Manley v. State, (No. 6160.)

• Citation: 144 S.E. 170,166 Ga. 563
• Decision Date: 11 July 1928
• Docket Number: (No. 6160.)
• Parties: MANLEY. v. STATE.
• Court: Supreme Court of Georgia

166 Ga. 563

144 S.E. 170

MANLEY.

v.STATE.

(No. 6160.)

Supreme Court of Georgia.

July 11, 1928.

(Syllabus by the Court.)

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Error from Superior Court, Fulton County; G. H. Howard, Judge.

W. D. Manley was convicted because of the fraudulent insolvency of a bank of which he was president, and he brings error. Affirmed.

W. D. Manley and others were jointly indicted. The indictment charges them with the offense of felony, for that the accused, in the county of Fulton, this state, on July 12, 1926, Manley being president of the Farmers' & Traders' Bank, a chartered bank incorporated under the laws of this state, and he and the other defendants being directors of said bank, and being charged with the fair and legal administration of its business and affairs, and during their said official charge and responsibility, "said Farmers' & Traders' Bank did become fraudulently insolvent, contrary to the laws of said state, the good order, peace, and dignity thereof." Manley demurred to the indictment, upon grounds which appear in the opinion. The demurrer was overruled, and he assigns error on that ruling. The jury returned a verdict finding the defendant guilty. He moved for a new trial upon the general grounds and upon many special grounds which appear from the opinion.

According to the evidence, the Farmers' & Traders' Bank had a capital of $25,000. The defendant was one of its directors from its organization in 1900, and was its president from 1914 to July 12, 1926, when it was placed in the hands of the superintendent of banks. The defendant was president of the Bankers' Trust Company. When the Farmers' & Traders' Bank closed, its books showed that it was solvent, treating its bills receivable and assets as of their face value.

E. B. Lewis was cashier of this bank from June 5, 1925, until it closed. He had 12 years' experience in banking. A run on the bank began on Saturday before it closed on Monday. When it opened on Monday it bad only $7,000 in cash. Before opening on that day, the cashier told the defendant that this sum was not sufficient in case there was a run on the bank. The defendant told him to open the bank, that there was nothing wrong, and he would take care of it. The defendant did not make any arrangements to supply the necessary money. Later on Monday he sent a written notice, signed by him and the other directors of the bank, placing the bank in the hands and control of the superintendent of banks, which notice was posted on the door of the bank; and the superintendent of hanks took possession. The banks composing the Atlanta Clearing House refused to handle the clearing account of this bank. Its balance was insufficient. The cashier informed the defendant that the bank was insolvent. During a period of about 30 days preceding the closing of the bank, the defendant drew out various amounts approximating $90,000, and placed them with various banks composing the chain of banks of which this bank was one. As these amounts were drawn out, he would instruct the cashier to make an entry on the books of this bank, charging each bank with the amount it got. That memorandum or instruction came from the Bankers' Trust Company. The defendant drew the checks for these amounts at the Bankers' Trust Company, and not at this hank. The bank did not get any security in any shape or form for this withdrawal of $90,000. It did not get notes therefor. The money was from the deposits in the bank. The books of the bank showed $17,000 profit and loss, treating its assets and bills receivable at their face or book value. This wiped out the surplus and impaired the capital of the bank approximately $2,000. There were $103,000 withdrawn and paid on notes negotiated by the Bankers' Trust Company with this bank. Most of those notes were renewals.

After the bank closed, a committee composed of the cashier and assistant cashierof the bank and three depositors appraised the value of the bills receivable held by this bank. Of the notes representing the $103,000, the committee appraised as good $2S, 000, as doubtful $19,000, and as worthless $55,500. This appraisal was unanimous. Lewis, the cashier, testified:

"I think I have personal knowledge of the assets and liabilities of this bank as a whole when it closed. Judging from the assets and liabilities, I would say that it was certainly insolvent within 30 days from the time we had the withdrawal of $90,000, and that it was certainly insolvent when they withdrew that $90,000. My opinion is that it was insolvent the day I took it over the year before."

