121 Cal. 74 | Cal. | 1898
This is an appeal from the order denying defendants a new trial. The appeal from the judgment in the same ease will be found reported in San Pedro Lumber Co. v. Reynolds, 111 Cal. 588. In the opinion there delivered the nature of the case, and many of the facts necessary to an understanding of this appeal, are presented. Others will be set forth as occasion may demand for a full understanding of the questions.
The plaintiff corporation was engaged in the lumber business. Its legal residence and place of the meetings of its hoard of directors was the city of San Francisco. It owned and' conducted a large lumber yard in San Pedro, and others in different towns in the southern part of the state. The general manager of its business was the defendant, Meriek Reynolds. From the date of the incorporation of the company in 1883 until October, 1889, Reynolds had occupied this position. His duties as such manager were regulated and prescribed by the ninth article of
When its examination of the books had been completed plaintiff brought its action to foreclose its lien upon, the pledged stock. It averred that it had suffered losses by the embezzlements, defalcations, and improper conduct of the defendant to the amount of over fifty-three thousand dollars; that the exact amount could not be determined without an accounting. It prayed for such an accounting, and for a sale of the stock and a reimbursement from the proceeds of the sale in such amount as might be found due. This action was instituted after demand for payment had been made upon Reynolds. Defendants answered by denial, and by pleading a tender of twenty thousand dollars alleged to have been made to Hooper, which it is averred was the full amount of all possible demands of plaintiff against defendant Reynolds. By cross-complaint they sought to recover damages for the full value of the stock, insisting that Hooper’s refusal to accept the tender amounted to a conversion of it.
Hpon the trial, the court held the action to be one to foreclose the lien upon the pledged stock, to which foreclosure an account was a necessary incident, notwithstanding the vast amount of labor involved in the stating of such an account, or perhaps because of it, the court declined to refer the matter, but retained it, heard the testimony, and itself stated the account, rendering judgment for the plaintiff in the sum of forty-eight thousand four hundred and thirty-two dollars and forty-four cents.
Reynolds, as has been said, was the manager of the corporation under the by-law above quoted. The principal place of business was at San Pedro, where Reynolds himself was located. It was the duty of the bookkeepers and employees in charge of the other lumber yards to report to the principal office at San Pedro, where the general books and accounts of the plaintiff
The first consideration which invites attention is that of the position which Merick Reynolds occupied in relation to the corporation, the duties which attached to that position, and the legal consequences which must follow a failure to perform those duties. Appellant challenges certain findings of the court making declarations in this regard, and contends that, as Reynolds was general manager, he was liable only for want of ordinary care in employing the bookkeeper Drane; that Reynold’s position is like and his responsibility the same as that of a director of a corporation in his relation to the stockholders. The cases of Scott v. Depeyster, 1 Edw. Ch. 513, and Savings Bank
The by-law above quoted became a part of Reynold’s contract of employment. It measured his powers, fixed his duties, and defined his responsibilities. He had immediate control of all the employees of the company outside of San Francisco, and could retain or discharge at his pleasure.. It was his duty to cause to be kept regular and accurate accounts of all the transactions of the company by a competent bookkeeper, and he was to transmit monthly, or as often as the board directed, abstracts of accounts, with necessary vouchers. For his failure to exercise due care in regard to these matters he was responsible to his principal.
But it is not merely with negligent omissions that he is charged. The case against him is not made up wholly, or even mainly, of averments and proofs that by reason of his negligence others in the employ of the company succeeded in embezzling its funds. The gravamen of the charges is that the defendant himself both connived at and procured the maiding of numerous false entries in the books kept under his immediate supervision and direction by the bookkeeper Drane, and that the falsification of these books was for Reynold’s own improper ends. It is charged that Reynolds himself knowingly and corruptly embezzled funds of the corporation, and concealed his peculations by an elaborate system of deceptive and fraudulent entries running through the books. It.is true the books were actually kept by Drane. It is true that Reynolds did not personally employ Drane. He was sent to San Pedro as bookkeeper by Hooper, the president of the corporation. But these facts do not even tend to exonerate Reynolds in the matters charged. It clearly appears from the evidence that Reynolds dominated Drane, and frequently directed the making of false" entries whose effect was to advantage Rey
