78 Ky. 435 | Ky. Ct. App. | 1880
delivered the opinion of the court.
This action was instituted by the Planters’ National Bank of Louisville on the bond of its cashier, J. W. Batchelor, and a recovery had of fifty thousand dollars against him and his sureties, from which they prosecute this appeal.
The condition of the bond is that the cashier shall “faithfully and honestly discharge his duties as cashier aforesaid, ■ and faithfully apply and account for all such moneys, funds, ■and valuables, and deliver the same, on proper demand, to the order of the board of directors of said bank, or to the person or persons authorized to receive them.” Signed by Batchelor as principal, and Black, Pepper, and others, his sureties.
It is alleged in the original petition that the cashier had violated the stipulations of his bond, in failing to account for the moneys of the bank placed in his custody and under his control as such, amounting to one hundred and four .thousand nine hundred and fifty-six dollars; that the sum ■unaccounted for greatly exceeds the penalty of the bond declared on, and therefore they ask, as against the sureties, a judgment for fifty thousand dollars, their liability being limited to that sum by the terms of the covenant.
It is further alleged that the appellee (plaintiff) had made due and proper demand of the cashier for the sum of fifty thousand dollars, but to pay the same, or any part thereof, he had refused and still refuses, &c.
The appellee, under a rule obtained to make the allegations of the petition with reference to the failure to account
It is now insisted that the statements of the petition are-insufficient to support the action, because there is no averment of a formal demand by some one authorized to receive the money from the cashier, that being, by the terms of the covenant, a condition precedent to the right of recovery.. The breach of the covenant alleged in the original petition is, the failure of the cashier to account for the money and deliver it on the order of the directors, or to some one authorized to receive it. In a case like this it is necessary, as was; decided by this court in the case of Owens against the Ballard County Court, to aver a demand of the money by some one entitled to receive it. Neither the president or any individual director of the bank could have lawfully demanded the money or have received it from the cashier, without an order of the board authorizing the demand and the payment over by the cashier. It does not appear from the petition that the cashier had resigned or been removed from his position,, or that the bank had ceased to have an existence, and, ,in;
An amended petition was also filed by the appellee on the 4th of January, 1877, that had been offered on the 23d of December, 1876, upon the terms that the allegations contained in the amendment were to be considered specifically controverted on the record. This amendment charges, in substance, that the cashier, Batchelor, carelessly and negligently permitted incorrect entries to be made in the books-of the appellee, whereby the employees of the bank could' abstract and embezzle its money and conceal such abstractions from the bank; that by reason of the false and deceptive entries made in the books of the plaintiff it appeared
It is not attempted by the proof to establish any claim against Batchelor and his sureties by reason of the latter having appropriated the money to his own use, or failing to account for money in his hands. The whole issue as presented by the proof was, whether the cashier was liable for the loss occasioned by the dishonesty of Rehim, by reason of a want of diligence on his part in supervising the affairs of the bank, and on such an issue no demand was necessary.
-The principal ground for a reversal of the judgment consists in the denial to the appellants of their right to have the issues made, tried by a jury. The action was instituted in the Jefferson court of common pleas, having'jurisdiction in ordinary actions. The issues were purely legal, and we see no reason for transferring the action to a court of equity. The appellants objected-to the transfer from the one jurisdiction to the other, and after the case had reached the chancellor a motion was made to remand the case to the proper .forum.
A motion was also made to try the issue of fact out of ■chancery, and this was denied. No equitable issue has been tendered by any pleading filed, and however great the delay or the inconvenience resulting from a jury trial, in the inspection and examination of the books of the bank, or the facility
The question of a want of diligence on the part of the cashier in the discharge of his duties, and for which he- and his sureties are sought to be made liable, was a question proper for the jury to determine; and in fact, the result of that issue must end the controversy, as there is but little doubt as to the default of Rehim and the sums of money abstracted by him.
Counsel for the appellee maintain that no injustice has-been done the appellants in denying the trial by jury, as their answers constitute no defense to the action, except as to the amount of money lost to the plaintiffj and this-amount is clearly established by the uncontroverted proof in the cause. It is alleged in the answer of the sureties ‘ that the board of directors of the appellee could, by reasonable and proper diligence, have discovered the first alleged defalcation occurring in 1869, and that, by reasonable and proper diligence, could have discovered each of the subsequent defalcations set out in the amended petition; but the directors, so far from exercising such diligence, and without sufficient examination, reported that the bank had in its vaults and under its control all the moneys, resources, and assets to which it was entitled,” &c. While denying any negligence-on the part of their principal, if these allegations can be-regarded in the light alone of an argumentative pleading,, the legal inference from such admissions would lead to the-conclusion that like diligence on the part of the cashier, their principal, would have produced a similar result. It is not.
