Kitchens v. J. H. Teasdale Commission Co.

• Decision Date: 15 March 1904
• Parties: KITCHENS et al. v. J. H. TEASDALE COMMISSION CO.
• Court: Missouri Court of Appeals

79 S.W. 1177

105 Mo. App. 463

KITCHENS et al. v. J. H. TEASDALE COMMISSION CO.

St. Louis Court of Appeals. Missouri.

March 15, 1904.

BANKS—OFFICERS—AUTHORITY—MISAPPROPRIATION OF FUNDS—RECOVERY BY BANK—DEFENSES—EVIDENCE—CUSTOM—ILLEGALITY.

1. The fact that directors of a bank were culpably negligent in the supervision of the bank's business, and permitted the cashier to have exclusive management of its affairs, is no defense to an action by the receivers of the bank to recover from a commission company funds of the bank transmitted to such company by draft on its correspondent, over the cashier's official title, to be used in the cashier's private speculation.

2. Where a bank cashier transmitted funds to a commission company by draft on the bank's

correspondent, over his official title, to be used in grain speculation, the commission company was apprised that the cashier, by the abuse of his power, was employing the funds of the bank in speculation on his individual account.

3. A bank may recover funds misappropriated by its cashier from one receiving them from the cashier with knowledge of the misappropriation.

4. In an action by the receiver of a bank to recover funds misappropriated by the cashier from one receiving them with knowledge of the misappropriation, where the answer was a general denial, and there was no application to amend, evidence of a secured note given by the cashier after the misappropriation, and of its acceptance by the bank directory in settlement, was properly excluded.

5. In an action by the receiver of a bank to recover funds misappropriated by the cashier, from one receiving them with knowledge of the misappropriation, testimony of a banking expert that it was a general custom for bank cashiers to draw drafts on their own banks in payment of their own indebtedness was not admissible, where the drafts received by defendant were not drawn in that form, but were drawn on the bank's correspondent by the cashier over his official signature.

6. A custom of bank cashiers to draw on their own banks to pay their personal indebtedness would be contrary to law, and could not affect the legal consequence that a payee of drafts so drawn, who knew that the funds were to be applied on the cashier's personal transactions, would be liable to repay the same to the bank.

Appeal from St. Louis Circuit Court; H. D. Wood, Judge.

Action by Thomas B. Kitchens and another against the J. H. Teasdale Commission Company. From a judgment for plaintiffs, defendant appeals. Affirmed.

R. F. Walker, for appellant. F. H. Sullivan, for respondents.

REYBURN, J.

This action was by the respondents, as receivers of the Greene County Bank, upon five drafts, substantially in the form following: "Greene County Bank. Paragould, Arkansas, Dec. 8th, 1899. Pay to the order of J. H. Teasdale Commission Company three hundred dollars. W. H. Ritter, Cashier. To Western National Bank, New York City. No. 6,160." The petition was subdivided into five counts, with modifications appropriate for varying dates, of December, 1899, and January, 1900, amounts, and drawee; two of the drafts being upon the Western National Bank, N. Y., and the remaining three upon the Merchants' Laclede National Bank, St. Louis, and all were remitted to appellant by their maker and drawer, W. H. Ritter, cashier, and collected and placed to his individual account with appellant, in speculative personal operations in grain conducted by him through the commission company. The proceeds of these remittances were absorbed and lost in these ventures, saving a trifling balance repaid Ritter. The drafts were drawn and executed by Ritter, and entered in a book of account of the bank, in which he was required to record exchange drawn. The bank had never conferred any authority to Ritter to employ its funds for his own purposes, and subsequent to its suspension it was discovered that these drafts were drawn in favor of appellant in lieu of the payees, in whose names they were entered in the exchange ledger. Ritter was cashier at dates of the drafts, and had occupied such official position for several years preceding. The book of account containing the personal account of Ritter displayed that from the 1st day of December, 1899, to the same date in February, 1900, his account had been overdrawn, and the largest amount to his credit at any one time had been but little in excess of $100, which had been applied shortly after its receipt upon a transaction other than those here involved, and none of these drafts appeared charged against his account. It was apparent from the testimony that to the cashier was confided the...