Pensacola Bank & Trust Co. v. National Bank of St. Petersburg

• Decision Date: 02 April 1910
• Citation: 59 Fla. 347,52 So. 294
• Court: Florida Supreme Court
• Parties: PENSACOLA BANK & TRUST CO. v. NATIONAL BANK OF ST. PETERSBURG.

52 So. 294

59 Fla. 347

PENSACOLA BANK & TRUST CO. v. NATIONAL BANK OF ST. PETERSBURG.

Florida Supreme Court, Division B.

April 2, 1910

Rehearing Denied May 4, 1910.

Error to Circuit Court, Hillsborough County; J. B. Wall, Judge.

Action by the Pensacola Bank & Trust Company against the National Bank of St. Petersburg. There was a directed verdict for defendant, and plaintiff brings error. Affirmed.

See also, 50 So. 414.

Syllabus by the Court

SYLLABUS

A bank dealing with the cashier of another bank, who is permitted by the directors to have complete control of its business relations with other banks, has a right to trust in the integrity of the cashier of the latter, and transact business with him accordingly, where there is nothing in the known state of affairs of the latter bank, or of the cashier's relation to it, to excite suspicion that he is using his position to the prejudice of his bank.

S. was the cashier of a bank in the city of P., and was permitted by the directors to have complete control over the dealings of his bank with other banks and of its mail. In February, 1907 he, in behalf of his bank, entered into business relations with a bank at St. P., by which his bank was to keep a balance of $5,000 with the bank of St. P., and the latter would receive certain collections for the former bank and credit the same to bank at P. A business of several thousand dollars a month was thus carried on between the two banks including the discounting of a note by one of the stockholders of the P. bank, which was finally charged up to the P. bank at the request of S. On the 26th of July, 1907 S. wrote the cashier of the St. P. bank inclosing his own note for $5,000, accompanied by good collateral, and requested that his note be discounted and the proceeds placed to the credit of the P. bank. This was done, and on September 11, 1907, at the request of S., this note was charged up to the P. bank and the collateral returned to it. Regular monthly statements showing these and all other transactions were sent by the St. P. bank to the P. bank, and no objection to the charging of S.'s note to the P. bank was made until the latter part of November, 1907. In a suit by the P. bank against the St. P. bank to recover the amount of the $5,000 note of S. which was charged up to the P. bank, it is held that under this statement of facts the P. bank is not entitled to recover.

COUNSEL Blount & Blount & Carter and F. M. Simonton, for plaintiff in error.

P. O. Knight and C. C. Whitaker, for defendant in error.

OPINION

HOCKER J.

The Pensacola Bank & Trust Company, a corporation organized under the laws of Florida, sued the National Bank of St. Petersburg, Fla., in the circuit court of Hillsborough county, in an action at law, in February, 1908. The declaration contained counts for $5,000, money received, for a like sum moneys expended, for a like sum work and labor, for a like sum moneys delivered and wrongfully paid out on the individual note of G. C. Scudamore, for a like sum of money of plaintiff used by the defendant, for a like sum of money found to be due plaintiff on account stated. The damages claimed are $10,000. A bill of particulars is attached to the declaration. The defendant pleaded it was never indebted, it did not promise as alleged, and payment. The case was tried on these pleas. After the evidence was all submitted and the law of the case was being considered by the circuit judge on sundry instructions which were presented to him by the parties, the judge announced his view of the case to the effect that in his opinion the plaintiff was not entitled to recover. He then instructed the jury to find a verdict for the defendant, which it did, and a judgment in favor of the defendant was then entered. The plaintiff has brought the case here on a number of assignments of error. We have read the evidence with care, and with our view of the law applicable thereto we are unable to see that the circuit judge erred.

