Farmers' Sav. Bank v. Aldrich

• Decision Date: 20 November 1911
• Parties: FARMERS' SAVINGS BANK v. ALDRICH ET AL.
• Court: Iowa Supreme Court

153 Iowa 144

133 N.W. 383

FARMERS' SAVINGS BANK

v.ALDRICH ET AL.

Supreme Court of Iowa.

Nov. 20, 1911.

Appeal from District Court, Story County; Chas. E. Albrook, Judge.

This is an action to recover the funds of the bank, alleged to have been misappropriated by defendant Aldrich, its cashier, in conjunction with the other defendants, in bucket shop transactions. Judgments were rendered against defendants in different amounts, and the defendants, other than Aldrich, appeal from the judgments rendered against them respectively. Reversed.John G. Myerly, Ole O. Roe, and McCarthy & Luke, for appellants.

Samson & Noble and Fitchpatrick & McCall, for appellee Farmers' Savings Bank.

E. H. Addison, for appellee Aldrich.

McCLAIN, J.

Prior to June 1, 1908, defendant Aldrich had been the cashier of the plaintiff bank, and on that date he retired from that office, making a settlement which the plaintiffs now allege to have been obtained by fraud in using false records and forged notes. It is admitted that for criminal conduct in connection with the business of the bank Aldrich was indicted, and, on being put on trial, pleaded guilty, and was sentenced to the penitentiary, where he is still confined. A subsequent investigation disclosed his indebtedness to the bank, in a sum exceeding $10,000, for misappropriation of funds. Judgment was rendered against Aldrich in the lower court for substantially the entire amount of this misappropriation, and he has not appealed. But the plaintiffs also allege that certain portions of the misappropriated moneys were used by the other three defendants, respectively, in partnership transactions with Aldrich, which may be sufficiently described as bucket shop transactions, carried on through Harper & Ward of Des Moines, who received the funds misappropriated in such transactions; and the plaintiff seeks to recover from each of said defendants, as portions of a trust fund misappropriated by Aldrich, the amounts paid to Harper & Ward in the partnership business. Said defendants deny, respectively, the partnership arrangements alleged by plaintiff, and deny any knowledge that Aldrich was carrying on bucket shop transactions in their names and for their benefit, and was using the plaintiff's money for the purpose. Defendants also rely upon a settlement with Harper & Ward as constituting a release of each of them from liability. The trial court held that the settlement with Harper & Ward did not constitute a release, and found on the issue of fact that each of the defendants authorized Aldrich to conduct the bucket shop transactions in their respective names, and rendered judgments against them, respectively, for the sums of money found to have been advanced from the funds of the bank to carry out the respective partnership arrangements.

[1] 1. A motion to transfer the case to the law docket for determination of the amount due by the defendants, respectively, to the plaintiff bank was overruled, and defendants assign error on this ruling. In view of the fact that the action was brought in equity to set aside the settlement with Aldrich, on the ground of fraud, that the issues raised involved an examination of mutual accounts of payments to Harper & Ward and credits to the several defendants for profits alleged to have been realized in the various transactions, and that the purpose of the entire action was to recover trust funds misappropriated by Aldrich through the connivance of the other defendants, and for their benefit, we think the court properly refused to hold that the case was not one of equitable cognizance.

[2] 2. After the officers of the bank had discovered the misappropriation of its funds, by their use in carrying on bucket shop transactions with Harper & Ward, negotiations were instituted by them looking to the return by Harper & Ward of the bank's funds employed in such transactions. Harper & Ward finally suggested the payment of $2,000 by them as a settlement. Later the president and attorney for the bank suggested that the claim might be settled for $6,000. Then, after several further meetings, Harper & Ward offered $4,000 to compromise the claim, and this offer was accepted and the money paid. Before this offer was accepted, the representatives of the plaintiff had dropped to $5,000. The negotiations had extended over a period of about six months, and the final settlement was in the nature of a release of Harper & Ward, so far as any further obligation to the bank was concerned. In connection with the settlement, but not as a part of it, so far as Harper & Ward were concerned, it was stated that the intention of the officers of the bank was to proceed against the other parties. The consummation of the settlement was by an instrument in writing, as follows: “Des Moines, Ia., Oct. 1, 1909. This is to acknowledge receipt of the sum of four thousand dollars from the firm of Harper & Ward to apply on sums of money belonging to the undersigned bank and misappropriated by Ralph H. Aldrich, formerly cashier of said bank; said bank reserving the right to apply the said four thousand dollars as it shall choose to apply the same, except that it shall not be applied to any portion of the indebtedness of said Ralph H. Aldrich to said bank by reason of the sums so misappropriated for which the bank has been reimbursed by the sum received from the surety on the bond of said cashier to said bank. In consideration of said four thousand dollars said bank agrees that it will not now nor at any time hereafter make any further demand upon said Harper & Ward because of any such misappropriations, nor by reason of any business, trades or transactions between said Ralph H. Aldrich and said Harper & Ward either for himself personally or in behalf of others. The undersigned officers of said bank hereby represent that they have due and full authority to receive said funds and make this agreement, on behalf of the bank. Farmers' Savings Bank of Huxley, Iowa, by O. J. Kalsem, President. Peter B. Brown, Director.”

The only words in this instrument indicating that it was not to constitute a full settlement with Harper & Ward, not only for their benefit, but for the benefit of all persons liable with them for the misappropriation of the money which had come into their hands, are those indicating that the amount received was “to apply on” the claim of the money so misappropriated, instead of being in full satisfaction thereof; but the release is unconditional, and there is no express reservation of any right to look further to other persons liable for the misappropriation. We think the question is therefore squarely raised whether the release of one wrongdoer constitutes a release also of others jointly liable with him for the wrong.

[3] Counsel for appellee contend that these appellants and Harper & Ward were not joint wrongdoers, and therefore the rule as to the effect of the release of one joint tort-feasor, as to the liability of others, has no application. But as we understand the rule it is not strictly limited to cases of wrongs against the person or against tangible property. It is applicable in every case where one person may look to two or more, charged with a wrong jointly, or jointly and severally, and it is applicable as well in cases of breach of contract. Turner v. Hitchcock, 20 Iowa, 310, 323. The plaintiff bank was asking to recover money misappropriated by its cashier, and this misappropriation consisted in paying the money to Harper & Ward. The connection of the appellants with the transaction was in procuring, or assisting, or profiting by such payment. None of the money passed through their hands, and they received no money from Harper & Ward. It is true checks for alleged profits were made out, payable to appellants, but they...