The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1872-05-30
IMPORTANT SUIT AGAINST A BANK.
Liability OF Banks for the Moneys Of Their De-
positors Embezzled by Bank Officials

The following abstract OF a suit tried In the Su-
preme Court OF the State OF Ohio, sitting at Ceve-
land in which the Second National Bank Of Cevc-
land was the defendant and one Captain Downing
o dcpositOr and regular customer OF the bank, was
PLAINTIFF win he read with interest, from the prn-
cple involved In the issue"Are banks responsible
for the moneys OF depositors embc1zlcd by bank
officials ~ The title and circumstances Of the
are as fOOws:-
Bowling vs.. The Second National Bank OF Cieve-
land.-The PLAINTIFF ian Old retired sea captain,
the Second National Bank OF Cleveland, deposited
with Che cashier Jefferson O. Buell., In 1867, $4,000
Of government bonds as special deposit From
and collect his interest. In the fall Of 1869, about
the middle of November, the bank having accumn-
lated surplus of over five hundred thousand dol
lars beyond its regular dividends the Directors
notified the cashier OF their intention 10
make disposition OF this surplus, and appointed
the day for the examination, nc. Immediately
after this notification the cashier committed sui
eide leaving letter addressed to the President or
directors, advising them that he had embez-
zed of the funds of the bank about S477,ooo, nom
some time In the spring OF 1869 up to the time OF
| his DEATH The heaviest losses were incurred IN
June, and by reason Of speculations In stock
and grain-the former in New York, the latter In
Chicago. This embezZlcment he stated, embraced
| the bonds of Captain bowling, amounting 70
S1OOoO as wen about $4,000 OF special deposits
| belonging to other parties.
| After the death of Buell., tho cashier Captain
Bowling called upon the bank to inquire about his
bonds, when he was advised 10y Che President that
tIey had been embezzied by their late cashier but
that the bank were responsible for the loss and would
either purchase new bonds or give him Their equva.
lent This entirely satisfactory to the Captain,
| but he asked for some acknowledgment rom the
President, who replied that II was not necessary
and that his word could be taken and was good
for $4,000, to which the plaintiff assured
him 1t was, and for ten times that amount. On the
oath OF November the Board or Directors mel, anu
by unanimous resolution agreed to make good
all losses incurred by reason OF the embezzlement
and at once, in order TO prevent litigation, ana as
matter Of policy at that jnnctlre IN their affairs
On the fst OF December following they addressed
circular TO the stockholders, detailing The losses BY
reason of the embezzlcment, embracing the special
deposits, which, deducted from their total surplus
would still leave about 100000. After the resolu
ton OF November "a Captain bowling called upon
the President of the bank, who made known TO
HIM its tenor and which satisfactory
The plaintiff, however feeling that the bank had
particular need OF the bonds or their equivalent
Just at that tine suggested 10 the President that il
IT. would be any accommodation to the bank they
might defer delivering him his bonds or their equiv
alent until the 10Th OF December. For this Offer he
was gratefully thanked by the President, and u
was accepted. subsequently the Captain was
advised by the President that the Board Of Directors
had reconsidered the matter, and were not going
to give him either his bonds or equivalent without
he could obtain redress by law. No other remedy
being left the Captain instituted suit for the
amount The first trial resulted in verdict in his
favor for the fun amount claimed Upon q second
trial the jury disagreed, and the present trial was
therefore the third.
Thc line OF defence adopted by the bank was that
they were not liable for the loss, as no cOnsidera
ton had been paid for the care and custody OF the
them. the act was not I'm the scope OF his employ
ment. During the progress OF the trial the loss Of
the bonds was proven as also the resolution of No
vember "A and circular of December /, ana the
promise made by thd President to Captain Bowling
70 restore the bonds or their equivalent Upon
these facts there was no dispute. The palnth
proved that In March, 1859, the account between the
second National Bank and its correspondent IN New
York was short 100000, and that subsequently
TO that time various discrepancies had been re
ported by the New York correspondent. 1t was also
proven that In September, 1860 there were various
oil ll m
OF the Second National Bank had been spccuatng
In stock and had lost heavily. The amounts stated
varied nom $4,000 to $4,000. In September 1869,
the Comptroller OF the Currency addressed letter
to the President Of the bank complaining OF irregu
larite5 reported against the second National Bank
by the Bank Examiner, ana expressing the beef
that the cashier was not performing his duties
as tle law required at .he saihe tle recoln,hcnu-
ing the Board OF Directors TO pay more and better
attention TO their duties in future. During this
period nearly all the prominent directors were
absent in Europe, and the President left the almost
exclusive management TO the cashier; not % single
monthly examination had ever been made by the
directors from March. 1860, TO the period when the
cashier committed suicide, the sworn monthly
statements having been made upon the representa-
ter Of the Comptroller the President rcplicd-First
that all the directors were men fifty years Of
age; that they were all men Of large wealth, worth
more in the aggregate than the directors OF ali
the other banks IN Cleveland combined; that this
bank was their special pride; ana pointed To It's
enormous surplus as an evidence OF good manage
ment. When the general bookkeeper OF the bank
was examined he was asked as to the discrepancy
III the New YORK account In March, 1869, OF
100000, how IL occurred, and IT, when ~ came
to his notice he had reported 1t to the President or
Board OF Directors. lie stated that he had made
known the fact to the assistant cashier only but
that ~ was all made right the next month; Ia what
way he did not attempt to explain When asked as
to other discrepancies he said they existed but the
September aud October statements he did not ex-
anime until November. He was asked IL the state
menis were rendered monthly, and, IL so, why he
dId nos report upon them. lie assigned a. u rea
son that he was very much hurried and had not
Tune to take them up promptly The President OF
the Oans, when on tile stand, was asked whether
ne hai made any inquiries as to the truth o. thc
ium0rs in regard 10 the stock and
other speculatons Of the thea late cashi9i,
In September, 1860, to which he replied lnat tne
rumors gave him very great concern ior tne sue,y
OF the bank, and that he ut once caued npoh r NY
cashier to explain as to their tfuh OF Husiy, Tue
cashier admitted the specuatons ana lne losses,
but assured him that the latter were not peyond
his ability TO bear. No inquiry was Inade OF any
one else and no examination OF any sort was maze
OF the effects OF the bank -, -,
The argument OF able counsel on both sides, and
a review OF ali the circumstances as to the facts
and the law bearing upon the same, closed the
case leaving it To the jury-a most intelligent
oneoto decide upon Its merits. The latter returned
q verdict for the plaintiff for $4,000, which result
was Enthusiastically In accord with the popular scnt
menL