Mohrenstecher v. Westervelt, 924.

• Decision Date: 21 March 1898
• Docket Number: 924.
• Parties: MOHRENSTECHER et al. v. WESTERVELT.
• Court: U.S. Court of Appeals — Eighth Circuit

87 F. 157

MOHRENSTECHER et al. v. WESTERVELT.

No. 924.

United States Court of Appeals, Eighth Circuit.

March 21, 1898

S. L Geisthardt, C. C. Flansburg, and W. H. Thompson, for plaintiffs in error.

O. A Abbott and John W. Blee, for defendant in error.

Before SANBORN and THAYER, Circuit Judges, and RINER, District Judge.

RINER District Judge.

This is a writ of error to review a judgment of the circuit court of the United States for the district of Nebraska, which was entered upon a verdict in favor of the defendant in error for the sum of $10,000, with interest from September 25 1894. The action was brought by Edgar M. Westervelt, receiver of the Citizens' National Bank of Grand Island, Neb., against George A. Mohrenstecher, Mary Mohrenstecher, William Stull, and A. W. Ocobock, upon a bond given by George A. Mohrenstecher, the cashier of the bank, as principal, and the other defendants as sureties. The petition contained three causes of action. In the first cause of action it was alleged, in substance, that the plaintiff was the duly appointed receiver of the Citizens' National Bank of Grand Island, Neb., and that the defendant George A. Mohrenstecher was the cashier of the bank from the 13th day of August, 1889, until the bank suspended payment, on the 4th day of December, 1893; that as such cashier he executed the bond upon which this suit was brought; that the bond provided that Mohrenstecher, as cashier of the bank, should execute the duties thereof with fidelity and integrity, and should faithfully perform and fulfill the trusts thereby in him reposed, and well and truly, at all times when thereto required, account for and render over to the bank all moneys, goods, chattels, and other things, the property of the bank, that came into his hands, possession, or control, so that no default, fraud, or failure should happen or be occasioned by any neglect or failure on his part to perform such duties as such cashier. It was then alleged that Mohrenstecher failed to perform his duties as cashier, and on or about the 29th day of December, 1891, appropriated to his own use $10,365.82 of the moneys of the bank, in his custody and possession as cashier, and used and applied the same in payment of certain real estate before that time purchased in the joint names of himself and one Alexander H. Baker; that this money was appropriated by the cashier under the trick, device, and pretense of loaning various sums of money upon the joint and several notes of said cashier and one Alexander H. Baker and M. J. Baker. The second cause of action alleged that Mohrenstecher, disregarding his duties as cashier, loaned one Alexander H. Baker, on his own note, and jointly with others, a sum largely in excess of the sum of $6,000, of the moneys of said bank in his custody as cashier, viz. the sum of $18,522.95; that this indebtedness was evidenced by a note of Alexander H. Baker and M. J. Baker for the sum of $8,157.13, and two joint notes of Alexander H. Baker and George A. Mohrenstecher (being the notes mentioned and described in the first cause of action), amounting to the sum of $10,365.82. The third cause of action alleged that Mohrenstecher loaned to himself individually, and jointly with others, a sum greater than 10 per cent. of the bank's capital stock, viz. the sum of $17,321.82; that this amount was evidenced by two notes aggregating $10,365.82, described in the first cause of action, and a note of George A. Mohrenstecher and Mary Mohrenstecher amounting to $5,990, and several smaller notes executed by George A. Mohrenstecher aggregating $966. The defendants filed separate answers. Each answer admitted the incorporation of the bank, its suspension of payment, the appointment of a receiver, the execution and delivery of the bond, and the signing and placing by Mohrenstecher, as cashier, among the bills receivable of the bank, of the two notes described in the first cause of action, aggregating $10,365.82, and denied each and every allegation in the petition contained, except those thereinbefore specifically admitted. The answers of three of the sureties, after making the above admissions and denial, alleged, in substance, that the term for which George A. Mohrenstecher was appointed cashier, by the action of the board of directors of the bank, terminated on the 4th day of January, 1890; that when Mohrenstecher was appointed cashier, and when his bond was given, he was indebted to the bank in an amount exceeding 10 per cent. of its capital stock; that this fact was known to the officers and directors of the bank, but was concealed from the sureties on the bond, with intent to mislead and defraud them; that when George A. Mohrenstecher was reappointed cashier, on the 14th day of January, 1890, he was indebted to the bank in an amount