Chew v. Ellingwood

86 Mo. 260 | Mo. | 1885

Lead Opinion

Norton, J.

— This suit is founded on the following bond: “Know all men by these' presents that we, Samuel J. Riley, as principal, and J. W. Bailey, J. L„ Ell ing wood and M. D. Morgan, as securities, are held! and firmly bound unto the Buchanan Life and General Insurance Company, in the sum of five thousand dollars, for the payment of which, well and truly to be made and done, we bind ourselves, our heirs, executors, administrators, jointly and severally, firmly by these presents, sealed with our seals, and dated this second day of July, 1867. The condition of the above bond is such that whereas the said Samuel J. Riley has been elected, and still is, book-keeper in, of and for the said Buchanan Life and General Insurance Company. Now,, if the said Samuel J. Riley shall well and truly and faithfully perform all his duties as such book-keeper, so-long as he may continue to serve as such, for the present; year, and for all time to come, whenever re-elected, and shall well and truly account for all money and property belonging to said insurance company, or which may pass through his hands, by virtue of his said office, during his service as such book-keeper,- and apply the funds of said company to their proper uses and purposes, then this bond to be null and void ; otherwise, to remain, in full force.

“ [Signed.]

“Samuel J. Riley, (Seal.)

“ J. W. Bailey, (Seal.)

“ J. L. Ellinowood, (Seal.)

“M. D. Morgan. (Seal.)”

Among the other breaches of the bond assigned are fchef olio wing, to-wit: The said Riley did not well, or truly, or faithfully perform all his duties as such book-keeper of said company during the time covered by said bond, from July 2, 1867, to January 15, 1873, nor did he during said time well or truly account for all money belonging to said company, nor did he during said time apply the funds of said company to their proper uses and purposes, in this : During the time of his service as such book-keeper as aforesaid, from July 2, 1867, to January 15, 1873, and within ten years next before the bringing of this suit, he, the said Riley, wrongfully took out of and from said company and bank, and appropriate to-his own use large sums of money belonging to said company, whereby the same were wholly lost to said corporation, which sums so taken and appropriated by said; Riley, and so lost to said corporation, together with the-dates of such takings, conversions, and appropriation and loss, are of the amounts and dates as stated in the-following itemized account thereof, and the balance thereof due said corporation, after allowing all proper credits to which the same is entitled, amounts in the aggregate, to $3,814=¡^0, no part of which has ever been paid to said company or bank.

The defendants, by answer, put in issue the averments of the petition, and set up that all the' money that came to the hands of Riley that was-used by him was borrowed of the company in the usual course of business with said company. The new matter set up was denied by replication, and, by agreement, the cause was referred to Franklin Porter, as referee, to report on the facts.

Various exceptions were taken to the report of the' referee, which were overruled, the report confirmed, and judgment entered in favor of plaintiffs, from which the* defendants have appealed. And the controlling question in the case is, whether under the terms of the bond and the facts found by the referee, the defendants were- or not liable.

Among other things found by the referee in his report, was that it was the duty of Riley, as book-keeper, to “ refrain from taking from said company any money not then due him.” That defendant Riley’s desk, as-book-keeper, was kept inside the counter of said bank, and twelve or foiirteen feet therefrom: During the day' the money of the bank was kept upon said counter, and .said Riley, by virtue of Ms position as said book-keeper, had access to said moneys, and when the teller was busy at the counter, said Riley frequently assisted Mm in re-. .ceiving and paying out money. The employes of said •company and bank, includiug said book-keeper, received their salaries in this way: The amount of the salary was -credited to each on the company’s books upon the last business day of each month, and they took the money themselves from the cash counter as they desired it, leaving memoranda of the charges to be made therefor upon the check files. Defandant Riley did that way all the time, and drew no checks upon the bank. Whenever he “wanted money he went and took it, leaving a memorandum of the amount taken upon the check files.” All -of which manner of taking money Mr. Williams knew, and did not object thereto. That between the date of «aid bond and January 15, 1873 (which was the date of the new bond given by said Riley as book-keeper), said account of Samuel J. Riley shows that from day to day, •or at intervals of a few days, said Riley continuously, •during all the time covered by the bond in suit, drew out and took of the moneys of said insurance company and bank, for his own use, many sums of money, in varying .amounts, aggregating the sum of $9,590.26 ; and during the same period credited himself from time to time with the amount of his salary on the last business day of each month, and, also, with the amounts of twelve different ■deposits made by him at different times (the sum of said deposits being -$1,065.78). The aggregate of all said .credits so shown was the sum of $6,699.10, which, deducted from the amounts taken by him as aforesaid, leaves as the amount of money so taken by him, over .and above all credits, between said dates, the sum of $2,291.16. That the directors knew nothing of the existence of overdrafts by defendant Riley until the day before the bank made an assignment for the benefit of its creditors.

