DeBaca v. Higgins

58 Colo. 75 | Colo. | 1914

Mr. Justice Gabbert

delivered the opinion of the court:

The transaction by which plaintiff in error received the draft and certificate of deposit was a personal one with Bowlds, and not with the bank. By the issuance of these obligations Bowlds undertook to discharge his individual indebtedness to the plaintiff in error, by issuing a draft and certificate of deposit signed by him as cashier.

The official of a bank in charge of its business is its agent, but his authority is limited to those transactions in connection with the affairs of the bank, which are usually exercised by such officer, so that the test to apply in ascertaining if the bank he represents is bound by his act, is whether the transaction is with the bank and its business, or with the officer personally, and in his business. If of the latter character, the bank is not bound thereby, unless it appears that the act of the official for his individual benefit was authorized or ratified. An agent is not vested with authority to appropriate the funds of his principal to pay his debts, and therefore, a creditor of a bank official receiving a draft or other obligation of the bank, which the officer represents, in payment of his individual obligation, which show upon their face that they were issued by himself, is advised that thereby the officer is appropriating the assets of the bank to pay his individual indebtedness and is therefore liable to the bank for the funds so received, or the obligation is nugatory in his hands, unless he establishes that the bank official was authorized to issue such obligations, or his act has been ratified by the bank.—Campbell v. Manufacturers Nat’l Bank, 67 N. J. L. 301, 51 Atl. 497, 91 Am. St. 468; Zane on Banks and Banking, 120; Anderson v. Kissam, C. C. 35 Fed. 699; Hier v. Miller, 68 Kan. 258, 75 Pac. 77, 63 L. R. A. 952; Langon v. Grognon, 123 La. 453, 49 So. 18, 22 L. R. A. (N. S.) 414; St. Charles Sav. Bank v. Orthweir Inv. Co. 160 Mo. App. 369, 140 S. W. 921.

Such proof was not made in the case at bar, and it appears that Bowlds never made any deposit with the bank to pay the draft or certificate of deposit.

It is urged, however, on behalf of plaintiff in error, that because Bowlds was the owner of the entire capital stock of the bank, transacted all its business, attended to all its affairs, was not subject to any authority in the conduct of the business of the bank, and because the bank remained silent, and made no objection to the authority of Bowlds to issue the certificate of deposit and the draft, the transaction was ratified, and both the bank and the receiver are estopped from questioning the validity of the transaction.

Bowlds, as we have stated, and as is claimed by plaintiff in error, was in full control of the affairs of the bank. Tie was therefore trustee for its stockholders and creditors. This fiduciary relation inhibited him making any use of the corporate assets, except such as might serve the purpose of the corporation. Consequently, he could not appropriate the funds of the bank to his own use, as against its creditors, and those having an interest in its stock. Prior to the transaction involved, he had transferred ninety shares of the capital stock to the Central National Bank, to secure his note to that institution. This note is unpaid. His attempt to discharge his individual indebtedness with the bank assets, was unquestionably wrong and illegal. He was the only one interested in the bank who appears to have had any knowledge of this wrongful act. In such circumstances his silence or acquiescence cannot bind his principal. To hold otherwise would enable a bank official, in sole charge of the affairs of a bank, to ratify his own wrongful act by his own silence and his own acquiescence. The law will not permit fraud to be perpetrated in this manner. "We must not be understood, however, as intimating that plaintiff in error, or those representing him, were guilty of any fraud, for they were not. When we speak of fraud, we refer to the act of Bowlds in appropriating the funds of the bank to his own use to discharge his individual indebtedness. It was this fraud of which plaintiff in error had notice that vitiates the transaction.

The contention on the part of counsel for plaintiff in error that the judgment is erroneous is based entirely upon the proposition that the transaction was ratified, and therefore, binding on the bank, and in considering the case, we have merely assumed, but not decided, that it could have been ratified, either in advance or by subsequent action.

It is suggested in the brief of counsel for plaintiff in error that the receiver holds his note against Bowlds, and claims it as an asset of tbe bank. We do not understand tbe receiver makes any sneb claim. If be bas tbe note, it should be turned over to tbe plaintiff in error.

Decided April 6, A. D. 1914. Rehearing denied November 2, A. D. 1914.

Tbe judgment of tbe District Court is affirmed.

Judgment affirmed.

• Mr. Chief Justice Musser and Mr. Justice Hill concur.