The Bankers' Trust Company borrowed from the National Park Bank $20,000, and the Farmers' & Traders' Bank furnished about $40,000 of its collateral to secure this loan. This paper matured in 90 days. The cashier of this bank was instructed by the treasurer of the Bankers' Trust Company to reshape the collateral and return it to the New York bank with a removal note, which he did. The collateral securing this note amounted to over $39,000. The cashier then thought the paper was renewed in New York, and made entries on the bank books charging the New York bank with the $20,000. In a few days the cashier was advised that the note was refused renewal in New York, and that the defendant took the collateral over as a personal matter. The cashier then made the proper entries on the bank books, crediting bills receivable with the $20,000, and charging the defendant. In a day or two the defendant instructed the cashier to credit his checking account with $5,000 of that $20,000, for which he held collaterals amounting to $39,000. This bank had a time certificate outstanding in favor of Lodi Trust Company for $9,500. About the time this crash came, the defendant instructed the cashier to send him immediately $20,000 of the best collateral the bank had, not to include anything from the Bankers' Trust Company. This the cashier did. After deducting $55,500 out of the above notes amounting to $103,000, $39,000 of notes to secure the transaction with the defendant, $20,000 in notes to secure the Lodi Trust Company, and the $90,000 cash withdrawn and placed with the various chain member banks, the notes of the bank amounted to $386,000. The committee appraised 52 per cent. of these notes as good, $114,000 of the bills receivable of the bank as worthless (this including $55,-000 of the above $103,000 in notes appraised as worthless), and $168,000 of the bills receivable of the bank as doubtful.

R. E. Bentley, an auditor of 21 years' practical experience in banking, as an officer of both small and large banks, testified as follows:

"Have made quite an extensive examination along certain lines of the Farmers' & Traders' Bank. Have examined the books of the bank

and others in connection with this investigation. Have read the minutes of the bank in arriving at my conclusion. From the information in the record, it is very clear to me as a banker that the bank had been insolvent since the first of 1915. * * * When I stated that in my opinion this bank was insolvent and that the insolvency dated back as far as 1915, I eliminated from consideration the capital stock or capital and surplus, and considered a reasonable time within which to liquidate the assets of the bank. I excluded undivided profits. In offsetting the liabilities against the assets in the manner in which I said I did it, it is now my opinion, after considering all of those things I have been asked about, that the bank was insolvent as far back as 1915."

Clifford Cagle, an accountant and auditor, was employed to examine the affairs of this bank after it went into the hands of the state hank examiner. He was assisted by J. E. Perry, an accountant. They examined the books of the bank. He testified that, according to the trial balance on the books, the assets were $575,016.49, and the liabilities, exclusive of capital and surplus, amounted to $531,000. lie took down the assets as they were appraised hy the committee above referred to. According to this appraisal, $114,-420.4S of the notes of the bank were worthless, and $168,159.04 were doubtful. "After taking the worthless assets alone, after deducting the assets appraised as worthless by the appraisal committee, * * * it would reduce the assets to such an extent that the capital and surplus would be wiped out, and there would be a deficit of $76,495. * * * After you deduct the assets appraised as doubtful by the committee, of $168,159, that would leave the deficit over and above all the assets and the capital stock of $244,654.59. * * * After that is done, that leaves the liabilities deducting the capital stock and surplus as shown by the books, the liabilities would be $537,000, and your assets $292,000 and some dollars. That would leave, then an insolvency of the difference between $292,000 and $513,000." The bank had deposits subject to check of $211,343.67, deposits in the savings department of $127,714.02, and certificates of deposit amounting to $51,519.69; total $390,577.38. The bank owed other banks $32,010.55. The bank owed the Bankers' Trust Company on open account $1,124.42, and accounts payable $206.43, making a total of $464,918.78. The real estate of the bank consisted of the banking house on Peters street, some property in Florida, a lot on East Fair street, and some property in Crystal City, Tex. They carried this property on the books as of the value of $29,675, 62. It was appraised at $20,600. "According to the books, and defining solvency as meaning excess of assets over liabilities other than capital stock and surplus, the books would show that the bank was solvent. * * * Whether that wastrue would depend upon what the assets were worth that they carried."

Z. G. McGee was the assistant liquidating agent in charge of this bank under the state banking department. He had had the report of Mr. Cagle and Mr. Perry in his office. According to this report, $114,420.48 of the...