W. J. Howey Company, a Corp. v. Cole

• Decision Date: 30 April 1923
• Citation: 269 S.W. 955,219 Mo.App. 34
• Parties: W. J. HOWEY COMPANY, a Corporation, Appellant, v. A. B. COLE, Special Deputy Commissioner of Finance of the State of Missouri, in Charge of McGIRK STATE BANK, a Corporation, and McGIRK STATE BANK, Respondents.
• Court: Kansas Court of Appeals

269 S.W. 955

219 Mo.App. 34

W. J. HOWEY COMPANY, a Corporation, Appellant, v. A. B. COLE, Special Deputy Commissioner of Finance of the State of Missouri, in Charge of McGIRK STATE BANK, a Corporation, and McGIRK STATE BANK, Respondents.

Court of Appeals of Missouri, Kansas City

April 30, 1923

Appeal from the Circuit Court of Moniteau County.--Hon. J. G. Slate Judge.

REVERSED AND REMANDED.

Judgment reversed and cause remanded.

Guthrie & Conrad and Ira H. Lohman for appellant.

John M Williams for Respondent Cole.

Embry & Embry and Roy D. Williams for McGirk State Bank.

Montgomery & Rucker for Amicus Curiae.

OPINION

BLAND, J.

This is an action upon a certificate of deposit in the sum of $ 1300, dated August 29, 1921, executed in favor of "Mark V. Packard, trustee," and "payable to the order of Himself in current funds on the return of this certificate properly endorsed 6 months after date, with 3 per cent interest per annum," and signed by "C. T. Moore cashier." The case was tried before the court without the aid of a jury. At the close of all the testimony the court sustained defendants' demurrer to the evidence and plaintiff has appealed.

The facts show that the certificate in question was issued by C. T. Moore, cashier of defendant bank, in exchange for a note in the sum of $ 2,000, made by D. Mondell and secured by stock of a motor car company. Before maturity the certificate of deposit was endorsed by "Mark V. Packard, trustee" to plaintiff and plaintiff became its purchaser in "due course." At the time of the institution of this suit, the bank was insolvent and in the hands of defendant Cole, Special Deputy Commissioner of Finance of the State.

It is insisted by plaintiff that the court erred in sustaining the demurrer to the evidence. In support of the action of the court defendants contend that the certificate of deposit is a promissory note and is, therefore, a bill payable; that section 11752, Revised Statutes 1919, prohibits a cashier of a bank from issuing bills payable without the consent of the board of directors; and that such consent not having been obtained, the certificate of deposit in question is void even in the hands of a bona-fide purchaser before maturity for value.

The evidence in relation to the authority of the cashier shows that Moore was one of the board of directors and was the manager of the bank. None of the other officers or directors of the bank issued certificates of deposit or cashier's checks. Moore received all of the deposits of the bank and had the custody of the bank's books. Moore was the executive officer, the manager, the alter ego of the bank, and there is no question but that he had power to issue certificates of deposit without the consent of the board of directors (7 C. J. 549, 552; 3 R. C. L., 444, 449; Bank v. Bank, 244 Mo. 554, 577), unless prohibited by the statute, supra. There is no evidence that such consent was ever obtained from the board or that the board knew anything about the issuance of the certificate or ratified the acts of Moore in issuing it.

It is true that a certificate of deposit is regarded as a promissory note. [Tiedeman on Commercial Paper, sec. 485; Daniels on Negotiable Instruments (6 Ed.) sec. 1698.] It is also true that an ordinary promissory note is a bill payable and the statute prohibits an officer of the bank from issuing such bills without the consent of the board of directors. Under this section it has been held that a cashier has no right to borrow money for the bank and execute a note therefor. [Bank v. Lyons, 220 Mo. 538.] However, in a dissenting opinion in that case by GRAVES, J., it was said of section 11752, and section 11762, at l. c. 579:

"The purpose of these statutes was to prevent the cashier 'by virtue of his office' from borrowing money."

This statement by Judge GRAVES does not in any wise conflict with what is said in the majority opinion but is rather in harmony with it, and we think properly construes the purposes of section 11752. Although a certificate of deposit is regarded as the promissory note of the bank, it is also "a written acknowledgment by a bank or banker of the receipt of a sum of money on deposit which the bank or banker promises to pay to the depositor, to bearer, to the order of the depositor, or to some other person or to his order." [7 C. J. 646, italics ours.]

