Schneider v. Thompson

• Decision Date: 12 April 1932
• Docket Number: 9275.,No. 9265,9265
• Citation: 58 F.2d 94
• Parties: SCHNEIDER v. THOMPSON. THOMPSON v. SCHNEIDER.
• Court: U.S. Court of Appeals — Eighth Circuit

58 F.2d 94 (1932)

SCHNEIDER v. THOMPSON.

THOMPSON v. SCHNEIDER.

Nos. 9265, 9275.

Circuit Court of Appeals, Eighth Circuit.

April 12, 1932.

A. W. Johnson, of Albert Lea, Minn. (A. L. Guesmer, H. S. Carson, and W. E. MacGregor, all of Minneapolis, Minn., on the brief), for Lena Schneider.

Garfield E. Breese, of Mason City, Iowa (Charles E. Cornwell and Breese & Cornwell, all of Mason City, Iowa, on the brief), for Mackey J. Thompson.

Before STONE and KENYON, Circuit Judges, and CANT, District Judge.

KENYON, Circuit Judge.

There are two appeals before us which may properly be the subject of one opinion. In No. 9275, Lena Schneider, appellant, is the widow of Fred Schneider, deceased, and residuary legatee under his will. Appellee is the receiver of the Citizens' National Bank of Albert Lea, Minn. (herein called the bank), which was closed as insolvent by the Comptroller of the Currency on February 14, 1927, and appellee was appointed receiver February 18, 1927. Oscar C. Olson was cashier and a director of this bank, and the active managing officer thereof. He was also administrator of the estate of Oscar Rood, deceased, and maintained a deposit account in the bank in the name of "Oscar C. Olson Adm. Oscar Rood Est." Before the closing of the Rood estate, Olson became administrator of the estate of Fred Schneider, deceased, and carried an account in the bank entitled "Oscar C. Olson Adm. Fred Schneider Est." Olson was also president of the Farmers' First National Bank of Rake, Iowa. His father was president of the Citizens' National Bank of Albert Lea. A national bank examiner had objected to two notes of A. T. Johnsrud, each for $1,500, and a note of H. B. Ross for $2,677 to the bank, and demanded that the bank remove these notes from the assets and replace the same with cash by October 1, 1924. This objectionable paper was later found to be worthless. In order to take care of this situation created by the withdrawal from the bank's assets of these notes, Olson, as administrator of the Rood estate, drew a check thereon for $6,775.94 to the bank, which check was charged to the deposit account of said estate. The funds so abstracted took up the bad paper including the Johnsrud and Ross notes, which thereafter were not shown on the books of the bank. At this time the Rood estate was not indebted to the bank. Olson's father, president of the bank, was one of the sureties on his bond as administrator of the Schneider estate. The other surety was one Knatvold, who was a director of said bank. Both sureties became insolvent. Olson sold some of the property of the Schneider estate, and deposited the proceeds in the bank to the credit of said estate. He drew three checks on the Schneider estate account, each payable to the order of the bank; one on February 5, 1925, for $1,200, one on February 9, 1925, for $2,300, one April 2, 1925, for $1,200; a total of $4,700. These checks were charged to the Schneider estate deposit account, and on the same dates the checks were deposited to the credit of the Oscar Rood estate and appear as deposits in the account of said estate. At this time the Schneider estate was not indebted to the bank and was not indebted to the Rood estate. These are the facts involved in the appeal of Mrs. Schneider.

In No. 9265, the appeal of the receiver, the facts are these: Two promissory notes are involved; one of $2,200 given May 3, 1924, by one Nelson to the Farmers' First National Bank of Rake, Iowa, of which Olson was president, and one of $2,000 given by one Ericksen and wife to the Citizens' National Bank of Albert Lea, March 10, 1923. These notes represented excess loans made by the bank to these parties. The Ericksen note was sold to one Reindall. When the notes were taken Olson agreed that if they were not paid when due he would see that they were taken up. The notes were not paid when due, and Olson drew a check on September 2, 1925, against his account in the bank, as administrator of the Schneider estate, in the sum of $4,275.56, payable "to the order L. Nelson note for $2,200; J. Ericksen note $2,075.56." It was charged to and paid out of the Schneider estate deposit account. The two notes had been carried temporarily as cash items. The Rake bank was given credit for the amount of the Nelson note, $2,200. Reindall's deposit account was credited with the amount of the Ericksen note plus interest, $2,075.56. Olson later signed some statements after the closing of the bank that he was the owner of these notes, which he excused on account of his "state of mind."

