BANKS AND BANKING - DUTY OF DEPOSITOR TO DETERMINE STATUS OF HIS ACCOUNT

Plaintiff's bookkeeper, who, as defendant bank admittedly knew, had authority only to indorse and deposit commission checks to plaintiff's account, embezzled considerable money between 1926 and 1931 by taking some of the proceeds in cash or drafts. In the passbook and in defendant's own records only the net transactions, not the total amount of the checks, were recorded. Plaintiff discovered the fraud in 1936 and now sues the receiver five years after the bank closed. Held, that plaintiff, charged with constuctive knowledge of the fraud, which reasonable examination would have revealed, is guilty of negligence and therefore barred from now asserting his claim, which would injure defendant bank by reducing dividends to depositors.

Mattison-Greenlee Service Corporation v. Culhane, (C. C. A. 7th, 1939) 103 F. (2d) 608.