, and again payment was refused, and said plaintiff’s note thrown out, protested and dishonored.” Had this allegation-been supported by proof a different question would arise as to the right of the plaintiff to recover substantial damages. The record,, however, fails to disclose any such proof, and the inferences fairly to be drawn from the entire case are that the bank, through mistake, refused to pay both the note and the check, and that when its attention was called to the two mistakes it at once undertook to remedy the errors so far as it was practicable to do so, by sending the letters of explanation to which we have referred. Upon the question of damages, therefore, we can briefly summarize the subject by saying that, as the plaintiff neither alleged nor proved .any special damage, and as the evidence did not show that the defendant was guilty of legal malice, the court was right in restricting the recovery to nominal damages. It accordingly follows that the judgment and order appealed from must be affirmed, with costs. Van Brunt, P. J.,. Ingraham and McLaughlin, JJ., concurred; Hatch, J., dissented. [DISSENT — Hatch, J. (dissenting):] Hatch, J. (dissenting): I am not able to agree with the majority of the court in its disposition of this case. Had the proof been limited to the dishonor of the first check, or even of the second, I would be disposed to hold that, under the facts as they existed, a verdict for substantial damages could not be sustained, but this is not what appears. Defendant was notified after the dishonor of the checks, and then discovered the mistake which had been made by its bookkeeper. It became incumbent upon the bank to take steps which would prevent such mistakes in the future, and in the exercise of ordinary care by the bank future mistakes of this character would" have been obviated. After notice of the dishonor of the checks it dishonored the note and refused to pay it. For this act there is no excuse, and the jury had the right to find therefrom that it was guilty of such negligence in connection with the plaintiff’s account as to show a willful disregard of his rights and interests, and under such circumstances an award of substantial damages may be made. (Davis v. Standard National Bank, 50 App. Div. 210.) The court was not, therefore, justified in making disposition of the case by awarding nominal damages. The judgment should, therefore, be reversed and a new trial granted, with costs to the appellant to abide the event. Judgment and order affirmed, with costs.