TMs report of the referee stands as a special verdict, and if there was evidence tending to establish the facts-found, this court will not disturb the finding. Wiggins Ferry Co. v. Chicago & Alton Ry. Co., 73 Mo. 389; 48 Mo. 37; 49 Mo. 95.

It appears that there were no by-laws of the company prescribing the duties of book-keeper, and the referee was, therefore, left to ascertain what his duties ■were from the evidence before him; and the fact found, by him that it was the duty of the book-keeper to refrain, from taking from said company any money not due him. is abundantly sustained by the evidence of Williams, Goff and Sayle, all of whom professed to be acquainted, with the duties of a book-keeper in a bank.

Mr. Sayle, who had experience as a book-keeper in. a bank, testified as follows : “I am acquainted with the-■duties of a bank book-keeper. In the absence of any by-law or regulation on the subject of overdrafts, neither the book-keeper nor any other person has any right to-overdraw his account in the bank, and it would be a violation, in my opinion, of the book-keeper’s duties to do-so. If the book-keeper of a bank has a custom of taking from the cash counter sums of money whenever he wants them, and in this way draws out more money than he has in the bank, and more than his salary amounts to, he violates his duty as such book-keeper. The duties of officers in banks vary more or less in different banks, as provided by the by-laws. My testimony referred to the duties of a book-keeper in the absence of by-laws. In the absence of a provision in the by-laws,, no officer of a bank has a right to permit an overdraft, and if he does'so he is personally responsible for it, that is, the officer permitting the overdraft.”

While the evidence of these witnesses proved the fact above found by the referee, the bond, by its plain terms, imposed upon Riley the obligation to well, truly and faithfully perform all his duties as such book-keeper, -to well and truly account for all money and property belonging to said company, or which might pass through his hands by virtue of his office, and apply the funds of :said company to their proper uses and purposes. The referee -''mud as facts that Riley did not refrain from taking money from the bank not due him, but, on the contrary, that he did take large sums not due; that Riley did not account for all money and property belonging to the bank, nor apply the funds thereof to their proper uses and purposes, but, on the contrary, that he took large sums of money which he applied to his own uses and purposes. It thus appears that every condition of the bond was broken by Riley.

While the evidence shows, and the referee so finds, that the employes of the bank were credited at the end -of each month with the amount of their salaries, and that they took the money themselves from the cash counter, as they desired it, leaving memoranda of the charges to be made therefor upon the check files, and that defendant Riley did that way all the time, but drew no checks on the bank, and that Williams, the cashier, knew of this manner of their taking money and did not object thereto, it also shows that while Williams had knowledge that Riley’s account was overdrawn four or five hundred dollars, that he never consented for him to overdraw his account at all. We have been cited to a number of authorities by counsel to ■establish the principle that the liability of sureties cannot be extended by construction or doubtful implication. While the principle invoked is elementary law, it is equally true that a bond should be so construed as not to eliminate, but to give effect to all the provisions it contains. The bond in question was taken for the benefit and protection of the stockholders and creditors of the company, and it provided, among other things, that Riley should well, truly and faithfully perform all the duties of book-keeper. As to what such a condition implies, the following authorities will show. In the case of Railroad Co. v. Shaeffer, 59 Pa. St. 357, Sharswood, J., in speaking of a bond containing such a condition, says that “the sureties, by executing the bond, became responsible for the fidelity of their principal. It is no collateral engagement into which they enter, dependent on some contingency or condition different from the engagement of their principal. * * * The fact that there .were other unfaithful officers * * * who knew and connived at his infidelity ought not, in reason, and does not, in law or equity, relieve them from their' responsibility for him. They undertake that he shall be honest, though all around him are rogues. Were the rule different, by a conspiiacy between the officers of a bank or other moneyed institution, all their sureties might be discharged. It is impossible that a doctriné, leading to such results can be sound. In a suit by a bank against a surety on the cashier’s bond, a plea that the cashier’s defalcation was known to and connived at by the officers of the bank, was held to be no defence." Vide Taylor v. Bank of Kentucky, 2 J. J. Marshall; 564.

