Goodrum v. Merchants & Planters Bank
| Decision Date | 08 January 1912 |
| Citation | 144 S.W. 198,102 Ark. 326 |
| Parties | GOODRUM v. MERCHANTS & PLANTERS BANK |
| Court | Arkansas Supreme Court |
[Copyrighted Material Omitted]
Appeal from Lonoke Chancery Court; John E. Martineau, Chancellor affirmed.
STATEMENT BY THE COURT.
This was an action instituted by the Merchants & Planters Bank, of England, Arkansas, against J. C. Goodrum, Jr., and his wife Belle Goodrum, seeking to require from them the execution of a deed for certain lands which they had, for that purpose conveyed to a trustee, who refused to carry out the trust by conveying said lands to plaintiff. The conveyance to the trustee was subsequently treated and held by the chancellor to be a mortgage to secure certain indebtedness alleged to be due by said Goodrum to plaintiff, and the cause proceeded and was determined as an action to foreclose same. It was alleged in the complaint that J. C. Goodrum, Jr., was the cashier of plaintiff's bank, and had converted to his own use a large amount of its funds. Thereupon he and his wife entered into a written contract with the bank whereby they agreed that expert accountants should be selected to examine the books of the bank in order to determine whether or not said Goodrum was criminally short in his accounts with the bank. In order to secure the payment of such criminal shortage, if any, they agreed to convey to a trustee for the use of the plaintiff certain lands, and, in event the accountants should find and determine that said Goodrum was criminally short in his accounts with the bank, the trustee should convey said lands to the plaintiff in satisfaction thereof. In pursuance of that agreement, the deed of trust was executed a few days thereafter by the defendants, and thereupon accountants were selected to examine the books of the bank. It was alleged that by said examination it was found that said Goodrum was criminally short in his accounts with the bank. Thereupon the plaintiff demanded the execution by said trustee to it of a conveyance of said lands, which he refused to make. The defendants filed answers in which they set up a number of defenses to the recovery sought by plaintiff, chief amongst which were the following:
1. They alleged that it was agreed at the time said contract was entered into that said Goodrum was to be present at the examination of the books made by the accountants, which plaintiff refused afterwards to permit, and that the plaintiff thereby breached the agreement, rendering it ineffective.
2. That the contract was contrary to public policy and illegal, because it was made upon the consideration and promise to compound any felony committed by Goodrum in embezzling the bank's funds.
3. That the execution of the contract and deed of trust was obtained by duress; and, finally,
4. That Goodrum had not wrongfully taken any of the funds of the bank and was not criminally short in his accounts with it.
The chancellor appointed a master with directions to take testimony and to make findings "as to what amount, if any, the defendant as cashier of plaintiff's bank, was criminally short in his accounts at the time he was relieved of duty in December, 1909;" and also "to ascertain and report any other matter or things that may be of service to the court in determining the rights and equities of all the parties to this action." A great mass of testimony was taken by the master. Hemade report, setting out in detail his findings. He found that said Goodrum was criminally short in his accounts with the bank, and that the said shortage amounted to $ 19,121. The chancellor confirmed the report of the master; he declared the trust deed a mortgage securing said shortage, and thereupon entered judgment in favor of plaintiff for the amount thereof and a decree foreclosing said mortgage.
The testimony relative to the various issues involved in this case is conflicting. We do not deem it necessary to set this out in detail. The determination of the issue relative to Goodrum's alleged shortage depends to a large extent upon the examination of the accounts and entries in the books, the effect of which can only be fully appreciated by a thorough inspection and examination of the numerous entries and lengthy accounts in connection with the testimony of the witnesses relative thereto. This we have endeavored carefully to do, and we have concluded that the matters can be better understood by giving in a general way the result which we think the evidence establishes.
The Merchants & Planters Bank was organized and opened for business in September, 1902, and the defendant was then employed to take charge of the books of the bank as assistant cashier. A short time thereafter he was elected cashier, and continued as such until December, 1909, when his relations with the bank were severed. From the organization of the bank until his connection therewith was terminated, he had complete charge of the books, moneys and assets of the bank, and every entry made in the general ledger during that time was made by him, and practically all entries made in the individual ledger and other books of the bank were made by him or by his authority and with his knowledge. Prior to his employment with plaintiff's bank, he had been clerk of Lonoke County for several years and had worked in minor positions in one or two other banks in the State. It appears that the officials of the bank and the people of the community in which it was located had great confidence in his ability and integrity. The bank was capitalized at $ 25,000, and its stock was principally owned by one R. E. L. Eagle, who was its cashier at its organization, and was afterwards its president. He was recognized as its principal owner, and the chief arbiter of its affairs during the time that Goodrum was connected therewith. While said Eagle had the ultimate supervision of the bank, its affairs and business were principally, and almost exclusively, managed and conducted by said Goodrum. In December, 1909, said Eagle was negotiating for a sale of his stock to parties who were nonresidents of the State, and requested the cashier, Goodrum, to give him a statement of the banks' assets and liabilities to present to the prospective purchasers. It appears that Goodrum had kept the books of the bank apparently balanced until 1906, but after that time the accounts on the general ledger were not kept balanced. This, we think, according to the testimony, was not known either by Eagle or any other director of the bank. The cashier, Goodrum, in his testimony claimed that the sole reason why the books were not duly kept balanced after 1906 was that his duties were so manifold that he did not have time to do so; that proper assistance was not furnished him to do the work required. Goodrum delayed making the statement requested from him, and, becoming impatient, Eagle endeavored to make a statement from the general ledger himself. He testified that he then learned for the first time that the accounts of the assets and liabilities would not balance. Becoming suspicious of the correctness of the books, he secured the services of one Frank Wittenberg, an expert accountant, to examine them. On December 6, 1909, this accountant began the examination of the books and continued same for a few days, when he reported that there was a deficit of $ 13,848.12 in the funds as shown by the accounts of the cashier, and that, in addition to this, it appeared that there was a shortage in the account of bills receivable of $ 2,777.15. Thereupon the president of the bank demanded that Goodrum should make good his shortage.
The charge that Goodrum was short in his accounts with the bank was published and made publicly known in the community where the bank was located. Goodrum insisted that he had done no wrongful act; that the apparent shortage was only due to bad bookkeeping, or that, if it occurred in any other way, it was not due to any act of his own. At his solicitation, or at the request of his wife, one T. M. Fletcher, who was sheriff of Lonoke County and a warm friend of said Goodrum, came to the town of England, where the bank was located, and another friend of Goodrum, J. M. Gates, accompanied him. As his friends and representatives, these persons endeavored to arrange and adjust these matters with the bank. They met with the president and some of the directors of the bank, and, after consultation, formulated a written contract by which the alleged shortage should be adjusted. This contract was thereafter signed by both Goodrum and his wife and the bank, and delivered to plaintiff, and, as to its material parts, is as follows:
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