Plaintiff introduced in evidence, over the objection and exception of defendants, the books of the corporation. These books, while not in the handwriting of Reynolds, were under his immediate care and supervision, and he was responsible for their accurate keeping under his contract of employment. It is contended by appellants that the books were not admissible, and sundry arguments are advanced in support of the proposition. It is said that they should be treated as are treated the books of a tradesman, admissible only if supported by independent evidence to their correctness, and then only as to the accounts of a tradesman with his customers; that these books, as was contended and shown by the prosecution, were not correctly kept, and that therefore they were inadmissible; that they were not used in establishing the account of the corporation against the customer, and that therefore they were inadmissible. Again, it is said that they were inadmissible against defendant Reynolds for any purpose, and herein the cases of Rudd v. Robinson, 126 N. Y. 113, 22 Am. St. Rep. 816, Scott v. Depeyster, supra,, and Neilson v. Crawford, 52 Cal. 248, are relied upon. This last proposition depends entirely for its force upon the point heretofore considered; that is to say, upon the relationship which existed between "the corporation and Reynolds, and the duty of Reynolds as manager. With Reynold’s duties thus defined, it will at once be seen that Rudd v. Robinson, supra, and Scott v. Depeyster, supra; are not at all in point. Those cases were similar. In Rudd v. Robinson, supra,
Appellant’s argument that plaintiff, having offered the books in evidence, is bound by them, may not be sustained. The books ■were offered for a twofold purpose: 1. To show that the agent did not keep either strict or accurate accounts of his deahngs with the property intrusted to him; and 2. For the distinct purpose of showing by the books, coupled with independent proof, that part of. the property with the custody of which Reynolds was chargeable was not accounted for by him, and was not by him delivered to the possession of his principal. The first purpose, that is to say, the failure of the agent to keep accurate accounts, was established by the very introduction of the books. They spoke for themselves. Hpon their face it could be seen and determined whether or not there were irregularities of double charges, overcharges, improper charges, or omitted charges. This did not amount to proof that the corporation had sustained loss, but it was direct proof that the agent had failed in his duty to keep by the books an accurate record or history of his deahngs and transactions with the corporation’s property. It is quite true that, since bookkeeping is only a history of transactions, a man does not lose money merely by faulty bookkeeping. This proposition, however, was fully realized, and frequently stated by both court and counsel during the trial of the cause. When, however, to the proof of faulty bookkeeping is added evidence from independent sources that large sums of money which would be due to the cor
The expert Lutgen, when. on the witness stand, presented certain schedules which he testified were summarizations of what the books showed. By these schedules appeared shortages and ' defalcations to the amount sued for. It is insisted by appellant that they were not admissible. In Burton v. Driggs, 20 Wall. 136, it is well said: “When 'it is necessary to prove the results of voluminous facts, or of the examination of many books and papers, and the examination cannot be conveniently made .in-court, the results may be proved by the person who made the examination. Here the object was to prove, not that the books did, but that they did not show certain things. The results sought to be established were not affirmative, but negative. If such testimony be competent as to the former, a multo fortiori must it be so to prove the latter.” Says Greenleaf (1 Greenleaf on Evidence, sec. 93): “A further relaxation of the rule has been admitted where the evidence is the result of voluminous facts, or of the inspection of many books and papers, the examination of which, could not conveniently take place in court.” Here the expert Lutgen was showing by his schedules, not alone what the books did contain, but what they should have, contained and did not contain. The records of accounts with their vouchers were most voluminous. It is said by the respondent that they would weigh a ton, and appellant concedes that this estimate is not far from the truth. The transactions covered years in time and millions of dollars in value. Lutgen was rigidly cross-examined as to the items composing his schedules, and their correctness was established. They were, therefore, unquestionably admissible.
It is further said by appellants that the court accepted the estimates as shown by Lutgen’s schedules, and charged defendants accordingly, and that this was error. Herein they rely upon and quote the case of North Hudson etc. Assn. v. Childs, 33 Am. St. Rep. 57, to the following effect: “In an action by a corporation against its president and treasurer to recover for losses alleged to have been sustained through their negligent and un
Appellant admits that a large sum of money is due from Reynolds upon account of his embezzlements and improper charges. But it is insisted that the court erred in charging him with any other or greater amount than the sum of fifteen thousand three hundred and twelve dollars and seventy-four cents. It is further said that the evidence does not show that Reynolds ever received any greater amount than that mentioned, and it is suggested, and indeed argued, that the further sums going to make up the judgment, if lost to the corporation, were lost by the peculations of Drane, with which Reynolds was in no wise chargeable. Hpon the part of the respondent it is answered that, having in view the duties of Reynolds under his trust, when it showed that he did not cause to be kept faithful and accurate accounts the duty of an accounting was cast upon him; that when it further showed that in specific instances Reynolds had defrauded and despoiled the corporation, the burden of proof shifted to him to account for every dollar of its property which had passed into his possession; that it was only necessary, therefore, for the corporation to prove that a specific amount of money had been lost; it was the duty of Reynolds to satisfactorily explain what had become of it, and, if he failed so to do, he was chargeable with it.
