Lyons v. Corder

• Decision Date: 24 December 1913
• Citation: 253 Mo. 539,162 S.W. 606
• Parties: LYONS v. CORDER et al.
• Court: Missouri Supreme Court

162 S.W. 606

253 Mo. 539

LYONS v. CORDER et al.

Supreme Court of Missouri.

December 24, 1913.

1. WITNESSES (§ 257)—DOCUMENTARY EVIDENCE —AUTHENTICATION—BOOKS OF ACCOUNT.

In a receiver's action against the bank directors to recover the amount embezzled by the cashier, the books of account kept in the due course of business by the employés of correspondent banks, who produced them and testified to their contents, were admissible as aids to the memory of the witnesses.

2. EVIDENCE (§ 119)—RELEVANCY—RES GESTÆ.

Such account books were part of the res gestæ, admissible on account of their independent probative force.

3. BANKS AND BANKING (§ 54)—DIRECTORS— RELATION AND POWERS IN GENERAL.

The directors of a bank of deposit and discount are trustees of its assets for the benefit of the bank and its stockholders, and, while the individual directors are not officers of the bank and have no individual power and control over its management, yet, as a collective body, they are responsible managers of its business, invested with full power to select and appoint officers and agents, subject to the limitations of its charter and the rights of its stockholders.

4. BANKS AND BANKING (§ 54)—DIRECTORS— LIABILITY FOR NEGLIGENCE—EMBEZZLEMENT BY CASHIER.

Where the directors of a bank, who failed to take a bond for the faithful performance of the duties of their cashier, and negligently failed and omitted to watch and direct the business of the bank, but left it almost wholly to the cashier, whom they permitted to become indebted and liable to the bank for overdrafts, upon which he had embezzled the difference between the draft entered in the bank's books and the draft presented to and paid by correspondent banks, which fact might have been discovered by reasonable diligence in the examination the bank's books, by examination of the correspondent banks' reports, by counting the cash on hand and comparing it with the books, or by examining the accounts of depositors, they were liable to the receiver of the bank for the money so embezzled.

5. APPEAL AND ERROR (§ 1015) — REVIEW — DISCRETION OF TRIAL COURT.

Where a trial judge, in his discretion, sets aside a judgment on the ground that it is against the weight of the evidence, his action will not be reviewed except on a showing that no verdict in favor of the party to whom the new trial was granted would be allowed to stand, in which event the granting of a new trial is deemed to be unjudicial, making it the duty of the Supreme Court to reverse.

Woodson and Walker, JJ., dissenting.

En Banc. Appeal from Circuit Court, Lafayette County; Samuel Davis, Judge.

Action by Charles Lyons, receiver, against John E. Corder and others. From an order setting aside a verdict for plaintiff, he appeals. Reversed, and cause remanded, with direction to reinstate the verdict.

