Kegan v. Park Bank

• Decision Date: 30 December 1927
• Docket Number: No. 26229.,26229.
• Citation: 8 S.W.2d 858
• Parties: KEGAN v. PARK BANK OF ST. JOSEPH.
• Court: Missouri Supreme Court

8 S.W.2d 858

KEGAN v. PARK BANK OF ST. JOSEPH.

No. 26229.

Supreme Court of Missouri, Division No. 1.

December 30, 1927.

Motion for Rehearing Withdrawn July 3, 1928.

Appeal from Circuit Court, Buchanan County; L. Vories, Judge.

Action by Thomas J. Kegan against the Park Bank of St. Joseph. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

Randolph & Randolph, of St. Joseph, for appellant.

Culver, Phillip & Voorhees, of St. Joseph, for respondent.

ELLISON, C.

This is a suit in trover for $47,830.22 for the alleged conversion of certain securities. From a judgment on the verdict for defendant, the plaintiff appeals. The respondent is a banking corporation at St. Joseph, organized and operating under the laws of Missouri. Of the amount sued for $4,575.22 represents interest earned up to the date of demand. The face value of the securities was $43,255. They consisted of securities to the value of $35,250, which are alleged to have been taken from appellant's strong box while gratuitously held in the care and keeping of the respondent bank, $200 in Liberty bonds, which were similarly in the custody of the bank in its own vault, and $7,805 in mortgage notes, which were up with the bank as collateral to secure the indebtedness of the appellant's brother. These misappropriations, if and in so far as committed, all appear to be chargeable to a defaulting assistant cashier of the bank, who had been discharged and invoked his constitutional exemption against testifying.

The errors assigned arise out of the giving of 14 instructions for defendant, the refusal of 8 instructions requested by plaintiff, and the modification of another, and the admission of evidence. Underlying them are three legal questions to which counsel for the respective litigants have especially addressed themselves:

(1) Were the books of the bank, its ledgers, note registers, etc., properly admissible in evidence against the plaintiff, a stranger to the transactions shown, and did the court rightly permit the bank's officers to testify therefrom, or were they hearsay evidence and self-serving?

(2) As to the securities in the strong box and the Liberty bonds in the vault, was the bank a gratuitous bailee because it made no charge for its service in keeping them, or did the fact that the appellant favored the bank with his general banking business make the latter a bailee for hire, in such sense that it is liable for the theft of the securities by the assistant cashier, though without knowledge of his dishonesty and having no reasonable ground for suspicion?

(3) As to the notes up for collateral, was it necessary for the appellant to pay off or tender the amount of his brother's debt, for which they were pledged, in order to maintain his action for the conversion thereof; and does the fact that the brother's indebtedness remained unpaid at the time of the trial, in an amount exceeding the value of the pledged notes, defeat the appellant's right to recover therefor?

The record of nearly 1,000 pages is hard to follow. Witnesses testifying from the many books and papers introduced often referred to items and notations thereon as "this" and "that," and in more than a few instances the documents mentioned are not preserved in the record. The statement of facts will be shortened as much as possible, but it will necessarily be long.

The appellant, Thomas J. Kegan, had been a customer of the respondent, Park Bank, for about 14 years. For some 8 or 10 years he had kept his papers in a tin box in the money vault of the bank. The box had two keys, but these also were left at the bank, accessible to its officers, and on one occasion, the evidence indicates, the box was left unlocked. It was purchased by the appellant on the advice of a bank officer and was not furnished by the bank. Some 50 or 60 other customers kept similar boxes there. It was an accommodation extended to them by the bank for which no charge was made, and the cashier of the bank testified it was not contingent on their being regular bank customers.

The assistant cashier was James F. Reardon. He had been in the bank's service nearly 20 years. He owned 11 shares of the capital stock of $50,000 and was also a director. He did some work at the tellers' windows, waited on customers, exercised a supervisory control over the books, made loans, set the time lock on the money safe at night, carried a key to the bank, and knew the combination of the tumbler lock on the vault door. He was an active officer. Up to the summer of 1923 he held the confidence and esteem of the public and of his fellow officers and employees. About the middle of August he came under suspicion and was given an enforced vacation while the other bank officers made an investigation. It was found that he had been guilty of irregularities and defalcations.

