LECHMERE TIRE & SALES CO. vs. JERALD D. BURWICK.

CUTTER, J. The plaintiff (Lechmere) seeks to recover for merchandise sold to a customer who presented Mr. Burwick's lost or stolen credit card. There was a finding for Lechmere in the District Court. Mr. Burwick takes this appeal from a decision of the Appellate Division sustaining Lechmere's position. The evidence is summarized from the report of the District Court judge.

On April 30, 1964, Mr. Burwick, an attorney and certified public accountant, signed a printed credit card application provided by Lechmere, on which appeared the following:

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"(I) We agree to surrender credit plate on request and to be responsible for all purchases through its use until surrendered or until the company has been notified of its loss or theft in writing."

After he had signed this application, Burwick received a credit card which contained a space for his signature. He signed the card. On many occasions he and his wife used it to obtain merchandise from Lechmere.

About October 11, 1967, Mr. Burwick received from Lechmere a statement showing charges of $153.22, with attached sales slips. Mr. Burwick then discovered that his signature had been forged on the sales slips and that his credit card was missing.

Mr. Burwick at once orally notified Lechmere. Lechmere's representative told him that additional charges had been made on his credit card and that the total charges then amounted to $611.78, arising from about fifteen separate transactions. Mr. Burwick had not made any of these purchases nor had he authorized anyone to do so. On October 17, 1967, he notified Lechmere in writing that the card was missing.

The signatures on several of the forged sales slips were misspelled. Mr. Burwick admitted that although he had signed the credit application and the credit card "Jerald D. Burwick," signatures in fact signed by him on sales slips were not always clear and had not always been in precisely the same form. On occasion, he had signed "J. Burwick" and at other times he had signed his whole name. One earlier sales slip was signed "D. Burwick," probably by his wife, Deborah Burwick.

Evelyn Post, Lechmere's financial officer, testified that for amounts larger than $15, there was approval from the credit department by telephone, but credit personnel did not see the sales slips. Mrs. Post also stated that sales personnel are not instructed to, and usually do not, compare signatures on purchase slips with those on credit cards.

At the close of the evidence, Mr. Burwick made thirteen

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requests for rulings of which only four need be quoted. These (and the judge's disposition of them) are set out in the margin. [Note 1]

1. This case arose before the enactment of St. 1968, c. 394, Section 1, inserting in the General Laws, the provisions of c. 255, Section 12E, [Note 2] dealing with the liability of credit cardholders, whose cards are lost or stolen, for purchases made by the use of the cards. Thus, Section 12E has no application to these events in 1967, except that the 1968 statute does show appropriate legislative concern about consumer protection in this area, and thus is some indication of the trend of public policy.

2. The District Court judge correctly ruled, in accordance with Mr. Burwick's request (no. 2, fn. 1), that the credit card application was an "adhesion" contract to be construed

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strictly against Lechmere in whose behalf it had been drafted. See Wright v. Commonwealth, 351 Mass. 666, 673, and cases cited. See also King v. Prudential Ins. Co. 359 Mass. 46, 50; Restatement 2d: Contracts (Tent. draft No. 5, March 31, 1970), Section 232. [Note 3] We do not regard the agreement as having been so unconscionable as to require that it be not enforced (cf. Williams v. Walker-Thomas Furniture Co. 350 F. 2d 445 [D.C. Cir.]). We merely hold that all doubts as to its interpretation and as to the meaning of the card itself are to be resolved in favor of the applicant for the card.

3. The application did not plainly state the effect or purpose of the space for the signature upon the credit card. As a practical matter it provided a method of checking the identity of a customer presenting the card. A customer signing the card in the space provided reasonably could think that Lechmere's salesmen would check the identity of persons using the card, at least to the extent of comparing the signature on a sales slip with that on the card. The card presumably was issued to increase Lechmere's business, as well as for the customer's convenience, and the customer could fairly expect Lechmere to use due care to prevent its use by imposters. It is strong evidence of Lechmere's negligence that its employees failed to make such a comparison in connection with fifteen separate transactions involving improper use of Mr. Burwick's card.

4. There has been a division of authority in cases like this one. There are no controlling decisions in Massachusetts. Some cases elsewhere, in circumstances largely distinguishable,

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have permitted, to some extent, enforcement of the agreement subjecting the cardholder to liability for unauthorized purchases prior to notice to the issuer of loss of the card. See Texaco, Inc. v. Goldstein, 34 Misc. 2d (N. Y.) 751, 756 (Mun. Ct., City of New York -- general credit card), affd. 34 Misc. 2d 751. See also Uni-Serv Corp. v. Vitiello, 53 Misc. 2d (N. Y.) 396, 398 (Civ. Ct., City of New York), where, however, there was no reference to any signature requirement; Magnolia Petroleum Co. v. McMillan, 168 S. W. 2d 881, 882 (Tex. Civ. App.) (card negligently lent by holder); Duke v. Sears, Roebuck & Co. 433 S. W. 2d 919 (Tex. Civ. App.); and Sears, Roebuck & Co. v. Duke, 441 S. W. 2d 521 (Tex. Supr. Ct.), S. C. Duke v. Sears, Roebuck & Co. 446 S. W. 2d 886 (Tex. Civ. App.), which allow enforcement unless the "circumstances would raise a question in the mind of a reasonable seller." Compare Allied Stores of N. Y. Inc. v. Funderburke, 52 Misc. 2d (N. Y.) 872, 877-879 (Civ. Ct., City of New York).

In other cases, the issuer has been held to a duty of care, on various theories, including that the cardholder is made by the agreement essentially the guarantor of a wrongful user of the card and thus is entitled to have his obligation strictly construed. Gulf Ref. Co. v. Williams Roofing Co. 208 Ark. 362, 368-369 (card marked, "Good for Truck Only," negligently disregarded by sales of items for a passenger automobile). Union Oil Co. of Cal. v. Lull, 220 Ore. 412, 430-437 (imposing the burden of proving that reasonable inquiry as to identity has been made on the person extending credit). See Humble Oil & Ref. Co. v. Waters, 159 So. 2d 408, 410 (Ct. of App. La.); note, 77 Yale L. J. 1418, 1419-1423; note, 43 N. C. L. Rev. 416; annotation, 15 A. L. R. 3d 1086.

We conclude that the preferable rule is that requiring the issuer of a credit card, or one extending credit on the basis of the card, to use due care to ascertain that the person using the card is its proper holder or one authorized to use it. The obligation is not merely to use good faith, as

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the District Court judge ruled. The use of due care in the circumstances also is necessary.

We perceive nothing inconsistent with our view in Polonsky v. Union Fed. Sav. & Loan Assn. 334 Mass. 697, 701. That case (in which there was no evidence that the bank acted either negligently or without good faith) merely held that an exculpatory provision in a savings passbook protected the bank, "using reasonable care and in good faith [when] it paid the money" to an imposter presenting the book.

The judge (see fn. 1) should have ruled in accordance with Mr. Burwick's first, seventh, and tenth requests. Despite the evidence warranting the conclusion that Lechmere was negligent in failing to make any comparison of the signature on the card with the signatures on the sales slips, the issue of Lechmere's due care must be decided by the trier of the fact.

5. The order of the Appellate Division dismissing the report is reversed. The finding for the plaintiff is to be vacated. There is to be a new trial.

So ordered.