Lyons v. Corder
| Decision Date | 24 December 1913 |
| Citation | 162 S.W. 606,253 Mo. 539 |
| Parties | CHARLES LYONS, Receiver, Appellant, v. JOHN C. CORDER et al |
| Court | Missouri Supreme Court |
Appeal from Lafayette Circuit Court. -- Hon. Samuel Davis, Judge.
Reversed and remanded (with directions).
Horace F. Blackwell and Alexander Graves for appellant.
(1) The directors were guilty of negligence per se in failing to require an official bond of the cashier. This conduct was in direct violation of law. (2) The directors cannot be heard to say they were not apprised of facts shown to exist by the ledgers, books, accounts, correspondence, reconcilements and statements of the bank which would have come to their knowledge except for their gross neglect or inattention. Hall v. Henderson, 61 L.R.A. 640, 126 Ala. 449; Society of Shakers v. Underwood, 15 Am. Rep. 737, 9 Bush, 609; Regan v. Bank, 61 N.E. 575. (3) The law conclusively presumes that a director knows all these things (even though in fact he be ignorant), including the state of the cashier's account and the bank's condition Bank v Wulfekuhler, 19 Kan. 63; Marshall v. Bank, 17 Am. St. (Va.) 86; Elliott v. Bank, 57 S.E. (W. Va.) 242; Campbell v. Watson, 50 A. 125. (4) It is immaterial that the directors got no salary. Williams v McKay, 40 N.J.Eq. 189, 53 Am. Rep. 776; Marshall v Bank, 17 Am. St. (Va.) 92; Hun v. Cary, 82 N.Y. 73; Warner v. Robinson, 75 Am. St. 739; Thompson on Corporations, sec. 4108; Bank v. Hill, 148 Mo. 392; Stone v. Rottman, 183 Mo. 597; Martin v. Webb, 110 U.S. 52. (5) The evidence shows that directors Bray and John Corder had actual knowledge that the cashier was an option gambler; and, as his gambling was notorious in the little village of Waverly, the jury was right in finding that all the directors knew the same thing. Conover v. Berdine, 69 Mo. 126; Dickenson v. Crisman, 28 Mo. 139; Bensoit v. Darby, 12 Mo. 206; Stephenson v. Kilpatrick, 116 Mo. 268. (6) All books of original entries used on the trial of the case were fair on their face and were shown to have been accurately kept and written up daily in the usual course of the business to which they pertain and were therefore competent, and sufficient evidence, in connection with the oral evidence adduced to the jury, to support the verdict. Milling Co. v. Walsh, 108 Mo. 277; Robinson v. Smith, 111 Mo. 205; Seligman v. Rogers, 113 Mo. 642; 1 Greenleaf on Ev. (15 Ed.), sec. 115. (7) Plaintiff's evidence showed conclusively that from April, 1904, to April, 1905, the directors permitted Cashier Lewis to overdraw his personal account $ 6657.95; and during the same time, discarding drafts numbered 4538 and 4894, named in the petition but unsupported by the evidence, he stole of the bank's funds deposited with its two correspondents $ 35,847.91, aggregating $ 42,505.86 for which the jury would have been justified in rendering a verdict. Wherefore, we submit that the judgment ought to be reversed and cause remanded with directions to render judgment on the verdict.
