Commonwealth v. Reading Savings Bank

• Decision Date: 15 May 1882
• Citation: 133 Mass. 16
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Commonwealth, by Commissioners of Savings Banks, v. Reading Savings Bank. William J. Holden & another, receivers, petitioners

133 Mass. 16

Commonwealth, by Commissioners of Savings Banks, v. Reading Savings Bank.

William J. Holden & another, receivers, petitioners

Supreme Court of Massachusetts

May 15, 1882

Argued March 15, 1881

Suffolk. Upon an application made by the commissioners of savings banks, under the St. of 1866, c. 192, § 5, the Reading Savings Bank had been enjoined from the further continuance of its business, and receivers had been appointed to take possession of its property and effects, for the purpose of settling its affairs.

The receivers filed a petition in the case, alleging that certain persons and corporations named had presented claims, to the amount of $ 24,900, against the bank, by virtue of certain deposit-books, purporting to be issued by the bank, and to be held by said persons and corporations by assignment; that there was no evidence upon the books of the bank, that any sum was due upon any of the claims; and praying that all said persons and corporations be ordered to appear and submit their claims to be determined in such manner as the court might order.

The court referred the petition to a special master, to hear the parties, and ascertain and report to the court the facts with regard to each claim.

On the coming in of the master's report, the case was reserved by Colt, J., upon said report, for the consideration of the full court. The facts appear in the opinion.

Claims disallowed.

S Bancroft, for the receivers.

A. Russ & W. G. A. Pattee, for the Faneuil Hall National Bank and the Monument National Bank.

E Hutchinson, for the First National Bank of Chelsea.

D. C Linscott, for the Metropolitan National Bank.

F. T. Greenhalge, for the Appleton National Bank of Lowell, Gyles Merrill and George T. Sheldon.

C. H. Fiske, for the Collateral Loan Company.

OPINION

Devens, J.

The record in this case discloses a series of various and extensive frauds, practised by the treasurer of the defendant corporation and others, sometimes aided by him, upon innocent parties, who were induced to part with their money upon his oral statements and upon the collateral security of alleged bank-books, forged or fictitious, or on which nothing was due. The holders of these books contend that the bank is responsible for the wrongful acts of its treasurer, and must treat these books as valid securities. The bank has derived no advantage from these transactions, and no portion of the money thus fraudulently obtained has found its way into its vaults or been expended for its use. The transactions proved were not shown by the official books of the treasurer, and were not authorized by any vote of the trustees. The liability of the bank is to be determined by ascertaining its responsibility for the acts of the treasurer by reason of the official relation he bore to it.

In some instances, money was borrowed by him, under the pretence that it was wanted for the bank, but in his own name, on the security of deposit-books originally genuine, issued to himself or others, the loans on which had been fully paid, but on which payment had not, by reason of his own fraud, been entered. When the books were originally payable to others, forged signatures to drafts for the money apparently due, and assignments of the books, were sometimes made; while sometimes, at the time of payment of the sums due from the bank, the depositor had been induced to sign his name to the draft (which was in blank on the deposit-book) and across the same as a receipt, which was afterwards fraudulently filled up as a draft and assignment by him. In some instances, books were used which were either entirely fictitious, or in which false entries had been made, so that they showed more to be due than was ever actually due from the bank. The assignments of books of this description as collateral security were recognized by the treasurer and assented to by indorsement thereon. In still other instances, loans were obtained by parties other than the treasurer upon books of the character above described, to the forged or pretended assignments of which the treasurer assented by his indorsement. Oral statements were also made by the treasurer as to these books, used both in the loans made to him and to others, that they were all right, and that they showed what was due.

The Reading Savings Bank was incorporated on June 12, 1869, by the St. of 1869, c. 393, with all the powers and privileges, and subject to all the duties, liabilities and restrictions, then or which might thereafter be in force in relation to institutions for savings. A savings bank in this Commonwealth is an institution formed for the purpose of receiving deposits of money for the benefit of the depositors investing the same, accumulating the profit or interest thereof, paying such profit or interest to the depositor, or retaining the same for his greater security, and further of returning the deposit itself. The regulations as to the payments of interest and return of deposit are prescribed partly by statute and partly by the institution itself. There is no capital stock, and there are no stockholders who are entitled to receive profits from the business. All these belong to the depositors, and nothing is deducted therefrom except the necessary expenses of transacting the business. Its affairs are administered by a board of trustees, the securities in which the deposits shall be invested are prescribed by law, and returns are made to commissioners of savings banks, who may examine the institution at any time, so that the conduct of its affairs may be constantly under public supervision. Although termed a bank, it has few characteristics of a commercial bank of discount and deposit, a large part of whose business consists in dealing in exchange and negotiable paper for the benefit of its stockholders, and to which, when done by its proper officers, the rules of such dealing are applicable. It affords a convenient mode of taking care of sums individually small, (as only deposits to a limited amount are permitted,) but often large in the aggregate, and its purpose is a public advantage without any interest in the members of the corporation. Huntington v. Savings Bank, 96 U.S. 388, 24 L.Ed. 777. The character of the corporation cannot exonerate it from the legal responsibilities involved in the business which it was created to transact, and it must be liable for the acts of its officers done in the regular performance of their duties. Reed v. Home Savings Bank, 130 Mass. 443. But its character is of importance in deciding what the duties of its officers are, and in determining whether the acts done by them were in the performance of such duties. Its officers cannot assume responsibilities or enter into transactions or contracts, express or implied, so as to involve the bank, unless such acts are clearly incidental to the duties imposed upon them.

The by-laws of the bank made it the duty of the treasurer "to enter all deposits and payments made to depositors in the books of the bank, and a duplicate of such entry in the book of the depositor, which shall be his voucher, and the evidence of the amount deposited;" to lay before the board of managers at specified times a statement of the concerns of the institution; to have charge of all books of accounts, moneys, papers and other securities, and property, and to be responsible for their safe keeping. It is further added, "He shall draw all necessary papers and discharge all obligations of the corporation, and his signature shall be binding on the corporation." He is also to pay the current bills of the corporation, not exceeding the appropriation previously made, and to keep a complete record of vouchers for all his payments for exhibition to any member of the board of trustees.

These by-laws do not show any intention to make the treasurer a general agent to bind the bank in the administration of its affairs, or to hold him out as one authorized to pledge its credit; nor can it be inferred that he has any such right by virtue of his office. In Dedham Institution for Savings v. Slack, 60 Mass. 408, 6 Cush. 408, it was held that the treasurer of a savings bank had not authority to release a debt due, upon payment of a dividend thereon. In Bradlee v. Warren Savings Bank 127 Mass. 107, it was held that he could not bind the bank by indorsing its name upon a promissory note, although in that case the bank had received the proceeds, and, further, that...