127 N.W. 522 | N.D. | 1910
The complaint in the action in which this appeal is taken alleges that respondent, who is a corporation engaged in the grain elevator business at the village of Emerado, North Dakota, had carried for two years and more prior to the beginning of the action, an open account on deposit with appellant, which was, during that period, engaged in a general banking business at the same place; that during said period appellant had paid out for respondent on checks drawn on its said account portions of its moneys, and that at the beginning of the action there still remained to respondent’s credit the sum of $3,044.02, which balance was payable on demand; that demand had been duly made and payment refused. The answer of appellant admits the allegation of an open account on deposit by respondent, but denies that there remains a balance of such deposit to respondent’s credit in any sum whatever; and further alleges, as a counterclaim, that during the continuance of the account between appellant and respondent as aforesaid, appellant honored checks of respondent duly issued by it to an aggregate amount of $3,257.97 in excess of all sums received from respondent, by deposit or otherwise; and prays judgment for the recovery of the amount of such overdraft in the sum alleged.
By undisputed facts shown upon the trial, it appears that on June 19th, 1907, there stood to respondent’s credit on the books of appellant bank a balance of $6,660.98; that between that date and October 3d, 1908, there were further sums deposited by appellant, which, including such balance, aggregated the sum of $146,682.49; and that during said period there was paid out for respondent upon checks duly drawn and presented to appellant sums aggregating $143,638.47, leaving a balance of $3,044.02, the sum for which suit is brought.
It further appeared that at all times from the fall of the year 1905 until his death by suicide, on or about the first day of October, 1908, one John Hempstead was secretary and treasurer of respondent corporation, and as such had authority, and it was a part of his official
It also appeared that from December, 1902, until the time of his. death, Hempstead was one of the directors and cashier of appellant bank. On August 15th, 1907, Hempstead, as treasurer of respondent Elevator Company, drew two certain checks, one in the sum of $2,000' and the other in the sum of $1,768, on which checks appellant, under the designation of “Farmer’s Bank,” was named as payee, and on August 17th, 1907, charged the amount of said checks against respondent’s account on the books of the bank. On May 8th, 1908, Hemp-stead, as treasurer, drew another check for the sum of $2,333.99, in which also appellant was the payee named, and on May 9th charged that sum against respondent upon the books of the bank. All three of these checks bear the bank’s stamp, “paid” upon their face gs of the date of their issuance. On the quality of these three checks depends the entire issue between appellant and respondent in this case. If they were properly chargeable against respondent’s account, then-the claim of the Elevator Company against appellant is fully paid,, and appellant is entitled to recover as an overdraft the amount prayed, for in its counterclaim. On the other hand, if the checks are worthless and their aggregate amount is not a legitimate charge against respondent, appellant concededly is indebted to it in the amount claimed in its complaint.
It was shown to have been the usual practice of Hempstead during the period that he was acting as treasurer for respondent to receive-over the counter of the bank grain tickets issued by the operating agent: of the Elevator Company at Emerado, and to pay them in cash with the moneys of the bank. During these seasons of the year when grain, was being marketed in considerable quantity, a number of such tickets, would be presented in the course of a day; and at the close of the day’s, business in order to adjust accounts between the Elevator Company and the bank, Hempstead would draw a check for the aggregate amount of the tickets issued during the day, payable to the bank, and sign the-same as treasurer of the Elevator Company. A large number of
It further appeared at the trial that at the time the three checks in question were drawn, marked paid and charged against the Elevator Company upon the books of the bank, there-was no indebtedness due from the Elevator Company to the bank in that sum or in any sum whatever.- It also appeared that after the time of Hempstead’s death, upon an examination of his account with the bank, there was a cash shortage of $800 or more; that false certificates of deposit aggregating several hundred dollars had been issued by Hempstead to certain depositors. Shortages and irregularities also appeared in the accounts with other banks during the period in which Hempstead was cashier, and in his account with a school district, of which he was treasurer. During his lifetime these shortages were covered by false entries or by some means not clearly shown, which prevented their disclosure upon the books of the bank. It seems apparent from the facts shown that for a period of at least two years before his death, Hempstead had dealt fraudulently with several of the different funds intrusted to him, and manipulated his accounts in such manner as to present a fair showing while he -misappropriated and used for his own benefit very considerable sums.
Upon the trial appellant introduced the testimony of Hempstead’s successor, as cashier, to the effect that so far as shown by the books and papers of the bank it had received no benefit from the three checks issued hy Hempstead and charged against respondent’s account upon its books; that the books of the bank, at the dates on which these entries were made, balanced exactly, a status that would not have existed if the cash account of the hank was intact at those dates and had been increased by the receipt of the amount of money shown by the checks or of any sum whatever. It also appeared that at all times prior to October 1st, 1908, the books of the bank at such times as a balance was
The trial court found the facts generally as hereinbefore narrated, and deduced therefrom a conclusion of law that appellant was indebted to respondent in the sum of $3,044.02, for which sum judgment was entered accordingly. Appellant’s principal assignments of error are directed against the findings of the trial court, holding that a balance upon deposit was still due respondent.