The right of a cashier to execute and issue certificates of deposit is too well settled and his doing so has become such a general practice and custom in the banking business of this State, that to hold that section 11752 deprives him of that right unless a meeting of the board of directors is first called to pass upon each particular transaction of the kind, would seriously interfere with the operation of banks. Section 11752 requires only one meeting of the board each month and thereby contemplates that there may be but one of such meetings per month. The provision in regard to the meetings is inconsistent with the idea that the board should be in continuous session so that it can authorize the cashier in each instance to issue certificates of deposit. Such provision in banking acts do not apply "to such contracts or engagements as occur in or are necessary to the ordinary business of the corporation usually performed by the Cashier, or some other officer or agent of the bank." [Carey v. McDougald, 7 Ga. 84, 87.] See also opinion of ALLEN J., in Barnes v. Ontario Bank, 19 N.Y. 152, 166, 167, where it is said:

"The whole business of a bank is confided, in the first instance, to a board of directors, and they usually confer the power to transact its most important and daily financial operations to their cashier and teller. The cashier is usually intrusted with all the funds of a bank. He receives directly all moneys and notes. He delivers up all discounted notes on payment. He draws checks and drafts, and in short is the executive officer, through whom and by whom the whole moneyed operations of the bank, in paying or receiving debts or discharging them, is to be conducted. It is his duty to apply the negotiable funds, as well as the money of the bank, to the payment of its debts. In receiving deposits did the Legislature ever contemplate that the depositor must wait for the president or vice-president to sign with the cashier a mere certificate or acknowledgment of the receipt of the money by the cashier? The answer to this question, is, to me, plain and conclusive. The power to receive must be a power to acknowledge the reception; and one follows as a necessary incident to the other."

In the Barnes case, at l. c. 156, the statute provided:

"Contracts made by any such association, and all notes and bills by them issued . . . shall be signed by the president and vice-president."

We are, therefore, of the opinion that section 11752 has no application to the issuance of the certificate of deposit in question.

It is stated that by reason of the fact that the certificate was made payable to Mark V. Packard, Trustee, he had no authority to sell the certificate to raise money for his individual use; that while a "third person dealing with a trustee is not bound to see to the proper application of the trust fund," yet where such person does not profess to act on behalf of the trust estate but for himself, such third person is not dealing with him in good faith, believing that the trustee is acting on behalf of the estate; that the word "trustee" being in the certificate of deposit was notice to plaintiff when it purchased the certificate that Packard did not own the certificate individually. In this connection we are cited to the evidence showing under what circumstances the certificate was purchased by plaintiff. This evidence shows that Packard was in Chicago when he negotiated the certificate to plaintiff; that Packard called at plaintiff's office and said that he "was short of funds," and asked plaintiff to buy the certificate of deposit. This was in the month of September, 1921. Plaintiff paid Packard $ 1,000 in cash and agreed to remit the balance of $ 300 at a later date, but the latter sum had not been paid by plaintiff at the time this suit was brought. There is no evidence whatever in the record tending to show that Packard was a trustee for any one, and the mere fact that Packard told plaintiff that he was "short of funds" does not show that he was not then on a mission of the trust estate, if there was one, and that the money was not needed to pay Packard's expenses in connection with some matter connected with such estate. As before stated, there is no evidence that there was any trust estate, therefore there is no evidence as to who the beneficiary was, and, of course, the beneficiary is not making any claim. It would appear then that the word "trustee" was a mere description of the person. There was certainly no evidence of any knowledge of any infirmity in the title or bad faith on the part of plaintiff in its transaction with Packard. [Reitherman v. Wheeler, 247 S.W. 222; Bank of Hale v. Linneman, 235 S.W. 178.] In the absence of evidence of the existence of a trust, we think that the endorsement and transfer of the certificate of deposit by Packard was sufficient. [Secs. 13425 and 818, R. S. 1919.]

The parties do not agree as to the circumstances under which this certificate of deposit was issued. There is evidence that the cashier issued several thousand dollars in certificates of deposit under very strange and peculiar circumstances. His story being that one Thompson, who had been in the town of McGirk on two or three occasions prior to the 20th of June 1921, selling oil stock, returned about 3:00 o'clock of the morning of said day and wanted the cashier to take him to Jefferson City so that he could...