Bank accepted a request for withdrawal by account holder's daughter; the bank was not judged to be at fault in duty of care

A daughter of an account holder asked a bank for withdrawal from an account, using a deposit book, a registered seal, a cash card and a passcode. The bank accepted her request. Afterward, the account holder claimed for damages against the bank for default due to negligence in duty of care.

The high court dismissed the first instance judgment that the bank had not fully performed duty of care which was reasonably required for a financial institution, and did not affirm default by the bank on the grounds that the withdrawal had been conducted based on consent by the account holder (Judgment by the Tokyo High Court on July 16, 2015).

• Page 40 of Kinyu Shoji Hanrei No.1475

Summary of the case

Plaintiff:

X (defendant in error, consumer)

Defendant:

Y (plaintiff in error, bank)

Parties involved in a suit:

A (X's daughter, Y's supporting intervener, missing during the first instance)
B (Y's teller)
C (repayment examiner at Y's counter)

X was born in 1941. X retired from employment in 2001. X had lived with A (X's daughter) till their home was burnt in a fire in March 2012. After that, they have lived separately in different rental apartments. A visited X once a week or so. X sometimes transferred money from the said account to A's account at A's request to cover A's cost of living.

X had a savings account at Y's branch 1 (hereinafter called "the account concerned"). X kept X's deposit book, a registered seal, a cash card, etc. in a locked cabinet inside a closet in a bedroom. However, the lock was prone to break and release when the locked door of the cabinet was strongly pulled.

On August 14 in the same year, X asked A to keep X's dog and stayed out overnight to attend a Buddhist memorial service for X's acquaintance. On August 14 and 15, A withdrew 1,000,000 yen in twelve batches from X's account through cash dispensers at convenience stores (This type of cash dispenser only allows cash withdrawals; it cannot transfer money or update transaction records on a deposit book). In addition, A visited Y's branch 2 (X had never used Y's branch 2) and withdrew nearly all the money from X's account concerned (the original balance: about 21,000,000 yen) on August 15.

On August 17, X noticed that X's deposit book and other items were missing. X reported the loss to police, and then visited Y's branch 3 where X had an account to hear an explanation. A few days later, X visited Y's branch 2 and heard that they had repaid the money according to prescribed procedure.

On August 30, A visited X and told that A had run out of all the withdrawn money. After that, A went missing.

X demanded Y for return of the withdrawn money, alleging Y's default on the grounds that A had received the money using the stolen deposit book, etc., so B and C had not fully performed duty of care.

In response, Y alleged that the repayment was valid under Article 478 of the Civil Code (Any performance made vis-a-vis a holder of quasi-possession of the claim shall remain effective to the extent the person who performed such obligation acted without knowledge, and was free from any negligence.) and the exemption agreement. X asked the Japanese Bankers Association for mediation, but the negotiation fell apart. Therefore, X filed a suit against Y.

In the first instance (reference precedent (1)), the court affirmed X's claim on the grounds that Y had been at fault because it was hard to recognize that B and C had fully performed duty of care which was reasonably required for a financial institution, while there was a particular circumstance which suggested that A had not been an authorized person to demand withdrawal from X's account, although it could be considered that the money had been repaid to a holder of quasi-possession of the claim because A had brought X's deposit book and other necessary items, which implied that X had conferred authority for withdrawal to A. Then, Y appealed to the higher court.

In the appellate instance, A, who had been missing during the first instance, attended court as Y's supporting intervener. During examination of a witness, A stated that A had withdrawn money from X's account concerned as told by X (including money withdrawn through cash dispensers at convenience stores).

Reasons

The appellate court decision dismissed X's claim, overruling the original decision.

1. X's consent for withdrawal

Prior to August 14, 2012, A was asked by X to withdraw the entire money from X's account concerned and to do the following:

1. to withdraw 1,000,000 yen in total from several ATMs in different places before visiting Y's counter.
2. to visit X's home to get X's deposit book and other necessary items while X was away, and to visit Y's branch 2 to be repaid at Y's counter.

