Farmers' & Traders' Bank of Auxvasse v. Harrison

• Decision Date: 31 December 1928
• Docket Number: 26842
• Parties: Farmers & Traders Bank of Auxvasse, Appellant, v. J. S. Harrison et al
• Court: Missouri Supreme Court

12 S.W.2d 755

321 Mo. 815

Farmers & Traders Bank of Auxvasse, Appellant, v. J. S. Harrison et al

No. 26842

Supreme Court of Missouri

December 31, 1928

Appeal from Callaway Circuit Court; Hon. David H. Harris Judge.

Reversed and remanded.

Cave & Cuthbertson and Rodgers & Buffington for appellant.

(1) Under the terms of the bond plaintiff made a clear primafacie case for the jury and the demurrer or peremptory instruction thereto should have been overruled. Henry County v Salmon, 201 Mo. 136; Weed Sewing Mach. Co. v Maxwell, 63 Mo. 488; Lionberger v. Kreiger, 13 Mo.App. 318; Jamison v. Griswold, 6 Mo.App. 405; Campbell v. Pope, 96 Mo. 472; 7 R. C. L. 621, sec. 616; 3 Fletcher, Corporations, 2100, sec. 1916. (2) The execution of the bond by the cashier of the bank, if irregular, was ratified by defendant directors and the giving of the peremptory instruction or demurrer was erroneous. Josephine Hospital Corp. v. Realty Co., 270 S.W. 642; Lungstras v. Ins. Co., 57 Mo. 109; Watson v. Bigelow, 47 Mo. 415; Smith v. Richardson, 77 Mo.App. 432; Norton v. Bull, 43 Mo. 116; Suddath v. Lime Co., 79 Mo.App. 597; Adv. Co. v. Wanamaker, 115 Mo.App. 270; Gatzweiler v. Morgner, 51 Mo. 47; Western Bank v. Gilstrop, 45 Mo. 422; Chouteau v. Allen, 70 Mo. 326. (3) Defendant sureties, by signing the bond with full knowledge of the cashier having executed it for the bank, either with or without record authority so to do, and the bank thereafter receiving and retaining all the benefits under the contract, estopped themselves from disclaiming liability on the bond. Slate v. Blackwater, 205 S.W. 629; Mining Co. v. Taylor, 247 Mo. 25; Bank v. Trust Co., 187 Mo. 536; Schlitz v. Brewing Co., 229 S.W. 814; Cass v. Ins. Co., 188 Mo. 26; 21 R. C. L. 999, sec. 47.

Baker & Baker and Greensfelder, Rosenberger & Grand for respondents.

(1) Where a bond shows on its face that it is to be signed by a principal, unless there is a valid signature by the principal, the sureties are not bound. Gay v. Murphy, 134 Mo. 106. (2) The power of a cashier of a bank to bind his principal is limited by statute, and the whole policy of the banking act is to forbid him to incur any liability on the part of the principal without authority of the board of directors expressed in the minutes. Secs. 11752, 11762, R. S. 1919. (3) A bank has no power or authority to execute a bond except in certain specific instances prescribed by law. Secs. 9749, 11737, R. S. 1919. (4) Both public policy and the provisions of the Banking Act forbid a banking corporation giving to one general depositor any preference over and above other general depositors. Any attempt on the part of a bank to give one general depositor a bond or other security is void, unless all general depositors are given like security. Commerce Trust Co. v. Trust & Guaranty Co., 165 S.W. 160; Art. 2, Chap. 108, R. S. 1919. (5) The defendants as voluntary sureties are favorites of the law and have a right to stand on the strict letter of their undertaking, and under the terms of the bond sued on there was no showing of any liability on the part of the defendants. Citizens Trust Co. v. Tindle, 272 Mo. 681. (6) The plaintiff bank having made substantial deposits in the Auxvasse Bank prior to July 18, 1923, the date of the bond, there was no consideration for the bond, and hence defendants incurred no liability in signing the same. Ring v. Kelly, 10 Mo.App. 411; Peck v. Harris, 57 Mo.App. 467.

Ellison, C. Lindsay and Seddon, CC., concur.

OPINION

ELLISON

This is a suit on a bond given by the defendants as sureties to the plaintiff, the Farmers & Traders Bank of Auxvasse. The principal in the bond is another bank called the Auxvasse Bank, but it had failed before the suit was brought, and was not joined as a defendant. The amount involved is $ 12,488.06 with interest. The court gave an instruction in the nature of a demurrer to the evidence at the close of the plaintiff's case and the plaintiff thereupon took an involuntary nonsuit with leave, etc. This appeal followed the court's refusal to set aside the nonsuit.

