Bank of Overton v. Thompson

• Citation: 118 F. 798
• Decision Date: 03 November 1902
• Docket Number: 1,671.
• Parties: BANK OF OVERTON v. THOMPSON.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

118 F. 798

BANK OF OVERTON v. THOMPSON.

No. 1,671.

United States Court of Appeals, Eighth Circuit.

November 3, 1902

T. J Mahoney (Marcellus L. Temple, on the brief), for appellant.

A. S Churchill, for appellee.

Appeal from the Circuit Court of the United States for the District of Nebraska.

The appellant (defendant below) is a banking corporation doing business at Overton, in the state of Nebraska. From some time prior to the year 1897, until October 4, 1899, G. S. Hardinger was its cashier, and had the charge and practical management of its affairs; its president and other directors residing at Lexington, in the same stated. On March 1, 1897 the appellee (complainant below), by an agreement in writing leased to said G. S. Hardinger nearly a section of land in Dawson county, Neb., for the term of three years from that date, and agreed to furnish money to stock the farm with hogs and cattle, as might be agreed on, to consume the pasture and hay on the place. Hardinger agreed to do all the labor on the place, and take care of the farm and stock. The title and possession of the stock were to remain in complainant until he was repaid all moneys advanced by him and 7 per cent. interest thereon; and, after such payment and payment of all debts, all profits or losses were to be evenly divided between said complainant and said Hardinger. Complainant during the year 1898 advanced and paid out, for 237 cattle placed on the said farm under said agreement, $4,180.36. There was probably some increase of this stock on the farm, and some losses by the death of animals. On July 7, 1899, said Hardinger, having been authorized by complainant to sell the said cattle, made sale of them all, together with about 15 cows to which complainant had no title, to one H. P. Stryker, for the sum of $5,500. Said Stryker obtained the money to pay said Hardinger by a loan to that amount which he obtained from the First National Bank of Lexington, Neb., giving as security therefor his chattel mortgage of said cattle. To be insured that the money so loaned would be applied to the payment for the cattle covered by the chattel mortgage, said First National Bank, with the consent of said Stryker, gave him, instead of cash, its draft on the Omaha National Bank of Omaha, Neb., payable to the order of the Bank of Overton, for $3,000, and a slip or ticket acknowledging that it had credited the Bank of Overton, with the sum of $2,497.75, which with the stamps and filing charges for the chattel mortgage, amounted to the sum loaned. Said Hardinger accepted said draft and credit slip as cash from said Stryker in payment for the cattle so sold, and immediately, on the same day, deposited both of them as cash in the defendant bank; taking credit therefor to himself on his individual deposit account in the sum of $4,738.31, and withdrawing from the bank the balance of said draft and credit slip in money. The amount of said draft and of said credit slip was duly received by defendant bank; and said Hardinger, between that date and October 1, 1899, by his checks, withdrew from said bank the entire amount of his said deposit, and of all others which were there to his credit, and, having about the same time embezzled other moneys belonging to said defendant bank, ceased to be its cashier or to be connected with it about October 4, 1899, and has since been insolvent. In receiving said draft and credit slip as cash, and in the collection of each, said Hardinger alone acted for the defendant bank, and was the only officer of that bank, or person connected therewith, who had any knowledge that such draft or credit slip had any connection with the sale of cattle in which complainant had any interest. On August 25, 1899, Hardinger informed complainant by letter that he had sold all the cattle in which they were interested for $5,000; the cattle to be taken between September 15th and 20th. Hardinger never paid complainant anything on account of the money for which the cattle were sold; but complainant afterwards sold hay on the farm in which Hardinger had an interest, and some machinery, and, on account of the same, credited Hardinger $694.70, and brought this action, alleging that Hardinger sold the cattle he was interest in to Stryker for $5,000, and that defendant bank received the proceeds, through said draft and credit slip, knowing the facts, and that it was a trust fund belonging to the complainant, by reason of his ownership of the cattle. Defendant bank, by its answer, denied any knowledge of complainant's transactions with Hardinger, or that complainant had any interest in the money represented by the said draft or credit slip, or that these represented anything out the individual money of Hardinger, and were received as cash belonging to Hardinger, and paid out afterwards to him on his checks by the defendant bank. The circuit court held that the moneys represented by said draft and credit slip, when deposited in defendant bank, were trust moneys belonging to complainant, to the extent of his interest in the same, and that Hardinger's knowledge of the facts was imputable to defendant bank, and rendered its decree in favor of the complainant for the sum of $4,761.31 and costs.

