Ellis v. First Nat. Bank of Woonsocket

• Decision Date: 03 April 1901
• Citation: 22 R.I. 565,48 A. 936
• Parties: ELLIS et al. v. FIRST NAT. BANK OF WOONSOCKET.
• Court: Rhode Island Supreme Court

48 A. 936

22 R.I. 565

ELLIS et al.

v. FIRST NAT. BANK OF WOONSOCKET.

Supreme Court of Rhode Island.

April 3, 1901.

Action by John W. Ellis and others against the First National Bank of Woonsocket On plaintiffs' petition for a new trial. New trial denied, and judgment rendered for plaintiffs.

Walter H. Barney, for plaintiffs.

Cooke & Angell and Erwin J. France, for defendant.

ROGERS, J. This is a petition by the plaintiffs for a new trial of an action of assumpsit for a bank deposit in a jury trial waived case. On the 10th day of February, 1899, the plaintiffs accepted the positions of assignees under a deed of assignment made February 6, 1899, by the American Worsted Company, a Rhode Island corporation, for the benefit of its creditors, the said assignor having become insolvent. On the said 10th day of February, 1899, there was on deposit in the defendant bank in the name and to the credit of said American Worsted Company the sum of $28.213.19, and at that same time the defendant bank was the holder and owner in its own right of three promissory notes made by said American Worsted Company, duly signed in its name by R. G. Randall, its treasurer, payable to the order of R. G. Randall, and by him Indorsed. The first of said notes was for $2,500, dated June 27, 1893, payable six months after date, and interest thereon had been paid up to December 20, 1898; the second was for $3,700, dated June 30, 1898, payable six months after date; and the third was for $2,500, dated September 5, 1808, and was also payable six months after date. On said 10th day of February, 1899, the plaintiffs, after having accepted said deed of assignment, and having deposited said deed for record, proceeded to the defendant bank and interviewed the cashier thereof, informing him that they had accepted the trust, and that John W. Ellis, one of their number, was authorized to draw checks in their names. They obtained from him a statement of the amount of the deposit in the bank to the credit of the American Worsted Company, and the cashier agreed to honor the checks drawn by Mr. Ellis, and directed the assistant cashier and the clerks to honor Mr. Ellis' checks. There is some contradiction in the testimony, some of the witnesses swearing that the cashier said that the bank would transfer the account to the assignees, and that it would be unnecessary to draw a check in the name of the company and redeposit it in the name of the assignees. The cashier denies this, but admits that he did agree to honor Mr. Ellis' checks, and did notify his assistant and the clerks to honor them. At said interview no reference was made to the promissory notes above referred to, nor to any lien or claim for lien on the deposit. The justice presiding at the trial of the case found as a fact, from the evidence, that the cashier did agree to transfer the account to the assignees. On said 10th day of February, 1899, the assignees made a deposit in said defendant bank upon a deposit ticket made out in their names as assignees, and the clerk of the bank receiving the deposit gave them a pass book with the balance to the credit of the American Worsted Company as the first credit, and with the assignees' deposit of that day as the second credit, thereon; and thereafter, from time to time, several deposits made by the assignees were entered by the bank officials on that pass book. In said book, when issued by the clerk of the bank, the place for the depositor's name was left blank, it being understood that the clerk of the assignees should stamp in the name with a rubber stamp, and the assignees' names were stamped in when the assignees' clerk returned to his office; but the bank clerk swore that the name to have been stamped in was that of the American Worsted Company, and not those of the assignees. Both the cashier and the assistant cashier of the bank denied all knowledge of such a pass book ever having been issued by the clerk, and swore that they never authorized any such issue. The American Worsted Company's account was not changed on the books of the defendant bank, but on the 2d of March, 1899, by direction of the assistant cashier, an account starting with an overdraft was opened with the assignees on the bank's books, and, four days later (March 6th), that assignees' account was changed back again to the American Worsted Company's account, which during all this time had a large balance to its credit. On March 10, 1899, two days after the maturity of the last note held by the defendant bank, the assignees drew a check for the whole amount standing to the credit of the American Worsted Company on the books of the bank, but to their own credit on said pass book, and payment was refused. Subsequently, on June 23, 1899, the bank allowed the sum of $17,123.70 to be drawn from that account by the assignees, leaving still standing on the bank's books to the credit of the said company $S,754.41, that being the amount of the three aforesaid notes, with interest, and which amount the bank claimed by way of set-off against said notes.

Is the bank entitled to hold, as against said assignees, all or any of said last-named balance? The situation in brief seems to have been as follows: Mr. Randall was treasurer of the American Worsted Company, was also cashier of the defendant bank, and individually was indorser upon the notes signed by him as treasurer, which were discounted by the bank of which he was cashier, and where his treasurer's bank account was kept. He knew the maker was insolvent, for he, as treasurer, had in its name Just executed a deed of assignment for the benefit of its creditors to the plaintiffs. He knew that two of said notes were past due, and that the other would become due in about a menth, to wit, on March 8th, for he had signed the notes for the maker, had indorsed them as an individual, and then held the manual possession of them as cashier of the defendant bank. He knew that the bank of which he was cashier was entitled to a lien upon the very ample deposit of the American Worsted Company to secure all notes made by said company that were past due. As indorser, one would suppose his interest would be best subserved by the bank's keeping the American Worsted Company's deposit in such name and condition as would enable the bank to get its full pay out of the maker's funds by way of set-off, so that he would not be called on as indorser. It may be, however, that he thought that, if the bank gave up its right to a lien on the deposit of the maker of the note, that would release the indorser. When one was acting in so many diverse capacities, it is diffioult to say which interest and what considerations might have affected him most; and the question certainly becomes very pertinent, how far he could act as the representative of one interest to its detriment in connection With the affairs of Ms other interest. "The general control and government of all the affairs and transactions of the bank," says Morse in his work on Banks and Banking (volume 1, § 116, "rest with the board of directors. * * * Organic banking laws and charters customarily confer upon the board the general power to conduct and manage the corporate business. But this language is practically only a recognition of the functions which the board would be entitled and called upon to exercise by the rules of the common law, and does not operate to enlarge those functions, or to designate them with any greater particularity. Neither can the duty thus conferred be construed as a requisition upon the directors to undertake the performance, in person, of all the acts called for by the daily routine of the business of the bank. * * * Though it has been said that powers of a public character given by the legislature to any body of individuals can never be subdelegated by the recipients, yet this doctrine has never been allowed to prohibit bank directors from appointing agents and endowing them with sufficient powers for executing the resolutions of the...