Harrisburg Bank v. Forster

| Pa. | May 15, 1839

The opinion of the Court was delivered by

Rogers, J.

This suit was brought to recover the amount of four promissory notes, which were executed by the defendant. The defendant took two grounds of defence; First, set-off, and secondly, the act of limitations.

We fully agree with the court, that as to the first ground, the defendant signally failed. However meritorious his conduct may have been, and how much it may have commended itself to the liberality of the directors, yet no contract has been proved which can be made the subject of set-off.

But the defendant insists that he is protected by the act of limitations. The notes have been due more than six years; so that, unless they come, within some excepted class of cases, they are barred. The statutes of limitations, which are statutes of repose, are certainly very beneficial, and of the highest importance. They are passed to assure titles to land, to quiet possession, to guard against perjuries, and more especially to prevent the commission of fraud and injustice. To prevent that, which was intended to guard the citizen against fraud and injustice, being made an instrument or a shield to fraud, the court has found it absolutely necessary to introduce exceptions to the operation of the statute. And one to which the circumstances of this case more particularly applies, is where there has been fraud or concealment on the part of the party seeking the protection of the statute, and especially when that party stands in a fiduciary relation. The plaintiff insists he ought not to be barred, because the defendant was the cashier of the bank from the 19 th of April 1S15, until the 25th of Nov. 1S33; that during that time he had the custody and care of the notes on which suit was brought. It was his duty, on the non-payment of the notes at maturity, to make a full, accurate and true statement of the case to the board of directors. And this was necessary, that they might take some order as to the measures to be taken; whether they would permit them to lie over, or would order their immediate payment. Unless this was done, the omission to do his duty amounts to such a concealment of the state of the case as in contemplation of law would deprive him of the protection of the statute. We cannot think, under the circumstances, that he is entitled to the benefit of the presumption, that every thing is presumed to have been rightly done. It is incumbent upon him to prove affirmatively, that he brought the transaction distinctly before the board, and that it was in consequence of their neglect that it was suffered to lie over without suit, or any steps taken to enforce payment. It is at all times a dangerous thing to permit transactions such as this to take place between the officers of the bank and the institution. And before an officer should be •permitted to avail himself of such a defence, it is not too much to require that he should show that in all things he has complied with his duty. In reference to Alward’s testimony, the court charged the jury, that if the directors knew, or by ordinary care and diligence might have known, that these notes were due, and unpaid after they Avere due, within six years from their becoming due, the act of limitations Avas a bar, unless they were fraudulently concealed from the knowledge of the directors. It Avould be unreasonable that the knowledge of the president, or any one of the directors, of the nonpayment of the notes, should enable the defendant to ávail himself of the act. It is very possible that the president may have seen these notes in the bundles, without having his attention particularly directed to them. And it also may possibly be, that when the board had the bundles before them, selecting from them such as were to be put in suit, these notes may not have escaped the observation of some of the directors. But be this as it may, this is not deemed sufficient, as it was the duty of the cashier, standing in the relation he did to the bank, to prove that the failure to pay was distinctly presented to them as a board, and that from some cause, either the fact as alleged, that they intended to remunerate General Forster for his disinterested conduct in relation to the reduction of his salary at the time the bank Avas under pecuniary difficulties, or for some other cause, they refrained from putting them in suit. It must be observed that the. directors, as well as the cashier, are but trustees for the benefit of the stockholders, and that each have their appropriate duties to perform. Among others, it Avas especially the duty of the cashier, particularly in his own case, to give distinct informal tion to the board of directors, sitting as a board for the transaction of the business of the bank, that the notes had arrived at maturity and had not been paid. It must not be left to conjecture or inference, that some of the directors of the board were cognizant of the real state of the transaction.

The court put the case on the ground of a fraudulent concealment^ from the directors, of the fact that the notes were unpaid. They repudiate the idea that his situation as cashier, having the custody and control of the books of the bank and the evidences of debt, will not prevent the operation of the act of limitations. We are of the opinion that that position is correct, provided it had been followed with distinct proof that the cashier gave full, explicit and prompt information to the board of the dishonour of the notes. To enable him to protect himself by the act of limitations, he must show a literal compliance with his duty as cashier, in relation to these notes. The security of the stockholders requires the utmost good faith on the part of the officers of the bank, and to enable them to shield themselves by a statute made to prevent fraud, they must adhere strictly to their duty. The same principle will also apply to a director, Avhose note may be suffered to lie over. If the cashier omits to lay the matter before the board, he must do it himself, or consent to forego the benefits of the act. In justice to the defendant Í must say, that we put this case on the ground of felony, without the slightest idea there was on bis side any intentional"concealment or meditated fraud whatever. From the testimony of Mr Alward, it appears his notes were in the same bundle with the notes of the president and some of the directors which were unpaid.

In this case, the discount of the notes was known to the directors; that came officially before them. But it has not been shown, this we think indispensable, that they had official information that they remained due and unpaid. They might, it is true, with diligence and care, have known the real situation of the notes, but that was not their peculiar duty. It was part of the official duty of the cashier to take the proper measures to secure payment of the notes, to inform the directors of' their dishonor, that legal means might be taken to collect the amount due.

The court say, if the directors knew, or if by ordinary care and diligence might have known that the notes were due and unpaid, the statute of limitations operates. This position must be taken rvith the important qualification that they had official information that they Avere unpaid. The case does not depend upon what is termed ordinary care and diligence on the part of the directors, Avhen there has been an omission of duty on the part of the cashier, Avho seeks to protect himself from payment. ' Until the directors have this knowledge, it is the opinion of the court the statute does not begin to run against the bank, notwithstanding the notes are due. In the complicated concerns of a bank, it is impossible that the directors can be sufficiently aware of the non-payment of all notes and securities belonging to the institution. A great deal must depend upon the cashier, Avhose peculiar duty it is to attend to that part of the business of the bank.

A doubt was suggested whether fraud Avas an answer to a plea of the act of limitations. This point Avas made in Turnpike v. Judd, 3 Mass. Rep. 207, where it was decided that a plaintiff may reply fraud to a plea of the statute of limitations, and avoid the plea.

Judgment reversed, and venire de novo awarded.