87 F. 157 | 8th Cir. | 1898
This is a writ of error to review a judgment of the circuit court of the United States for the district of Nebraska, which was entered upon a verdict in favor of the defendant in error,'for the sum of $10,000, with interest from September 25, 1894. The action was brought by Edgar M. Westervelt, receiver of the Citizens’ National Bank of Grand Island, Neb., against George A. Mohrenstecher, Otto A. Mohrenstecher, Mary Mohrenstecher, William Stull, and A. W. Ocobock, upon a bond given by George A. Mohrenstecher, the cashier of the bank, as principal, and the other defendants as sureties. The petition contained three causes of action. In the first cause of action it was alleged, in substance, that the plaintiff was the duly-appointed receiver of the Citizens’ National Bank of Grand Island, Neb., and that the defendant George A. Mohrenstecher was the cashier of the bank from the 13th day of August, 1889, until the bank suspended payment, on the 4th day of December, 1893; that as such cashier he executed the bond upon which this suit was brought; that the bond provided that Mohrenstecher, as cashier of the bank, should execute the duties thereof with integrity and fidelity, and should faithfully perform and fulfill the trusts thereby in him reposed, and well and truly, at all times when thereto required, account for and render over to the bank all moneys, goods, chattels, and other things, the property of the bank, that came into his hands, possession, or control, so that no default, fraud, or failure should happen or be occasioned by any neglect or failure on his part to perform his duties as such cashier. It was then alleged that Mohrenstecher failed to perform his duties as cashier, and on or about the 29th day of December, 1891, appropriated to his own use $10,305.82 of the moneys of the bank, in his custody and possession as cashier, and used and applied the same in payment of certain real estate before that time purchased in the joint names of himself and one Alexander H. Baker; that this money was appropriated by the cashier under the trick, device, and pretense of loaning various sums of money upon the joint and several notes of said cashier and one Alexander H. Baker and M. J. Baker. The second cause of action alleged that Mohrenstecher, disregarding Ms duties as cashier, loaned one Alexander H. Baker, on his own note, and jointly with others, a sum largely in excess of the sum of $6,000, of the moneys of said bank in his custody as cashier, viz. the sum of $18,522.95; that this indebtedness was evidenced by. a note of Alexander H. Baker and M. J. Baker for the sum of $8,157.13, and two joint notes of Alexander H. Baker and George A. Mohrenstecher (being the notes mentioned and described in the first cause of action), amounting to the sum of $10,365.82. The third cause of action alleged that Mohrenstecher loaned to himself individually, and jointly with others, a sum greater than 10 per
Numerous errors are assigned, but we shall not find it necessary to discuss them separately. Several of them raise the same questions presented to and decided by this court when the case was first before it. That these questions are not now open for re-examination is well settled. Balch v. Haas, 36 U. S. App. 693, 20 C. C. A. 151, and 73 Fed. 974; Thatcher v. Gottlieb, 19 U. S. App. 469, 8 C. C. A. 334, and 59 Fed. 872; Supervisors v. Kennicott, 94 U. S. 498; Clark v. Keith, 106 U. S. 464, 1 Sup. Ct. 568.
The court instructed the jury that the making of an excess'loan, in the absence of fraud, would not of itself constitute a breach of the cashier’s bond, that such fact was not material to the issues in the case, and that the jury should not give such fact any weight in arriving at a verdict; thereby eliminating from the controversy everything except the issues presented by the first cause of action. It becomes unnecessary, therefore, to consider the assignments of error by which it is sought to quéstion the correctness of the ruling of the circuit court in denying the motion filed by the defendants to
The following instruction given to the jury is assigned for error:
“But yon are instructed that, under the law of the United States, national hanks are prohibited from loaning to any person, company, corporation, or firm, or the several members thereof, a sum exceeding one-tenth part of the capital stock of such bank; and in this case, if you find from the evidence that the defendant George A. Mohrenstecher and one A. H. Baker got possession of the sum of $10,363.82 of the funds of the bank at a time when each of said persons was indebted to such hank in the sum of $6,000 or more, you may consider this fact, if proven, in connection with other facts and circumstances in evidence, in determining whether the transaction by which said Baker and Mohrenstecher got possession of $10,365.82 of the funds of the bank, If you find from the evidence they did so get possession of such funds, was a misappropriation of such funds by said George A. Mohrenstecher, the cashier of said bank.”
