Williams v. Peoples Bank, 188 N.C. 197 (1924)

Sept. 17, 1924 · Supreme Court of North Carolina

188 N.C. 197

P. W. WILLIAMS v. PEOPLES BANK and CLAYTON MOORE, Trustee.

(Filed 17 September, 1924.)

1. Principal and Agent — Banks and Banicing — Cashier—Misappropriation of Funds.

Where a customer of a bank has his note for borrowed money accepted by a bank, and delivers it to its cashier for discount, the cashier is the agent for the bank to pay the proceeds over to the customer, or to place it to his credit at the bank; and where the cashier instead misappropriates it to his own use, he is acting within the scope of his agency as cashier of the bank, and applying the general principle relating to principal and agent, the bank is liable to its customer for the money thus misapplied. Grady v. Bank, 184 N. C., 158, cited and distinguished.

2. Same — Mortgages—Deeds in Trust — Equity—Injunction.

Where the cashier of a bank acting within the scope of his authority has misappropriated the funds paid to him, to take up the borrower’s note given- to the bank secured by a mortgage, the foreclosure of the mortgage will be enjoined in the suit for that purpose brought against the bank by the maker of the note.

Appeal by defendants from Lyon, J., May Special Term, 1924, of MARTIN.

Tbe material.facts are:

That Pleny Peele executed deed to P. W. "Williams on 30 October, 1919, conveying 33 acres of land for a consideration of $6,000.

That P. W. Williams gave to Pleny Peele note for $1,250.15 to cover cash payment, with O. H. Godwin as endorser thereon, said note being dated 30 October, 1919.

That under date of 8 November, 1919, P. W. Williams executed bis note to tbe Peoples Bank for $1,400, witb deed of trust on certain land to Clayton Moore, trustee, as security. That tbis note bas not been paid. J. G. Staton, since tbe action was brought, was appointed receiver for tbe defendant bank, and, by order of court, made a party defendant.

Tbis action is brought by plaintiff against defendants to restrain them from selling tbe lands as set out in tbe deed of trust to Clayton Moore, trustee, to secure tbe note to tbe Peoples Bank for $1,400, dated 8 November, 1919.

Tbe plaintiff contends that tbe evidence shows that be bought a piece of land from Mr. Peele, and that to raise tbe first payment be gave Peele bis note, witb one, C. H. Godwin, cashier of defendant bank, as surety, for $1,250.15, and that to enable Peele to get tbe money be gave to Moore, as trustee for tbe bank, a deed of trust to secure tbe note be made to tbe bank for $1,400, which covers interest, discounts, registration fees, etc. He contends that tbis note which be made to tbe bank after be bad a conversation witb Mr. Staton, tbe president, and Godwin, tbe cashier, was to put it in,tbe bank for tbe purpose of raising twelve hundred and fifty and 15/100 dollars to pay Peele, and that is tbe last be bad to do witb it. He contends that tbe evidence shows that instead of tbe bank putting it to bis credit, or paying it over to Peele and taking up tbe note that be bad given Peele, Godwin, tbe cashier, took tbe money himself and placed it to bis own credit and converted it to bis own use. Tbe plaintiff contends that be does not owe tbe bank anything because tbe bank bas never paid anything to him or to Peele on tbis note.

Tbe contention of tbe bank is that tbe bank knew nothing of Godwin being on tbe Williams note until after Godwin bad left, and contends that tbe bank knew nothing of Godwin taking tbis money and putting it to bis individual account until after be bad left, and that Godwin was acting for himself and tbe plaintiff, and not for tbe bank.

Tbe issue submitted to tbe jury was: “Is tbe plaintiff indebted to tbe defendant, J. G. Staton, receiver, on account of tbe note dated 8 November, 1919, if so, in what amount?”

Tbe court below charged tbe jury as follows: “Tbe court charges you that if you find from tbe evidence and by tbe greater weight thereof, tbe burden being on tbe plaintiff, that after plaintiff executed and delivered note and mortgage in controversy to tbe bank that Godwin, tbe cashier of said bank, converted said funds to bis own personal use instead of giving tbe plaintiff credit or paying plaintiff tbe money, then it would be your duty to answer tbe issue ‘no,’ otherwise, you would answer it, ‘yes’.”

