McCarthy v. Brockton Nat. Bank
| Decision Date | 30 June 1943 |
| Citation | 314 Mass. 318,50 N.E.2d 196 |
| Parties | MARY AGNES MCCARTHY v. BROCKTON NATIONAL BANK. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
April 6, 1943.
Present: FIELD, C.
J., DONAHUE LUMMUS, QUA, & RONAN, JJ.
Deceit. Fraud.
Agency, Scope of authority or employment. Corporation, Officers and agents Ultra vires. Bank and Banking. National Bank. Proximate Cause. Damages, For tort. Interest.
Evidence of conduct of the president of a national bank respecting transactions of a woman customer of the bank with an investment corporation organized by the bank and doing business on the bank's premises warranted a finding that he was acting within the scope of his apparent authority, and bound the bank, when he stated to the customer, after the liquidation of the investment corporation, that one, who had been its manager and with whom she had dealt upon the president's assurance that he was a manager of the investment department of the bank, still was working for the bank so far as the bank's customers were concerned and that the bank "stood behind everything he said or did."
Ultra vires was not a defence to an action to recover from a national bank damages sustained by reason of fraud of one of its officers acting within the scope of his authority even if the fraud was perpetrated in a transaction in which by statute the bank was not authorized to engage and it derived no benefit therefrom.
Misrepresentations made to a customer by the president of a national bank within his apparent authority and with intent that the customer should act in reliance thereon, to the effect that a certain person to whom the president advised delivery of negotiable securities was working for the bank so far as its customers were concerned and that the bank
"stood behind everything he said or did," warranted a finding for the customer in an action of deceit against the bank for loss sustained by the ustomer through defalcation by the customer through defalcation by that person, to whom he had delivered securities without knowledge of the falsity of the representations and in reliance on them and on the advice so given.
A finding was warranted that deceitful statements, made by the president of a bank to its customer to the effect that a certain person whom he advised the customer to entrust with negotiable securities was an employee of the bank and that it "stood behind everything he said or did," were the proximate cause of loss sustained by the customer through defalations of such person after delivery of securities to him.
At the trial of an action for deceit against a national bank, evidence of transactions of the plaintiff, a customer of the bank, with a certain person over a period of years on the strength of deceitful representations by the bank's president that such person was an employee of the bank and that it "stood behind everything he said or did," did not warrant a finding of damage sustained by the plaintiff until a transaction resulting in loss to him through a defalcation by such person after the plaintiff had entrusted him with securities in reliance upon such representations; and the measure of damages for such loss was the market value of the securities at the time they were delivered to him by the plaintiff.
Damages consisting of the value of securities lost as a proximate result of deceit of the defendant might be increased by the addition of interest in the discretion of the jury.
CONTRACT OR TORT. Writ in the Superior Court dated July 13, 1939. The case was tried in the Superior Court before Greenhalge, J., and a verdict was returned for the plaintiff on a count for deceit. The defendant alleged exceptions.
R. S. Wilkins, for the defendant. T. H. Mahony, for the plaintiff.
The plaintiff, who had been a depositor in the defendant bank for many years, visited the bank in August, 1929, to make an inquiry as to whether she should hold or sell certain rights which had been issued to her as a stockholder in a public service corporation. She met the defendant's president one Fillebrown. He told her that the bank had a new manager one Oburg, whose duty it was to deal with securities owned by the customers of the bank and to advise them about investments. This, he said, was a service which the bank was offering to its customers and she might as well avail herself of it. He stated that Oburg was honest, reliable and experienced and that the bank "stood behind everything he said or did." The bank, she was told, had reserved a safety deposit box for the securities of customers who had left them to be handled by the bank and that this box could be opened only by Oburg in the presence of two of the officers of the bank. He further said that the certificates that she wished the bank to manage for her should be indorsed in blank; that they would be kept in the safety deposit box and any gains from the sale, purchase or exchange of securities would be credited to her savings account at the bank. He then introduced her to Oburg. Fillebrown repeated what he had told her as to Oburg's position in the bank. After discussing the retention or sale of the rights, she left them with Fillebrown and Oburg. They were sold and her account at the bank was credited with the proceeds. She was so advised in a letter from Oburg upon a letterhead of the Brockton National Company. This letterhead contained the names of the officers of the company and a picture of the defendant bank. She called at the bank within a few days and brought various certificates of stock which Fillebrown told her to indorse in blank; this she did and gave them to him. He gave her a receipt for them. The last time she saw them they were on a desk in Oburg's office. Both Fillebrown and Oburg were there.
The board of directors of the defendant in June, 1927, had appointed a committee to investigate the establishment of a bond department. The records of the board state that "it was the sense of the meeting that a securities department could well be established," and the plan of the Old Colony Corporation seemed most feasible. It was then voted that the committee have definite papers drafted along the lines suggested by the committee for final consideration. The Brockton National Company, hereafter called the company, was organized. One half of the shares were held by the Old Colony Corporation and one half by trustees under a trust agreement whereby stockholders of the bank could subscribe for as many shares as they held in the bank. Fillebrown was president of the company; one of the vice-presidents of the defendant was a vice-president of the company; another vice-president was the treasurer and clerk of the company. These three officers of the defendant, together with another vice-president of the defendant and a director of the defendant, comprised the board of directors of the company. Oburg was the manager of the company. He was not an official or employee of the defendant. The company occupied space at the bank from August 1, 1927, until December 31, 1932. The space was located next to the tellers' cages. It was separated from the rest of the bank by a marble wall as high as the jury rail, and entrance was through a metal gate. This space was rented from the bank. There were two lighted signs, one read "Brockton National Co." and the other "Investment Securities." There was testimony that the bank prior to 1929 and afterwards was purchasing and selling securities upon order of its customers. The defendant's board of directors voted on October 24, 1932, "to recommend to the directors of the Brockton National Company that they take such action as may be necessary to legally dissolve the Brockton National Company." The company was liquidated on December 30, 1932, and dissolved by St. 1934. c. 187, Section 1. Oburg opened an office in another building in his own name in January, 1933, and maintained this office until he was adjudged a bankrupt in 1937.
The plaintiff saw Fillebrown in March, 1934. He told her that on account of a new securities law Oburg could no longer occupy space in the bank but that Oburg was working for the bank in so far as the bank's customers were concerned, and that transactions must take place in Oburg's new office. Fillebrown said that Oburg was honest and trustworthy, and that the bank "stood behind everything he said or did." He told her to go to Oburg's office and exchange her bank receipts for receipts which Oburg would give her in his name to comply with the change in the law; that as far as the bank was concerned she would be covered by the new receipts. He said he would keep her securities at the bank and deliver them to Oburg. She went to Oburg's office on March 6, 1935, surrendered the bank receipts and got the new receipts. When she did not get a dividend after January 15, 1935, on one of her securities, she saw Oburg in April, 1935, who told her to be patient as he was "moving her stocks around to make more money for her." She did not know how he could do that without selling the stock but she did not then know the stock had been sold. The plaintiff had left her stocks with the idea that the bank would use its discretion in disposing of them and she knew that Oburg was to be the one who would do what was to be done as she understood "he was manager of the department."
Fillebrown died on February 2, 1935. Oburg sold all the plaintiff's stocks in March, 1935, and paid nothing to the plaintiff. She did not learn until after his bankruptcy in 1937 that he had disposed of her securities.
We have now recited many of the salient facts which the jury could find from the evidence. The jury returned a verdict for the plaintiff for $20,000, the ad damnum of the writ, on a count for deceit. The case is here on various...
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