We think this instruction was erroneous, in that it authorized the jury to consider the fact of an excess loan in determining whether the transaction by which Baker and Mohrenstecher got possession of $10,365.82 of the funds of the bank was a misappropriation of such funds by Mohrenstecher, the cashier, when such fact, if established, would not tend to show either deceit, fraud, or misappropriation.
It is also insisted that the court erred in refusing the request of the defendants to instruct the jury to return a verdict in their favor, and in giving the following instructions to the jury:
“And, when an officer converis money of a bank to his own use, he violates his duty; and no trick or device, however shrewd, will protect him in so doing, no matter how elaborate a system of notes and bookkeeping he may adopt. The law looks at tlie realities of the transaction, and will not allow a system adopted to hide the offense to protect the offender.” “Therefore, no matter what acts were, done by tlie cashier, Mohrenstecher, with reference to the notes in question, and disclosed by the evidence, if you find from the evidence, under these instructions, that such acts taken to conceal from the bank officials or the bank examiner the conversion by said George A. Molirensi eclier to his own use the money of the bank, if, under the evidence and these instructions, you find, there was such conversion, you should disregard such acts, if any you find there were, designed to conceal, and find the fact of conversion to be fully proved.”
The ground of objection to the two instructions just quoted is that they are misleading, and assume the existence of facts not proved. If the defendants are liable upon this bond, it is because Mohrenstecher, the cashier, misappropriated or misapplied $10,-365.82 of the bank’s funds, as alleged in the first cause of action. To constitute a misappropriation, there would have to be a conversion of ihe funds of the bank, in some form, to the use of the cashier, or some, person other than the bank, with the intent to injure and defraud the bank. If the notes described in the petition were merely renewals of oilier notes held by ihe bank, ihe fact that they were taken by (lie cashier in lieu of the old notes would not consulate a misappropriation or misapplication of the funds of tlie bank by him. for ihe reason Hint the funds of the bank were in no way wilhdravvn or diminished by his act. In Dow v. U. S., 49 U. S. App.
“To complete a misapplication of the funds of the bank, it was necessary that some portion thereof should he withdrawn from the possession or control of the bank, or that a conversion, in some form, should be made thereof, so that the bank would be deprived of the benefit thereof.” “It is not necessary in all cases that the money should be actually withdrawn from the bank. Thus, if, by connivance between a bank official and a customer of the bank, the latter is allowed to draw checks on the bank when the drawer has not the funds to meet the cheeks, and the same are given by the drawer to third parties in payment of claims due them, and the third parties, instead of getting the cash on the checks, have them credited up to their accounts in the bank, this completes the misapplication of the funds of the bank, because the bank has become bound for the payment of the sums thus credited to the third parties; and the result is just the same as though the holders of the checks had obtained the money thereon, and had subsequently deposited it to their credit. In such cases the funds of the bank would be lessened, and thereby the criminal misapplication might be completed. If, however, the customer presents the checks himself, and has the same credited on his account, the crime of misapplication is not completed thereby, because the bank is not under legal obligation to pay out any of the amounts wrongfully credited to the customer, and may refuse to pay checks drawn against the inflated account, and may at any time charge back against the customer the amounts of the checks upon which nothing was In fact realized by the bank. To complete the criminal misapplication of the bank funds in the supposed case, some sum must be paid by the bank to the customer, or to third parties on his order, or must be credited to third parties, under such circumstances that the bank becomes bound for the payment thereof.”