Tbe jury answered tbe issue “no.” Tbe court below rendered tbe following judgment: “It is ordered and adjudged tbat defendant recover nothing on note and mortgage set out and described in complaint for $1,400. And it is further ordered and adjudged tbat tbe said note and mortgage for $1,400 executed by P. W. "Williams and wife, dated 8 November, 1919, be declared null and void and tbat tbe same be surrendered to plaintiff and tbat plaintiff recover cost.”

Tbe defendants prayed tbe court to give tbe following instruction: “If tbe jury believe tbe evidence and find tbe facts to be as it tends to show, tbe jury should answer tbe issue, ‘Yes, $1,250.15, with interest from 1 January, 1921’.”

Tbe defendants excepted and assigned as error tbe refusal of1 tbe court below to give tbe instruction prayed, tbe charge as given, tbe refusal to set aside tbe verdict as a matter of law, and tbe judgment as signed by tbe court, and appealed to tbe Supreme Court.

Critcher & Gritcher and Martin & Peel for plaintiff.

Dunning, Moore & Horton, and Stephen G. Bragaw for defendants.

Clarkson, J.

Tbe only question involved in this controversy is: “Was C. H. Godwin, tbe cashier of tbe defendant bank, tbe agent of plaintiff, P. W. Williams?” If be was, tbe plaintiff cannot recover. If be was tbe agent of tbe bank, tbe plaintiff can recover. •

“Tbe cashier of a bank is tbe chief executive officer. Still be is but an agent of tbe bank, and bis acts are governed by tbe general rules applicable to agents, and if be exceeds bis authority bis acts will not bind tbe bank.” 3 R. C. L., sec. 71, p. 444.

When tbe plaintiff delivered to defendant bank’s cashier, Godwin, tbe $1,400 note and deed in trust, and tbe cashier accepted it, Godwin was tbe agent of tbe bank. There is no. question about tbe bank making tbe loan. J. G. Staton testified: “This particular note went through on 10 November, 1919, and was approved by tbe finance committee 2 February, 1920. That is tbe signature of some of them approving tbe notes. Above my signature is written ‘approved.’ I do not know what date it was approved.”

In Goshorn v. Peoples Nat. Bank, 32 Ind. App., 428 (102 Amer. State Reports, 251), it was said: Tbe bank “selected its own cashier, and held him out to tbe world as deserving of confidence. Those who deal with persons occupying such responsible positions have a right to rely upon their integrity, and do so constantly. Depositors do not deal at arm’s length with tbe cashier. In language used by Justice Faxon of tbe Supreme Court of Pennsylvania: ‘It would be'monstrous to allow them to take advantage of tbe ignorant and unwary, by reason of their position, and the confidence it inspires.’ Zeigler v. First Nat. Bank, 93 Pa. St., 393, 397; Steckel v. First Nat. Bank, 93 Pa. St., 376; 39 Am. Rep., 758; City Nat. Bank v. Martin, 70 Tex., 643; 8 Am. St. Rep., 632; 8 S. W., 507.”

In the instant case the plaintiff was borrowing the money from the bank to pay a note made by himself to Pleny Peele, on which C. H. Godwin was endorser. The note of Williams was made to defendant bank, secured by deed in trust. The record shows that the cashier had authority to make the loan, as the president of the bank and the finance committee approved it. The cashier, Godwin, representing the bank had discounted the note for the bank and, after taking out the interest, etc., had misappropriated and converted the balance to his own use. He was the agent of the bank to give the plaintiff credit for it or to pay plaintiff the money or to pay the Peele note and mortgage. He did neither, and the bank is liable for the conversion and misappropriation of its agent, the cashier. It is immaterial that Godwin was endorser on the Peele note.

We do not think the case of Grady v. Bank, 184 N. C., 158, is an authority in this case. In that case (at p. 162) the. Court says: “It is a well settled principle of law that the cashier cannot bind the bank by his acts in respect to matters in which he is personally interested, and third persons are bound to know that the cashier has no authority to use the funds of the bank for his own benefit.”

In the case at bar the cashier was not using the funds of the bank for his own benefit. He misappropriated and misapplied the plaintiff’s money contrary to the contract as cashier of the bank — in the scope of his employment — ratified by the president and finance committee — that he made with plaintiff, for which wrong the bank is liable. LeDuc v. Moore, 111 N. C., 516; Phillips v. Hensley, 175 N. C., 23.

For the reasons given, there is

No error.