For several years prior to this dénouement the appellant, Tom Kegan, and his brother, John, were on terms of business intimacy with Reardon; that is, they did most of their banking business at the bank with him personally, and were interested with him in private enterprises. They were associated in one venture in oil and they traded in city real estate, the deeds being taken either in blank or in Reardon's name, and he being interested sometimes with one brother and sometimes with the other in these transactions. The appellant testified that on two occasions he purchased diamonds from Reardon, for which he paid $2,500, and, on one occasion in 1919, loaned him $1,000 on his personal note with collateral. It seems they were interested also, more or less, in the automobile business, and Reardon and John Kegan together owned a large hog ranch for about 2 years and operated it for 4 years—of this more later. John Kegan testified that all together the private business ventures of his and Reardon's lost from $20,000 to $30,000.

The appellant's testimony was that on or about August 15, 1923, he went to the bank and asked Reardon for his box. This was about two days before Reardon's exposure, and before the appellant knew anything of his trouble. The securities were gone. Except for some worthless papers, the box was empty. It had the appearance of having been pried open. Reardon told him the securities were in the bank where the Liberty bonds and gold were kept, and to come in the next morning. The next morning appellant found the blind in front of Reardon's window pulled down. One of the other employees said Reardon had gone on a vacation. Two days later appellant demanded his securities from Mr. Stinson, the cashier. The latter said things were "all muddled up" and that the condition was brought about by Reardon's dealings with a man in St. Joseph whom he named.

Thus, according to appellant, the fact was brought to light that his securities were gone. It later developed that some of them had been put up as collateral by Reardon at the respondent, Park Bank, and some at the First National Bank in St. Joseph. Some have never been found. But before going further into the history of the case, it would be better to set out a list of the securities in detail, as it will be necessary to refer to them frequently hereafter:

Securities in Strong Box.

Second Mortgage. Bank No. 18296. T. J. Kegan note to Park Bank, No. 1, $2,000. T. J. Kegan note to Park Bank, No. 2, $3,000. T. J. Kegan note to Park Bank, No. 3, $3,000. T. J. Kegan note to Park Bank, No. 4, $3,000. T. J. Kegan note to Park Bank, No. 5, $3,000. All notes dated December 7, 1921, due in 5 years, secured by second mortgage on part of R. & K. hog ranch, acknowledged December 30, 1921, recorded January 5, 1922, subject to first mortgage of $8,000.

First Mortgage. Bank No. 18297. T. J. Kegan note to Park Bank, No. 1, $3,000. T. J. Kegan note to Park Bank, No. 2, $3,500. T. J. Kegan note to Park Bank, No. 3, $3,500. All dated December 7, 1921, due in 5 years, secured by first mortgage on part of R. & K. hog ranch, acknowledged December 30, 1921, recorded January 5, 1922.

First Mortgage. Bank No. 18298. T. J. Kegan note to Park Bank, $4,000. Note dated December 7, 1921, due in 5 years, secured by first mortgage on part of R. & K. hog ranch, acknowledged December 30, 1921, recorded January 5, 1922.

Undivided interest in R. G. Lewis $6,500 mortgage note, $6,000.

J. F. Reardon note for $1,000. Secured by 3 shares of stock in Park Bank as collateral.

United States baby bonds, $250.

Total securities in box, $35,250.

Securities in Bank Vault.

Liberty bonds, as per receipt of bank, $200.

Securities up for Collateral.

Victor H. Nelson note ($5,800 originally), $5,000.

Moore note for, $2,000.

J. E. Swope note for $850, less $45 credit, $805.

Total securities, $43,255.

The $28,000 Ranch Notes.

Referring first to the entire issue of $28,000 In notes payable to the Park Bank, signed by T. J. Kegan and secured by mortgages on the R. & K. hog ranch. Between 1912 and 1919 appellant and his brother, John, were partners in the liquor business. While Tom was in the Navy during the World War, John speculated in oil and lost. On January 1, 1919, he turned over to Tom his interest in the saloon in settlement of his indebtedness to Tom. Thereafter in the spring or summer of 1919 John and Reardon, the assistant bank cashier, purchased a 313-acre farm near St. Joseph, which they called the "R. & K. hog ranch." The title was taken in Reardon's name. In buying, improving, stocking, and operating the ranch they ran behind. As a result John borrowed money from Tom from time to time until he owed him $18,500. To satisfy that indebtedness he transferred his interest in the ranch to Tom. At the same time Tom bought Reardon's half interest for the same price, paying him $3,500 in Liberty bonds, 14 diamonds valued at $7,500, $1,500 in currency, and a two-thirds interest in four pieces of St. Joseph real estate (valued at $6,000) which he owned with Reardon, the deeds being in Reardon's name or in blank. Thereafter...