The case cited was a criminal case, but the principle announced applies in this case. The burden was upon the plaintiff to show that Mohrensteeher by means of these notes wrongfully obtained money from the bank. If, by executing the notes and delivering them to the bank, he was either paid or took money from the bank, that fact was capable of proof by showing the reduced amount of the cash on the day it was taken. The evidence in the case tended to show that the notes executed on the 29th day of December, 1891, were renewal notes; that the indebtedness represented thereby had its origin in the purchase of the real estate known as the “Hurford Property” on January 25, 1890; that this real estate was purchased by the cashier on the 25th day of January, 1890, for the sum of $22,250; that the money used to pay for the property was represented by four notes (one for $6,000 signed by the vice president of the bank, William Hagge; one for $6,000 signed by the teller, William Geddes; one for $6,000 signed by the president’s son, Richard Koenig; and one for . $4,250 signed by-Mohrensteeher and Baker); that subsequently a loan was made upon the property for the sum of $12,000, and the proceeds thereof turned in to the bank, and used to cancel the notes of Geddes and Koenig; that thereafter a further sum of $5,000 was obtained by Mohrensteeher and Baker, and applied as a part payment of the Hagge note; that the two notes, which aggregate the sum of $10,365.82, represented the balance of the purchase price of this property, the accumulations of interest, and the taxes. While the record shows that on the 31st of December, 1891, the cashier’s check for the amount of the two notes ($10,365.82) passed through the bank, yet a careful examination of the record fails to show that the bank parted with any mon
“Q. You may state what those are. A. Bill discount and discount slip. Q. Of what bank and date? A. Citizens’ National Bank, and made on the 31st of December, 1891. Q. Now, with those slips in your hand, and from an examination of them, can you tell wliat went to make up the consideration of the note for $6,000 (No. 26,685), and the note for $4,305.82 (No. 26,686), or either of them? A. These are renewals. Q. Of other notes? A. Of other notes of the same party. Q. As a matter of fact, did these not renew other notes aggregating $9,452.70, and interest upon them of $913.12? A. Yes, sir.. Q. Do you know, of your own knowledge, whether this check was ever paid? A. I don’t know. Q. Do you know, of your own knowledge, anything about the transaction testified to? A. I do not. Q. Do you know whether there was $10,-363.82 in cash paid out of Hie bank upon the check on that day? A. The books will show It. Q. Do you know? A. I don’t know. Q. These discount slips that yon have just testified to show that these were renewals, — -Exhibits C and D were renewals of certain other notes? A. It looks like it, and the check shows lhat he has taken up old notes by it, because Mr. Mohrenstecher put it plain on the check himself. Q. As a matter of fact, this check says, ‘Pay to the order of’ certain other notes? A. Yes, sir. Q. And these are certain notes described in the discount slip and slip of bills discount? A. Yes, sir. Q. And these two notes were given in the place of those notes that were taken up? A. That I don’t know. Q. That is what you infer from this transaction? A. Yes, sir. Q. I understand you to say that looking at these two notes, Exhibits O and D, and these discount tickets, you infer from the examination that these two notes took up the other notes mentioned here? A. Yes, sir.”
The account of G. A. Mohrenstecher, agent, also shows that on December 31, 1891, a charge of $10,865.82 was exactly counterbalanced by credit for the same amount. Mohrenstecher, in his deposition, also testified that these notes were given for the balance of principal and the interest and accumulation of interest and taxes accrued upon the purchase of the Hurford property. This record, we think, fails to show a misappropriation of the funds of the bank at the time alleged in the petition; and if the plaintiff desired to rest his case upon the transaction of December 29, 1891, the defendants were entitled to the instruction requested. There was no evidence tending to show that there was any trick or device employed by the cashier with the intent and for the purpose of covering up and concealing the transaction complained- of. On the contrary, the evidence shows that the notes mentioned in the first cause of action at all times appeared upon the books of the bank, were kept in a note case in the usual place in the bank, and were frequently-examined by the directors and officers of the bank authorized to examine them, including the discount committee. The two instructions above quoted are therefore ojien to the criticism made by counsel.
