Johnston Fife Hat Co. v. Nat'l Bank of Guthrie

• Decision Date: 13 February 1896
• Citation: 44 P. 192,4 Okla. 17,1896 OK 17
• Parties: JOHNSTON FIFE HAT COMPANY v. THE NATIONAL BANK OF GUTHRIE.
• Court: Oklahoma Supreme Court

1896 OK 17

44 P. 192

4 Okla. 17

JOHNSTON FIFE HAT COMPANY v. THE NATIONAL BANK OF GUTHRIE.

Supreme Court of Oklahoma

Decided: February 13, 1896

Error from the District Court of Logan County.

Syllabus

¶0 1. DAMAGES--Petition for, States Facts Sufficient. When--Error. A petition for damages against a bank which alleges that Melone Bros. were engaged in the mercantile business in the City of Guthrie; that the National Bank of Guthrie was a corporation engaged in the general banking business; that DeSteiguer was the president of the bank, and had active control and management of its business; that the Johnston Fife Hat company was a corporation under the laws of Missouri, doing a general merchandise business; that Melone Bros. entered into a conspiracy with DeSteiguer, and through him with the bank, whereby Melone Bros were to purchase of wholesale dealers goods to the amount of several thousand dollars on credit, and have them shipped to their Guthrie store; that the bank was to loan them $ 1,000, and take a chattel mortgage on the stock for a large sum; then sell the goods under the mortgage, and give the bank one-third the proceeds and the Melone Bros. two-thirds, and leave the creditors unpaid; that pursuant to this conspiracy they bought goods of plaintiff in the sum of $ 354, and goods from divers other firms to the value of over $ 10,000; that the bank loaned them $ 1,000 and took a chattel mortgage on the stock for $ 9,960, and before the bills for goods became due, foreclosed the mortgage and took possession of goods and sold same for $ 5,300, which the bank received; that the plaintiff sold the goods in good faith with no knowledge of the conspiracy to defraud, and which seeks to recover the value of the goods sold, states a good cause of action against the bank, and it was error to sustain a demurrer to such petition.

2. BANKING CORPORATIONS--Liable for Damages, When. It is a part of the duty of a banking corporation to loan money, and to collect such loans by sale of goods or other security, and where the president of the bank has the active control and management of the affairs of the bank, and in conducting its business enters into a conspiracy to defraud, and puts the same into execution whereby another is damaged, the bank will be liable in tort for the damages.

3. SAME--Liable for Acts of Officers. A managing officer of a bank is not a servant of the corporation, but is the head of the corporation, who does its thinking and through him it acts. And the bank is liable for his torts committed in carrying on its business while acting in the scope of his powers, even though the tortious acts are not within the corporate Dowers of the bank.

4. SAME--Guilty of Fraud. A corporation may be guilty of a fraud. As a mere legal entity it can have no will, and cannot act at all, but in its relations to others, it is represented by its officers and agents, and their fraud in the course of the corporate dealings is, in law, the fraud of the corporation.

5. SAME--Responsible for Wrongs. Corporations are responsible for the wrong s committed by them, under substantially the same rules which govern the responsibility of natural persons.

6. SAME--Fraud. If an officer of a banking corporation, while exercising the authority conferred on him by the corporation, is guilty of falsehood and fraud, the corporation is liable for the consequence which may flow therefrom.

7. SAME--Notice of Fraud. Where the president of a banking corporation, who has the control and management of its business, enters into conspiracy to defraud third persons, and carries out such fraudulent design through his relations with the bank, such corporation has notice of such fraud, and if it accepts the benefits resulting therefrom it becomes a participant in the fraud and liable for the damage.

Keaton & Cotteral, for plaintiff in error.

E. B. Green and Harper S. Cunningham, for defendant in error.

BURFORD, J.:

¶1 This is an appeal from a judgment sustaining a demurrer to plaintiff's complaint. The plaintiffs brought their action in the district court of Logan county to recover judgment against the defendant, together with certain other defendants, in which complaint they alleged that the defendants had entered into a conspiracy by which the plaintiffs were defrauded in the sale of certain merchandise. The complaint is as follows:

"In the District Court of the First Judicial District, holding terms at Guthrie, in and for Logan County, Territory of Oklahoma.

"Johnston Fife Hat Company, a corporation under the laws of Missouri, Plaintiff, v. Drury L. Melone and Baker H. Melone, partners composing the firm of Melone Brothers, and L. DeSteiguer, and the National Bank of Guthrie, Defendants.