The Middleton Bank was incorporated March 13, 1883, with a capital stock of $15,000. It was closed on the 2d of May, 1905, under orders of the Secretary of State. The plaintiff, Charles Lyons, was appointed receiver by the circuit court of Lafayette county on the 6th of May, 1905, and directed to bring this suit against the board of directors of said bank, who had been elected on April 14, 1904, for one year. The president of the bank having died before the institution of the suit, his executors were made defendants. Another executor having died after the suit was begun, the action was revived against his administrator. These representatives and the remaining members of the board of directors are the defendants to this action. E. H. Lewis, the cashier of the bank, was originally joined as defendant, but no service was obtained on him (he having absconded) and the suit was dismissed as to him. The action was originally in two counts. The second count was dismissed. It went to trial on the first count, which averred the incorporation of the bank and the election of the defendants as its directors, and alleged their failure to take a bond for the faithful performance of the duties of their cashier, E. H. Lewis, and their failure to discharge their duties as directors, in that they negligently failed and omitted to direct, manage, control, and watch the affairs and business of the bank as required by law, by reason of which the said bank became insolvent and lost during the year of their incumbency of office the sum of $37,650.71; that they negligently permitted said cashier during that period to become indebted and liable to said bank for overdrafts in large sums of money, and negligently failed to examine the books of said bank showing such overdrafts; that they negligently employed said cashier, who was a gambler and customer of bucket shops, which fact they either knew or by reasonable diligence could have ascertained; that, from the month of August, 1903, until the closure of the bank, said cashier had been converting the money of the bank to his own use, and at the time the bank was put in the hands of a receiver had embezzled funds in the sum of $78,129.46; that, in the accomplishment of this embezzlement, the said cashier made false entries on the books of the bank, showing, among other things, that he had issued drafts for small amounts, when, in fact, he had issued them for large amounts and cashed the same and converted the proceeds thereof, over and above the small amount for which said drafts were apparently issued, to his own use; that a full disclosure of these transactions would have been made to the directors if they had not negligently failed and omitted to examine the monthly statements of the correspondent banks where the raised drafts were cashed, and had not negligently failed to count the cash on hand and compare the same with the books of the bank, and make an examination or inspection of the accounts of the depositors of the bank; that they negligently failed to adopt any such methods of discovering the dishonesty of their cashier and his forgery of the drafts of the bank upon its correspondent banks; that they also negligently permitted the cashier to perform the duties of president, vice president, and of every other officer of the bank without any supervision or examination of his transactions in so doing; that the defendants negligently failed to appoint committees to examine and count the cash of the bank, and examine and compare with the books the bills discounted and the property of the corporation, and make an inventory of the same, but turned over the exclusive and absolute management and control of said bank to its said cashier. The petition further set forth, with great particularity, other instances of the negligent failure of the defendants to perform their duties as directors and trustees of the said bank, embracing 29 specifications of drafts drawn by its cashier on funds deposited in a bank in St. Louis and a bank in Kansas City. As an example of one of these transactions, the petition shows that said cashier, in August, 1904, caused the books of the Middleton Bank to show that draft No. 4426 on its correspondent bank in St. Louis was issued to himself as an individual for the sum of $25, and thereafter filled out so as to show that it was drawn for $2,500; that the latter sum was paid by the St. Louis bank a few days thereafter, and due report thereof was forwarded to the Middleton Bank; that in January, 1905, the said cashier caused the books of the said Middleton Bank to show that draft No. 43,580 was made upon its correspondent bank in Kansas City, payable to the cashier, for the sum of $10, which draft was afterwards filled out for the sum of $1,099.28, and the latter amount was duly paid by the correspondent bank at Kansas City, and due report thereof made in its statement subsequently rendered. Wherefore, for these and other matters alleged in the petition, the receiver prayed judgment for an amount embezzled from the bank during the year of the directorate of the defendants in the sum of $37,650.71. The defendants filed separate answers—all in the form of general denials.

During the course of the trial, plaintiff offered in evidence entries contained on the books of its correspondent banks in St. Louis and Kansas City, which showed the amounts paid by said banks on the said drafts drawn upon them by the cashier of the Middleton Bank. These books were produced by the respective employés of such correspondent banks, who had kept them and made the entries thereon. The court permitted these entries to be read in evidence, but afterwards excluded them upon the objection made by defendants that the entries were matters of hearsay and incompetent. This ruling of the court was duly excepted to. The entries on the books thus excluded showed the peculations of the cashier as charged in plaintiff's petition. Plaintiff also showed by the books of the Middleton Bank that the cashier was overdrawn during the last year of the bank's operation in the sum of $6,657.95. Plaintiff adduced evidence tending to show that the cashier of the Middleton Bank was known to be a trader in options or a patron of bucket shops while he was an officer of the bank; that the president of the bank had been notified that it was run as a "one man bank by the cashier." Plaintiff further proved that the correspondent banks of the Middleton Bank in Kansas City and St. Louis returned "reconcilement sheets" each month to the Middleton Bank, which showed the amounts and drafts paid on its account.

The defendants adduced evidence tending to show that they convened monthly in a directors' meeting; that their cashier bore a good reputation in the community; and that they were not actually apprised of his peculations and misconduct. Other facts as far as necessary will be stated in the opinion.

On the trial, plaintiff had a verdict for $18,955.90, which the court set aside on the ground that "the said verdict is against the weight of the evidence." From that ruling, plaintiff has appealed to this court, and...