Before SANBORN and THAYER, Circuit Judges, and LOCHREN, District Judge.

LOCHREN District Judge, after stating the case as above, .

1. The question as to whether the books on account of defendant bank were properly admitted in evidence, though much discussed in the briefs of counsel, is not presented by this appeal. The complainant who objected to this evidence does not appeal, and the evidence must be considered as properly admitted.

2. But assuming that the moneys which Hardinger obtained for the cattle sold to Stryker were trust funds, and that complainant had an interest in the specific money represented by the draft and credit slip which Hardinger received from Stryker as cash for the cattle, to the extent of what complainant was entitled to receive on such sale, and that the deposit by Hardinger to his personal credit in his individual deposit account in that bank was a fraud on the complainant, completed by his drawing out the same money by his checks paid by that bank, and by converting the whole to his own use, the defendant bank cannot, on the facts of this case, be charged with any responsibility to the complainant. Aside from Hardinger, no one connected with the bank had any knowledge or notice that the complainant had any interest in the cattle sold to Stryker, or in the proceeds of such sale, or that the deposit by Hardinger in the bank was other than his own moneys, which he had a right to withdraw and use at any time.

But it is claimed on behalf of the complainant that as Hardinger certainly had full knowledge of complainant's interest in the cattle, and in the money for which Hardinger sold them, and as he was the cashier of the defendant bank, when, as such, he took into that bank the deposit made there by himself as an individual depositor, his knowledge of all the facts connected with the rights of the complainant to that money is imputable to that bank, under the well-settled general rule that the knowledge of an agent, or notice to an agent, while acting within the scope of his authority, is notice to his principal, because within that scope he is the alter ego of the principal, and because the law will presume that the agent has performed his duty to disclose to his principal all notice to himself necessary to his principal's protection or guidance. The officer of a corporation, like a cashier of a bank, is such agent. There are, however, well-settled exceptions to this rule, where notice or knowledge on the part of the agent will not be imputed to the principal, and one of these is 'where the agent's relations to the subject-matter, or his previous conduct, render it certain that he will not disclose it. ' Mechem, Ag. Sec. 721. 'In such cases the presumption is that the agent will conceal any fact which might be detrimental to his own interests, rather than that he will disclose it. ' Id. Sec. 723; Koehler v. Dodge, 31 Neb. 329, 336, 47 N.W. 913, 28 Am.St.Rep. 518; Bank v. Sharpe, 40 Neb. 123, 127, 58 N.W. 734; Benton v. Bank (Mo.) 26 S.W. 975; Bank v. Lovitt, 114 Mo. 519, 21 S.W. 825. In the case last cited it is said:

'An officer of a banking corporation has a perfect right to transact his own business at the bank of which he is an officer, and in such transaction his interest is adverse to the bank, and he represents himself, and not the bank. The law is well settled that, when an officer of a corporation is dealing with it in his individual interest, the corporation is not chargeable with his uncommunicated knowledge of facts derogatory to his title to the property which is the subject of the transaction.'

Notwithstanding some dicta and one decision-- Bank v. Blake (C.C.) 60 F. 78-- to the contrary it is fairly well settled that knowledge of an agent, actually concealed from his principal, while the agent is dealing with the principal on his own account, is not to be imputed to the principal, even though the agent, assuming to act as such, did whatever was done on the part of the principal in the transaction with himself, if disclosure of the matter concealed would have had a tendency to defeat his purposes. His position would be as antagonistic to his principal, and his motive for concealment as great as, and easier of accomplishment than, if he were dealing with the principal directly, or with another agent. In Innerarity v. Bank, 139 Mass. 332, 1 N.E. 282, 52 Am.Rep. 710, the court says:

'While the knowledge of an agent is ordinarily to be imputed to the principal, it would appear now to be well established that there is an exception to the

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