Chew v. Ellingwood

• Decision Date: 30 April 1885
• Citation: 86 Mo. 260
• Parties: CHEW et al. v. ELLINGWOOD et al., Appellants.
• Court: Missouri Supreme Court

86 Mo. 260

CHEW et al.

v.ELLINGWOOD et al., Appellants.

Supreme Court of Missouri.

April Term, 1885.

Appeal from Buchanan Circuit Court.--HON. G. D. BURGESS, Judge.

AFFIRMED.

Silas Woodson, Crosby & Rusk and James P. Thomas for appellants Ellingwood and Bailey.

(1) The court below should have permitted appellants, Ellingwood and Bailey, to file the amended answer. R. S., 1879, sec. 3567, p. 610; Wellman v. Dismukes, 42 Mo. 101. (2) The board of directors, without a vote of stockholders authorizing it, had no power to transfer the entire assets of the bank, including the unpaid capital stock, thereby putting it out of the power of the corporation to carry on the business or accomplish the purpose for which it was created. Rollins v. Clay, 33 Me. 139; Abbott v. American Hard Rubber Co., 33 Barbour, 579; Hartford & N. H. Ry. Co. v. Crosswell, 5 Hill, 383; Buford v. Keokuk N. L. Co., 3 Mo. App. 166; Price v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 262; Atlantic & Pacific Ry. Co. v. City of St. Louis, 66 Mo. 247 (subhead “Corporation Deeds.”) (3) The knowledge of the secretary or cashier, as he was styled after 1872, pertaining to the business of the institution under his management and control, was knowledge of the bank. Bank of America v. McNeil, 10 Bush, 59; Harrisburg Bank v. Tyler, 3 Watts and Sergeant, 376. (4) In the transaction and management of its business, the secretary or cashier was the bank--the corporation itself--and his acts are its acts. Bissell v. First National Bank,69 Pa. St. 415; Bank of Kentucky v. Schuylkill Bank, 1 Par.'s Selected Cases, 180; Merchant's Bank v. State Bank, 10 Wallace, 604, and authorities there cited; Caldwell v. The National Mohawk Valley Bank, 64 Barb. 340; Wakefield Bank v. Truesdell, 55 Barbour, 604; Lloyd v. The West Branch Bank,15 Pa. St. 172. (5) The directors are presumed to know, and are bound by the facts known to the cashier, or that are shown upon the face of the books of the bank, and are bound by a line of conduct that they have suffered the cashier to pursue for years without objection. New Hope & Delaware Bridge Co. v. Phœnix Bank, 3 N. Y. 156; Bank of America v. McNeil, 10 Bush (Ky.) 59; Caldwell v. National Mohawk Valley Bank, 64 Barbour, 342; The City Bank of New Haven v. Perkins, 4 Bosworth, 441-444; United Society of Shakers v. Underwood, 9 Bush (Ky.) 621. (6) From the third, fourth and fifth points, as applied to the facts in this case, it follows that the relation of debtor and creditor existed between Riley and the bank, hence, no liability attaches on the bond. Jones v. Biggs, 1 Jones' Law (N. C.) 364. (7) This action cannot be maintained in the name, or for the benefit of T. J. Chew, Jr., and A. C. Craig, because they are the sureties on the bond of John Williams as cashier, and as such are liable for the amount of Riley's overdrafts, by reason of the failure of Williams to report such overdrafts to the board. The transfer of the assets of the bank to Chew and Craig was without consideration and is void, the court had no authority to sanction or approve such transfer, and its order to that effect has no validity. The effect of the transaction was to make the Buchanan bank pay off and discharge the liability of Chew and Craig on the cashier's bond, at the expense of the stockholders, without their consent or knowledge. (8) Williams, by virtue of his office as cashier, had the superintendence of the books of accounts of the bank. Morse on Banks and Banking (2 Ed.) 156. (9) The bond is to be strictly construed as against the sureties; their liability cannot be extended by construction or doubtful implication. Taylor v. Parker, 43 Wis. 81; Blair v. Perpetual Ins. Co., 10 Mo. 566; Nolley v. Callaway County Court, 11 Mo. 463; City of St. Louis v. Sickles, 52 Mo. 126; Home Savings Bank v. Traube, 75 Mo. 199. (10) The operative force and effect of the words used in the condition of the bond is limited and restricted by the recital of the bond. The National Mechanic's Banking Association v. Conkling, 90 N. Y. 116. (11) The “money, property and funds” of the company, referred to in the condition of the bond, are such as came into the principal's hands, or were received by him by virtue of his office or employment as book-keeper. Brandt on Sur. and Guar., sec. 451; People of N. Y. v. Pennock, 60 N. Y. 423; Nolley v. Callaway County Court, 11 Mo. 463; City of St. Louis v. Sickles, 52 Mo. 126. (12) The court may disregard the conclusions and inferences drawn by the referee and render such judgment as the facts that are found by the referee and supported by the evidence will warrant. Moniteau National Bank v. Miller, 73 Mo. 187. (13) The failure to appoint a successor to Mr. Riley, as book-keeper, in 1869, when Mr. Hoagland was elected president, and Mr. Williams secretary, by the board, terminated the liability of the appellants as sureties on Mr. Riley's bond as effectually as if the board had at the same time appointed nother person to succeed Mr. Riley as book-keeper.

