Jackson Exchange Bank v. Russell

• Decision Date: 03 March 1914
• Citation: 164 S.W. 694,181 Mo.App. 698
• Parties: JACKSON EXCHANGE BANK, Appellant, v. ANNIE E. RUSSELL, Executrix, et al., Respondents
• Court: Missouri Court of Appeals

164 S.W. 694

181 Mo.App. 698

JACKSON EXCHANGE BANK, Appellant, v. ANNIE E. RUSSELL, Executrix, et al., Respondents

Court of Appeals of Missouri, St. Louis

March 3, 1914

February 4, 1914, Argued and Submitted

Appeal from Cape Girardeau Circuit Court.--Hon. C. B. Faris, Judge.

REVERSED AND REMANDED (with directions).

STATEMENT.--Under date of June 11, 1898, Henry R. English, James W. Russell and T. E. McNeely, executed their bond to the Jackson Exchange Bank, a banking corporation of this State, in the sum of $ 5000, it being recited in the bond that Henry R. English had been duly elected by the board of directors of the bank "to the office of president of said institution and is actively engaged in said bank and authorized to perform the duties of cashier." The bond proceeds: "Now if said Henry R. English shall faithfully demean himself, in office as such president and discharge the duties thereof, account for and pay over to his successor in office all money and property coming to his hands as such president, belonging to said bank, then this obligation to be void, otherwise to remain in full force and effect." It is further provided in the bond that it shall be "in force and effect from year to year during such time as the said Henry R. English shall be elected and re-elected to the said office of such president of said Jackson Exchange Bank." The minutes of the meetings of the board of directors of the bank were in evidence, covering the period from May 7, 1898, to July 1 1906. From these it appears that Mr. English was re-elected president on May 9, 1898, and was then also appointed bookkeeper and with H. R. Quinn elected a member of the executive committee, and that this bond was approved June 14 1898, the recital being, "bond of H. R. English president, and actively engaged in the bank and authorized to discharge the duties of cashier, in the sum of $ 5000, with J. W. Russell and T. E. McNeely as security, approved, which bond is placed in the custody of H. R. Quinn." It also appears that his salary as bookkeeper was fixed at $ 100 per month and that it remained at that sum until May 3, 1905 when it was fixed at $ 75, and so continued until May 12, 1906, the last election of Mr. English as president and bookkeeper. How soon after this latter date he ceased to hold office with the bank, does not appear.

The by-laws of the bank, which were in evidence, provide, among other things, that the officers elected should consist of president, vice-president, as also cashier, "who in addition to his other duties shall be ex-officio secretary of said board, . . . who shall qualify and in all things conduct themselves in office as provided by the laws of this State relating to bank corporations." The board was also to appoint an executive committee of two members, and it appears that down to May 12, 1906, this executive committee consisted of Messrs. English and Quinn. Shortly afterward, this action was commenced on the bond against Messrs. English, Russell and McNeely. Mr. Russell dying pending the action, it was dismissed as to him, his wife as executrix being substituted and appearing to the action. It further appears that pending the action Mr. English was adjudicated bankrupt and the action was dismissed as to him.

