Cassidy v. Uhlmann

• Decision Date: 08 April 1902
• Citation: 170 N.Y. 505,63 N.E. 554
• Parties: CASSIDY v. UHLMANN et al.
• Court: New York Court of Appeals Court of Appeals

170 N.Y. 505

63 N.E. 554

CASSIDY

v.UHLMANN et al.

Court of Appeals of New York.

April 8, 1902.

Appeal from supreme court, appellate division, First department.

Action by Martin Cassidy against Frederick Uhlmann and others. From a judgment of the appellate division (66 N. Y. Supp. 670) affirming a judgment in favor of plaintiff and an order denying a new trial, defendant Frederick Uhlmann appeals. Affirmed.

Parker, C. J., and Martin and Haight, JJ., dissenting.

William A. Jenner and Oscar W. Jeffery, for appellant.

Harold Nathan, for respondent.

WERNER, J.

The plaintiff, as assignee of the claims of several depositors in the Madison Square Bank, brought this action against the president and two directors thereof to recover damages for their alleged fraud and deceit in directing and permitting said bank to remain open for the transaction of its regular business after it had become hopelessly insolvent, and in directing the permitting said bank to receive the deposits made by plaintiff's assignors while said bank was in said insolvent condition, and with full knowledge thereof. The complaint charges, in substance, that the Madison Square Bank was a moneyed corporation organized under the laws of this state, and prior to August, 1893, engaged in the banking business in the city of New York; that on the 7th and 8th of August, 1893, the plaintiff's assignors deposited certain moneys with said bank; that it was then hopelessly insolvent, and permanently closed its doors at the end of banking hours on the 8th day of August, 1893; that the defendant Blaut, as president of said bank, and the defendants McDonald and Uhlmann, as directors thereof, constituting a committee having the charge, management, direction, and actual control of said bank, and having knowledge of its insolvency, did direct the same to be kept open for the regular transaction of its business, for the purpose of inducing depositors to deposit moneys therein, and, with that purpose and intention, did represent to the depositors of said bank that it was solvent and could properly and lawfully accept deposits; that said representations were false; that while said bank was insolvent it received the moneys of the plaintiff's assignors; that this was done with the consent, direction, procurement, and instigation of said defendants, who wrongfully concealed from said depositors the actual condition of said bank, to their damage to the extent of their said deposits, less the dividends paid to apply thereon by the receiver of said bank. Service of the summons herein was never made upon said Blaut, the president of said bank. McDonald, although served, died before the trial of the action, and it has not been revived as against his personal representatives. The appellant, Uhlmann, is therefore the sole defendant. He presented no evidence.

