Thomas v. First Nat. Bank of Scranton
101 A.2d 910, 1954 Pa. LEXIS 428, 376 Pa. 181 (1954)
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Rule of Law:
An exculpatory clause in a stop-payment request form, which purports to release a bank from liability for negligently paying a check over the order, is void as against public policy.
Facts:
- E. J. Thomas was a depositor at the First National Bank of Scranton.
- On October 12, 1950, Thomas wrote a check drawn on his account.
- The next day, October 13, 1950, Thomas went to the bank to request that it stop payment on the check.
- A bank clerk provided Thomas with a pre-printed form titled 'Request to Stop Payment of Check,' which he signed.
- The form included a clause stating that if the check were paid through 'inadvertence, accident or oversight,' Thomas expressly agreed the bank would not be held responsible or liable.
- On October 16, 1950, the bank paid the check despite the stop-payment request.
- The bank acknowledged that the payment was made through 'inadvertence, accident or oversight.'
- Thomas demanded that the bank refund the amount of the check, but the bank refused.
Procedural Posture:
- The case was submitted to the trial court as a 'Case Stated' to decide a question of law.
- The trial court entered judgment for the plaintiff, E. J. Thomas.
- The defendant, First National Bank of Scranton, appealed to the Superior Court of Pennsylvania, an intermediate appellate court.
- The Superior Court reversed the trial court's judgment, finding in favor of the bank.
- The plaintiff, E. J. Thomas, was granted an allocatur (permission to appeal) to the Supreme Court of Pennsylvania, the state's highest court.
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Issue:
Does a release agreement, in which a depositor agrees not to hold a bank responsible for paying a check over a stop-payment order due to 'inadvertence, accident or oversight,' absolve the bank from liability for its own negligence?
Opinions:
Majority - Mr. Justice Allen M. Stearne
No. A release agreement does not absolve a bank from liability for its own negligence. At common law, a bank is liable to a depositor for paying a check after receiving a valid stop-payment notice. Paying a check under such circumstances constitutes a failure to exercise due care, which is negligence, regardless of whether it results from inadvertence, accident, or oversight. Such an agreement to release a party from liability for its own negligence is void as against public policy. Banks, similar to common carriers and public utilities, perform an essential public service and cannot contractually limit their liability for their own negligence. The court distinguished a prior case, Cohen v. State Bank of Philadelphia, as having unique facts, and noted that the forthcoming Uniform Commercial Code aligns with this public policy by prohibiting banks from disclaiming responsibility for their failure to exercise ordinary care.
Analysis:
This decision establishes that exculpatory clauses in bank-provided stop-payment forms are unenforceable in Pennsylvania as a matter of public policy. It solidifies the bank's non-delegable duty of care to its depositors by equating banks with other quasi-public entities like common carriers, which cannot contract away liability for their own negligence. The ruling protects consumers from contracts of adhesion where they have little to no bargaining power. This precedent reinforces the fundamental debtor-creditor relationship between a bank and its depositor and foreshadowed the codification of this principle in the Uniform Commercial Code.
