Castetter v. Barnard

• Decision Date: 23 December 1932
• Docket Number: No. 14333.,14333.
• Citation: Castetter v. Barnard, 98 Ind.App. 210, 183 N.E. 681 (Ind. App. 1932)
• Parties: CASTETTER et al. v. BARNARD.
• Court: Indiana Appellate Court

98 Ind.App. 210

183 N.E. 681

CASTETTER et al.

v.BARNARD.

No. 14333.

Appellate Court of Indiana, in Banc.

Dec. 23, 1932.

Appeal from Hendricks Circuit Court; Archie J. Kahl, Special Judge.

Action by the Tuxedo State Bank against Roy E. Castetter and another, wherein George M. Barnard, receiver for the Tuxedo State Bank, was substituted as plaintiff. Judgment for plaintiff, and defendants appeal.

Affirmed.Henderson & Henderson and E. O'Harra, all of Indianapolis, and E. M. Blessing and A. J. Stevenson, both of Danville, for appellants.

Lesh & Lowther, James E. Lesh, and A. E. Schmollinger, all of Indianapolis, and Otis Gulley, of Danville, for appellee.

NEAL, J.

This action was instituted by the Tuxedo State Bank against Roy E. Castetter, cashier of the named bank and London & Lancashire Indemnity Company of America, surety, on Castetter's bond running to the bank as obligee. After the filing of the complaint, a receiver was appointed for the bank, and he was substituted as plaintiff.

The amended complaint consists of three paragraphs: The first two paragraphs are practically the same. The allegations are to the effect that Castetter, while in the employ of the bank, and while in the performance of his duties as cashier, either directly or in connivance with others unknown to the plaintiff, embezzled, secreted, and wrongfully misappropriated $37,000 of the bank's funds under the guise of having made loans to himself, his relatives and other parties, and taking their notes in evidence thereof.

The third paragraph is on the theory that Castetter did not faithfully and honestly discharge his duties as such cashier, thereby causing a breach of the bond, in that he in person and with the aid, co-operation, and connivance of others committed various and diverse acts of misappropriation and made or caused to be made fraudulent loans thereof to himself, his relatives, business associates, and various others, who were, at the time of the making the loans insolvent, of which he had knowledge or should have known, and without requiring adequate security for the bank for such loans (enumerating them) thereby causing loss to the bank.

Each defendant filed a first paragraph of answer in general denial and each a second paragraph, alleging that Castetter paid $9,500 to the bank in full and final settlement of any claim the bank had against him. Plaintiff replied to each affirmative paragraph in general denial.

Trial was had before the court. Pursuant to written request, the court made a special finding of facts and stated its conclusions of law thereon in favor of the plaintiff and rendered judgment accordingly.

Errors relied upon for reversal: (1) Error in the conclusion of the law. (2) Error in overruling motion for new trial, setting forth causes (a) that the decision of this court is not sustained by sufficient evidence; (b) that the decision is contrary to law. (c) Error in the assessment of the amount of recovery, the same being too large.

A résumé of special finding, following the division thereof as numbered and lettered, is as follows:

(1) The Tuxedo State Bank was organized pursuant to the law of Indiana with an authorized capital stock of $25,000 in 1922, and had its principal place of business in a residential section in the city of Indianapolis, and continued to operate as a bank of discount and deposit until about February 1, 1928, when by order of the banking commissioner its doors were closed and shortly thereafter a receiver was appointed.

(2) That, prior to the appointment of plaintiff receiver, this action was instituted by the bank, and thereafter, by authority and order of the court, the receiver was substituted as party plaintiff, and the pleadings altered so as to conform therewith.

(3) That, from the time of the opening of the bank until the middle of October, 1924, the defendant Castetter was the cashier of the Tuxedo State Bank, and as such officer was in active charge of receiving moneys for deposit and making of loans, the discount of paper, and other business activities conducted by the bank. Castetter was assisted in the conduct of such business and the keeping of books and records by several subordinate agents and employees, who were each and severally under his control and direction. That prior to his appointment as cashier, Castetter had had extended experience in the banking business, and he was the only officer or agent of the bank who had previous experience in such business.

(4) On May 10, 1923, the defendant duly executed and delivered the fidelity bond sued upon.

(5) That for a consideration the bond was duly extended from May 9, 1924, up to and including May 9, 1925.