"Come now the Johnston Fife Hat Company, a corporation doing business under the laws of Missouri, and for their complaint against the defendants say:

"That at all times hereinafter mentioned the said Drury L. Melone and Baker H. Melone were partners, composing the firm of Melone Brothers, and engaged in the retail clothing and gent's furnishing goods business in the city of Guthrie, Logan county, Oklahoma Territory.

"That the said defendant, the National Bank of Guthrie, was at such times, and now is, a national banking corporation, organized and doing business under the national banking laws of the United States. That L. DeSteiguer was and is the president and business manager and active officer of said National Bank of Guthrie.

"That the plaintiffs, Johnston Fife Hat company, above mentioned, are a corporation, engaged in the wholesale clothing and gent's furnishing goods, etc., business in the city of St. Joseph, Mo.

"That on or about the 30th day of October, 1891, the said defendants, Melone Brothers, and the said National Bank of Guthrie, through its agent and business manager, L. DeSteiguer, for the use and benefit of said bank, while acting in the due course of his business and scope of his authority as such agent and officer of said bank in loaning money and taking mortgages for said bank, which was to take chattel mortgages on personal property to secure loans by said bank to others, and L. DeSteiguer, all entered into a fraudulent and corrupt conspiracy and agreement, whereby it was understood and agreed between said defendants that the Melone Brothers should procure by and with the advice and assistance and aid and help of said other defendants, and purchase from various wholesale houses in St. Joseph, Kansas City, Chicago, and elsewhere, and of these plaintiffs, all of the goods and merchandise that the said Melone Brothers could purchase and in the sum of many thousand dollars worth on credit and with the intention and purpose of never paying for the same.

"That they should procure these plaintiffs and other wholesale houses to ship these goods to the said Melone Brothers at Guthrie. That thereafter the said Melone Brothers should give to the said National Bank of Guthrie, in the name of L. DeSteiguer, president, a chattel mortgage on said goods for a large sum of money, to-wit, the sum of $ 10,000, or thereabouts, without the said National Bank of Guthrie paying to the said Melone Brothers any sum whatever therefor, excepting the sum of about $ 1,000 or $ 1,500 loaned by the bank to said Melone Brothers, and without the said National Bank of Guthrie actually being a creditor of said Melone Brothers in any sum whatever, except as above stated, and that said defendants should then pretend to foreclose said mortgage and take all of the goods purchased from said creditors, and divide the proceeds thereof, the said Melone Brothers giving the said National Bank of Guthrie and L. DeSteiguer the one-third of the amount which said stock of goods of said Melone Brothers should be worth or bring.

"The plaintiffs allege that in pursuance to said fraudulent and corrupt conspiracy and agreement the said defendants by and through one of the said defendants Baker H. Melone, did come to the city of St. Joseph, Mo., and purchase of these plaintiffs goods, wares and merchandise in the sum and value of three hundred and fifty-four dollars and fifty cents, a true anti verified account of which is hereto attached and marked exhibit 'A' and made a part of this complaint.

"The plaintiffs allege that the said National Bank of Guthrie, through its agent and president, L. DeSteiguer, in the due course of his employment, and as recognized by the directors of said bank in his general authority as given by said directors of said bank to do any and all acts for said bank, and L. DeSteiguer, furnished to the said Baker H. Melone on said trip $ 100 to pay expenses of said trip, and that said purchases were made in pursuance to said agreement, and by the request, aid and assistance of all of the said defendants.

"The plaintiffs further allege that after the receipt of said goods of the plaintiffs by said defendants, the said National Bank of Guthrie, in the name of L. DeSteiguer, president, did, in pursuance to said agreement and conspiracy, take a chattel mortgage on said goods and the said other goods of the said Melone Brothers in the sum of $ 9,960, which said mortgage was without any consideration whatever, excepting the sum of about $ 1,000 or $ 1,500, the money of said bank loaned to said Melone Brothers, and was fraudulent and corrupt and a part of the carrying out of the said agreement and corrupt conspiracy and was made in pursuance thereof.

"That the said L. DeSteiguer and the National Bank of Guthrie, through and by its said officer and agent, L. DeSteiguer, who was authorized to take and foreclose chattel mortgages for said bank, did proceed to foreclose said chattel mortgage and did take and close up the business of the said Melone Brothers, and did convert the said goods and merchandise and property of the said Melone Brothers to the use and benefit of said bank and L. DeSteiguer.

"That the said bank, by its said president, foreclosed said mortgage and

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