First National Bank v. Byrnes

1. Trusts and Trustees — Misappropriated Funds. A person is not responsible for the misappropriation of trust funds by a trustee unless he knowingly participates or aids in committing the breach of trust. 2. -Bank Gashier — Commission Agent not Responsible. Where such person, without knowledge or notice of the misconduct and misappropriation of money by a cashier and teller of a bank, forwards drafts, wrongfully issued by that officer for personal purposes, to a commission company in another city, and is paid by the company a small commission as compensation for that service, he is not responsible to the bank for the misappropriated funds. S. - Certain Funds Held not Impressed with a Trust. The fact that a part of the funds deposited by such person and sought to be reached by the bank was received by him from the commission company is not sufficient to impress them with a trust in favor of the bank, or to make him liable as its trustee.

Error from Kingman district court; P. B. Gillett, judge. STATEMENT. This is an action by tbe First National Bank of .Kingman, Kansas, for the delivery and cancelation of six certificates of deposit of $1000 each, payable to the order of John Byrnes, which, it was alleged, were fraudulently obtained, and were the proceeds of money embezzled from the bank by R. L. Hanscome while acting as cashier and teller of the same. It was alleged and claimed that the defendant Byrnes knew of the misappropriation of the money by Hanscome, and cooperated with him in abstracting the funds of the bank, a portion of which was represented by the certificates of deposit. The defendant denied any such knowledge, participation, or wrong-doing, and at the trial the court made the following findings of fact and conclusions of law: “ 1. The plaintiff, the First National Bank, is now and for more than fifteen years last past has been a corporation under the U. S. banking law, and for five years last past W. E. Maynard has been its president, A. 0. Tredick its cashier, and until July 11th, 1898, and for five years prior thereto, R. L. Hanscome has been its assistant cashier and teller (part of this time assistant cashier and part of the time teller). “2. That the defendant, John Byrnes, is and for more than five years last past has been the agent and operator of the Western Union Telegraph Company, at Kingman, Kan., and also the agent of the Pacific and U. S. Express Companies.” “4. That the said cashier and teller, R. L. Hans-come, during the time hereinbefore mentioned had full power and authority to draw on the plaintiff’s correspondents at Kansas City and other places. “5. That during said time the First National Bank of Kansas City, Mo., the Hanover National Bank of New York, the National Bank of Commerce of Kansas City, Mo., and the Fourth National Bank of Wichita, Kan., were correspondents of plaintiff. “ 6. That during the year 1897 and up to May 9th, 1898, the W. A. Michael Commission Co., was a commission house in Kansas City, Mo., engaged in the buying and selling for customers grain, stocks, etc. On May 9th, 1898, this house failed. “7. That on the 11th day of July, 1898, R. L. Hanscome absconded, being then indebted to the First National Bank in the sum of about $41,000 which he had improperly taken from said bank, and only about. $5000 of that sum has been repaid. “8. That the said R. L. Hanscome began misappropriating the funds of the bank as far back as the year 1895, and continued in said practice from time to time, until about the time he absconded, July 11, 1898. “9. That during the year 1897, and part of the year 1898, R. L. Hanscome speculated largely in grains through the W. A. Michael Commission Co., using for such purpose the funds of the plaintiff, which he had abstracted as aforesaid. Other persons also speculated in grain through said commission company during this time, but none of these speculators used their names. They used numbers instead. R. L. Hanscome had two numbers, number 1, and number 51. There were from fifteen to twenty of these numbers, representing speculators. “ 10. That the court is unable to state whether or not R. L. Hanscome represented a syndicate composed of several persons, or traded for himself alone, but the court finds that the said R. L. Hanscome represented to .John Byrnes and many others, that in his speculation he was representing a syndicate, and that John Byrnes believed this to be true. “11. That the said R. L. Hanscome carried on his speculations in grain in the following manner : He would go to the defendant, John Byrnes, and direct him to wire the commission company to purchase or sell for him, at a given price, so many bushels of wheat. These messages were transmitted by the said John Byrnes the same as other messages were. If the order was to buy grain the said Hanscome would deliver to the defendant a draft for the amount to be invested by him, and in all cases the said drafts were signed by R. L. Hanscome as teller or cashier. These transactions were carried on in a general way, said Hanscome keeping to his credit with said commission company a general balance so that he could wire a purchase and pay for it out of his general balance to his credit. These drafts that were drawn by the said Hanscome were made payable to John Byrnes, and often included sums of money sent by other speculators, and the credits were made by the commission company to the account of the several speculators as directed by the defendant in his letters or messages of instruction. “12. That the said John Byrnes always transmitted the full amount of drafts delivered to him by said Hanscome to commission company, never retaining any part thereof. - “ 13. Tliat when the said R. L. Hanscome began to speculate in grains, and for a long time thereafter, the said John Byrnes received no compensation for his services, other than the price of the message sent, but later the business increased, and the number of speculators became so great that the said Byrnes informed the commission company that he would not longer attend to the business without compensation, and during the month of August, 1897, an arrangement was made by which the commission company paid the said Byrnes 1.8 cents per bushel for all grain bought and sold through him, regardless of who the purchasers or sellers might be, and this arrangement continued from that time forward, a,nd the said Byrnes receiving his check for commission the first of each month. “14. That no time during the speculations herein referred to were R. L. Hanscome and John Byrnes partners. “15. That the six certificates of deposit involved in this action were issued by the plaintiff to the defendant for money and checks and drafts, the property of the defendant, and that none of the funds of the plaintiff are included in them or any of them, and that the plaintiff has failed to trace any of the funds represented by the said certificates of deposit, so that they can claim the same in this action. “36. That R. L. Planscome was the bookkeeper and kept the books of said First National Bank during all the time he was employed by it, and that he made changes in statements sent by plaintiff’s correspondents by erasures or by adding additional figures to conceal his fraudulent transactions, and that these alterations and erasures were skilfully made. “ 17. That said R. L. Hanscome would indicate on the stub of the draft register of said bank a certain sum, as the amount of said draft, but in drawing the body of the draft would make it call for a larger sum, in several instances the stub showing $1.50 and the draft with corresponding number being drawn for $1,500. “ 18. That'R. L. Hanscome was receiving a salary of $65 per month from the plaintiff. “19. That plaintiff during 1897 and 1898 kept large balances to its credit in its correspondent banks in Kansas City, Mo., New York, N. Y., and Wichita, Kan. “20. That at the time defendant took out the certificates of deposit set out in the first, second, third and fourth, causes of action, checks drawn by the W. A. Michael Commission Co. upon the National Bank of Commerce of Kansas City, Mo., in favor of John Byrnes for payment of his commission for services were turned in and indorsed by him as part consideration of said certificates of deposit. “21. That checks of the W. A. Michael Commission Co., drawn on the National Bank of Commerce of Kansas City, Mo., in favor of John Byrnes, and indorsed by him in payment for his commission for services were presented by him as part consideration for each of the certificates of deposit set out in the fifth and sixth causes of action.” CONCLUSION OB’ LAW. “1. That the plaintiff is not the owner of the certificates of deposit set forth in its petition or the funds represented thereby, and that said certificates of deposit are not impressed with a trust in favor of the plaintiff, and that the injunction issued herein should be dissolved, and this cause dismissed at cost of plaintiff.” Judgment was accordingly given for the defendant, and the plaintiff alleges error.