Barsness v. Tiegen
| Decision Date | 02 October 1931 |
| Docket Number | 28,319 |
| Citation | 238 N.W. 161,184 Minn. 188 |
| Parties | ALFRED BARSNESS v. B. T. TIEGEN AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Douglas county to recover from the directors of the Farmers State Bank of Brandon the amount of certain certificates of deposit evidencing moneys deposited in the bank when it was insolvent, less amounts paid thereon in course of liquidation. Plaintiff recovered a verdict of $6,400, and defendants appealed from the judgment, Nye, J entered pursuant thereto. Reversed.
Bank and banking -- renewal of certificate of deposit.
A certificate of deposit in a bank is in legal effect a promissory note. Its renewal extends the time of payment. It is not, under usual circumstances, a payment by the bank and the making of a new deposit. The surrender of a certificate and taking a renewal certificate in place of it do not constitute a deposit within G.S. 1923 (2 Mason, 1927) § 10407, which makes it an offense for officers and directors of a bank to receive deposits knowing or having good reason to know that the bank is unsafe or insolvent.
Constant Larson and Frankberg, Berghuis & Frankberg, for appellants.
Leonard Eriksson, for respondent.
Action to recover from the directors of the Farmers State Bank of Brandon the amount of certain certificates of deposit evidencing moneys deposited in the bank when it was unsafe and insolvent, less amounts paid thereon-in course of liquidation, upon the ground that the directors knew or had good reason to know the unsafe or insolvent condition of the bank when the deposits were received. There was a verdict for the plaintiff. The defendants, except one against whom there was no award of damages, appeal from the judgment.
On June 24, 1925, Albert Barsness, the father of the plaintiff, received a certificate of deposit from the Farmers State Bank of Brandon for $10,000. Afterwards the plaintiff became the owner of it. On February 24, 1926, the plaintiff received a certificate of deposit for $500; on December 3, 1925, another for $5,300; and on October 26, 1925, another for $3,700. He was then the owner of certificates aggregating $19,500. Each certificate was a renewal of an earlier one. When each renewal was issued the bank was unsafe or insolvent, and the directors knew or had good reason to know it to be so. This was not the situation when the original certificates were issued. The plaintiff's right of recovery is based upon G.S. 1923 (2 Mason, 1927) § 10407, which makes it an offense in the officers or directors to receive in a bank a deposit, knowing or having good reason to know that it is unsafe or insolvent. It reads:
"Every officer, director, stockholder, cashier, teller, manager, member, messenger, clerk, person, party, or agent of any bank, banking corporation, association or firm, banking house, savings bank, banking exchange, brokerage deposit company and private bank, and every person, company, and corporation engaged in whole or in part in banking, brokerage, exchange, or deposit business in any way, who shall accept or receive on deposit in such bank or banking institution as aforesaid, with or without interest, from any person, any money, bank bills, or notes, or certificates or currency, or other notes, checks, bills, drafts, or paper circulating as money, when he knows, or has good reason to know, that such person, bank, banking corporation, association or firm, banking house, savings bank, banking exchange, brokerage deposit company or private bank as aforesaid is unsafe or insolvent, and every person knowing such insolvency or unsafe condition who shall be accessory to, or permit, or connive at the accepting or receiving on deposit therein or thereby any such deposits as aforesaid, shall be guilty of felony, and punished by imprisonment in the state prison for not less than one nor more than ten years, or by fine of not less than five hundred dollars nor more than ten thousand dollars."
The statute does not by specific declaration make the officers or directors pecuniarily liable when they offend the statute. Their liability comes from the application of the principle, general in scope, that the violator of a statute intended for the protection of a class is liable to a member of the class for damages proximately resulting from his violation of the law. We have applied the principle to § 10407 in Baxter v. Coughlin, 70 Minn. 1, 72 N.W. 797; Johnson v. Larson, 177 Minn. 60, 224 N.W. 466; Johnson v. Floan, 183 Minn. 461, 237 N.W. 23; and Olesen v. Retzlaff, 184 Minn. 624, 238 N.W. 12, 239 N.W. 672. And it has been applied in many other situations where the statute creates a criminal offense with an attendant penalty.
In Johnson v. Floan, 183 Minn. 461, 237 N.W. 23, involving this statute, it was assumed for the purpose of the case, but not held, that the renewal certificate was a deposit within the statute; but the decision went for the defendant upon the ground that no damage was proved. Theoretically the renewal of a certificate may be regarded as taking the money from the bank and putting it back under another contract like that under which the first deposit was made. The date of the new certificate is different, the maturity is changed, and the rate of interest may be different. The theory stated has some reason to support it. Usually the fact is not in accord with the theory, and it is not here -- rarely is such thing done. A certificate of deposit is in legal effect a promissory note. Easton v. Hyde, 13 Minn. 83 (90); Cassidy v. First Nat. Bank, 30 Minn. 86, 14 N.W. 363; Mitchell v. Easton, 37 Minn. 335, 33 N.W. 910; Francois v. Lewis, 68 Minn. 409, 71 N.W. 621. When the original certificates of deposit were issued the bank became a debtor. Upon the renewal the bank received no fresh money. Nothing was taken from the plaintiff except the right to immediate payment of the money which he had deposited before. Nothing was given the bank except relief from immediate payment of the principal upon payment of accrued interest. The statute was intended to prevent a bank when insolvent receiving money from a depositor and to protect the depositor from loss. The deposit of course may be in the form of checks or other instruments evidencing money by commercial usage.
In State v. Shove, 96 Wis. 1, 70 N.W. 312, 315, 37 L.R.A. 142, 65 A.S.R. 17, a renewal certificate of deposit was held a deposit within a similar statute when issued under these circumstances:
The certificate holder surrendered a certificate for $200 on which there was due in principal and interest $210, added $90 in cash, and took a certificate for $300. The bank received $90 in new money. Its assets were increased to the extent of the new money. It did what the statute had in mind preventing. It received on deposit money when insolvent....
To continue reading
Request your trial