The evidence given in support of the allegations of the complaint is substantially as follows: At the expiration of banking hours on Tuesday, August 8, 1893, the Madison Square Bank closed its doors, never to open them again. It was then hopelessly insolvent, and had been so during several days prior to the 7th and 8th days of August, when the deposits upon which plaintiff's claim is based were made. On the evening of August 2d, Blaut, the president of the bank, McDonald and Uhlmann, two of its directors, thompson, cashier and director, and Morton, its bookkeeper, met in the banking house. Blaut, McDonald, and Uhlmann were in the president's room, or the cashier's department. At intervals they called in Morton, the bookkeeper, who gave them figures and statements from the books as to the assets and liabilities of the bank. On the evening of Friday, August 4th, the appellant Uhlmann, McDonald, his codirector, Putney, the latter's lawyer, Thompson, the cashier, and Morton, the bookkeeper, were again in the banking house. Morton was at work upon a statement of the bank's assets and liabilities, which was not complete. He showed it to Uhlmann, and had some conversation with him about it. On Saturday morning, August 5th, between 9:30 and 10 o'clock, McDonald and Uhlmann were again at the banking house. Morton showed the completed statement of the bank's assets and liabilities of Uhlmann, and had some talk with him about it. After the latter had examined it, he threw his pencil upon the table and exclaimed: ‘The surplus is gone. The capital begins to walk off. By gosh! the bank is busted.’ Uhlmann was at the banking house again that afternoon. In the evening he was there with McDonald and Thompson. At the latter meeting there was some discussion as to the advisability of receiving deposits on the following Monday. McDonald and Uhlmann both stated that it would not be right to receive deposits in the then condition of the bank. McDonald asked Thompson what could be done about it. Then the former told the latter to receive deposits on Monday under the following plan, viz.: ‘If a person owed the bank any money, and the amount that he owed the bank was in excess of his deposit then standing to his credit, the amount should be entered upon his pass book. If it was less, he was to be given a duplicate deposit ticket, and his book held. In case the depositor did not owe the bank, a duplicate deposit ticket was to be given him, and his book held on any pretext,-for balancing or whatever it might be.’ This method of receiving deposits was followed on Monday until some time in the afternoon, ‘when word was received from down town to put the deposits through.’ Until this message was received, the deposits taken in were laid aside; but after that all deposits, including those received under said agreement, were entered upon the books as assets of the bank. On Monday evening, August 7th, there was a meeting at the banking house. There were present Blaut, the president, who had not been there since the preceding Wednesday; Soulard, McDonald, and Uhlmann, directors; Thompson, cashier and director; Mr. Jenner, counsel for Uhlmann; Messrs. Putney and Twombly, counsel for McDonald. On Tuesday, August 8th, the bank was opened at the usual hour, and deposits were received in the regular way. This was continued throughout the day. At the close of banking hours the bank shut its doors forever. At 6 o'clock that evening there was a meeting at the banking house. There were present Blaut, the president; Thompson, cashier and director; Uhlmann, McDonald, Ottenberg, Kalisher, and Soulard, directors; and a committee of the clearing house. Later in the evening the state treasurer entered the banking house, and was admitted to the private room where a conference was going on. On Wednesday morning, August 9th, it transpired that after the close of banking hours on the previous day checks had been drawn in favor of said state treasurer for $250,000; in favor of the East River Bridge Company, of which the defendant was president, for $50,000, and in favor of the Glen Ridge Mining & Quarry Company, a corporation of which Simon Uhlmann, the defendant's brother, was an officer, for $5,000,-against the deposits for these amounts, respectively, standing to their credit; and these checks were paid by the St. Nicholas Bank, the clearing-house agent of the Madison Square Bank. There was evidence to the effect that the defendant had not been in the habit of visiting the banking house in the evening at any time prior to August 2, 1893. There was no evidence showing that any meeting of the directors of the Madison Square Bank was held or called at any time between the 2d and 9th days of August, 1893, or that any attempt was made to hold or call such meeting. It did not appear who sent word to the bank on Monday ‘to put the deposits through.’

Upon this evidence the court submitted to the jury two questions: (1) Did the defendant know at the time the deposits in question were taken by the bank that the bank was insolvent? (2) Did the defendant take part in directing the receipt of the deposits by the bank, knowing that it was insolvent? Both of these questions were answered in the affirmative, and a general verdict was rendered in favor of the plaintiff for $6,496.86.

As the appellate division has affirmed the judgment entered upon this verdict, every fact found which has the support of any evidence is conclusive upon this court. Bank v. Rogers, 166 N. Y. 380, 59 N. E. 922;Castleman v. Mayer, 168 N. Y. 354, 61 N. E. 282;Townsend v. Bell, 167 N. Y. 462, 60 N. E. 757. The facts thus found are (1) that the deposits under which the plaintiff claims were made in the Madison Square Bank on the 7th and 8th days of August, 1893; (2) that said bank was then insolvent; (3) that the defendant, then a director of said bank, had knowledge of such insolvency; (4) that the defendant, with knowledge of such insolvency, took part in directing the receipt of deposits by said bank. In its final analysis, therefore, the case resolves itself into the question whether, upon the facts established, the legal conclusion of defendant's liability follows.

The theory upon which the action was brought, and upon which the defendant has been held liable in the courts below, is that by taking part in directing the receipt of deposits by said bank, knowing that it was insolvent, the defendant was guilty of a fraud, by which the plaintiff's assignors were damaged, and which gave them or their assignee a cause of action. This charge of fraud is predicated not alone upon the ordinary duties with which the defendant was charged by virtue of his office as a director of the bank, but upon those duties in connection with others which he is said to have voluntarily assumed by his course of conduct during the last days of the bank. It is evident that we can arrive at no just conclusion upon the questions involved in the action without an approximately correct understanding of the relations to each other of the parties interested in the controversy. The ordinary relation between a bank and its...