The want of diligence merely on the part of the directors-constitutes no defense on the part of the cashier for a neglect of.his duty; and if the loss has been caused by his negligence, he and his sureties are liable, although the directors, might have discovered the fraud by the exercise of reasonable diligence; nor does the fact of- Rehim having acted in the double capacity of teller and general book-keeper-, relieve the cashier from the exercise of that diligence, in the inspection of the general condition of the bank and its resources, required of him by reason of the position he occupied. When accepting the position, he undertook to discharge his duties and to supervise the action of his subordinates, in. so far as was practicable with reference to the discharge of his other duties. The acceptance of the cashier’s bond does not preclude the bank 'or its directors from designating the-position of a subordinate, and the character of the work to be done by him, when not interfering with the duties properly belonging to the cashier. Such action on the part of the board cannot affect the liability of the sureties, and if, in the opinion of the board, the subordinate can discharge-the duties of both the teller and general book-keeper, his appointment to both positions will not release the sureties-of the cashier, although the bond may have been executed when the subordinate was acting only in the one capacity. In March, 1865, Batchelor was acting as cashier, teller, and book-keeper, and as the business of the bank increased, a. book-keeper was appointed, ■ and Batchelor became cashier and teller, and finally Rehim was made teller and book
Without discussing further the effect of the answer made by the sureties, it will be conceded that any substantial defense made by the cashier (their principal) must inure to their benefit. If no judgment could have been properly rendered against Batchelor in the absence of proof, none could have been rendered against the sureties; so it is immaterial whether the answer of the sureties constitutes a ■defense or not.
It is alleged in the answer of Batchelor, “that whatever money was abstracted from the bank was fraudulently taken from the vault or office of the bank by Rehim — he having ■at the time, with the consent of the plaintiff, taken possession of the same, without the knowledge or consent of the defendant — and the fact that he, Rehim, had so fraudulently taken said money of plaintiff or that he contemplated doing .so, was so skillfully concealed from the defendant that he
To this answer the appellee filed a reply, in which it is alleged, in substance, ‘ ‘ that the said Batchelor carelessly and negligently suffered and permitted, while the plaintiff’s books and money were under his control and supervision, false entries to be made in the books.to conceal from plaintiff the true amount of money in its bank,” &c., causing the loss. This issue necessarily involves the character of diligence to be exercised by the cashier in supervising the affairs of the bank, including its money and all other resources, as well as the conduct of those under him.
A cashier, says Morse, is the chief executive financial officer of the bank. He has charge of its moneys, its securities, its valuable papers. He has the superintendence of its books of accounts. He must have his subordinates, whose offices will be offshoots of his own, but he will not be liable for the default of any of these subordinates, unless his own laches or collusion has caused or aided it. It is impossible for him to be omnipresent and omniscient among all the servants in the institution, and he is not liable for his failure to perform this impossibility. He is required only
As stated in substance with reference to the defense made by the sureties, .the cashier is not an insurer of the honesty •and fidelity of those who occupy subordinate positions in the bank, and while it is his duty to supervise and control the affairs of the bank and its officers under him, in the discharge of their duties, he is required only to exercise that diligence in regard to the action of his subordinates consistent with the discharge of all his duties in connection with the bank, exercising that care and skill that is reasonable and practicable. He is not required to examine by actual inspection every original entry made by those under him, but his care extends to a general supervision of the books and affairs of the bank; and when it is shown that he has ■exercised such diligence as a prudent man would in the control of those under him and in the supervision of their work, he has discharged his duty. If the appointment of Rehim to the position of teller and book-keeper enabled him to • accomplish his dishonest purposes with greater facility, it did not increase the diligence required of Batchelor, nor did it lessen the obligation he was under to the bank to protect its interests.
The question made as to the discharge in bankruptcy of Pepper from the payment of his liabilities cannot be determined from the facts before this court.
His discharge relieves him from all of his liabilities made ■provable against his estate which existed on the 24th of .February, 1868. When the alleged breaches occurred can
The judgment below is reversed, and the cause remanded, with directions to remand the case to the common pleas court for trial.