Ditto v. Dufur, 10623.

• Citation: 88 F.2d 266
• Decision Date: 15 February 1937
• Docket Number: No. 10623.,10623.
• Parties: DITTO v. DUFUR et al.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

88 F.2d 266 (1937)

DITTO v. DUFUR et al.

No. 10623.

Circuit Court of Appeals, Eighth Circuit.

February 15, 1937.

E. F. McEniry and J. D. Reynolds, both of Creston, Iowa, for appellant.

M. G. Kellam, of Greenfield, Iowa (Frank B. Wilson, of Greenfield, Iowa, on the brief), for appellees.

Before STONE, SANBORN, and VAN VALKENBURGH, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

Defendant Dufur in 1922, and for some time prior thereto, owned a three-fourths interest in a private bank known as the Citizens Bank at Lorimor, Iowa. In 1922 the First National Bank of Lorimor was chartered and took over certain assets of the private bank, amounting, approximately, to $227,000. The new national bank was operated in the same building in which its predecessor had been located. This building was owned by Dufur, who occupied as an office, and conducted private business in, a room adjacent to that in which the business of the bank was conducted. He was president and director of the bank, and assisted in the transaction of some of its business, but the cashier, Murray G. Bacon, was its managing officer. Dufur's participation in the business of the bank consisted largely in being consulted by the cashier with respect to the extension of any large line of credit to borrowers. He also, as the cashier testifies, "received some deposits, some in the back room, and some at the windows. He made loans to customers and sometimes wrote out the note or called an employee or myself." Mrs. Bacon, wife of the cashier, and employed as bookkeeper, testifies that Dufur had an office in the back room of the bank. "He had free access to the vault, and the books of the bank, and I never noticed in particular him examining books and loans and other things there in the bank, back of the counter and back of the desk." The general administration and conduct of the business was lodged in the cashier. Dufur had approximately $70,000 on deposit in the bank. He was about 82 years of age at the time of the transactions involved in this litigation, and 85 years old when this case was tried. Since the taking of this appeal this court has entered an order making True Woods, the permanent guardian of the person and property of Dufur, a party appellee in this cause.

March 4, 1933, the bank, being insolvent, was so declared by its board of directors. The Comptroller of the Currency immediately took charge of its affairs. Appellant Ditto is now its duly appointed, qualified and acting receiver. February 1, 1935, the then receiver of the bank filed suit against Dufur in 21 counts by which he sought to recover the aggregate sum of $33,981.37, alleging that the defendant, in collusion with cashier Bacon, and in violation of the National Banking Act of the United States had caused losses to the bank in that amount. Subsequently the various counts of the petition were amended and the following is typical of the amended causes of action stated: "For Amendment to Count 1 of Plaintiff's petition, the Plaintiff withdraws the following words: `and in violation of the National Banking Act of the United States of America as amended,' and alleges that prior to January 10th, 1933, the said First National Bank, Lorimor, Iowa, had suffered large losses by reason of poor loans, a more particular description of which loans is now unknown to Plaintiff; and that the Defendant, in collusion with the said M. G. Bacon as alleged in Count 1, received the said deposit of R. J. Hammans, as Secretary of the Monroe Township School District, and used the same to pay, cancel and balance a part of the losses theretofore suffered by the Bank as aforesaid, in the sum of $688.90, and failed to give credit to the said Monroe Township School District, thereby causing the loss to the First National Bank, Lorimor, Iowa, in the sum of $688.90 as alleged in Count 1 of Plaintiff's petition."

In his answer defendant Dufur denies categorically the charges made in the several counts of the petition, and then added a count, No. 23 — in which he recited his deposit amounting to $70,916.22 which had been allowed to him by the receiver, on which one dividend had been paid and a second declared; also the recovery by the receiver of $5,000 against a surety company on the bond of Cashier Bacon, for the identical items upon which this suit had been brought. Defendant, in case anything should be found against him in this action, asked an offset of his said claims, and all that might be found due him in winding up the affairs of the bank.

The acts complained of in the several counts of the petition, whereby the alleged losses resulted, were those of the cashier, Bacon. It appears that the First National Bank had suffered losses by reason of poor loans. This is the specific charge of the receiver. To repair these losses, so far as shown by the books and records of the bank, the cashier committed irregularities principally of two kinds. He received deposits of cash without crediting the depositors upon the books, and he sold bonds belonging to the bank, or to others who had left them in the custody of the bank, without giving proper credit on the books of the bank. The cash thus realized went into the bank's current funds, and was used in the ordinary course of its business. There is neither allegation nor proof that it found its way into the pockets of the president or cashier. The charge against Dufur is that, in collusion with Bacon, he received the deposits specified, and the proceeds of the bonds, and "used the same to pay, cancel, and balance a part of the losses theretofore suffered by the bank as aforesaid." The only testimony that is conceived to support these allegations as to appellee Dufur is that of cashier Bacon. He, of course, concedes his irregularities in the respects charged, and says they were committed to keep the bank in essential funds and as a going concern. He says:

"After these losses developed in the bank I talked to Mr. Dufur about them.

"Q. What did he say? A. Well generally he would expect me to look after it in some way and take care of it. I don't recall just what he said. * * * He kept insisting that it was my duty to get them (the losses) cleaned up and promised me a number of times that if it was necessary for him to put up money personally, that he would do it to help the bank out."

The cashier kept a memorandum of all these irregular transactions in an envelope in...