City of Barnsdall v. Barnsdall Nat. Bank

WELCH, J. The defendant below has appealed. We will generally refer to the parties as plaintiffs and defendant, as they appeared in the trial court. Plaintiffs’ action is founded upon the fact that one Hammer, who at the time was vice president and active managing officer of the bank, *229 and at the same time treasurer of the defendant city, paid by draft drawn by him on the hank two interest coupons for the city, totaling $6,015, and plaintiffs seek recovery upon the theory that the bank received no reimbursement therefor from the city. The drafts were drawn January 29. 1923, and July 31, 1923. It was discovered in November, 1923, that Hammer had embezzled about $50,000 of the bank’s funds and the stockholders, who are parties plaintiff here, made good the loss and claimed subrogation upon the theory that they paid the city’s obligations without reimbursement or recompense. This is the second appeal to this court in this case. On the former appeal see City of Barnsdall v. Barnsdall National Bank, 164 Okla. 167, 23 P.2d 373. A full statement of facts is found in the former opinion. We will reiterate only such facts as are necessary to clarify our views of the issues now before us. In the former appeal it was one of the contentions that plaintiffs had made no showing that the city had provided funds to pay the interest coupons which were paid by the drafts of the bank.■' It was therein held, in effect, that if no funds had ever been provided for such purpose, the plaintiffs could not prevail under the rule of subrogation, because in such case the payment would have been in law a voluntary one. The former judgment was reversed and the cause remanded so plaintiffs might have an opportunity to make proof that funds had been so provided, and for the purpose of then determining the equities between the parties if funds had in fact been provided by the city. Upon the second trial it is clearly shown that the city had provided funds for the payment of the interest coupons, and therefore the plaintiffs are not in the position of being barred as volunteers from seeking subrogation. The result of the former appeal was the reversal of the former judgment and the remanding for a new trial to determine the equities of the parties, upon showing being made as to the city’s provision of and for its sinking fund. And so, upon the trial from which this appeal is taken, it was clearly established that the defendant city had provided a sinking fund for the payment of the interest coupons. It was also established that on June 29, 1922, the defendant city had $12,712.66 of its sinking funds on deposit with the plaintiff bank; that subsequent thereto and up to June 30, 1923, there was deposited additional sinking funds in the bank in the total sum of $5,783.58, making a total amount of $18,496.24 received by the bank as deposits to the city’s sinking fund to the last above named date. These figures are taken from the records of deposit which are undisputed by the bank. There is other evidence showing deposits within said period aggregating a greater sum. When these deposits were received by the bank the relation of debtor and credit- or between the bank and the city was created thereby. State ex rel. Barnett v. Exchange Nat. Bank of Tulsa, 172 Okla. 361, 45 P.2d 759; Shull, State Bank Com’r, v. Town of Avant, 159 Okla. 271, 15 P.2d 49; Multnomah Co. v. Oregon Nat. Bank (C. C. A.) 61 P. 912; Board of County Com’rs v. State Nat. Bank of Idabel, 169 Okla. 182, 36 P.2d 281; Dempsey Oil & Gas Co. v. Citizens Nat. Bank, 110 Okla. 39, 235 P. 1104. 'Such being the case, before the bank’s obligation becomes discharged, it must show proper disbursements or proper charges against the city’s deposits. Inasmuch as plaintiff’s claims are based upon alleged payments of the city’s obligations out of the bank’s money without reimbursement, it would seem apparent that the claim could not be well founded in equity if at the time the claim is made the bank owed the city an equal or greater amount. The statement of the charges against the deposits which the bank asserts as correct charges are the following: June 29, 1922 _$9,176.56 July 14, 1922 _ 6,000.00 Aug. 10, 1922 _ 1,206.81 Sept. 11, 1922 _ 300.00 Nov. 22, 1922 _ 350.00 Dec. 22, 1922 _ 500.00 Dec. 30, 1922 _ 446.60 Totaling _$17,979.97 —leaving only the small balance of $516.27, which balance had been paid to the city. These charges, however, are forcefully contradicted by other evidence which we consider binding upon the plaintiffs and largely decisive of this cause. There was introduced in evidence an instrument purporting to be a statement furnished by the bank for the information of its depositor, the city, with reference to the condition