First State Bank of Corpus Christi v. Ake

• Decision Date: 12 June 1980
• Docket Number: No. 1656,1656
• Citation: 606 S.W.2d 696
• Parties: FIRST STATE BANK OF CORPUS CHRISTI et al., Appellant, v. Arthur E. AKE, Appellee.
• Court: Texas Court of Appeals

Page 696

606 S.W.2d 696

FIRST STATE BANK OF CORPUS CHRISTI et al., Appellant, v. Arthur E. AKE, Appellee.

No. 1656.

Court of Civil Appeals of Texas, Corpus Christi.

June 12, 1980.

Rehearing Denied Aug. 29, 1980.

Second Rehearing Denied Sept. 25, 1980.

Richard A. Hall, Gary, Thomasson, Hall & Marks, Corpus Christi, Hugh Rice Kelly, Richard K. Willard, Baker & Botts, Houston, for appellants.

Russell H. McMains, William R. Edwards, Edwards & Perry, Corpus Christi, for appellee.

OPINION ON MOTION FOR REHEARING

NYE, Chief Justice.

Our original opinion is withdrawn and this opinion is substituted therefore. This libel case involves an appeal by First State Bank of Corpus Christi and Roger Mize, Chairman of the Board of Directors of the Bank, from a judgment in favor of the plaintiff, Arthur E. Ake. Ake brought suit upon an allegedly libelous statement made by the Bank in a fidelity bond claim that was signed and sworn to by Mize as Chairman of the Board of Directors. The jury found that the statement in question was false when it was made and that Mize, the Chairman, believed it to be false when he signed the claim form. Publication of the allegedly libelous statement was established as a matter of law. Judgment based on the jury verdict was rendered in favor of Ake for $450,000.00.

Ake was president of the First State Bank from 1968 until 1970, when he was discharged. He was hired initially for the position of President by defendant Mize, who was a member of the Board of Directors at that time. His starting salary was $20,000.00, which increased steadily until it was $25,000.00 in July, 1970. In addition, Ake received other remunerations, including hospital benefits, a car and expenses, membership in the Country Club, dividends on 1,000 shares of stock, Board of Directors' fees and a bonus for each year in which he was employed as Bank President.

In a little over two years during his tenure as chief executive officer of the Bank, the Bank's earnings more than doubled and its dividends more than tripled. The transactions which were the subject of the fidelity bond claim against the plaintiff concerned Allied Roofing Company, a customer of the Bank. One group of transactions involved a series of loans or loan renewals which Ake was involved in making to Allied, some of which were in excess of Ake's lending authority under the circumstances. The other group of transactions involved the withholding of some of Allied's insufficient checks for reprocessing, which had the effect of extending additional credit to Allied, again in excess of Ake's lending authority under the circumstances. The money owed by Allied as a result of these two groups of transactions was ultimately written off as a loss at the express direction of the Board of Directors.

In June and July of 1970, the F.D.I.C. conducted a routine examination of the Bank at which time the examiner discovered that Ake had illegally hypothecated his Bank stock in violation of an oath he took as President. Ake admitted this transgression and was told to submit his resignation which he did that day. Shortly thereafter the Bank filed a fidelity bond claim against Ake specifically claiming losses totaling $41,456.05 resulting from the dishonesty of Ake.

Ake had never been informed of the Bank's action in filing of the fidelity bond claim. He found out about it sometime later when he specifically questioned one of the Board members. In the meantime, he attempted to obtain work from a number of banking institutions, all of which turned him down. Subsequently he was able to obtain employment at the Parkdale State Bank as a loan officer in December, 1971, at a considerable reduction in pay. Ake worked approximately 5 years for Parkdale State Bank until April, 1976, where he was discharged because of an improper business relationship with a customer. He sought employment with 10 or 15 other banks thereafter without success. At the time of trial, he was selling automobiles where he was making between $700.00 and $800.00 per month.

The defendants' sole contention as to the motivation for the filing of the fidelity bond claim in question was, according to them, that a certain deceased bank examiner had allegedly instructed them to do so. Sometime after the filing of the bond claim, the Bank sent a letter to the insurance carrier withdrawing its claim for the loan losses portion because it had expressly ratified Ake's action regarding these losses. The balance of the claim was ultimately denied. Chairman Mize conceded during trial that there was no distinction whatsoever between the action of the Board in ratifying Ake's action in regard to the loans and the recirculation of the checks in question since all had been charged off by the Bank in like manner at the same Board meeting.