So, also, it is said in case of Rochester City Bank v. Elwood, 21 N. Y. 94: “I cannot doubt that the covenant that Gold should faithfully discharge the trust reposed in him as assistant book-keeper, included within its scope and intention an engagement that the employe would not transcend the limits of the trust reposed, in availing himself of his position to misapply or embezzle the funds of his employer. There has not been a faithful discharge of the trust reposed in a book-keeper of a bank, who transcends the limits of and abuses his trusr, and loss thereby ensues to the employer.” See, also, German Bank v. Auth, 87 Pa. St. 419; Engler v. People’s Fire Insurance Co., 46 Md. 322. Under the above authorities, if Williams; the cashier, had knowledge of the fact that Riley was taking money of the bank not due him, and applying it to his own use, and consented to it, such knowledge and consent could not have the-effect of relieving either Riley or his securities from the liability of their undertaking, that Riley would truly account for all money belonging to the bank, and apply its' funds to their proper uses, any more than a debtor of the bank to whom Williams might have surrendered the-note of such debtor without payment, ■ and as a gift,, would be relieved from its payment.

In the case of Daviess County Savings Association v. Sailor et al., 63 Mo. 24, it is held that the general duties of the cashier are to collect the notes and keep the funds arising from them, and deliver up notes when paid, and his representations made to a surety, that he-will no longer be looked to for payment, will not bind the bank, nor will the bank be estopped from asserting its claim .by reason of such assurance. That no officer or agent of a bank has power to confer authority on any other agent to perpetrate a wrong on -the bank is established by the following authorities: Brandt on Surety-ship, sec. 474; National Bank v. Drake, 29 Kas. 328; Minor v. Mechanics Bank, 1 Peters, 46.

Neither can the- defendants claim exemption from liability on their bond on the ground that the directors were negligent in not ascertaining the fact, till the day before the assignment was made, that Riley had been applying to his own use more money of the bank than was due him. Upon this branch of the case.the following observations made in the case of State to use, etc., v. Atherton, 40 Mo. 216, are appropriate, viz.: “We cannot accede to the first proposition of counsel for defendant, that he is exonerated by reason of the negligence of thé cashier and directors of the bank in failing to make frequent examinations of the affairs of the bank, to count the money, inspect the books, and generally watch over its concerns. The principle contended for would have the effect to deprive a corporation of all remedy against one agent on account of the negligence or default of another. ' The cashier might excuse himself by pleading the failure of the directors to perform their duty, and the directors would excuse themselves by showing that the cashier had been guilty of neglect, and omitted to execute the trust devolved upon him.” See, also, Minor v. Mechanics Bank, supra; Market Street Bank v. Stumpe, 2 Mo. App. 545; 2 J. J. Marshall, 564; 81 Pa. St. 466; United States v. Kirkpatrick, 9 Wheat. 720.

The point made by appellants’ counsel, that the assignment made by the directors is void, must be ruled against them. The right of the directors of a bank in failing circumstances to make an assignment for the benefit of creditors, where there is nothing in the charter or general laws forbidding it, we think, is clear. See authorities under this head cited in respondent’s brief. While, in the case of Eppright v. Nickerson, 78 Mo. 482, an intimation is made that the stockholders might question such right, it was expressly held that such assignment would be valid as against everybody else. Many of the authorities cited go to the extent of saying that under such circumstances the directors not only have the right, but that, in justice, they ought to make an assignment so that creditors might share equally in its assets. Indeed, under constitution and laws which make it a felony for directors and officers of a bank to receive deposits, knowing it to be in failing circumstances, it would seem to leave them no other alternative but to close its doors and make an assignment for the benefit of its creditors.

We have no doubt of the right of these plaintiffs to maintain this suit, and perceive no error in the record justifying an interference with the judgment. It is hereby affirmed.

All concur except Henry and Sherwood, JJ.

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Dissenting Opinion

IIenky, C. J.,

Dissenting. — There is no evidence tending to prove that the bank’s books were not kept correctly by the book-keeper, precisely as they had been kept ever since the organization of the company, except in one item, wherein the book-keeper took credit to himself twice for the same amount, about five hundred dollars. The evidence proved, and so the referee found, that an examination of these books at any time would have disclosed .the true condition of the bank, except as to the above item. The book in which individual deposit accounts were kept would not have shown the overdrafts made, either by the book-keeper or other customers of the bank, but other books kept by him in connection with that, would, and this was the system of book-keeping adopted and sanctioned by the bank,, and there was no breach of his bond in thus keeping the books, although not the most approved method.