of its sinking fund deposit for the above-mentioned period. This statement was in the regular form used by the *230 bank for such purposes. The trial court seems to have proceeded on the theory that this statement was kept by Hammer to deceive the city or others as to the condition of the city’s bank deposit of sinking funds, or- to satisfy the city or others as to the correct credit of the city in that bank deposit. The amount of credit shown in that statement was the correct amount which the city should have had as a balance on deposit in its sinking fund. We think the plaintiffs, under the facts herein disclosed, are bound by such statement. Hammer, at all times hereinabove mentioned, was the treasurer of the city; at the same time he was vice president and managing officer of the bank; he had complete charge and control of all the bank records, and the directors and other officers and employees made no substantial efforts to examine into any of his acts whatsoever in relation to any of the bank’s affairs. Although the bank had a cashier, he was outside of the bank most of the time, and Hammer appears to have practically handled all of the bank’s affairs alone. It would seem that Hammer was generally the only official of the bank available from whom information could be obtained concerning accounts or balances. We think when he exhibited this statement to other proper persons interested in the fiscal condition of the city’s affairs, that it cannot be doubted that he did so as an agent of the bank. If in fact the same was not a true statement of the city’s sinking fund account in the bank, it can scarcely be questioned from this record that Hammer had possessed himself of same for the purpose of assuring proper inquirers of his sinking- fund bank account, and that he did so use the same seems certain, inasmuch as the city procured an audit to be made at the end of the mentioned period, which audit conforms to such statement instead of the one which plaintiffs claim to be correct. The audit was made at the instance of the city, was undoubtedly relied upon by the city and is in exact conformity with this statement, referred to by plaintiffs as “bogus.” Such statement and the audit obviously prepared therefrom show only three charges against the bank account of the city’s sinking fund for the period from June' 28, 1922, to June 30, 1923. These charges totaled $11,661, and are all' admitted as correct charges by the defendant city.-,.¡This left a balance of the admitted deposits ■ on- June 30, 1923, of $6,835.24. A greater balance was in fact shown thereby due to a record thereon of additional deposits, but the balance of the admitted deposits are in excess of plaintiffs’ claims herein. This representation of charges against this bank account, obviously relied upon by the defendant city’s agents and auditors, and furnished by the active managing officer of the bank, under the facts and circumstances here, precludes the plaintiffs from asserting the charges shown on the other bank records and enumerated above. It cannot properly be said that this statement so used by Hammer is not a record of the bank. It was used by Hammer as an official of the bank in disclosing the banli account, and not in disclosing the records of the city treasurer’s accounts, and when so used it became a record of the bank for purposes of our present consideration. No showing is made or attempted to be made of any other proper disbursement by the bank of this balance on deposit. It therefore follows that the defendant’s equities are equal to or greater than those of plaintiffs, because the amount the bank owed defendant is equal to or greater than the amount of the bank’s funds used for the payment of the city’s obligations. The city may owe the bank, but the bank owes the city an equal or greater amount. It would appear equitable that the respective accounts be balanced, offset, or- canceled in the amount in controversy. The city had ample funds with which to pay the interest coupons on deposit in the bank at the time the bank’s money was used for their payment. The bank has not accounted to the city for so much of the funds as were used for the payment, all of which is shown by the great weight of the evidence. In an action of purely equitable cognizance, this court will consider the entire record and weigh the evidence and cause to be rendered such judgment as the trial court should have rendered. Teachers Conservative Investment Ass’n v. England et al., 115 Okla. 298, 243 P. 137. The judgment is reversed, and judgment is rendered in favor of the defendant. OSBORN, C. J., and PHELPS, CORN, HURST, and DAVISON, JJ., concur. RILEY, J., dissents. GIBSON, J., concurs in part and dissents in part. BAYLESS, V. C. J., absent.