The cause stood on amended pleadings. The amended petition, after setting out the death of Mr. Russell and the appointment of his wife as executrix, and reciting the fact that Mr. English, on the day of , 1898, had been duly appointed by the board president of plaintiff bank and was by its board of directors authorized to perform the duties of cashier of said bank, and on June 11, 1898, had accepted the office of president and acting cashier and, before entering upon his duties, made and executed and delivered to plaintiff, the bond above set out, that being set out in full. Averring that it was approved by the board on June 14, 1909, on its presentation to that body by Mr. English and its subsequent approval on the dates before mentioned, and the reelection of Mr. English as president and acting cashier, down to and including the election of May 12, 1906, it is averred that Henry R. English, as principal in the bond, had breached it in the following particulars, namely: that he failed to faithfully demean himself in office as president and acting cashier of plaintiff bank and failed to discharge the duties of president and acting cashier, and failed to account for and pay over to his successor in office all money and property coming into his hands as such president and acting cashier of plaintiff bank belonging to the bank, and that the amount which he had so failed to account for and turn over to his successor in office or to plaintiff bank is far in excess of and over and above the sum of $ 5000, the penalty of the bond, to-wit, the sum of $ 23,000; that at the time the said English quit the service of the bank, on the day of July, 1906, the "depositors' account" of the bank was found to be short in the sum of $ 20,000, and that the "depositors' account," "long and short" of journal entries showed a shortage of $ 11,650.96, the shortage being set out by years. It is further averred that Henry R. English was also bookkeeper and acting cashier of plaintiff bank from its organization in 1894 to July, 1906, and at all times had full access to the money of the bank and kept its accounts; that plaintiff bank had lost the sum of $ 23,000 from its vaults while H. R. English was custodian and cashier, as aforesaid; that plaintiff is unable to account for the shortage in "depositors' account," as shown by the books of the bank, except through withdrawals of cash from time to time by English, bookkeeper and acting cashier aforesaid, and the appropriation of the same to his own personal use and benefit, thereby permanently depriving plaintiff bank of its money and property. Wherefore plaintiff alleges and charges that Henry R. English, custodian and cashier as aforesaid, has taken out and withdrawn from the vaults of plaintiff bank from January 6, 1903, to June 6, 1906, as shown by the "depositors' account," $ 11,651 and appropriated the same to his own personal use and benefit, wherefore judgment is demanded against defendants for the penalty of the bond.

The answer, after admissions of corporate character of plaintiff, death of J. W. Russell, appointment of executrix, execution of the bond, and a general denial, consists (1) of a denial of any default on the part of English, or of any indebtedness resulting from a violation of his bond, averring and charging "that whatever, if any, shortage or defalcation which might exist or has existed during the continuance of this bond on the part of Henry R. English, was due and is due to no fault or misfeasance of the said English in the capacity under which he was bonded. But if in fact there be a shortage, which defendants now again deny, it was due to errors, mistakes or whatever it may be, on the part of said English, as bookkeeper in said bank, and in no wise due to any act of his in the capacity covered by the alleged bond." (2) That Henry R. English was acting gratuitously as president or acting cashier of the bank, without any compensation whatever, and that the bond sued on was therefore without consideration. (3) That after English was elected president and after the bond was executed his duties were enlarged by making him bookkeeper, "thereby increasing the hazard of the risk assumed by these defendants by reason of which additional risk whatever shortage, if any, was created and brought about, and by reason of this fact these defendants are discharged," etc. (4) That the shortage complained of covered a period of four years and that plaintiff bank should have known the same, or did know, or by the exercise of ordinary care and prudence could have known it, and that by retaining the said Henry R. English in its employ after said first shortage was charged in the year 1903, and after knowledge of the fact, defendants were discharged from liability. (5) That Hugh R. Quinn owned and controlled the bank and that all things were done under his specific direction; that whatever errors there were in the books were due to his direction and action; that the knowledge of Quinn was the knowledge of the bank, and that it is estopped. (6) That whatever errors there were in the books were not due to any misconduct of English as president but were due to errors of English as bookkeeper, directed by the owner of the bank, and for which these defendants are not liable.

The cause being called for trial was referred by consent of parties to Frank Kelly, Esq., he as referee to hear all the testimony relating to the liability of the sureties and to report to the court. Afterwards at the August term of the court, the referee filed a report, in which he stated that the question presented to him for decision is whether a liability to plaintiff, on the part of the sureties, exists in the bond and under the facts which govern and control that liability, leaving out of consideration the question as to whether there is a shortage in the accounts of the bank. He further recites that the facts were not disputed, but the sufficiency of the facts to show a liability, or, even if sufficient, that they show a liability being denied, the question of law was presented as to whether the facts show a liability of the sureties on the bond to plaintiff. The referee found that the bond was a continuing one, accepted and approved at each meeting of the directors of plaintiff from June 14, 1898, to May 12, 1906, inclusive. He found as a matter of law, that the entry in the minutes of the board, after the execution and acceptance of the bond, that Mr. English was acting as bookkeeper, threw no additional...