Both banks were located at the village of Auxvasse in Callaway County, and were organized and operated under the banking laws of this State. For two years prior to May 7, 1923, the appellant bank had been county depository, and on that day was again designated as such for a like period of two years. Some two months thereafter, on July 18, 1923, the $ 40,000 bond in suit was executed, the Auxvasse Bank signing as principal by F. E. Stokes, its cashier, and the five defendants signing as securities, they being five of the nine directors of the Auxvasse Bank. The bond provided:

"The condition of the above bond is such, however, that Whereas, the said Farmers & Traders Bank of Auxvasse, Missouri, was on the 7th day of May, 1923, duly selected as depository of all the public funds of every kind and description going into the hands of the county treasurer, the deposit of which was not otherwise provided for by law, of the County of Callaway and State of Missouri, for a period of two years, or until the time fixed by law for another selection of such depository; and,

"Whereas, the Farmers & Traders Bank of Auxvasse, Mo., is redepositing a portion of said funds with the Auxvasse Bank, Auxvasse, Missouri,

"Now, Therefore, if the said Auxvasse Bank, Auxvasse, Missouri, shall faithfully perform all duties and obligations devolving upon it under the law and by the agreement mentioned above, then this obligation to be void; otherwise to remain in full force and effect."

Between May 9 and the execution of the bond on July 18th, the appellant bank made three separate deposits in the Auxvasse Bank aggregating $ 12,000 and took demand certificates of deposit therefor. Following that, on August 6th a deposit of $ 2500 was made and a demand certificate issued therefor. This made $ 14,500 in demand certificates of deposit. On August 11th this $ 14,500 was converted into a checking account. All told, twelve separate deposits aggregating about $ 50,500 were made at different times and in different amounts after the bond was executed, making about $ 62,500 during the whole period of the banking relation, and during that same time there were twenty-one withdrawals, so that when the bank closed on July 7, 1924, the balance in the checking account stood at $ 12,488.06. The State Finance Department took charge, and refused to pay out this balance, of course, when demand was made therefor.

There was no entry in any corporate or other book or record of the Auxvasse Bank giving Stokes, its cashier, authority to execute the bond in its name or behalf, and likewise no mention of the bond or of any separate agreement between the two banks for the redeposit of county funds. On this latter point the cashier of the Farmers & Traders Bank testified his bank deposited no funds in the Auxvasse Bank except pursuant to the agreement expressed in the bond, and that the former bank had kept no money in the latter bank before the opening of the account mentioned in evidence and heretofore referred to. Other facts will be noted, as necessary, in the course of the opinion.

I. The best way to dispose of the case will be to take up the points made by the respondents in defense of the trial court's ruling. The first of these is that there was no evidence showing the funds deposited in the Auxvasse Bank were in fact county money. As to this, it is true the evidence affirmatively shows funds deposited by the county in the Farmers & Traders Bank were not segregated or placed on special deposit so their identity would be preserved; on the contrary, they were carried in certain checking accounts running in the name of the County Treasurer and went into the general assets of the bank. In the same way remittances by the Farmers & Traders Bank to the Auxvasse Bank for deposit were drawn from these general assets, and there was no notation on the drafts, checks or other instruments by which funds were transferred, that the money was county money.

But we think there was enough evidence to take the case to the jury, for the cashier of the Farmers & Traders Bank testified without objection that the deposits made by his bank in the Auxvasse Bank were county money, and further said they were made possible solely by reason of increased assets due to having the county money on hand. It seems, also, that all credits to the account of the Farmers & Traders Bank in the Auxvasse Bank were ultimately drawn against the accounts of the County Treasurer in the former bank, though the evidence is not clear on that point.

II. The next point is that the bond was meaningless -- a nudum pactum, as the brief says. The concluding paragraph required the Auxvasse Bank "faithfully (to) perform all duties and obligations devolving upon it under the law and by the agreement mentioned above." Respondent says there is no agreement "mentioned above," and that the Auxvasse Bank had no duty under the law because it was not the bank which had been selected by the county as the depository.

We cannot assent to that. It is true no agreement is mentioned in terms earlier in the bond, but there are recitals (1) that the Farmers & Traders Bank has been appointed depository of county funds, (2) and that it is redepositing a portion of said funds with the Auxvasse Bank. Thereafter the instrument refers to these recitals as an agreement, and binds the Auxvasse Bank faithfully to perform the duties devolving upon it under the law and by the agreement. In our opinion all this taken together is sufficient to express the meaning that by agreement the Farmers & Traders Bank was depositing and the Auxvasse Bank receiving as county money the funds mentioned in evidence, and that the latter bank,...