The defendants' appeal consists of 17 points of error which cover three major contentions. First, points 1 through 4 question the manner in which the primary libel issue was submitted to the jury. Second, points 5 through 7 question whether the statement set out in the bond claim was legally actionable. Third, points 8 through 17 attack the jury's award of damages and the trial court's action in excluding certain evidence in mitigation of the damages.

The alleged libel was contained in a proof of loss form supplied to the Bank by its insurance carrier. In one of the blanks, the Bank typed in "loans made unauthorized by Directors resulting in a total loss of $16,940.51." At another place, the bank stated: "checks held without authorization of Directors, resulting in a loss of $24,515.54." "Total loss ... $41,456.05." At the bottom of the form appeared the certification which stated: "I hereby certify that the above statement is true and correct in every respect; that this company sustained a loss in the amount above stated through the dishonesty of Arthur E. Ake employed as President." The form was subscribed and sworn to by Mize as Chairman of the Board of Directors. The claim form is reproduced from the original court exhibit "B" below (see appendix).

The primary libel issue (question No. 1) submitted to the jury inquired:

"Do you find that the statement contained in the fidelity bond claim to the effect that First State Bank of Corpus Christi, Texas, sustained a loss in the amount of $41,454.05 'through the dishonesty of Arthur E. Ake' was false when it was made?

Answer: 'Yes' or 'No.'

Answer: 'Yes.' "

In points of error 5, 6 and 7 the defendants argue that the word "dishonesty" was an opinion based upon true facts and that the trial court's refusal to submit an issue concerning whether the word "dishonesty" was an actionable opinion was error. In this regard the defendants rely upon Section 566 of the Restatement of Torts which provides:

"A defamatory communication may consist of a statement in the form of an opinion, but a statement of this nature is actionable only if it implies the allegation of undisclosed defamatory facts as the basis for the opinion."

The defendants characterized the statement in the bond claim that the Bank lost money through the dishonesty of Ake as an opinion based upon disclosed facts; i. e., the allegations that Ake made unauthorized loans and withheld checks without authorization. According to the defendants these statements contained in the bond claim were true. We disagree.

The inquiry in Special Question No. 1 focused on the dishonesty of plaintiff Ake. The very nature of a claim on a fidelity bond is dishonesty since the fidelity bond only covers losses through dishonest or fraudulent acts of employees. Mize testified that he knew of the nature of a fidelity bond claim at the time he filed it. Mr. Mize conceded that there was no evidence and no basis for him to assert that Mr. Ake had ever been guilty of any dishonest acts with regard to the Allied Roofing Company or any other transaction. The Bank withdrew a portion of the bond claim and the balance of the claim was denied. No further pursuit was had by the Bank thereafter. The evidence concerning Ake's honesty was in dispute. Attributing the losses suffered by the Bank to the dishonesty of Mr. Ake necessarily involved the lack of moral turpitude. Great American Insurance Co. v. Langdeau, 379 S.W.2d 62 (Tex.Sup.1964). The accusation (of dishonesty) in a fidelity bond claim such as the statement in the case at bar is not merely an expression of an opinion, it was a statement of fact which generally must be proved under rules of evidence like any other fact. Great American Insurance Co. v. Langdeau, supra; Downer v. Amalgamated Meat Cutter, Etc., 550 S.W.2d 744 (Tex.Civ.App.-Dallas 1977, writ ref'd n. r. e.). This the appellants failed to do. These points of error are overruled.

The defendants argue next that Special Issue No. 1 which asked whether the statement that the Bank lost $41,454.05 through the dishonesty of Ake was false when made, unfairly and prejudicially took the statement in Special Issue No. 1 out of context. Defendants contend that the jury should have been instructed to answer a fairly submitted special issue in light of the context of the bond claim and on attendant statements and circumstances and in light of the substantial truth doctrine.

In Times Publishing Co. v. Ray, 1 S.W.2d 471 (Tex.Civ.App.-Eastland 1928) aff'd 12 S.W.2d 165 (Tex.Com.App.1929), it was held that a party should not be permitted to carve out isolated words or phrases and have them considered without reference to their settings. Applying this rule to the case at bar, defendants claim that Special Issue No. 1 unduly focused upon the printed language of the form found at the bottom of the fidelity bond claim form and erroneously ignored the remainder of the form. The excluded portion of the form, however, constituted mere evidentiary matter which should not have been submitted to the jury. The only ultimate fact in this case was whether the allegedly libelous statement that Ake was dishonest was "true" or ...