Federal Savings & Loan Ins. Corp. v. First Nat. Bank

• Decision Date: 25 July 1946
• Docket Number: No. 1755.,1755.
• Citation: 67 F. Supp. 207
• Court: U.S. District Court — Western District of Missouri
• Parties: FEDERAL SAVINGS & LOAN INS. CORPORATION v. FIRST NAT. BANK, LIBERTY, MO.

67 F. Supp. 207

FEDERAL SAVINGS & LOAN INS. CORPORATION v. FIRST NAT. BANK, LIBERTY, MO.

No. 1755.

District Court, W. D. Missouri, W. D.

July 25, 1946.

COPYRIGHT MATERIAL OMITTED

Ray E. Dougherty, of Washington, D. C., and Charles M. Miller, of Kansas City, Mo., for plaintiff.

Francis G. Hale of Liberty, Mo., and Wm. S. Hogsett, of Hogsett, Trippe, Depping & Houts, all of Kansas City, Mo., for defendant.

REEVES, District Judge.

This is an action for money had and received. Plaintiff is the assignee of Liberty Federal Savings and Loan Association of Liberty, Missouri. The suit is in twenty-four counts and each count involves practically the same facts save as to the amount.

The defendant was a depositary of the said Liberty Federal Savings and Loan Association, hereinafter called the Association, and the suit is for the amount named in each of 24 checks issued by the Association and made payable in each instance to the defendant. The several transactions extended over a period of years.

The defense interposed is substantially that the checks were issued by said Association in due and regular course of business, and, though made payable to defendant, yet each was paid and the proceeds applied as directed by authorized officers and agents of the Association and that in each instance either immediately or ultimately, the payment discharged an equal liability of the Association created by specific act of the board of directors of the Association or by the necessary liabilities that inhere and accrue in regular routine operation of the Association.

The facts are undisputed. One Harold Wilson was, at all the times mentioned in the pleading and the evidence, the president and general manager of the Association. He bore a good reputation for honesty and fair dealing and had the confidence of the board of directors of the Association and was invested by said board with plenary powers and the defendant was so advised. However, the said Wilson was secretly faithless to his trust and by means of excessive appraisals and the fraudulent release of valid mortgages, he, over a period of years, defrauded the Association of much more than $100,000.

Aileen Chrisman was, at the same time, secretary and treasurer of the Association and all the aforementioned checks were signed either by the said Wilson or by her, that is, by them as president-manager or as the secretary-treasurer.

The plaintiff contends that if due and reasonable inquiry had been made by the defendant the fraud of Wilson would, to a large extent, have been averted or minimized, and that the fact that said checks were made payable to defendant put it on notice.

Additional facts as they may become pertinent will be stated in the course of this memorandum opinion.

1. At the outset plaintiff proffers a procedural objection that, upon a suit for money had and received, or assumpsit, the defense is greatly limited and the defendant can neither properly plead nor prove that no loss was actually sustained in the transactions. This objection is untenable.

The action is one that involves equitable principles and the defendant may interpose any defense that shows the plaintiff in equity and good conscience not entitled to recover. Myers v. Hurley Motor Co., 273 U.S. 18, loc. cit. 24, 47 S.Ct. 277, 71 L.Ed. 515, 50 A.L.R. 1181; Stone v. White, 301 U.S. 532, loc. cit. 535, 57 S.Ct. 851, 81 L.Ed. 1265; Henderson v. Koenig, 192 Mo. 690, 91 S.W. 88; Bradley Lumber Co. v. Bradley County Bank, 8 Cir., 206 F. 41, loc. cit. 45.

2. The first logical inquiry relates to the proper course of the defendant when the checks payable to it were presented:

And, first, was this such an unusual circumstance as to provoke or justify an inquiry? The evidence showed that literally scores of checks were similarly drawn and paid by defendant over a period of years, concurrently with as well as antedating the several checks sued on.

And, second, the applications of the proceeds of the checks were made under the immediate notice and observation of the defendant and were apparently properly applied.

And, third, the defendant had regularly furnished the plaintiff's assignor with statements of its account with the paid checks as vouchers. This was done monthly, and no complaints had ever been made.

And, fourth, the Association had been annually examined by federal authorities and no fault had been found with such a method of doing business.

And, fifth, the said Wilson not only bore a good business reputation but was clothed by the board of directors of the Association with plenary powers, and, such being true the question arises,—In what way could the officers of the defendant have questioned the method?

Both the courts and text-writers have accorded a logical legal status to checks made payable to drawee banks. In legal effect it is the same as if payable to bearer or to cash and necessarily involves an intended change in the status of the fund. Mayo Bros. Chemical Corporation v. Capital National Bank, 192 Miss. 293, 5 So.2d 220, 138 A.L.R. 849, loc. cit. 852. And the application of the proceeds of each check under the immediate observation and supervision of the defendant surely would not form the basis for or compel an inquiry. Moreover, the defendant had submitted monthly statements to the Association, and, even though these came solely into the hands of the dishonest Wilson, yet his knowledge, under all the authorities, became the knowledge of the Association's board of directors and it was the duty of the Association promptly to challenge the method. England National Bank v. United States, 8 Cir., 282 F. 121, 125,...