Huffman v. Wilkes

• Decision Date: 07 March 1936
• Docket Number: 32660.
• Citation: 55 P.2d 366,143 Kan. 458
• Parties: HUFFMAN v. WILKES et al. [*]
• Court: Kansas Supreme Court

55 P.2d 366

143 Kan. 458

HUFFMAN v. WILKES et al. ^[*]

No. 32660.

Supreme Court of Kansas

March 7, 1936

Syllabus by the Court.

In depositor's action against national bank's officers and directors individually for wrongfully refusing to permit teller of bank to pay depositor's check drawn on bank which subsequently became insolvent, failure to give requested instructions defining "act of insolvency or in contemplation thereof" as used in federal statute, and instructing that directors' fear that payment of check would imperil solvency of bank was no defense, held reversible error (12 U.S.C.A. § 91).

If payment of check for full amount of deposit would have permitted depositor to have preference in distribution of assets of national bank under receivership, bank officers and directors had duty to refuse payment, notwithstanding bank had money on hand with which to make payment (12 U.S. C.A. § 91).

Depositor suing national bank's officers and directors individually, in common-law action for tort, for wrongfully refusing teller to pay check drawn on bank which subsequently became insolvent held not entitled to attorneys' fees.

Plaintiff sued persons who were officers and directors of a national bank for damages for their alleged individual wrongdoings in refusing to permit the teller of the bank to pay his check drawn thereon. Held, the court erred in instructions given and in refusing to give appropriate instructions respecting acts of insolvency, or in contemplation thereof, within the meaning of the federal statutes, and the duties of defendants as officers and directors of the bank under the facts as the jury might find them from the evidence. Further held, that an allowance made plaintiff for his attorneys' fees cannot be permitted to stand,

Appeal from District Court, Montgomery County; Joseph W. Holdren Judge.

Action by Ed Huffman against La Rue C. Wilkes and others. From a judgment for plaintiff, defendants appeal.

Reversed.

DAWSON J., dissenting.

Sullivan Lomax, of Cherryvale, and John Bertenshaw, and Kirke C Veeder, both of Independence, for appellants.

C. E. Pile, of Parsons, and James A. Brady, of Cherryvale, for appellee.

HARVEY Justice.

This is an action for damages predicated upon the alleged wrongful acts of defendants in refusing to permit the teller of a bank on which it was drawn to pay plaintiff's check, he having to his credit in a checking account the amount of his check. The case was here before (140 Kan. 637, 37 P.2d 988, 97 A.L.R. 310), where the court held the petition states a cause of action as against a general demurrer. After that decision, an answer and reply were filed. There was a trial by a jury, which answered special questions and returned a verdict for plaintiff. Defendants have appealed.

The bank was not sued. Persons who were officers of the bank were sued as individuals for their alleged individual as distinct from official wrongdoing, causing loss to plaintiff.

Shortly stated, plaintiff in his petition alleged that on May 2, 1931, the Montgomery County National Bank of Cherryvale was an open, going banking institution, receiving deposits, paying checks (except plaintiff's), and transacting a general banking business in the usual and ordinary manner; that defendants were officers or directors of the bank, and the position of each is described; that they were present at the bank and in charge of its business; that by reason of deposits previously made by him in the bank he had a credit in his checking account of $1,977.04; that within banking hours the afternoon of that day he went into the bank and presented his check, properly drawn on the bank, for that amount, to the paying teller for payment; that she started to pay the check when one of the defendants interfered with her, took the check, conferred with the other defendants, with the result that the teller was not permitted to pay the check, and payment was refused. The petition sets out the acts and conduct of the respective defendants in great detail, which we need not repeat here, since they are quite fully stated in our former opinion. It is further alleged that the bank had currency and coin sufficient to pay the check, and that defendants, severally, jointly, and in conspiracy with each other, wrongfully prevented the payment of the check, to plaintiff's damage in a sum named. The petition contained a second cause of action for damages for loss of time, attorneys' fees and exemplary damages, predicated on the alleged willful, fraudulent, and malicious misconduct of defendants.