Therefore, aside from certain objections made upon the trial to the introduction of evidence, which will be referred to hereafter, the point upon which the entire controversy hinges is whether or not the three checks aggregating $6,101.99 were properly chargeable against respondent. If it be held that these checks are a valid charge against respondent, then it is quite apparent not only that respondent’s entire deposit had been paid out to it, or on its order, but that it is liable to appellant for the sum paid in excess of such deposit as shown by the counterclaim.
The dual relation of Hempstead to this transaction in its various incidents is, of course, the only factor which complicates and renders at all uncertain or doubtful the determination of the controlling points of this appeal. If respondent and appellant in their dealings had been represented by different agents, the solution of the question of liability by the application of well-recognized principles would be direct and simple. The meager showing of the evidence throws little light upon the ultimate actual disposition by Hempstead of the sum of money represented by the aggregate amount of the three checks or the fund from which it was drawn; so that these facts are left almost entirely to speculation and surmise. It would seem that neither appellant nor respondent received any benefit whatever from whatever transfer' of funds is represented by the passage of these checks. The most
Ero'm the fact that all moneys belonging to the Elevator Company, under the control of Hempstead, were at all times involved in this transaction on deposit with appellant, it follows that only under the last hypothesis could he be said to have actually misapplied these funds while acting as treasurer of the Elevator' Company. His opportunities ■for fraudulent manipulation of these funds as cashier of the bank were, therefore, more numerous than when acting in the other capacity, and the consequent temptation to misappropriation much stronger. While,
If, under the conditions of hypothesis 1, the checks were issued and used by Hempstead merely as a temporary fraudulent cover for the misappropriation of bank funds, it seems quite clear that the bank can make no claim to any benefit from a contract based upon the checks. In preparing the checks with such purpose in view, it cannot reasonably be claimed that Hempstead had any intention that they should in fact operate as a transfer of the funds of the Elevator Company to the bank. As he acted only as treasurer of the Elevator Company in preparing and handling the checks, there was no meeting of minds between it and the bank in a contract operating to transfer the funds. In such state of fact, there is no support to a claim of liability in favor of the bank against the Elevator Company for any of the sums of money designated in the checks. Eirst Nat. Bank v. New Milford, 36 Conn. 93.
Under hypothesis 2, it is readily apparent that a transfer by means of such checks and the application of the funds of the Elevator Company to the payment of the private debt of Hempstead would, of itself, operate as notice to the bank of a misappropriation. The bank, taking the checks under such conditions and with such notice on principles so elementary that demonstration is superfluous, could not predicate upon them a claim of liability against the Elevator Company.
The facts of hypothesis 3 are analogous in every way to those presented in cases where one person takes the property of another and uses it as a means of liquidating his debt to a third person. In such case, the third party, taking the benefit with notice of the fraud out of which it proceeds, cannot retain it without becoming particeps crimmis with .the person committing the fraud. Whether the transfer of funds from the Elevator Company to the bank was made simply upon the books of account or by manual transfer of bills, notes, or coin, the benefit conferred thereby must necessarily have been accepted for the bank by Hempstead, its cashier. “It must be deemed to have known what he knew, and it cannot retain the benefit of his act without accepting the .consequences of his knowledge. . . . [It] cannot obtain greater
Hypothesis 4, the last in order and the one which, as we have noticed, is most improbable of occurrence,' is also the most difficult of •determination. The controlling principle is that, a banking institution is not authorized to pay out funds intrusted to it by deposit to a person standing in a trust relation to the depositor when it knows such person intends to misappropriate and devote the fund to his own uses when paid over. It is argued by respondent that, if Hempstead as treasurer of the Elevator Company presented these checks to Hempstead .as cashier of the bank, and he, acting in the latter capacity, paid over the money to Hempstead as treasurer, who thereupon misappropriated it, the party paying the money, being the same person who received i¿, must necessarily have knowledge of what he intended to do with it in his other capacity; and therefore that the cashier of the bank knew at the time he paid out the Elevator Company’s money that the agent to whom he paid it meant to turn it to his personal uses. The general principle underlying this proposition of law is formulated by our Code •as follows: “As against a principal, both principal and agent are ■deemed to have notice of whatever either has notice of, and ought in .good faith and the exercise of ordinary care and diligence to communicate to the other.” Bev. Codes 1905, § 5782. But, appellant contends that Hempstead, being merely the agent of the bank and engaged in a fraudulent transaction which rendered it against hist interest to ■disclose his knowledge as treasurer of the Elevator Company to the ■executive officers of the bank, could not be presumed to have made known these facts. Cases are cited in which the principle is so applied ■to facts that are very closely analogous to those of the case at bar. Innerarity v. Merchants’ Nat. Bank, 139 Mass. 332, 52 Am. Rep. 710, 1 N. E. 282; Gunster v. Scranton Illuminating, H. & P. Co. 181 Pa. 327, 59 Am. St. Rep. 650, 37 Atl. 550. These cases, however, are
The evidence received by the trial court under objection was all directed to the point that the Elevator Company had no knowledge of oí*
As our conclusion upon the legal principles governing the case agree in result with the findings of the trial court, the judgment is affirmed.