The morning call., 1892-12-17
THE BLAME FIXED.
Three Bank Directors Held
Responsible.
Judgment Against the Executive Com
nittee of the Collapsed California
National Bank for $2oo 900.

a decision of great interest to stockhOld-
e!s in banking institutions was rendered by
Judge Finn in the Superior Court yesterday.
Its effect will he to compel tho executive
committee of the defuact California Ma
tional Bank to make good the losses,
amounting TO fully $4,000.
The bank suspended four years ago. II
was wrecked by its cashier, Charles Rams
den, who is now in London. He made a
loan to Woodward on worthless bonds of
the Laundry Farm Railroad in Alameda.
David Gutman secured from him loan on
mining stock and real estate situated near
Livermore.
Wiekman, who secured $4,000 on forged
securities, was arrested and died in prison
awaiting trial. United States Attorney
Carey, after an investigation Of Cashier
Ramsden's accounts. reported that he could
not be prosecuted as his offense amounted
only 20 Irregularities. Ramsden remained for
some time under police espionage and was
hnally allowed TO leave the country.
The following is the full text of Judge
Firms decision:
John Cheiwood Jr. VS.. the California National
Bank: his action Is IN effect brought by the
plaiRIlh, a stOckholdeT IN the national bank,
against Richard /. Thomas, the president OF the
bank, and Robert a. Wilson, tie vice-pTeslceDf,
and Robert X Thomson. member OF the board
executive committee Of Tie bank.
The bank was organized under the laws OF the
United States as a national bank on October 20,
1886. with capital stock of $500, 900. 1t trans.
acted general banking business fan This city
until the 10Th Of December, 1883, when IL sus-
pended payment and thereafter went into Iiuui-
dation. The failure Of The bank was primarily
caused by tie reckless management OF c. Ii.
Ramsden the cashier.
The charges brought against the members of
the executive committee are that tney neg
hgenl IA tie discharge Of their duty; that they
nal m ten nf han
wh0fe business lie fit and 10 lend
and dispose OF the banks money without
adequate security, which resulted In great loss
TO he bank aad In It's ultimate failure.
Three loans were specified, viz: the Wood
ward, Wtekham and Gutman loans. which ag-
gfegate a net loss To the bank OF SI5O,7l9.
IL appears from The evidence that these loans
were made by the cashier without The knowledge
OF the executive committee. and were OF such
character that no prudent bank otIcer would
have made them.
The bylaws OF the bank require that the exec.
uIiye committee should have immediate super
vision OF all officers and business, audit bills.
discount notes and generally 10 direct its cashier
and employees; TO see that The moneys OF the
bank were not wasted. that exchanges
properly secui ed. that money not lent on
inadequate security or 10 irresponsible persons,
aud, TO secure these results. TO sea That proper
books and accounts were kept aud exaniue the
same.
When the executive committee aecerted their
positions they did so With q knowledge of the
requirements OF the ofiicr, and the stock holders
had right TO expect OF them that they would
discharge their duties IN a businesslike manner
aud with fair average ability.
do not think that the committee or any Of
It's members made any proper reasonable
effort To discharge their duty under the by laws.
They imposed implicit confidence I'm the cashier
ana acqueSced In his control of the bank. aud
as the bank appeared prosperous and there was
no open evidence OF fraud or miSmanagement
they W re lured into false sense of security
The danger OF this neglect OF duty was forclbly
commented upon by tie auditing committee OF
The bank III "A written report made 60 the board
oil directors on the 9Th OF July, 1885. fvr months
before the banks failure. This was an official
DOtice 10 The executive committee of their neg
iect of duty, and should have been promptly
attended TO. but II was not regarded and the
COMMITTEES wlllnlly persisted In neglrctlng their
duty by leaving the cashier in continued control
OF The bank and by falling 10 examine the &C.
counts.
acier and OF financial standing. They have
acted In perfect good faith, WITH absolute integ-
MY, and TWO OF them have received no compen-
satlon Tor their services. They invested their
means IN the bank and have all lost heavily by
the failure. Prior 10 the 9TH OF Juiy 1883. DO
not tblnk that they should be held responsible
Tor The cashiers acts, for while they were
Negligent. they were not cupably negligent.
Everything about the bank appeared to them to
be regular, and their lack OF experience In bank
ing matters. taken IN connection with their en-.
liIo good falth may. under The authorities, be
beId sufnclent TO exonerate them, but when their
aueniioB was formally and forcibly called to
their neglect OF duly and 10 the probable coDse-
queDees OF that neglect, and they paid no heed TO
the remonstranees OF their associates 10 tie
directory, they must then be held respons ible
for any loss suffered by the bank on the loans
specified between the 9th day OF july 1888, and
the day OF It's failure
A further examination OF the books of The bank
Will be necessary to ascertain the amount OF
these losses, and when ascer aimed judg-
nent VIII be entered therefor, with interest at
A ID