Prather v. Kean

• Decision Date: 03 January 1887
• Citation: 29 F. 498
• Parties: PRATHER and others v. KEAN and others.
• Court: U.S. District Court — Northern District of Illinois

29 F. 498

PRATHER and others v. KEAN and others.

United States Circuit Court, N.D. Illinois.

January 3, 1887

H. W Jackson and Robert Hervey, for plaintiffs.

John P Wilson and O. H. Horton, for defendants.

GRESHAM J.

The plaintiffs, who were bankers at Marysville, Missouri, opened an account in 1873 with the defendants, who were bankers at Chicago, and this relation continued until the spring of 1883. Interest was allowed the plaintiffs on their deposits above a certain amount, at the rate of 2 1/2 and 3 per cent per annum, and the deposits averaged from $200,000 to $400,000 a year. On July 7, 1880, the defendants sold to the plaintiffs $12,000 of 4 per cent. government bonds, for which the latter paid, including premium and accrued interest $13,005. The letter which the plaintiffs wrote ordering the purchase concluded thus: 'You will please send us description and numbers of the bonds, and hold same as special deposit for us. ' In the account which the defendants rendered to the plaintiffs of the purchase, the latter were informed that the bonds were held as a special deposit, subject to their order. The numbers of these bonds appeared upon the bond register which the defendants kept, and they remained in their custody until some time between November, 1881, and November, 1882, during which period they were stolen by their assistant manager, Ker, who disappeared on January 16, 1883, and this suit is brought to recover their value.

On October 8, 1880, the plaintiffs wrote to the defendants: 'Would it be convenient for you to discount for us, say, up to par of our bonds with you as collateral, and, if so, at what rate?' and in reply to this, on October 11th, the defendants said: 'We will discount for you with pleasure, taking your government bonds at par as collateral. ' On December 22d the defendants discounted plaintiffs' note for $12,000, and on the same day notified them that the bonds were held as collateral security for the loan. This note was renewed, and when it became due, on April 27, 1881, the defendants wrote the plaintiffs: 'We debit you $12,000 for your note due to-day, which please find inclosed, canceled. What disposition shall we make of the collaterals? ' The answer to this letter was not produced; but Robinson, one of the plaintiffs, testified that he directed the defendants to 'hold the bonds, as formerly, for our (plaintiffs') use,' and to furnish a list of them, giving numbers. On May 5th the defendants wrote to the plaintiffs: 'Your favor of the second inst. at hand. We hold $12,000 U.S. 4%, as special deposit;' giving the numbers, and informing the plaintiffs the bonds were held subject to their further orders. On October 11, 1882, the defendants discounted the plaintiffs' note for $10,000, at 60 days, receiving as collateral security therefor a number of notes given to the plaintiffs by their customers. This note was paid at maturity, and the collaterals returned.

Robinson testified that, in a letter which he wrote to the defendants asking for the last loan, he informed them the plaintiffs preferred giving the notes of their customers in place of the bonds as collateral, as they wished to use the bonds in case of emergency. He also stated that after the purchase of the bonds, the plaintiffs had overdrawn their account from time to time, and that their overdrafts had been honored. On November 24, 1880, the plaintiffs wrote to the defendants: 'We are carrying a large amount of hogs and cattle at this time for our customers, and we shall wish to overdraw our account for a small amount, and we will thank you to honor the same, and will consider our bonds in your hands as security for the same. We do not wish to overdraw, but stock may be detained on the road;' and two days later the defendants replied: 'Yours of the twenty-fourth inst. received. In reply, we beg to say, should you have occasion to check on us as you suggest, we will pay your checks with great pleasure.'

Robinson testified that on January 16, 1883, he wrote to the defendants asking for another loan of $10,000 on the notes of their customers, as the plaintiffs wished to keep the bonds for emergencies, meaning to meet overdrafts as previously. On January 29th the defendants replied to this letter, apologizing for the delay which had occurred through oversight on the part of their corresponding clerk, saying: 'We telegraphed you to-day that it is all right, meaning to say that your request for discount is granted. ' If the defendants did not know when they wrote this letter that Ker had stolen the bonds, they had abundant reason for believing he had. On March 5, 1833, the defendants wrote to the plaintiffs: 'Do your books show that you should have a special deposit of government bonds with us; if so, what issue of bonds, and what amount?' to which the plaintiffs replied, on March 8th: 'We refer you to your advice of July 7, 1880, in regard to our bonds held by you.'

Kean, one of the defendants, told Robinson in July, 1883, so the letter testified, that he (Kean) did not know until about the middle of January of that year that Ker had stolen the bonds. At the time the plaintiffs demanded the bonds, or their equivalent, there was nothing due from them to the defendants; and the latter refused to comply with the demand on the sole ground that the bonds were held as a special deposit, without reward, and that they were not liable for their loss.

Ker acted as book-keeper for about 10 years previous to May 1881, when he became assistant cashier, at a salary of $2,000 a year. The plaintiffs' bonds were kept in the 'treasury' part of the safe, where the securities and reserve or surplus funds, not in active use, were kept. Ker took $21,500 of the defendants' funds, and $35,000 in bonds, including those sued for. Kean also testified that he did not know when the plaintiffs' bonds were last seen in the vault; that it was their habit to examine their securities and count...