The answer admitted defendants were officers of the bank, as alleged, and that plaintiff had a credit in his checking account at the bank to the amount alleged, and in effect admitted plaintiff had presented his check and that it was not paid. It alleged the bank had been having financial difficulties; that for more than a week prior to the date the check was presented a national bank examiner had been at the bank making an examination of its affairs under the authority of the federal banking department; that he had discovered irregularities of one Dillman, who had been president of the bank prior to May 2, 1931, and had determined and advised defendants that the affairs of the bank must be put in better condition and that certain notes must be collected or better secured if the bank was to continue in business, and that he directed the deposits of that day be segregated as received from other assets. It is further alleged that defendants were endeavoring to comply with these requirements, and on the day in question conducted the affairs of the bank under the direction of the bank examiner; that when plaintiff's check was presented, late in the afternoon, there was not sufficient money then on hand to pay it; that defendants referred the question of its payment to the bank examiner, who directed them not to pay it; that the bank was in fact insolvent at that time, although defendants were still endeavoring to restore its solvency; that defendants informed plaintiff the bank was unable to pay the check, and that they acted in good faith in so doing, and denied generally allegations of the petition not admitted by the answer.

The reply was a general denial, with the plea the bank examiner had no authority to direct the affairs of the bank, such authority being vested in defendants, who were its officers and directors.

The evidence may be summarized as follows: The bank had been having some financial difficulties for a time. Apparently that had become known to some extent, for between April 17 and May 2 about $18,000 of deposits had been withdrawn. On April 27 a national bank examiner, P. V. Miller, and an assistant, began an examination of the bank. Miller continued at this work up to and including May 2. The bank did not open for business after that date. Later a receiver was appointed, who closed up its affairs. The bank examiner discovered shortages and asked for the resignation of W. L. Dillman as president. He resigned the last of April and La Rue C. Wilkes was elected president. Miller continued to examine the financial affairs of the bank, the value of its assets, and the security for its notes, and to advise the bank officials what should be done. The morning of May 2 he suggested to Wilkes that the deposits of that day be kept segregated from other assets of the bank, and that was done until after closing time. Throughout the day, when a customer made a deposit, a teller would enter the amount of the deposit in his passbook or give him a duplicate deposit slip, as was customary for an ordinary deposit, but the money or checks deposited would be placed on the counter and left there. The amount of the deposit was not posted in the bank's books, nor was the money or other items deposited mingled with other money or items of the bank. The total deposits that day amounted to $4,718.37, none of which was paid out by the bank to anyone. Of the amount deposited, $2,566.89 was in checks on other banks; the balance was in cash. After the closing time of the bank that day the employees posted the deposits of that day and placed the money and checks deposited in the safe. This was later turned over to the receiver. The morning of May 2 the cashier, Shanton, told one of the directors, Carson, the bank could not run through the day without some money. Carson went to Independence and got about $3,000 in cash for the bank's use. The bank began business that morning with $3,169.94 actual cash on hand, of which only about $370 was on hand when the bank closed business for the day. When plaintiff presented his check to Miss Hoffman, the teller, for payment, she testified she picked up money and started to count it to pay the check, and found she did not have enough to pay it. She stepped a few feet to another employee, who had worked longer in the bank, told her the situation, and asked what to do, and was referred to the cashier, Shanton, who had just come into the room. Shanton took the check and began talking to plaintiff. Miss Hoffman did not pay the check, nor did she see it again, nor did she have any further talk with plaintiff.

The afternoon of May 2 plaintiff met Mr. Dillman on the street and talked with him a few minutes. He then went to the bank and asked Miss Hoffman what his account was. She looked it up and told him. He asked her to write a check for him for the amount; she did so; he signed it, and handed it to her for payment. We quote his testimony as to what took place in the bank, as shown by the abstract.

"Miss Hoffman counted out quite a bunch of money and took the check and stepped over to Miss Conrad. *** She said something which I did not hear. She then started to the south door and Mr Shanton stepped into the...