Anderson v. Kissam

• Decision Date: 11 August 1888
• Citation: Anderson v. Kissam, 35 F. 699 (S.D. N.Y. 1888)
• Parties: ANDERSON v. KISSAM et al.
• Court: U.S. District Court — Southern District of New York

35 F. 699

ANDERSON v. KISSAM et al.

United States Circuit Court, S.D. New York.

August 11, 1888

George W. Wingate, for plaintiff.

John E Burrill and Elisha Root, for defendants.

WALLACE J.

This action is in substance one of trover to recover moneys of the First National Bank of Albion, alleged to have been wrongfully appropriated by the defendants during the years 1880 and 1881.The case was tried with a jury, and the jury found a verdict for the plaintiff for $103,000 principal with $44,759 interest.The case is now here upon a motion by the defendants for a new trial.

It appeared by the evidence that in 1880 one Warner was the cashier of the Albion bank, and for some time had been intrusted with the almost exclusive management of its affairs.In November, 1881, he became its president.In August, 1884, the bank failed, Warner absconded, and the plaintiff, who was appointed its receiver, took possession of the assets.An examination of its affairs showed that Warner had misappropriated moneys and securities of the bank to the amount of over $300,000, and was otherwise indebted to the bank in a considerable sum.It was further shown that Warner had been carrying on stock speculations through the agency of the defendants, who were stock-brokers and bankers of New York city; that he opened a customer's account with them May 11, 1880, and continued to buy and sell stocks and securities upon margins through them, and to deposit with and draw upon them as bankers, during that year and the next; and that from time to time the defendants received large sums of money from him by checks of the Albion bank payable to their order, drawn by Warner, as cashier, upon the Third National Bank of New York city.The defendants collected these checks and placed the proceeds to Warner's credit in his account with them.It was also proved that for many years the Albion bank had kept a banking account with the Third National Bank of New York, and had been accustomed to draw upon it at sight, and send it collections and remittances; that after Warner became the cashier of the Albion bank he took personal charge of the correspondence between that bank and the New York bank, and intercepted the letters of advice and monthly statements sent by the New York bank to the Albion bank, and adopted other methods to conceal from the other persons associated with him in conducting the Albion bank the true state of the account between the two banks; that from time to time he deposited with the New York bank, in the name of the Albion bank, funds in his possession, and from time to time drew checks and drafts in the name of the Albion bank, as cashier, upon the New York bank, for his own transactions and speculations; and that the checks and drafts thus drawn by Warner for his own use were not credited to the New York bank on the books of the Albion bank, although they were credited to the Albion bank by the New York bank; and neither the checks nor drafts nor the credit items appeared in any way upon the books of the Albion bank.The evidence was sufficient to justify the jury in finding that Warner used the account of the Albion bank with the New York bank as the means of appropriating, without the knowledge of the directors or other officers of the Albion bank, and clandestinely, the funds and credit of that bank for his own benefit.It appeared by the books of the two banks that the checks and drafts upon the New York bank, and charged to the Albion bank, but not credited by the Albion bank to the New York bank, during the period of Warner's defalcations, amounted to $267,000, and the deposits credited by the New York bank to the Albion bank, but not charged by the Albion bank to the New York bank, during the same period, amounted to $281,000.The checks received by the defendants between May 11, 1880, and August 16, 1881, and including those dates, aggregated the amount of $103,000.During the same period they received from Warner from other sources $107,703.The defendants bought and sold stock for Warner on a margin of 10 per cent., and many of the checks in question were received by them pursuant to their request to remit for margins.The first and last checks were for $10,000 each; one was for $15,000.In January, 1881, they received checks for margins aggregating the sum of $50,000.Testimony was given for the plaintiff tending to show that Warner was rated, where he resided, as worth from $15,000 to $20,000; and testimony was given for the defendants tending to show that they supposed that other persons were interested with Warner in his stock transactions, and did not suspect that he was using the funds of the bank illegitimately.It also appeared that from time to time Warner drew on the defendants, and that during the period covered by the checks in controversy they paid on his drafts, into the Third National Bank, to the credit of the Albion bank, at various times, sums aggregating $89,202, and that this amount was credited to the Albion bank on the books of the New York bank, and $25,850 thereof was charged on the books of the Albion bank to the New York bank, but the rest did not appear in the books of the Albion bank.

Upon the trial, the court excluded the testimony offered by the defendant to show that it was customary with bankers and brokers of New York city to receive cashiers' checks and drafts drawn in favor of their own banks upon New York banks as cash, upon transactions with the cashier individually.At the close of the testimony, the defendants requested the court to instruct the jury to find a verdict for the defendants.Defendants also requested the court to instruct the jury that the defendants were not liable for any sum in excess of the difference between the sums received by them from Warner upon the checks of the Albion bank and the sums paid by them on Warner's drafts to the New York bank to the credit of the Albion bank.The court refused such instructions.The court instructed the jury, in substance, that it was incumbent upon the plaintiff to establish that the moneys represented by the checks received by the defendants were moneys of the bank which had been misappropriated by Warner; and that, when the defendants received the checks, they took them with guilty knowledge that Warner in using them was misappropriating the funds of the bank; and that, unless they found both these propositions established by the evidence, their verdict should be for the defendants.They were further instructed that they might find upon the evidence that Warner was permitted by the directors of the bank to draw such checks for his own use, or to use the money of the bank for his own purposes, or they might find that the directors of the bank were in collusion with Warner, and cognizant of his transactions; that if they found that those who represented the stockholders of the bank as its directors or managers permitted Warner to draw such checks, or use the moneys of the bank for his own purposes, not as co-conspirators or collusively, but trusting in his integrity, or believing that the bank would not be injured, or through loose management on their part, the plaintiff could not recover; but if they did this collusively their consent could not shelter the defendants, because they had no power by virtue of their position to consent to a fraud upon the stockholders.The jury were further instructed that upon the issue whether the defendants received the checks with guilty knowledge the question was not whether they were negligent in receiving them, or in allowing Warner to deal with them as they did, but the question was whether they were guilty of bad faith; that defendants were bound to know that a cashier has no authority as such to loan the money of the bank, or use its checks, for his personal use; that the jury were to infer that the defendants knew this when they received the checks, and therefore the question was whether the defendants believed that by some special arrangement or confidence Warner was permitted by those who were associated with him in the management of the bank to use its checks and moneys as he did; and if the jury found that the defendants so believed, the defendants were not guilty of mala fides.The defendants insist upon this motion that the court erred in excluding the testimony of custom, in refusing to instruct the jury as requested, in the instructions given to the jury, and urge other grounds for a new trial.

In some aspects this is a hard case for the defendants.If the verdict stands, they are made responsible to pay over a very large sum of money which came to their hands to be invested and handled for another person in consideration of a small commission to be received by them, and which they have paid back to the person from whom they received it; and there is no reason to suppose that they had any active or defined purpose when they received the money, or at any time, of assisting the person from whom they received it to defraud others, or to injure others in any way.It is altogether likely that they could have shown, if they had been permitted to do so, by the testimony of any number of respectable bankers and brokers, that it is every day practice in Wall street for those in their line of business to buy and sell stocks for bank presidents and cashiers who are speculating there, and to accept drafts and negotiable paper of the corporations of these officers, made by them officially, in payment of the margins or purchase money, and that such transactions are so frequent and common in Wall street that they do not attract special notice, and do not usually excite a passing suspicion that they are irregular or improper.But no usage, however common and well recognized, can be invoked to...