The facts are that the notes were given as part of the arrangement to circumvent the prohibition of the statute as to excess loans. While in the trial court it was sought by Lena Schneider to have her claim allowed as preferred, such claim is here abandoned, and it is asked that it be allowed as a general claim.

The trial court held that as to the moneys abstracted from the Schneider estate to make good the abstraction from the Rood estate, it was a personal matter with Olson, and the bank was not charged with notice of his conduct, placing his decision upon the ground that the wrongful use of the funds from the Rood estate in taking out the bad paper of the bank was an accomplished fact before the abstractions from the Schneider estate, and that what Mr. Olson did in transferring credits from the Schneider estate to the Rood estate did not increase the assets of the bank or diminish its liabilities; that the bank was not charged with knowledge of the wrongful character of the acts of Olson as administrator of the Schneider estate, and found in favor of the bank on that transaction. As to the transaction concerning the Ericksen-Nelson notes, it held that the matter was not a personal matter with Olson, but that in his arrangements as to these notes he was acting on behalf of the bank, and the court established Mrs. Schneider's claim against the receiver in the amount of $4,275.56, the sum abstracted by Olson from the Schneider estate to take care of these notes. From this holding the receiver appeals, and from the other holding of the court Mrs. Schneider appeals. In both appeals is involved the question of whether the bank should be held to have had notice and knowledge of Olson's acts. A discussion of this question as to the first transaction will be sufficient, as a holding there that the bank was charged with Olson's acts would necessarily indicate that the same doctrine should be applied to the second transaction. In the latter, however, there is an additional question of ultra vires, which will hereinafter be discussed.

It is the receiver's theory that knowledge of Olson's embezzlement was not imputable to the bank, that the bank did not profit thereby, that Olson was acting entirely for himself and his own benefit, and that the Rood estate holds the stolen funds of the Schneider estate in trust for it.

What is the law applicable here?

The rule is elementary that the principal is bound by the knowledge of his agent acquired in the course of the principal's business and while acting within the scope of his authority. The Distilled Spirits, 11 Wall. 356, 20 L. Ed. 167; Curtis, Collins & Holbrook Co. v. United States, 262 U. S. 215, 43 S. Ct. 570, 67 L. Ed. 956.

The receiver relies on an exception to this rule which is well stated in 7 Ruling Case Law, p. 657, § 659, as follows: "An exception to the general rule that notice to an agent is notice to his principal arises in case of such conduct of the agent as raises a clear presumption that he would not communicate the fact in controversy, as where the agent acts for himself in his own interest and adversely to that of the principal; and this rule is applied to officers and agents of a corporation. So where a corporate officer or agent is engaged in committing an independent fraud on his own account and the facts to be imputed relate to this fraudulent act, the corporation is not charged with the knowledge of the officer or agent."

This exception to the general rule is well established.

In Thomson-Houston Electric Co. v. Capitol Electric Co. (C. C. A.) 65 F. 341, 343, in discussing the general rule that the principal ordinarily is charged with notice of what the agent knows in a matter intrusted to him, the court says: "Such a presumption cannot be indulged, however, where the facts to be communicated by the agent to the principal would convict the agent of an attempt to deceive and defraud the principal. The truth is that where an agent, though ostensibly acting in the business of the principal, is really committing a fraud, for his own benefit, he is acting outside of the scope of his agency, and it would therefore be most unjust to charge the principal with knowledge of it."

In Bank of Overton v. Thompson, 118 F. 798, 800, this court says, concerning the action of a cashier there involved: "* * * His knowledge of all the facts connected with the rights of the complainant to that money is imputable to that bank, under the well-settled general rule that the knowledge of an agent, or notice to an agent, while acting within the scope of his authority, is notice to his principal, because within that scope he is the alter ego of the principal, and because the law will presume that the agent has performed his duty to disclose to his principal all notice to himself necessary to his principal's protection or guidance. The officer of a corporation, like a cashier of a bank, is such agent. There are, however, well-settled exceptions to this rule, where notice or knowledge on the part of the agent will not be imputed to the principal, and one of these is `where the agent's relations to the subject-matter, or his previous conduct, render it certain that he will not disclose it.' Mechem, Ag. § 721. `In such cases the presumption is that the agent will conceal any fact which might be detrimental to his own interests, rather than that he will disclose it.'"

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