Sedalia Nat. Bank v. Economy Steam Heating & Elec. Co.

Citation130 S.W. 377,145 Mo. App. 319
CourtMissouri Court of Appeals
Decision Date28 June 1910
PartiesSEDALIA NAT. BANK v. ECONOMY STEAM HEATING & ELECTRIC CO.

The vice president and general manager of a nontrading corporation, a heating company, had no express or implied authority to borrow money and give corporate notes therefor. The manager was the only representative of the corporation in the locality where it did business, and for his own use fraudulently borrowed money on the notes of the corporation from various banks extending over a period of six years, and received from some of the banks pass books issued in the name of the corporation. The company knew that he had a bank account but never examined the pass books. Held, that the corporation was not liable on a note given under such circumstances because of negligence in not discovering the unauthorized loan, since it was not charged with knowledge that its manager would turn rascal, and the bank should have looked into the authority of the manager.

Appeal from Circuit Court, Pettis County; Samuel Davis, Judge.

Action by the Sedalia National Bank against the Economy Steam Heating & Electric Company. From a judgment for defendant, plaintiff appeals. Affirmed.

Sangree & Bohling and W. M. Williams, for appellant. Charles E. Yeater, for respondent.

JOHNSON, J.

This action is upon a negotiable promissory note for $4,200, payable to the order of plaintiff bank, and signed by the Economy Steam Heating & Electric Company, per Robert Mowbray, vice president and manager, and by Robert Mowbray individually. The note was dated December 22, 1906, and was made payable 90 days after date. No part of it, either principal or interest has ever been paid. The answer of the defendant corporation was a plea of non est factum; the individual defendant made no defense and suffered judgment to go against him. By agreement of parties a jury was waived, and, after hearing the evidence, the court rendered judgment in favor of the defendant corporation. Plaintiff appealed.

The facts of the case, about which there is little controversy, thus may be stated: The American District Steam Company of Lockport, N. Y., engaged in the business of manufacturing and operating steam heating plants, installed a plant of that character in Sedalia under contract with a local corporation, and, failing to receive payment of the agreed price, caused the property to be sold under legal proceedings and became the purchaser. The officers of the company then caused the defendant company to be organized and incorporated under the laws of the state of Missouri for the purpose of owning and operating the business. There were five stockholders of defendant company, three of whom resided in Missouri, the other two in New York. The Missouri stockholders each owned one share and the remainder of the capital stock was owned by the two New York men, one of whom was elected president and the other secretary and treasurer. The defendant Mowbray was elected vice president and manager, and assumed the management of the business in the fall of 1900. The business of the company was the manufacture and sale of steam heat for use in public buildings, business houses, and residences in Sedalia; Mowbray was the only representative of the company in Sedalia, and he acted as general manager of its business for something more than six years. He was discharged from the service of the company upon the discovery that he was a defaulter and an embezzler of its funds. The total volume of business transacted by the company under the management of Mowbray was approximately $90,000, or about $15,000 per year. There was no demand for the company's product in the summer months, and during such periods the plant remained idle. The principal duties of Mowbray were to purchase coal and other supplies, procure customers, collect bills, and make weekly reports to the secretary, whose office was in Lockport. The business being small there were but few employés. The by-laws of the company provided: "The board of directors may engage a general manager or superintendent who shall have the general supervision of the operation of the company's property, and the transaction of such other business as is necessary in the absence of the officers of the company. He shall not have the power to create debts or obligations without the consent of such officers of the company as have the vested right to create such indebtedness." The installation of extensions to the plant was not intrusted to Mowbray, but was performed under the personal supervision of the president, and, in fact, as well as by the provisions of the by-laws, Mowbray's authority and duties were restricted to matters of routine business. When the business ran behind, funds were sent from Lockport in anticipation of the requirements of the business beyond its income.

Shortly after he took charge of the business in 1900, Mowbray opened a bank account for the company with one of the Sedalia banks, and began borrowing money on the company's paper which he executed as vice president and general manager. He deposited the proceeds of collections, and checked against the account in making disbursements on account of the company. He also checked against it for his own purposes, but signed the company's name to such checks. He continued this practice for six years, and, in the latter part of the year 1906, owed the Citizens' National Bank, where the account was kept, a note of $3,800, to which he had signed the defendant's name. Pressed for payment of this note, he applied to the cashier of the plaintiff bank for a loan of $4,200. The cashier knew that defendant company kept an account with the Citizens' National Bank, for he had often noticed the checks of the company in the clearing house, but he did not know that Mowbray had borrowed money on the corporate name of defendant. We quote from the testimony of the cashier: "When he (Mowbray) came for the money he said that he had concluded to change his account over to our bank, and I asked him how much money he wanted. He took his pencil and figured around awhile, and said, `I will want about $4,200,' and he said, `I owe the Citizens' Bank about $3,600 — I don't know the exact amount.' He said, `I have not noticed the account lately, and I will want about $600 to pay for coal.' I then asked him if he was authorized to borrow money, and he said he was. He said, `I have been borrowing money ever since I have been here of all the banks.' He said, `I have had an account with all three of the banks here.' * * * He told me he had authority to borrow money. I asked him explicitly about it. I asked him how he signed notes, and he said the Economy Steam Heating Company, by himself as vice president and manager. He said, `I am manager and vice president of the company.' I said, `The department criticises a loan made in that way' * * * and he said he would sign the note...

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6 cases
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