Smith v. Wallace Nat. Bank

• Citation: 150 P. 21,27 Idaho 441
• Parties: NORA SMITH, Executrix, etc., Respondent, v. THE WALLACE NATIONAL BANK, a Corporation, and H. F. SAMUELS, Appellants; F. C. NORBECK, D. E. KEYS and THOMAS MCCABE, Respondents
• Decision Date: 01 June 1915
• Court: United States State Supreme Court of Idaho

150 P. 21

27 Idaho 441

NORA SMITH, Executrix, etc., Respondent, v. THE WALLACE NATIONAL BANK, a Corporation, and H. F. SAMUELS, Appellants; F. C. NORBECK, D. E. KEYS and THOMAS MCCABE, Respondents

Supreme Court of Idaho

June 1, 1915

PRACTICE-ASSIGNMENTS OF ERROR-TRUST FUND-BANKS AND BANKING-KNOWLEDGE OF CASHIER-NOTICE TO BANK-NEW TRIAL.

1. The purpose of the provision in the rules of practice that appellant's brief shall contain a distinct enumeration of the several errors relied on is to require appellant to inform respondent and this court what action of the trial court is relied upon for a reversal of the judgment or order appealed from, and when it is stated in appellant's brief that the appeal is from the order granting a new trial, and when no other action of the trial court is complained of, the appeal will be considered upon its merits, although appellant's brief does not contain an assignment of errors in the usual form.

2. Held, that the rule that "an owner is always entitled to follow a trust fund wherever it may be found" does not apply to the facts in this case as the verdict shows them to have been found by the jury.

3. While it is a general rule that a bank is bound to take notice of facts pertaining to its business within the knowledge of its cashier, there are exceptions to the rule, and it is not bound by notice of facts relating to an independent fraudulent act which the cashier is committing on his own account, the communication of which would prevent the consummation of the fraud, nor when he is openly acting on his own behalf, or on behalf of another in a transaction with the bank.

4. Held, that under the facts in this case the appellants are not liable for the acts of the cashier in conducting the business entrusted to him by respondent's testatrix.

5. Where the record does not show the ground upon which a new trial was granted, and no error warranting it appears, the order granting it will be reversed upon appeal.

APPEAL from the District Court of the First Judicial District for Shoshone County. Hon. William W. Woods, Judge.

Action for damages for failure to record a mortgage and for procuring it to be released when recorded, whereby plaintiff's security was lost. Judgment for defendants. Order granting a new trial. Reversed.

Order of the district court reversed. Costs awarded to appellants.

John P Gray and John H. Wourms, for Appellants.

The acts of Norbeck were clearly without the scope of his employment. (City Electric Street Ry. Co. v. First Nat Bank, 65 Ark. 543, 47 S.W. 855; Hummell v. Bank of Monroe, 75 Iowa 689, 37 N.W. 954; Langlois v Gragnon, 123 La. 453, 49 So. 18, 22 L. R. A., N. S 414; School Dist. v. De Weese, 100 F. 705; Sherwood v. Home Savings Bank, 131 Iowa 528, 109 N.W. 9; Lilly v. Hamilton Bank, 178 F. 53, 102 C. C. A. 1, 29 L. R. A., N. S., 558; Schumacher v. Greene Cananea Copper Co., 117 Minn. 124, Ann. Cas. 1913C, 1115, 134 N.W. 510, 38 L. R. A., N. S., 180; Kennedy v. Otoe County Nat. Bank, 7 Neb. 59; State v. Commercial Bank, 14 Miss. 218, 45 Am. Dec. 280; Ballston Spa Bank v. Marine Bank, 16 Wis. 120.)

The jury by their verdict upon all of the disputed questions of fact found in favor of the appellants, and under the decision of this court in the case of Maw v. Coast Lumber Co., 19 Idaho 396, 114 P. 9, the trial court as well as this court is bound by the findings of the jury upon these questions. No legal cause has been given why the new trial was granted and under the cases a new trial should not be granted except for some legal cause. (Clifford v. Denver etc. Ry. Co., 12 Colo. 125, 20 P. 333; Braithwaite v. Aiken, 2 N.D. 57, 49 N.W. 419.) A new trial should not be granted unless it appears that an injustice has been done. (Manning v. German Ins. Co., 107 F. 52, 46 C. C. A. 144; Barksdale v. Smith, 31 Ga. 671; Woodward v. Horst, 10 Iowa 120; Rowe v. Matthews, 18 F. 132.)

Chas. E. Miller and Featherstone & Fox, for Respondent Smith.

When, in the course of his employment, an officer or other agent of a bank acquires knowledge or receives notice of any fact material to the business in which he is employed, the bank is deemed to have notice of such fact. (Tiffany on Banks, 333; 5 Cyc., subd. 2-c, 460.)

A more stringent rule applies to the president, cashier or other managing officer, because he devotes his chief attention to the business of the bank. All the knowledge acquired by him pertaining to its affairs is imputed to the institution. (Bolles on Banking, 398 (5).) Notice to the cashier is notice to the bank. (First Nat. Bk. v. Ledbetter (Tex. Civ.), 34 S.W. 1042; City Nat. Bank v. Martin, 70 Tex. 643, 8 Am. St. 632, 8 S.W. 507.)

