Court Opinion

ID: 7891306
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:49:14.477265+00
Date Added: 2024-06-11T16:31:55.518512
License: Public Domain

The opinion of the court was delivered by
Johnston, J.:
The record shows beyond controversy the fraud of Hanscome and the embezzlement of the *464money of the bank by him while acting as its cashier and teller, and that a large part of the money embezzled was used in his grain speculations with the W. A. Michael Commission Company. It further appears that the propositions of Hanscome to buy and sell, as well as the money used in the transactions, were forwarded to the commission company through Byrnes. It appears, too, that Byrnes received compensation from the commission company for, his services in this respect, and that a portion of the money deposited or represented by the certificates sought to be canceled was obtained from the commission company by him as such compensation. The weakness of the position of the bank is that it failed to establish the complicity of Byrnes in the frauds of Hanscome. As a general principle, all persons who knowingly participate or aid in committing a breach of trust are responsible for the wrong and may be compelled to make good the loss. An effort was made by the plaintiff to show that Byrnes knowingly cooperated with Hanscome in the misappropriation of the bank’s money, and was in'fact a partner of his in these dealings, but the findings are against it on both of these contentions. If Byrnes did not know of the fraud of Hanscome, or that he was wrongfully using the money of the bank, he is no more responsible for the loss than any innocent stranger through whose agency the misappropriated funds were invested.
It is contended that the court erred in finding that Byrnes believed that Hanscome represented a syndicate. It appears from the evidence that Iianscome’s dealings with the commission company were large — that is, that large drafts of money were forwarded by Hanscome through Byrnes to the commission company ; that the salary of Hanscome was small, and *465that the property owned by him was quite limited in value. From these and other facts it is claimed that Byrnes must have known that Hanscome was using the money of the bank. The court, however, found, and there is testimony to sustain the finding, that Hanscome represented to Byrnes and to many others that in his speculations he was representing a syndicate, and that Byrnes believed this representation to be true. The testimony of Byrnes himself and one other witness supported the finding, and we see no reason why this testimony should be ignored.
Another objection is that the court erred in finding that Byrnes and Hanscome were not partners, but a reading of the record satisfies us that this finding is abundantly sustained by the testimony.
The remaining contention, that the funds represented by the certificates of deposit belonged to the bank, or were impressed with a trust in favor of the bank, must be determined upon the facts found by the trial court. Much of the argument is an attack upon these findings and the weakness of the testimony ; but whatever might have been our view of the facts as an original proposition, we find testimony to support the findings, and they are therefore conclusive in this inquiry. As cashier and teller of the bank, Hanscome was authorized to draw drafts, and it appears that the exchange purchased by the patrons of the bank was signed by him in his official capacity. The fact that he was abusing his trust and wrongfully using the funds of the bank for personal purposes was not easily ascertained by outsiders. Hanscome himself operated under two numbers, and the drafts which were issued were intended to and did cover the dealings of others than Hanscome. Aside from this fact, there is the further one that Hanscome had represented to Byrnes *466that a syndicate of persons were operating under his numbers, and that this representation was believed by Byrnes. Of course, if Byrnes knew that the money was abstracted from the bank, as the plaintiff claims, he could acquire no title to it, but the findings are to the effect that he had no such knowledge; and if he believed the representations of Hanscome, as the jury found he did, there is nothing in the facts inconsistent with his good faith. The transactions, as will be observed, were with the commission company, which is not a party to this proceeding, and the remittances were all forwarded to and received by that company. The drafts, or some of them, were made to Byrnes, but they were delivered to him for transmittal to the company and immediately forwarded in accordance with the intention and request of the dealing parties. There is a specific finding that no part of the drafts or funds left with him for transmittal to the company was ever retained or used by him.
It is said that 'the form and character of the drafts were notice to him, and that the transmittal of such drafts to the company through him was at his peril. In support of this contention, Lamson v. Beard, 36 C. C. A. 56, 94 Fed. 30, 45 L. R. A. 822, is cited. That was an action by a bank to recover from brokers the proceeds of drafts which the president of the bank drew on the funds of the bank without authority. It was held that the brokers, by. the acceptance of the drafts, became parties to their original execution, and hence were put on inquiry as to the authority of the president to draw them, and if the authority was exceeded they might be liable to the bank for the proceeds of the drafts received by them. This rule, it would seem, carries the doctrine and effect of implied notice to a questionable extent; but assuming it to be *467correct, it does not control the decision of the case in hand. This action is not brought to cancel the drafts which were issued to be sent to the company, nor is it brought to recover from the company the proceeds of the drafts which it received. It is brought against one whose position is one remove from that occupied by the parties who received the proceeds of the drafts wrongfully issued. Byrnes, who innocently forwarded the drafts, and who retained no part of them, does not occupy the position of the brokers in the cited case. The fact that some of the commission earned by Byrnes formed a pkrt of the deposit represented by the certificates in question does not give them the character of trust funds. Where the funds were derived from, which the company forwarded and paid to Byrnes, is not shown in the record, and the fact that some of the funds in the hands of the commission company may have had the character of trust funds is not a sufficient tracing or identification of the trust funds to make Byrnes liable as trustee of the bank.
The judgment of the district court will be affirmed.