The National Bank of St. Petersburg was organized as a national bank in 1905. Mr. T. K. Wilson was its cashier before and during the time when the transactions occurred which brought about the litigation in this case. The Pensacola Bank & Trust Company was organized as a state bank in January, 1907, and G. C. Scudamore was its cashier. Scudamore and Wilson came to this state from Kentucky, were acquainted, and had business relations with each other before coming to this state. In February, 1907, Scudamore, the cashier of the Pensacola Bank, wrote to Wilson, the cashier of the St. Petersburg Bank, offering to enter into business relations on the part of his bank with the latter bank, which he represented would be of advantage to both banks. He offered on the part of his bank to keep an average balance of $5,000 with the St. Petersburg Bank on the condition that the latter bank should receive certain collections for the former and credit the same to the Pensacola Bank--in other words, in the phraseology which they use--to clear its collecting items at par. These terms were accepted, and an account was opened in February, 1907, by the Pensacola Bank with the St. Petersburg Bank. It seems that the first item of this account was a note of $5,000 made by a Mr. Gordon, who seems to have been a stockholder in the Pensacola Bank, and the note was intended to raise money to pay for his stock in the latter bank. Scudamore rote Wilson that he was anxious to interest Gordon in the bank, and that later on, if Gordon wanted to carry the note, the Pensacola Bank would take it from the St. Petersburg Bank and carry it. The note was renewed with the St. Petersburg Bank, and on August 20, 1907, at the request of Scudamore, was charged to the account of the Pensacola Bank. No objection appears to have been made to this action by the Pensacola Bank, though a statement was sent it showing the transaction. The business thus begun between the two banks continued from February, 1907, until some time in November, 1907. The accounts filed show that it amounted to several thousand dollars each month. The St. Petersburg Bank seems to have paid most of its indebtedness to the Pensacola Bank in New York Exchange at the request of the latter. On the 26th of July, 1907, Scudamore wrote Wilson, inclosing his own individual note for $5,000, to the St. Petersburg Bank, and requested the latter to discount the note and place the proceeds to the credit of the Pensacola Bank. This note was accompanied by collateral security in the form of a note for $5,000 executed to Scudamore personally by parties who are represented as perfectly good for the amount. The note was discounted by the St. Petersburg Bank on the 29th of July, 1907, as requested by Scudamore, and the proceeds, $4,970, was placed to the credit of the Pensacola Bank. On September 11, 1907, at Scudamore's request, this note was charged to the account of the Pensacola Bank and the collateral security returned with the note. A monthly statement showing this transaction was sent to the Pensacola Bank containing this request: 'If your account is incorrect notify at once.' And no objection was made to it until the 27th of November, 1907, when Mr. Bass, the president of the Pensacola Bank, wrote to Mr. Wilson, the cashier of the St. Petersburg Bank, stating that the latter had no right to charge the note of Scudamore for $5,000 to the Pensacola Bank, and demanding that the amount be sent to the latter by return mail. On the 30th of November, 1907, Cashier Wilson answered this letter and stated that the understanding was when the loan was made it would at maturity be charged to the Pensacola Bank; that he simply carried out instructions; and that so far as the St. Petersburg Bank was concerned the matter was closed. Up to this time all of the business correspondence on the part of the Pensacola Bank with the St. Petersburg Bank, and all the financial arrangements between them, were conducted by Scudamore exclusively. After this time a good deal of correspondence took place between the two banks in regard to this Scudamore note; the St. Petersburg Bank maintaining that it was fully authorized to do what it had done. About this time the financial panic of 1907 was becoming acute, and the officers of the Pensacola Bank seem to have begun to take some interest in the affairs of the bank. An investigation was made, and it was found that Scudamore had appropriated over $70,000 of the money of the bank. It was discovered that on the 26th of June, 1907, he had appropriated $2,500 of the Pensacola Bank's cash and had charged the same to the St. Petersburg Bank, and left the books in such shape that the matter could not be traced any further. On July 27, 1907, Scudamore charged the St. Petersburg Bank on the books of the Pensacola Bank with $2,500 and credited himself on his individual account with that amount. There is no evidence to show that the St. Petersburg Bank had any knowledge of these transactions, and no evidence that any one of the directors or officers of the Pensacola Bank knew of them until some time in the latter part of November, 1907, or even later, when the books of the latter were examined by an auditing company.

Mr Wentworth testified that he was a director of the Pensacola Bank from the opening of the bank until about 1st of January, 1908; that his bank did not have a finance committee whose duty it was to reconcile statements of accounts between his and other banks doing business with it; that Scudamore generally attended to this; that he does not know who received the various statements sent to the Pensacola Bank by other banks; that he was not present when the mail came in, did not examine these statements until after this trouble arose about the 24th of November, when 'we...