A bank is liable for the fraud of its agent committed in the course of the bank's business, at least to the extent of the benefit received by it from the fraud. (Binghamton Trust Co. v. Auten, 68 Ark. 299, 82 Am. St. 295, 57 S.W. 1105.)

In such a case as this the bank should be held responsible instead of an innocent party upon every principle of reason and morality. (Cooke v. State Nat. Bk., 52 N.Y. 96, 11 Am. Rep. 667; Farmers' etc. Bank v. Butchers' etc. Bank, 16 N.Y. 125, 69 Am. Dec. 678; New York & N. H. R. v. Schuyler, 34 N.Y. 30; Bell v. Campbell, 123 Mo. 1, 45 Am. St. 505, 25 S.W. 359.)

The owner is always entitled to follow a trust fund whereever he may find it. (Bolles on Banking, 495; Bank of Virginia v. Domestic Sewing Machine Co., 99 Va. 411, 86 Am. St. 891, 39 S.E. 141; Overseers v. Bank of Virginia, 2 Gratt. (Vt.) 544, 44 Am. Dec. 399; State v. Bruce, 17 Idaho 1, 134 Am. St. 245, 102 P. 831.)

Failure to assign errors upon appeal from an order granting a new trial is fatal and amounts to a waiver of all error. (2 Cyc. 1010; Hollister v. State, 9 Idaho 8, 71 P. 541.)

All exceptions taken in the court below will be treated as waived unless they are assigned as errors in the supreme court. (Purdy v. Steel, 1 Idaho 216.)

Errors not set out in the specifications of error, in the statement of the case and in the bill of exceptions will not be considered on appeal. (Gaffney v. Hoyt, 2 Idaho (184) 199, 10 P. 34.) Error assigned in the transcript but not referred to in brief is waived. (Idaho Mer. Co. v. Kalanquin, 8 Idaho 101, 66 P. 933; Byron v. First Nat. Bank (Or.), 146 P. 516; Adrich v. Chemical Nat. Bk., 176 U.S. 618, 20 S.Ct. 498, 44 L.Ed. 611; Wyman v. Wallace, 201 U.S. 230, 26 S.Ct. 495, 50 L.Ed. 738; Poppleton v. Wallace, 201 U.S. 245, 26 S.Ct. 498, 50 L.Ed. 743; United States Nat. Bank v. First Nat. Bank, 79 F. 296, 24 C. C. A. 597; Merchants' Bank v. State. Bank, 10 Wall. (U.S.) 604, 19 L.Ed. 1008; Chapman v. First Nat. Bank (Or.), 143 P. 630.)

MORGAN, J. Sullivan, C. J., and Budge, J., concur.

OPINION

MORGAN, J.

Since the appeal in this case was taken the respondent, Mary A. Smith, died. Her death has been suggested of record and by stipulation of the parties Nora Smith, her executrix, has been substituted as respondent.

This is an action commenced by Mary A. Smith against the Wallace National Bank and H. F. Samuels, president thereof, appellants, and against D. E. Keys, vice-president, F. C. Norbeck, cashier, and Thomas McCabe, assistant cashier of said bank, for damages for failure to record a certain mortgage given to secure the payment of a promissory note for $ 3,000 due to her and for procuring the same to be released when recorded, whereby her security was lost and said promissory note became valueless. Norbeck failed to answer or otherwise appear in the case and the trial resulted in a verdict and judgment for the other defendants. An order was entered granting a new trial as to the bank and Samuels from which order this appeal is prosecuted.

Norbeck, who was a nephew of Mrs. Smith by marriage, on about June 1, 1908, visited her at her home in Tacoma, Washington, and on that occasion urged her to place in his hands to be loaned the sum of $ 3,000, which amount of money she had on deposit in a bank in Tacoma. Upon his return to Wallace, Idaho, he wrote a letter which, while addressed to a daughter of Mrs. Smith, was intended for her information. It is in part as follows:

"Am all ready for the $ 3,000 if you will send it to me at once. Can get you 1% per month and will mail you a draft for $ 30 each month on any date you say for the interest. This will last for three months sure, and then I think I can get you a little better than that, so you are certain of $ 30 per, at least. Send the draft payable to the Wallace Nat'l Bank, our new name, and I'll fix up the note, etc. and will guarantee everything to you as well."

Thereafter and about June 20, 1908, Mrs. Smith mailed to Norbeck a draft for the sum of $ 3,000 payable to the Wallace National Bank. He placed the money to his own credit in the bank and immediately thereafter loaned it to one Herman Rogell, who was a customer of the bank and who was at that time indebted to it. Rogell applied a portion of the $ 3,000 in payment of his indebtedness to the bank and paid Norbeck $ 200 for procuring the loan for him. As evidence of the indebtedness to Mrs. Smith, Rogell gave his promissory note to Norbeck in the sum of $ 3,000 and, to secure the payment of the same, he and his wife made, executed and delivered to Norbeck a mortgage, in which Norbeck was named as mortgagee, upon real property situated in the village of Mullan, Idaho. The mortgage was not recorded until March 10, 1910, and after its execution and before it was recorded Rogell deeded a portion of the property covered by it, by way of mortgage, to an innocent purchaser or encumbrancer for value and thereby about one-third of Mrs. Smith's security was lost. On about September 9, 1910, Rogell was heavily indebted to the bank and, at the urgent and insistent request of...