(6) That the defendant Castetter did not faithfully and honestly discharge his duties as cashier under the bond, but was guilty of acts of negligence, unfaithfulness, and dishonesty in each of the following particulars, to wit:

(a) That some time prior to the execution of the bond in suit Castetter from time to time took from the moneys and funds of the bank of which he was in possession and control as cashier the total sum of $5,000. In order to take care of the moneys so withdrawn by him, Castetter induced his father to execute his note for the sum of $5,000 in favor of the bank. That, at the time of the execution of the note and during the entire time covered by the bond in suit, the father was married and owned real estate of the reasonable value of $12,000, with no incumbrance thereon. Thereafter and within the period covered by the bond, the note given by the father in evidence of the money so withdrawn by Roy E. Castetter matured and became due. At the time of the maturity thereof, the maker of the note continued in the ownership of the farm, and, by pressing for payment, the amount due thereon could have been realized, but Roy E. Castetter, unmindful of his duties as such cashier and out of consideration for his father, accepted renewal notes from time to time without requiring security, in consequence of which indulgence the bank lost $6,000.

(b) That on or about the - day of August, 1923, the Ideal Dairy Company, a concern then engaged in the business of purchasing and distributing milk within the city of Indianapolis, and the McCallie brothers, viz. Ernest, W. E., Ralph, and Roy, who were also engaged in a like business, founded a partnership and conducted the business thereof under the firm name of North Side Milk Company. That at the time of this business formation the Ideal Dairy Company was indebted to the bank in the sum of $8,052.45, and, by and with the consent and acceptance of the defendant Roy E. Castetter, the McCallie brothers became the sole obligors of this indebtedness, and, as evidence thereof, Castetter took two notes, one for the amount of $4,206.23, executed by Ernest, Ralph, and Roy McCallie, and the other note for $4,026.22, executed by all four brothers. Each of the notes bore date of August 24, 1923, payable to the order of the bank, due 90 days thereafter. No security was required or received on behalf of said notes other than the personal promises of the makers thereof. Thereafter the indebtedness evidenced by the aforesaid notes was divided; each of the McCallie brothers executing his individual note for a sum slightly in excess of $2,000. The notes so taken by the defendant Castetter were renewed from time to time by Castetter until October, 1924, without requiring payment thereof, or additional security, and they were thereafter renewed from time to time until they culminated in the notes of the respective makers issued the latter part of September, 1925, as follows: Ernest, $1,914.85; W. E., $1,901.08; Ralph, $1,914.85; Roy, $2,117.32. Action was thereafter instituted by the bank against each of the makers, and in February, 1928, judgments were obtained against the respective defendants for the amount due and owing. Execution issued and returned unsatisfied because no property could be found on which to levy execution. At the time of the taking of the original notes, by defendant Castetter, the makers of said notes had no property, real or personal, other than a horse and wagon for the delivery of milk. In the formation of the North Side Milk Company, on the - day of August, 1923, defendant Roy E. Castetter became the officer and agent thereof, to wit, the secretary-treasurer, and as such officer and as cashier of the Tuxedo State Bank knew, or by the exercise of reasonable skill and ordinary care and diligence in the discharge of his duties, could have known, of the financial responsibility of the said McCallie brothers. That, on account of the failure of said defendant Roy E. Castetter to faithfully discharge his duties as cashier of the Tuxedo State Bank in this respect, the bank sustained losses as heretofore found in this finding. The court further finds that the original credit, the subject of this finding, was extended to the said McCallie brothers by the defendant Roy E. Castetter during the period of time covered by the bond in suit and without first having the approval of the board of directors of said bank.

(c) On or about September 25, 1924, the defendant Roy E. Castetter withdrew from the moneys and funds of the Tuxedo State Bank the sum of $3,000 for his own use and account. To shield and protect himself in this transaction, Castetter procured the note of W. T. Barnes, his father-in-law, in the sum of $3,000, payable to the order of said bank, twelve months after date, with 7 per cent. interest thereon, without any security other than the personal obligation of the maker. At the time of the taking of said note, the said Barnes was a painter and paper hanger with no known financial standing, and the only amount that said bank or the receiver thereof has been able to realize on account of said transaction was a credit of $375 indorsed on said note as having been received from the defendant Castetter under date of December 28, 1926. On account of the...