When A entered X's room, there was an envelope left on a desk containing the deposit book, the registered seal, the cash card and a slip indicating X's passcode.

A withdrew money according to the instructions (1) and (2). At Y's branch 2, A showed driver's license as identification, and told that A came there on behalf of A's father X, who was away for business trip, and that the money to be repaid would be used for rebuilding the burnt house. Then, A went through the repayment procedure.

X alleged that A had stolen X's deposit book and other items and that if X had asked A to withdraw money, X should not have withdrawn money several times late at night in a short time prior to A's visit to Y's branch 2. In response, the appellate court dismissed X's allegation on the grounds that if A had stolen the deposit book and other items, A should have tried to withdraw the maximum amount per one time in order to avoid to be detected when withdrawing money (Several withdrawals in a short time would have been unnatural if A had stolen them), and that A's statement that A had been instructed by X to withdraw money was credible.

2. Y's negligence in duty of care

Under the exemption agreement, Y shall be exempted from liability if the seal brought is found identical to the registered seal or if the passcode entered is identical to the registered passcode. In this case, the seal and the passcode were both recognized to be identical to those registered. Even considering other facts, there was no sufficient evidence to affirm Y's negligence in duty of care. Y's performance was regarded to be effective under Article 478 of the Civil Code. Accordingly, Y's negligence in duty of care alleged by X was not affirmed by the high court.

Explanation

The appellate court decision was different from the original decision (reference precedent (1)). As the main factual difference between the two trials, A was missing during the first instance, while A attended the appellate court as Y's supporting intervener (system whereby a third party who has an interest in the outcome of a suit may intervene in the suit in order to assist either party to the suit) and stated that A had followed X's instructions. The original court assumed that A had withdrawn money from X's account against X's intention. On the other hand, the appellate court trusted A's statement and assumed that A had acted as told by X.

It represents a difference in factual findings. Detailed facts are unknown because factual finding was simple both in the original decision and the appellate court decision. For example, through cash dispensers at convenience stores, A withdrew 460,000 yen in four batches and withdrew 40,000 yen in four batches (500,000 yen in total) on the day before the withdrawal at Y's counter, and withdrew 500,000 yen in four batches on the day of the withdrawal at Y's counter.

The appellate court construed that A had followed X's instructions. However, the series of A's actions still seem unnatural. If X had instructed A during Bon holiday to withdraw money from X's account to cover the construction cost, key points would have been the due date for payment and the amount charged by the contractor. However, these facts were not found by the court.

It doesn't seem unusual that a relative of an account holder withdraws money from a bank on behalf of the account holder. The case on this article can be an informative example that the original decision and the appellate court decision were split over the withdrawal by the account holder's daughter.

The original court construed that there was a particular circumstance which suggested A had not been an authorized person to demand withdrawal from X's account based on the fact that A was missing. On the other hand, the appellate court construed that Y had not neglected duty of care in a circumstance where A attended the court as Y's supporting intervener. Therefore, the appellate court judgment was not simply lead by the exemption clause which exempts the bank from liability if the seal is found identical to the registered seal or if the entered passcode is identical to the registered passcode.

Reference precedents

1. Judgment by the Tokyo District Court on August 21, 2014
   (Page 56 of Kinyu Shoji Hanrei No.1453)
2. Judgment by the Kushiro District Court on October 4, 2012
   (Page 28 of Kinyu Shoji Hanrei No.1407; The account holder's wife withdrew money from two different branches of a bank on a same day. The court construed that the bank had been at fault for the second withdrawal.)
3. Judgment by the Tokyo District Court on January 25, 2012
   (Page 63 of Hanrei Jiho No.2147; Concerning withdrawal from ATM with use of a stolen credit card, the court affirmed bank's liability for compensation under the Act on Protection, etc. of Depositors and Postal Saving Holders from Unauthorized Automated Withdrawal, etc. Using Counterfeit Cards, etc. and Stolen Cards, etc.)