exceeding 10 per cent. of its capital stock, which the officers and directors knew, but of which the sureties on the bond were ignorant; that such reappointment, under the circumstances, was a fraud on the sureties; that the two notes complained of, aggregating $10,365.82, were in fact not a debt of the cashier, but represented a legitimate bank transaction, growing out of a purchase of certain real estate, known as the 'Hurford Property,' on January 25, 1890; that Mohrenstecher as cashier, purchased the property on the date above mentioned for the benefit of the bank, for the purpose of realizing upon a claim which the bank held against Hurford; that the title was taken in his name, and the name of Alexander H. Baker in trust for the bank; that the money used to pay for it was replaced by four promissory notes (one for $6,000 executed by the vice president, William Hagge; one for $6,000 executed by the teller, William Geddes; one for $6,000 executed by Richard Koenig, son of the president of the bank; and one for $4,250 executed by George A. Mohrenstecher and Alexander H. Baker); that a loan was afterward effected on the property, in the sum of $12,000, and the proceeds thereof were turned in to the bank, and used to cancel the notes of Geddes and Koenig; that thereafter a further sum of $5,000 was procured by Mohrenstecher and Baker for the benefit of the bank, and applied in partial satisfaction of the note of Hagge; that the notes for the remainder of the purchase price, evidenced by the notes still outstanding, were from time to time renewed, until, with the accumulation of interest and taxes, they amounted to the sum of $10,365.82, which sum was evidenced by the two notes mentioned in the first cause of action; that the notes mentioned in the first cause of action, were, for a valuable consideration, extended by the officers of the bank without the knowledge or consent of the sureties; that, soon after the Hurford property was purchased by Mohrenstecher, William Stull, on behalf of himself and the other sureties on the bond, proceeded to Grand Island, and there made inquiry of the cashier himself, also of the president and vice president of the bank, in regard to the transaction and the cashier's relation to the bank, and was informed by each of them that the Hurford purchase was a bank transaction, and not a private speculation on the part of the cashier; that it involved the cashier in no liability to the bank; that he owed the bank nothing, beyond a small, nominal sum; that nothing whatever had been done which involved them in any liability upon the bond; that Stull and the other sureties relied upon that information, and took no action to indemnify themselves; that Mohrenstecher at that time had ample property to secure the sureties for any loss which they might have incurred by reason of their suretyship, but at the time when this suit was brought, and ever since, he was, and has been wholly insolvent, and the receiver is now estopped, by reason of these facts, from claiming any liability upon the bond against the sureties; that, when the bond was executed by Mary Mohrenstecher, she was a married woman, and the bond was not signed by her with reference to, or upon the faith of, her separate estate; that under the laws of Nebraska, she was thereby exempt from liability on the bond. This same defense is also set out in her answer. The answer of George A. Mohrenstecher was substantially the same as the answer of the sureties, in relation to the purchase of the Hurford property, and the execution of the notes described in the first cause of action. Replies putting in issue the new matter set up in the answers were duly filed. There was a trial, and verdict and judgment in favor of the plaintiff for the sum of $10,000 and interest. The case has been once before this court, on a writ of error sued out by the plaintiff in the circuit court to review a judgment rendered against him by that court upon the pleadings. 76 F. 118.

Numerous errors are assigned, but we shall not find it necessary to discuss them separately. Several of them raise the same questions presented to and decided by this court when the case was first before it. That these questions are not now open for re-examination is well settled. Balch v. Haas, 36 U.S.App. 693, 20 C.C.A. 151, and 73 F. 974; Thatcher v. Gottlieb, 19 U.S.App. 469, 8 C.C.A. 334, and 59 F. 872; Supervisors v. Kennicott, 94 U.S. 498; Clark v. Keith, 106 U.S. 464, 1 Sup.Ct. 568.

The court instructed the jury that the making of an excess loan in the absence of fraud, would not of itself constitute a breach of the cashier's bond, that such fact was not material to the issues in the case, and that the jury should not give such fact any weight in arriving at a verdict; thereby eliminating from the controversy everything except the issues presented by the first cause of action. It becomes unnecessary, therefore, to consider the assignments of error by which it is sought...