There is no pretense that the book-keeper ever used any money belonging to the bank, except such as he obtained by means of overdrafts, and that he was habitually overdrawing his account was known and consented to by the cashier. True, he says he did not consent to it, but, knowing it, and it being his duty, and in his power to ■stop it, he is to be taken to have acquiesced and consented to the overdrafts, made by the book-keeper, and the bank is as much bound by it as if the cashier, standing in its stead, and as to such transactions to be regarded as the bank itself, had been expressly authorized by the board of directors to allow such overdrafts to be made by the book-keeper.

Nor does it help plaintiff’s case that the cashier, aware that the book-keeper was making over-drafts, did not know the extent to which he was overdrawing his account. He could easily have ascertained, and, therefore, tacitly consented to any amount of overdraft he might make. The book-keeper, as to those transactions, was a customer of the bank. By its acquiescence he became its debtor, and it subsequently accepted and enforced a deed of trust executed by the book-keeper to ■secure the indebtedness thus contracted, and cannot hold his securities as for an embezzlement by the book-keeper ■of the amount of such indebtedness. DeColyar on Securities, 434, and cases cited. The obligation of the securities was to the bank, which had the right to permit their principal to overdraw his account, and thus become "the debtor of the bank, but it cannot hold his securities for the failure of their principal to pay money so borrowed. They did not undertake as his securities for money borrowed by him, and even conceding that the bond is as broad as claimed, and bound the securities for thefts or embezzlements committed by their principal, the evidence establishes against the book-keeper no element of theft or embezzlement, but only that, with the consent of the cashier, he borrowed money from the bank.

The referee found that the bond obligated Riley to refrain from taking any money from said company, not due him. If this means that he obligated himself not to steal or embezzle the money of the bank, it may be conceded that the bond has that effect, but if it is meant by that finding that he obligated himself never, even with the consent of the bank, to overdraw his account or otherwise borrow money of the bank, there is nothing in the bond to warrant the finding. The cashier of a bank is the agent of the corporation. Bissell v. First National Bank, 69 Pa. St. 419; Caldwell v. The National Mohawk Valley Bank, 64 Barb. 333. “The bank will also be bound by the acts of the cashier, if the directors, either through inattention, or otherwise, suffer the cashier to pursue a particular line of conduct for a considerable period, without objection.” lb. “He is the general manager, and unless his operations are restricted by the directors, he is, for many purposes,, looked upon by the law, and is treated as if he was, the whole body, whom he has power to bind, even by his tortious act.” Grant on Banking, 518. “The cashier is the financial officer of the bank, and his agreements in behalf of his principal, in all matters relating to its business of discounting and banking are binding upon it, to the same extent as if made by a resolution of the-board of directors.” Wakefield Bank v. Truesdell, 55 Barb. 603. Directors will not be heard to say that they were ignorant of facts, “the existence of which is shown by the ledgers, books, accounts, correspondence, etc., of the bank, and which would have come to their knowledge but for gross neglect or inattention.” United Society of Shakers v. Underwood et al., 9 Bush. 611. De Colyar, in his work on Guaranties and Principal and Surety, at page 434, says : “It also appears that where one gives security for the conduct of another in a certain office, which brings him in contact with other persons also in the office, he has a right to expect that these persons will, in all things affecting the surety, conduct themselves according to law and discharge their duties.” This is the precise language of Lord Brougham in Mactaggart v. Watson, 3 C. & F. 525.

The same doctrine is recognized in Meir v. Hardie, 5. Shaw & Dunlop, 346, and in the People v. Janson, 7 Johns. 332, it is said: “The security had a right to look to the provisions of this statute, and to calculate his liability on the presumption that the duties enjoined on these public officers would be faithfully and punctually discharged. * * * There can be no doubt that the plaintiffs are chargeable with the consequences of the neglect, or breach of duty of their agents or public officers intrusted with this business.”

The book-keeper in the case at bar, as to those overdrafts, stood as a debtor to the bank, the same as the •numerous other depositors • with the bank, whose accounts were overdrawn. Can it make any difference that, instead of using a formal check, he drew the money on tickets, which, though not in form, were in substance checks, and this with the knowledge and acquiescence of the cashier ?

I think that the judgment should be reversed and . the cause remanded, or that a judgment should be entered in this court for the sum for which the bookkeeper twice took credit to himself, with interest from the date of that transaction.

Case Details

Case Name: Chew v. Ellingwood

Court Name: Supreme Court of Missouri

Date Published: Apr 15, 1885

Citation: 86 Mo. 260

Court Abbreviation: Mo.