St. Charles Savings Bank v. Edwards

• Decision Date: 01 June 1912
• Citation: 147 S.W. 978
• Parties: ST. CHARLES SAVINGS BANK v. EDWARDS et al.
• Court: Missouri Supreme Court

147 S.W. 978

ST. CHARLES SAVINGS BANK v. EDWARDS et al.

Supreme Court of Missouri, Division No. 2.

June 1, 1912.

1. APPEAL AND ERROR (§ 639)—ABSTRACTS— DEFECTS OF FORM.

An appeal will not be dismissed solely because appellants' abstract is not in proper form, unless the form used is clearly violative of the statutes or rules of court.

2. LIMITATION OF ACTIONS (§ 121)—AMENDMENT OF PLEADINGS—DISCONTINUANCE AS TO ALLEGED PARTNER.

Where plaintiff sued defendants and P. as partners, and, failing to prove that P. was a member of the firm at the time of the transaction in question, dropped him from the case by amendment, leaving the allegation as to partnership in full force as to the remaining defendants, there was no change of the cause of action by the amendment so as to permit the intervention of the statute of limitations.

3. BILLS AND NOTES (§ 339)—CHECKS—NEGOTIABLE INSTRUMENTS LAW—"HOLDER."

Rev. St. 1909, § 10,026, provides that, to constitute notice of an infirmity in an instrument or defect in the title of the person negotiating it, such person to whom it is negotiated must have had actual knowledge of the infirmity or defect or knowledge of such facts that his action in taking the instrument amounted to bad faith. Held, that the holder within such section, and in the rule that constructive notice is insufficient to impair the title of a bona fide holder for value, is limited to an indorsee, and has no application to the payee as the original holder of the instrument.

4. BANKS AND BANKING (§ 297)—CASHIER— CHECKS—RIGHT TO DRAW.

The cashier of a savings bank who maintained a speculative account with defendants had no authority to draw checks in the name of the bank in favor of defendants for use by himself as margins in speculation.

5. BANKS AND BANKING (§ 297) — BANK CHECKS—ILLEGAL ISSUANCE—NOTICE.

The cashier of plaintiff bank maintained a speculative account with defendants, who were grain and stock brokers, and, on being called on for margins, delivered to them checks drawn to their order on plaintiff's account in a national bank, signed by himself as cashier. Held, that such checks bore on their face evidence that they had been drawn by the cashier for his individual use, without authority, and that plaintiff could recover the amount thereof, notwithstanding the defendants had no actual knowledge of the cashier's want of authority or fraud in drawing them.

6. BANKS AND BANKING (§ 297)—MISCONDUCT OF OFFICERS—USE OF FUNDS—BURDEN OF PROOF.

Where a bank's cashier drew checks on the bank's account which he deposited with his brokers to the credit of a speculative account as margins, the burden was on the brokers in an action by the bank to recover the proceeds of the checks to show that the cashier was either authorized to draw them, or that the bank had received full value therefor.

7. ESTOPPEL (§ 72)—LOSS BY ONE OF TWO INNOCENT PERSONS.

The rule that, where one of two innocent parties must suffer by the act of a third, he who enabled such third party to occasion the loss must sustain it, has no application in a suit by a bank to recover from stock brokers the amount of money misappropriated by the bank's cashier and deposited with the brokers as margins by means of checks drawn by the

cashier in his official capacity on the bank's funds.

Appeal from St. Louis Circuit Court; Hugo Muench, Judge.

Action by the St. Charles Savings Bank against George L. Edwards and others, doing business as A. G. Edwards & Sons. Judgment for plaintiff, and defendants appeal. Affirmed.

This controversy arises upon the following facts, which are not substantially controverted:

The plaintiff is a banking institution, located at St. Charles, Mo. From 1890 to 1904 its cashier was one A. F. Mispagel. The appellants during the year 1903 were engaged in St. Louis in the grain and stock brokerage business as partners under the firm name of A. G. Edwards & Sons. From February 12, 1903, to November 25, 1903, Mispagel was dealing in stocks and grain on open account with appellants' firm. From time to time, upon request from appellants, Mispagel sent them remittances to apply to his credit on this account. Such remittances during the period mentioned amounted in the aggregate to about $9,500. They were made in the form of checks drawn by the St. Charles Savings Bank, by Mispagel, cashier, on its depository bank in St. Louis, payable to the order of A. G. Edwards & Sons. There were thus remitted 16 checks at different dates, and for different amounts. Of these the following, which differs from the others only as to date and amount, may be taken as an example: "St. Charles Savings Bank. No. 7,555. St. Charles, Mo., Sept. 30, 1903. Pay to the order of A. G. Edwards & Sons $650.00 (six hundred and fifty dollars). To the Mechanics' National Bank, St. Louis, Mo. A. F. Mispagel, Cashier." Each and all of said checks were indorsed by A. G. Edwards & Sons, collected by them, and the proceeds credited to the individual account of Mispagel current in said stock and grain operations. Each remittance was made in response to a written request addressed to Mispagel personally, and referring to his individual account. The following may serve as an example of the form and general tenor of such letters: "St. Louis, Aug. 19, 1903. Mr. A. F. Mispagel, St. Charles, Mo.—Dear Sir: Your grain account with us needs $600 at close tonight. Kindly send us your check for this amount, and oblige, Yours truly, A. G. Edwards & Sons." In their written acknowledgments, Edwards & Sons sometimes say "your check," or "check," received. In several instances the language of the receipt refers to the remittance as the check of plaintiff bank. Thus, on October 14th: "We are in receipt of check No. 7556 of the St. Charles Savings Bank for 700, drawn on the Mechanics National Bank here, and have given credit to your stock account for that amount." Mispagel, in various ways, concealed from the bank officials the fact that these checks were issued. He was bookkeeper as well as cashier. The bank received no equivalent for them. They were, in fact, misappropriations by Mispagel of the funds of the bank. No authority, either general or special, is shown in him to draw checks in the name of the bank for his individual benefit. Edwards & Sons had no actual knowledge of the fact that Mispagel was misappropriating the bank's funds. The record further concedes that appellants gave value to Mispagel for the amount of these checks by credit on his account. The plaintiff had no interest in this grain and stock account, and was ignorant regarding the entire transaction. Plaintiff sues to recover the amount received by defendants on each draft; the petition containing sixteen counts. The answer denies generally, pleads good faith, and, further, that the checks were received in ordinary course. As no question arises on the pleadings, so far as the merits are concerned, they need not be further considered.

The case was tried by the court. Plaintiff asked no instructions. Defendants asked instructions in the nature of a demurrer to each count, which were refused, also instruction No. 3, in the following form: "The court finds from the evidence that the defendants received the drafts in question from A. F. Mispagel in regular course of business for full value in good faith, and without any actual knowledge of any fraud or irregularity on the part of A. F. Mispagel in issuing the same."

This was given in the following modified form: "(3) The court finds from the evidence that the defendants received the drafts in question from A. F. Mispagel in regular course of its business with him for full value in good faith, and without any actual knowledge of any fraud or irregularity on the part of A. F. Mispagel in issuing the same."

The following offered by defendants was refused: "(4) The court declares the law to be that, unless the defendants had actual notice of the fraudulent acts or irregularities of A. F. Mispagel in issuing the drafts in question, then the plaintiff is not entitled to recover upon any draft the basis of any count in its petition, unless the defendants had actual notice of the fraudulent acts or irregularities of A. F. Mispagel in issuing the same."

Judgment was rendered in favor of plaintiff for the amount claimed in each count.

G. L. Edwards, Edward D'Arcy, and Percy Werner, for appellant. T. C. Bruere, Lon O. Hocker, and C. W. Wilson, for respondents.

FERRISS, J. (after stating the facts as above).

1. On the threshold of the case respondent objects that there is no proper record before us. We are not disposed to turn an appellant out of court for the sole reason that he has not presented his abstract in proper form, unless the form used is clearly violative of the statute or rules of court. Here the point made is at least doubtful, and will be ruled against respondent.

2. Appellants also, before reaching the merits, object to the order below allowing respondent to dismiss as to one of the defendants named in the petition, and to amend the petition to adjust it to such dismissal, and this on the ground that such dismissal and amendment changed the cause of action. Appellants also, rather inconsistently, claim that the change to this new cause of action let in the statute of limitations, which ran before the amendment was made. We can find no substance in the point. The suit was filed against the appellants and one Peck as partners. Respondent, failing to prove that Peck was a member of the firm at the time of the transaction involved, dropped him from the case, leaving the allegation as to partnership in full force as to the remaining three defendants. The cases cited, involving joint contracts, do not apply. There was no change in the cause of action.

3. Appellants contend that they are not liable, because of the fact that they had no actual knowledge of wrongdoing on the part of Mispagel. It is not claimed by respondent that appellants had any...