Hawkeye Gold Dredging Co. v. State Bank of Iowa Falls

• Citation: 157 F. 253
• Decision Date: 23 November 1907
• Docket Number: 37.
• Parties: HAWKEYE GOLD DREDGING CO., Limited, v. STATE BANK OF IOWA FALLS.
• Court: U.S. District Court — Northern District of Iowa

157 F. 253

HAWKEYE GOLD DREDGING CO., Limited, v. STATE BANK OF IOWA FALLS.

No. 37.

United States Circuit Court, N.D. Iowa, Cedar Rapids Division.

November 23, 1907

The complainant, a corporation of British Columbia, seeks an accounting and the recovery of money deposited for it with the defendant bank in the name of 'H. C. Miller, Tr H.G.D. Co., Lt'd,' which money it is alleged belonged to complainant; that defendant so well knew, but has wrongfully converted the same to its own use by applying it without rightful authority to the credit of Byron B. Bliss upon his account and overdraft in said bank, and refuses to account for or pay the same to complainant upon its demand therefor. Defendant, among other defenses, denies being indebted to complainant in any sum whatever, and avers that it has paid in full all moneys deposited with it to the credit of said account, upon checks duly drawn by complainant and its treasurer; and by amendment to its answer filed just before the hearing it challenges the jurisdiction of the court upon the ground that complainant's remedy, if it has any, is at law.

From the testimony, which is voluminous and much of it quite confusing, it appears that in 1904 Byron B. Bliss, Samuel Calvin, George L. Dobson, Lewis W. Lansing, George T. Hedges and other residents of Iowa, and John Mulholland of the town of Lillooet in the Province of British Columbia, Canada organized the complainant as a corporation under the laws of said province. Calvin, Bliss, Mulholland, and R. D. George were the owners of a mining lease embracing some five miles of the bed of the Fraser river near Lillooet in said province, and the purposes of the corporation as stated in its memorandum of association are, among others, to sell the shares of its capital stock, and acquire by purchase, lease or otherwise said Fraser river mining property and other rights and privileges and pay for the same, and to work develop, sell, or otherwise deal with such properties. The organization of the company was completed May 19, 1904, and it was then authorized to commence business. The memorandum of association also provides that the business of the company may be transacted at any place in the British dominions, or in the United States as the company may determine. The persons above named and others, including H. C. Miller, were selected as the first board of directors of the company in June, 1904, and Professor Calvin and Mr. Bliss were selected by the board as president and secretary, respectively, and Mr. Miller as treasurer. Mr. Bliss resided at the city of Iowa Falls in this state, and an office or place of business of the company was established at that place and he there acted as its principal officer and manager. The defendant is a banking corporation, organized under the laws of Iowa, located and doing business at said city of Iowa Falls. H. C. Miller was a director of the bank, and its president and managing officer from 1894 to August 1, 1904, when he retired from the position of president and manager. B. H. Thomas was then elected vice president, and afterwards had the general management of the bank's affairs. Bliss made contracts for the sale by complainant of large amounts of its capital stock and received the pay therefor prior to its completed organization and agreed to pay commissions to others for effecting such sales, and continued to make such sales, receive pay therefor, and pay such commissions and other expenses and obligations of the company until sometime in September, 1904, when it was discovered, or thought by other officers and shareholders of complainant, that he was not properly accounting for the money so received by him. The money of the complainant so received by Bliss was deposited from time to time in the defendant bank in the name of 'H. C. Miller, Tr. H.G.D. Co., Lt'd,' and the account is so designated upon the books of the bank. It is conceded that the letters following the name of Miller stand for 'Treasurer Hawkeye Gold Dredging Company, Limited. ' Bliss kept an individual account with the bank, and his practice was to pay all of the expenses and other obligations incurred by or for complainant by his own checks upon the bank in favor of the person to whom the obligation was due, which checks were paid by the bank and charged to the account of Bliss therewith. The checks of Bliss for the amounts so paid by the bank were for payments upon the purchase price of the Fraser river property, which was later transferred to complainant, for commissions on sale of its capital stock, for expenses of incorporation, and other expenses and obligations of complainant. Bliss would reimburse himself for these payments by warrants drawn by him as secretary of the company upon its treasurer payable to himself individually, which warrants show the purpose for which they were made. These warrants were made and delivered to Miller from time to time, who then made his check as treasurer upon the bank in favor of Bliss for the amount thereof, and as president of the bank charged the check, or directed it to be charged to his account as treasurer and credited to that of Bliss with the bank. Miller and others of the directors of complainant knew and fully understood this practice of Bliss and acquiesced therein. Bliss also made other warrants upon the treasurer in favor of himself, upon which Miller also made his checks as treasurer, which in like manner were charged to his account as such and credited to that of Bliss. But such warrants do not show for what they were made, and it does not appear that they were made to reimburse Bliss for any payments made for complainant or for its benefit in any way.