At the trial the defendants offered to prove by the defendant William Stull: That in a conversation had with Mr. Koenig, the president of the b"ank, soon after the purchase of the Hurford property, he demanded information as to whether Mohrenstecher, the cashier, had borrowed money from the bank for the purpose of purchasing the property, and whether the bank claimed any liability at that time upon the bond by reason of any act of Molirenstecher’s
“Q. How much of that time were you actively engaged in the management of the bank’s business? A. Well, I was there most of the time in the bank. Once in a while, of course, I had business outside.”
In line with Mr. Hagge’s testimony, the record of a meeting of the board of directors of the bank held on the 13th of October, 1891, after showing that all members of the board of directors were present, sets out at length a report made by the examining committee,
“Your committee desire at this time to call the attention of the board to the fact that the assistant cashier and acting teller of the bank, the vice president and ihe president, who are engaged in the active management of the hank, have not given bends in accordance with the bydaws and resolutions of the board.”
If the statements contained in the offers by the defendants were made by the president, vice president, and the director, who was chairman of the finance or discount committee as therein stated, as against the sureties upon the cashier’s bond, who, relying upon the information thus received from the officers of the bank, took no action to protect themselves against loss, the bank’would be estopped to deny that the purchase of the Hurford property was a bank transaction, and that the title to the property was simply taken for convenience in the name of the cashier. In the case of Illinois Trust & Sav. Bank v. City of Arkansas City, 40 U. S. App. 257, 22 C. C. A. 171, and 76 Fed. 271, Judge Sanborn, delivering the opinion of the court, said:
“No principle is more universal in the jurisprudence of civilized nations, no principle is more equitable in itself, or more salutary in its effects, than that no one may, to the damage of another, deny the truth of statements and representations by which he has purposely or carelessly Induced that other to change his situation.” Paxson v. Brown, 27 U. S. App. 49, 10 C. C. A. 135, and 61 1ed. 874; Dickerson v. Colgrove, 100 U. S. 578; Kirk v. Hamilton, 102 U. S. 68.
That this principle applies to ihe transactions of corporations as well as to those of individuals is well settled. Zabriskie v. Railroad Co., 23 How. 381; Omaha Bridge Cases, 10 U. S. App. 98, 188, 190, 2 C. C. A. 174, 239, 244, and 51 Fed. 309; Butler v. Cockrill, 36 U. S. App. 702, 20 C. C. A. 122, and 73 Fed. 945. There was testimony tending to show that Mohrenstecher was solvent at that time, and had property sufficient to satisfy any liability which might accrue upon the bond. Stull, the surety, was entitled to a truthful answer to his inquiry in reference to Mohrenstecher’s indebtedness to the bank. It was a matter in which he was vitally interested. If Mohrensteeher was improperly using the bank’s funds for the purpose of purchasing real estate, the sureties upon his bond had a right to know (hat fact. These officers knew that Stull was a surety upon Mohrenstecher’s bond, and the purpose of the inquiry could not be misunderstood. True, the cashier was allowed to testify upon this point, and his testimony was, in substance, the same as the proof offered and rejected. We do not think, how-even-, that it can be said that the testimony offered was merely" cumulative, and therefore'the error was error without prejudice. The credibility of this cashier had been seriously attacked before the jury, and Ms interest in withholding correct information in regard 1o his own transactions, if they were illegal, would render Ms declarations of little value. The sureties upon this bond had taken every precaution to save themselves and the bank from loss. They had made timely inquiry of the officers of the bank engaged in the active management of its affairs, with reference to a. transaction which might affect their liability as sureties upon the cashier’s