In addition to these sums which were thus. directly traced to Reynolds, it was shown by the corporation that it had not received other large sums. The evidence did not disclose what had become of these moneys. But enough had been proved to cast the burden upon Reynolds of accounting for all of this property with which he was primarily chargeable, and in any instance in which he fails he must bear the loss. This accounting he could make either by a showing that the principal in fact received the property, or admitting the loss, by establishing that it occurred through no failure upon his part to perform his duties. Ho such proof does defendant offer. In Wharton on Agency, section 299, it is said: “The agent is bound to debit or charge himself in the account with all money and other things which have come into his hands in his agency; and, if by his own fault he has let any of them be lost or perish, he must charge himself in place of these with the sums at which the damage resulting from their loss may be estimated.” In Pomeroy’s Equity Jurisprudence, section 1063, it is said: “A failure to keep full and accurate accounts raises all presumptions against the trustee, and may subject him to pecuniary loss as for moneys received and not duly accounted for.” An affirmative duty was cast upon Reynolds to cause to be kept accurate accounts. Instead of doing this, the books were falsified under his direction and for his benefit in a great many instances, and in very many ways. Upon establishing his agency and these facts, the burden of proof shifted to him to account for all of the losses which the company by its prima facie case established, and in any instance where he failed to account for property he was chargeable with it or its value. (Roubidoex v. Parks, 48 Cal. 215; Young v. Powell, 87 Mo. 128; Darling v. Younker, 37 Ohio St. 487; 41 Am. Rep. 532; Marvin v. Brooks, 94 N. Y. 76; Rochester v. Levering, 104 Ind. 562; Bank of British North America v. Cooper, 137 U. S. 473; Bailey on Onus Probandi, 316; Kerr on Fraud and Mistake, 151; 2 Pomeroy’s Equity Jurisprudence, sec. 959; Bigelow on Fraud, 301.)
The effect of the evidence establishing fraud in specific in
It is again urged by appellant that the court relied solely upon the evidence of the books, and that no other evidence was offered in arriving at the amount of its judgment, and that the books being a mere history of transactions, appellant was improperly charged with losses which were not proved to exist, but which only appeared to exist by reason of defective bookkeeping. To this it may be said that, where the defective bookkeeping shows a loss, that is at least prima facie evidence that the loss existed. But, in addition to that, there is the evidence of the expert Lutgen on behalf of respondent, as follows:
“Q. And that was relied upon by yon to make up your defalcation of fifty-three thousand dollars? A. I told you already, Mr. Graff, partly it was; partly it was relied upon, upon the absence of money, because afterward I did not find the money for these remittances and for these defalcations. If I had found the money afterward, there would have been no defalcation, but through the absence of money it became a defalcation or defalcations." Indeed, with the burden east upon him, defendant Reynolds throughout the whole case lamentably failed to account for any of these sums.
It has been noted that in the month of August, 1889, the bookkeeper Drane fled the state. After his flight Reynolds, in the name of the San Pedro Company, brought action against him for the sum of five thousand dollars, moneys had and received, and attached some of his property within the jurisdiction of the court. Drane, of course, made no answer. Judgment passed for the corporation, and was satisfied out of the property. At this time Reynolds’ complicity'and culpability were not suspected by his employer, but furthermore, the corporation' not only did not authorize the action, but did not know of it. Upon this appeal Reynolds urges that, as he and Drane were
It is unnecessary to discuss appellants’ tender of twenty thousand dollars. If the tender were in itself good and kept good, it is more than doubtful whether the case is one in which a tender could be made at all, remembering that the stock was pledged for an undetermined amount, and for an amount undeterminable until after an accounting had. (Boston etc. Iron Works v. Montague, 108 Mass. 248; Bartlett v. Johnson, 9 Allen, 530; McDaniels v. Bank of Rutland, 70 Am. Dec. 406; Beatty v. Sylvester, 3 Nev. 228.) In any event the tender was not for the amount found due. (San Pedro Lumber Co. v. Reynolds, supra.) Nor was the offer made in compliance with the law. (Chielovich v. Krauss (Cal., Sept. 1, 1886), 11 Pac. Rep. 781.)
The statute of limitations cannot be successfully invoked. Reynolds was acting in a fiduciary capacity. Such of his acts as resulted in loss to the corporation were concealed breaches of trust. The statute of limitations would not begin to run in his favor, so as to enable him to escape the results of an accounting, until after knowledge by his principal of his derelictions. In this case the accounting was promptly demanded after discovery.
The record in this ease is very voluminous; the labor entailed in its examination is far from slight, but that labor has been made as light as possible by the very able and exhaustive presentations in the briefs of counsel upon either side. It is thought that the court may with propriety express its appreciation of the valuable aid which counsel have afforded.
The order appealed from is affirmed.
McFarland, J., and Temple, J., concurred.
Hearing in Bank denied.