Cantley v. American Sur. Co. of New York

• Decision Date: 06 April 1931
• Citation: 38 S.W.2d 739,225 Mo.App. 1146
• Parties: S. L. CANTLEY, FINANCE COMMISSIONER ET AL., APPELLANTS, v. AMERICAN SURETY COMPANY, RESPONDENT
• Court: Kansas Court of Appeals

38 S.W.2d 739

225 Mo.App. 1146

S. L. CANTLEY, FINANCE COMMISSIONER ET AL., APPELLANTS, v. AMERICAN SURETY COMPANY, RESPONDENT

Court of Appeals of Missouri, Kansas City

April 6, 1931

Appeal from the Circuit Court of Johnson County.--Hon. Leslie A Bruce, Judge.

AFFIRMED.

Judgment affirmed.

Richard H. Musser and M. D. Aber for appellant.

W. E Owen & Son and W. E. Suddath for respondent.

BLAND J. Arnold, J., concurs. Trimble, P. J., absent.

OPINION

BLAND, J.

This is a suit upon a bond, executed by the defendant, Reynolds, as principal and the defendant, American Surety Company, as surety. The case was tried before the court without the aid of a jury, resulting in a judgment in favor of defendants. Plaintiff filed a motion for judgment non obstante veredicto, which motion was overruled. They then filed a motion for a new trial which was likewise overruled. Plaintiffs have appealed.

The facts show that at the time of the alleged breach of the bond, and until the time of the taking over of plaintiff, Farmers Bank of Leeton, by the Commissioner of Finance on October 8, 1925, defendant Reynolds was cashier of plaintiff bank; that the bond sued upon was in full force and effect at the time of the alleged breaches thereof; that the bond indemnified the bank against loss "by reason of any act or acts of larceny, embezzlement, fraud, dishonesty, forgery, theft, wrongful abstraction, or willful misapplication by" said Reynolds.

The theory upon which recovery is sought upon the bond if founded upon the acts of Reynolds in making loans to one S. L. Miller, a director of the bank, in amounts in excess of ten per cent of the capital and surplus of the bank, without the consent of a majority of its board of directors first having been obtained at a directors' meeting and made a matter of record before the loans were made, in violation of clause 8, section 11740, Revised Statutes 1919.

The undisputed testimony shows that the bank examiner had made complaint to Reynolds, the cashier, that Miller's loans were excessive and must be reduced and suggested that Reynolds "get some other member of the family (Miller's) on" the notes to take up the excessive indebtedness, saying that "in other places they have the wives sign on excessive loans;" that on March 2, 1920, after the conversation between Reynolds and the bank examiner, Miller signed his wife's name to a note in the sum of $ 5,000 in favor of the bank; that upon January 6, 1922, a similar situation arose and Miller on that day signed his wife's name to a note in the sum of $ 1200 in favor of the bank; that at the time the bank failed the $ 5,000 note had been reduced by payments made by Miller to the sum of $ 3,000, so at that time, upon the indebtedness created in favor of the bank by these two transactions, the sum of $ 4,200 remained unpaid.

The undisputed testimony further shows that Miller signed these notes without the knowledge or consent of his wife; that she knew nothing of the signing of the first or $ 5,000 note until about six months thereafter, when a renewal notice was received by her from the bank; that at that time Miller explained the matter to her and she made no objection to what he had done but said to him "that it was all right, but I wanted him to get rid of it as soon as he could." She knew of his making the various renewals of this note. When she received notice of the execution of the $ 1200 note in her name she did not give Miller any directions in reference to same, but he testified that she read this notice and made no objection to it; that she permitted him to transact her business affairs; that she never made any objection to his making various renewals of these notes.

The undisputed evidence further shows that Miller's account with the bank was credited with the amounts of these notes upon the days they were executed and that the amounts of the credits, plus his other indebtedness to the bank, at the time of their receipt, in each instance, was much greater than ten per cent of the capital and surplus of the bank.

The facts further show that suit was brought by the plaintiff against Mrs. Miller upon the balance due upon the two notes in controversy; that she made no defense to the action and judgment was rendered against her; that execution upon the judgment was returned nulla bona; that Miller had gone through bankruptcy and had been discharged from his liabilities.

There is no denial that Miller signed his wife's name without her consent and received the money upon the notes, but defendants sought to prove at the trial that the bank sustained no pecuniary loss as a result of these transactions, first, by introducing testimony which defendants assert tends to show that these two loans were made by Miller for the purpose of reducing his indebtedness to the bank, and, second, by introducing testimony which defendants claim tends to show that Miller was agent for his wife in signing the notes and the renewals thereof and that she ratified his action in regard thereto, and that at the time of the execution of the notes she was the owner of property in excess of the loans out of which property the bank could have realized their amount. It is claimed, in effect, that the loans, having been ratified by Mrs. Miller, were her indebtedness and not Miller's; that Miller's indebtedness to the bank was not increased by the transactions and it suffered no loss thereby.

There was other evidence which defendants now contend, tends to show that, in any event, there was no breach of the bond for the reason that there was no concealment or bad faith on the part of Reynolds, and therefore, no breach of the bond. In this connection it is pointed out that Reynolds merely followed the advice of the bank examiner in having Miller sign his wife's name to the notes, and that Reynolds' acts in making the loans were later ratified by the board of directors at their regular meetings. The evidence on the question of approval of the loans by the board of directors tends to show that the loan of $ 5,000, made on March 2, 1920, was approved by the board on March 5 of that year and the $ 1200 loan of January 6, 1922, was approved shortly after it was made.

The evidence fails to show, at least definitely, as to what was done with the money that Miller obtained upon the two notes in controversy. The ledger sheets of the bank show the condition of his account from day to day; that when the loan of March 2, 1920, was made Miller might have had a slight over-draft; that between that time and March 6 he drew out small sums and, on the latter day he drew out the sum of $ 4,000; that on January 2, 1922, there was a balance in his account in the sum of $ 98.49; that on January 3, there was deposited $ 1200 to his account; that on January 4 there were withdrawals amounting to $ 31.65 and that on January 6 a check was cashed in the sum of $ 1165.86. The records of the bank show that on February 6, 1920 he owed the bank $ 6500 and that on April 2 of the same year, he owed it $ 7500. There is no showing of the amount of his indebtedness in the interim. In October, 1921, he was indebted to the bank in the sum of $ 6362.58 and on March 3, 1922, he owed $ 6210. There is nothing to show his indebtedness in the interim.

The testimony of Miller, who was a witness for the plaintiffs, was somewhat conflicting as to what the $ 5,000 loan went for but he finally stated that he did not remember. He did state, however, that the $ 1200 loan went to reduce his indebtedness.

The witness, John Stacey, assistant cashier of the bank testifying for the plaintiffs, stated that, in his opinion, the $ 4,000 check issued by Miller, on March 6, 1920, was to take up an existing note of Miller's; that to the best of his knowledge, the check for $ 1165.86, dated January 6, 1922, was applied on Miller's indebtedness to the bank, but that it was impossible to tell definitely whether these sums were so applied without the daily balance sheets. The record shows that a notice to produce these sheets was served upon plaintiffs by defendants prior to the trial but that plaintiffs failed to produce them for the reason that they did not come into the possession of the deputy commissioner of finance at the time the affairs of the bank were taken over and he did...