W. H. Chiles, William Aull, D. D. Duggins and W. M. Williams for respondents.
(1) This court will not interfere with the action of the trial court in granting a new trial on the ground that the verdict was against the weight of the evidence. Garneau v. Herthel, 15 Mo. 191; McCarty v. Transit Co., 192 Mo. 402; Fitzjohn v. Transit Co., 183 Mo. 78; Casey v. Transit Co., 186 Mo. 232; Foley v. Harrison, 232 Mo. 507; McKay v. Underwood, 47 Mo. 187; Reid v. Cox, 58 Mo. 429; Smoot v. Kansas City, 194 Mo. 532; Johnson v. Grayson, 230 Mo. 393. (2) Power to make by-laws for corporations, including banks, vested solely in shareholders. Carroll v. Bank, 8 Mo.App. 249; Trust Co. v. Lumber Co., 118 Mo. 457; Klix v. St. Stanlaus Parish, 137 Mo.App. 358. (3) The case of Society of Shakers v. Underwood, cited by appellant, is not regarded as sound law. Thompson on Liability of Officers, p. 381; 13 Am. Law Reg. (N. S.) 218, and notes -- held by Redfield to be unsound. (4) The respondent directors are not liable under the evidence and the law. The cases cited by appellant in Point 3 including Savings Bank v. Wulfenkuhler and Marshall v. Farmers Bank combatted and distinguished: Briggs v. Spaulding, 141 U.S. 132; Mason v. Moore, 76 N. E. (Ohio) 932; Current Law, p. 360; Stone v. Rottman, 183 Mo. 572; Wakeman v. Bailey, 51 N.Y. 32; Daugherty v. Poundstone, 120 Mo.App. 309; Bank v. Hill, 148 Mo. 380; Utley v. Bank, 155 Mo. 264; Swentzel v. Bank, 15 L.R.A. 315; Spering's Appeal, 71 Pa. St. 11; Maisch v. Savings Fund, 5 Phila. 30; In re Dean Coal Co., L.R. 10 Ch. 450-51; Manhattan Co. v. Lydig, 4 Johns. 389; Turquand v. Marshall, L.R. 4 Ch. 382; Dunn v. Kyle, 77 Ky. 134; Brannin v. Loving, 82 Ky. 370; Warfield v. Clark, 91 N.W. 833; Zane on Banks and Banking, 122; Jones v. Johnson, 86 Ky. 530. (5) The case of Williams v. McKay, cited by appellant, is discussed and distinguished in Fusz v. Spaunhorst, 67 Mo. 264. (6) For complete quotation of remarks of Harlan, J., in Martin v. Webb, a portion of which were omitted by appellant, see Martin v. Webb, 110 U.S. 15. (7) Statutory requirements of board of directors. R.S. 1899, sec. 1281; R.S. 1909, sec. 1099. (8) The books of Mechanics National Bank and Union National Bank and the entries therein were not competent evidence in this case. Hissrick v. McPherson, 20 Mo. 310; Lord v. Siegel, 5 Mo.App. 582; Hanson v. Jones, 20 Mo.App. 601; Hengsgen v. Mulaly, 23 Mo.App. 613; G. S. 1865, ch. 144, secs. 1 and 2; Anderson v. Vollmer, 83 Mo. 403; Milling Co. v. Walsh, 108 Mo. 277; Robinson v. Smith, 111 Mo. 205; Seligman v. Rogers, 113 Mo. 642; Wilcoxen v. Garr, 139 Mo. 660. (9) The law lays down the measure of a director's duty, to-wit: Such care as an ordinarily prudent person would exercise under similar circumstances; the application of the rule to particular facts is for the jury. Any other practice would require the court in each instance to declare, as a matter of law what is negligence and what is diligence. After the event, it is easy to determine its cause and to suggest a preventive. There have been few bank failures -- probably none -- after which, it could not be easily pointed out that a simple precaution, not thought of before by the most careful, would have prevented the disaster. If the courts can declare, as a matter of law, that this precaution should have occurred to the minds of the directors and applied in the particular instance, no question of fact can ever arise in such cases. A jury has no duty to perform in them. Stone v. Rottman, 183 Mo. 573; Hun v. Cary, 82 N.Y. 78; 10 Cyc. 830; 1 Morawetz on Private Corporations (2 Ed.), sec. 552; Marshall v. Bank, 8 S.E. 590; Mining Co. v. Ryan, 44 N.W. 46; Davenport v. Prentice, 110 N.Y.S. 1056, 198 N.Y. 570; Daugherty v. Poundstone, 120 Mo.App. 307.
OPINION
BOND
In Banc.
STATEMENT.
The Middleton Bank was incorporated March 13, 1883, with a capital stock of $ 15,000. It was closed on the 2nd 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 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...
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