B. R. Vineyard for respondents.

(1) The report of a referee is equivalent to the special verdict of a jury, which will not be disturbed if there is any evidence to support it, and this court will not consider the weight of the evidence in such cases. Western, etc., Association v. Kribben, 48 Mo. 41; Gimbel v. Pignero, 62 Mo. 242; Wiggins Ferry Co. v. Ry. Co., 73 Mo. 419; Frantz v. Dietrick, 49 Mo. 95; Brooks v. West, 3 Mo. App. 581, at bottom; Woods v. Mo., etc., Co., 3 Mo. App. 602. (2) Where there is nothing in the charter or general statutes prohibiting it, the directors of any corporation in failing circumstances may make a general assignment for it for the benefit of its creditors, without first obtaining the sanction of its stockholders to do so. Shultz v. Sutter, 3 Mo. App. 137; Dana v. Bank of U. S., 5 W. and S. 223; DeCamp v. Alward, 52 Ind. 468: Cotton v. Eagle Bank, 6 Conn. 233; Town v. Bank, 2 Dougl. (Mich.) 530; Union Bank v. Ellicott, 6 Gill & J. 363; State of Maryland v. Bank of Md., 6 Gill & J. 206; DeRuyter v. St. Peter's Church, 3 Barb. ch. 119, 124; S. C. affirmed, 3 N. Y. 238; Lenox v. Roberts, 2 Wheat. 373; Burrill on Assignments, sec. 64; Angell & Ames on Corp., sec. 191; Hurlbut v. Carter, 21 Barb. 221, 224; Ringo v. Real Estate Bank, 13 Ark. 563; McCallie v. Walton, 37 Ga. 612; Flint v. Clinton Co., 12 N. H. 435; Gilson v. Golthwaite, 7 Ala. 281. (3) The sureties are joint obligors with the principal on the bond and are alike bound with him. Pittsburgh v. Shaeffer,59 Pa. St. 357; Engler v. Ins. Co., 46 Md. 322; The Home Sav. Bk. v. Traube, 75 Mo. 202. (4) While the bond did not define the trust reposed in Riley, it indicated the department of duty to be assigned to him, and guaranteed that the appointee was a trustworthy person to be introduced into the bank to discharge that duty. Rochester Bk. v. Elwood, 21 N. Y. 91; German Bk. v. Auth,87 Pa. St. 419; Engler v. Ins. Co., 46 Md. 322; Angell & Ames on Corp., sec. 319; Hart v. Pittsburgh, etc.,81 Pa. St. 466. (5) Riley did not “well and truly and faithfully perform all his duties” in making false monthly statements of the affairs of the bank, for the use of the directors, by reason of which they were kept in ignorance of its true condition, and in not informing the board of his overdrafts, and those of Williams, and in so keeping his books that such overdrafts were not discovered. Nat. Bk. v. Drake, 20 Kas. 328. (6) The only way one owing money to another can “account for it” in law is to pay it. State ex rel. v. Williams, 77 Mo. 463; State ex rel. v. Colman, 73 Mo. 685; State ex rel. v. Steele, 21 Ind. 207. (7) The directors had no power to permit Riley to overdraw his account, much less did Williams, the cashier, possess such power. Market Street Bank v. Stumpe, 2 Mo. App. 545. Nor had Williams any power to release any part of any claim due the bank. Davis Co. Sav. Ass'n v. Sailor, 63 Mo. 24. In fact, no officer or agent of a bank possesses any power to confer authority on any other agent to perpetrate a wrong on the bank. Brandt on Suretyship, sec. 474; Nat. Bk. v. Drake, 29 Kas. 328; Minor v. Bank, 1 Pet. 46; Morse on Banking. (8) It is no defence that the directors were guilty of negligence in failing to discover before the assignment that Williams and Riley had for a series of years been improperly taking the bank's money. Pittsburgh v. Shaeffer,59 Pa. St. 357; State, etc., v. Atherton, 40 Mo. 216; Minor v. Bank, 1 Pet. 46; Market Street Bank v. Stumpe, 2 Mo. App. 545; Taylor v. Bank, 2 J. J. Marsh. 564; Hart v. Pittsburgh,81 Pa. St. 466; United States v. Kirkpatrick, 9 Wheat. 720.

NORTON, J.

This suit is founded on the following bond: “Know all men by these presents that we, Samuel J. Riley, as principal, and J. W. Bailey, J. L. Ellingwood and M. D. Morgan, as securities, are held and firmly bound unto the Buchanan Life and General Insurance Company, in the sum of five thousand dollars, for the payment of which, well and truly to be made and done, we bind ourselves, our heirs, executors, administrators, jointly and severally, firmly by these presents, sealed with our seals, and dated this second day of July, 1867. The condition of the above bond is such that whereas the said Samuel J. Riley has been elected, and still is, book-keeper in, of and for the said Buchanan Life and General Insurance Company. Now, if the said Samuel J. Riley shall well and truly and faithfully perform all his duties as such book-keeper, so long as he may continue to serve as such, for the present year, and for all time to come, whenever re-elected, and shall well and truly account for all money and property belonging to said insurance company, or which may pass through his hands, by virtue of his said office, during his service as such book-keeper, and apply the funds of said company to their proper uses and purposes, then this bond to be null and void; otherwise, to remain in full force.

“[Signed.]

SAMUEL J. RILEY,

(Seal.)

J. W. BAILEY,

...