Meetings of the shareholders and directors of the company were held in complainant's office in Iowa Falls August 30, 1904, and the day before such meetings the bank, upon request of Miller or some one for complainant, made up a passbook, showing the condition of the Miller account as treasurer with the bank, and delivered it to Miller. Omitting an item of $1,000 which appears upon both sides of this account, and which does not affect the true condition thereof, the passbook shows that the account was opened April 8, 1904, and from that time to and including August 29th there was deposited with the bank to the credit of this account a large number of deposits,

aggregating,........................................... $64,742 25 August 29th there was also placed to its credit an item of............................................. 16,077 65 ---------- $80,819 90 (The item of $16,077.65 will be again referred to in the opinion.) There is charged to the account nine checks, signed, "H. C. Miller, Tr. H. G. D. Co., Lt'd," and entered in the passbook, as follows: 1904. April 9th (Check No.) 1 ........ $4000 00 April 20th " 2 ........ 7,000 00 May 25th " 3 ........ 7,699 19 June 6th " 4 ........ 7,174 46 July 7th " 5 ........ 2,500 00 July 7th " 6 ........ 5,000 00 Aug. 3rd " 7 ........ 1,407 38 Aug. 6th " 8 ........ 1,800 00 Aug. 13th " 9 .......... 500 00 $37,081 03 Four other items aggregating........................... 1,504 00 Balance.............................................. 42,234 87 ---------- $80,819 90

-- which balance is carried forward to the credit of the account.

The checks numbered 1 to 9, inclusive, are based upon warrants so made by Bliss, are payable to his order, and were charged by Miller as president of the bank, or under his direction to the Miller account as treasurer, and credited to that of Bliss with the bank. The four items, aggregating $1,504, the complainant concedes are proper charges against it, and they need not be further noticed. Notwithstanding such credits to Bliss, his account with the bank was largely overdrawn from and after April 8, 1904. Miller assisted in making up this passbook, and left the book and canceled checks with Bliss, or in the office of the company in Iowa Falls, which was in charge of Bliss, on August 29th, and they were there at the time of the meetings of the shareholders and directors on August 30th. September 24, 1904, the passbook was again made up and balanced by the bank as follows:

Deposits.
1904.
Aug. 29th Balance ...................	$42,234 87
Sept.16 .................................	300 00	$42,534 87
Checks.
Sept. 14th " .........................	16,077 65
Sept. 16 to 23, checks aggregating ...	13,327 15
Sept. 24th Balance ...................	13,130 07	$42,534 87

-- which balance is carried forward to the credit of the account.

September 24th the board of directors of complainant passed a resolution removing Mr. Bliss and Mr. Miller from the office of secretary and treasurer, respectively, and appointing George T. Hedges as secretary and treasurer, and directing that checks be drawn upon the bank by the president, and attested by the secretary and treasurer, for $13,130.07 and $16,077.65, and immediately presented for payment. Notice of this resolution was given to the bank, and checks for said amounts were at once made pursuant to said resolution, and duly presented for payment on September 24th. The one for $13,130.07 was paid, but the one for $16,077.65 the bank refused to pay.

December 3, 1904, complainant commenced an action at law in this court against the defendant to recover the amount of said check of $16,077.65. April 4, 1905, it filed an amended and substituted petition in said action setting out the entire Miller account with the defendant bank, crediting it with said check of $13,130.07 only, and demanding judgment for the balance. The defendant answered, and in November, 1905, said action came to trial. At the close of the testimony the complainant dismissed the...