Lansing National Bank v. Coleman ( 1898 )

Grant, C. J.

(after stating the facts). 1. A settlement was made between the bank and the defendant. What was settled, and what was the consideration for the settlement? The defendant had taken' a note for $2,000, placed it among the assets of the bank, and had credited himself upon the books with $2,000 as loaned upon 'this note. In fact no loan was made, no cash paid out, no note had ever existed of which the one taken could be a duplicate. There was nothing upon the books of the bank to indicate the existence of any such note, or that Bement & Sons had ever been indebted to the bank upon such a note. Defendant had no reason to believe that the Bements had ever executed such a note, or were indebted to the bank in such a sum. If there was a shortage at that time in the cash of the bank, defendant did not then inform any of the bank officials, and give them an opportunity to investigate. Defendant, under his contract and bond, had control of the bank assets and loans. He recognized his liability for the transaction, and took this note, himself taking it, and entering it, and being alone responsible for it. It requires no argument to show tüat he was primarily liable to the bank. The bank had sued Bement & Sons. The suit was pending. They had executed the note. They appear to have had a valid defense. Defendant recognized it. On the strength of defendant’s agreement, that suit was discontinued. Defendant recognized his liability, agreed to pay, time to pay was extended, and any further investigation by the officials of the bank rendered unnecessarjo Defendant was not settling a larceny committed by his son, but a transaction of his own. The fact, if so it be, that defendant informed the president and directors that his son had taken -the money, did not change the situation. The statement did not bind them or the bank. They did not know whether the statement was true or false, and made no investigation. It was immaterial to the bank who had taken the money. There is no evidence to show that the bank officers understood and agreed that they would settle a theft by young Coleman. The fact that Mr. Barnes, the president, believed the statement of the defendant, did not bind the bank, or change the nature of the transaction. If defendant stated to the directors that his son had confessed that he had taken the money, and “substituted the note” for it, the statement, as a whole, was not true, for his son had nothing whatever to do with getting the note or entering it on the books, as appeared from his (defendant’s) cross-examination. But this is not all. It was not true, as stated by his counsel, that Bement & Sons had failed to take up a $2,000 note, and his son, instead of retiring it, had permitted it to stay upon its cashbook as a claim due the bank. The bank, through its officers, insisted that defendant was liable. He did not deny his liability. On the contrary, he recognized it, and settled. It would be a gross injustice to permit him, years afterwardsj to escape liability under a plea of theft by his son. If defendant had disputed his liability, and this dispute was compromised and settled, the compromise would have been a good consideration. 3 Am. & Eng. Enc. Law, 837. Is the settlement any less valid where he admitted his liability?

2. If, however, we assume that this settlement was made to secure the debt, default, or miscarriage of young Coleman, the defense cannot be maintained. The agreement is in writing, and answers the statute of frauds. The agreement itself implies an extension of time, because it was to be paid out of future dividends. It was clearly-understood that no proceedings to recover it were to be taken against young Coleman. None were taken. The agreement lulled the directors into nonaction against him. The settlement was voluntary. The amount was agreed upon, as well as the terms of payment. Defendant’s written obligation was accepted by the bank, acted upon, rendered any investigation by the bank as to the liability for the money unnecessary, and, in short, was treated as a complete settlement, and acted upon, for nearly four years. Defendant was continued in the service of the bank. In Bodine v. Morgan, 37 N. J. Eq. 426, the defendant had given a mortgage to secure the firm for which he and his son were employed for peculations made by the two. Five years afterwards Morgan attempted to defend against the mortgage because it was obtained by duress. It was there said:

“The mortgage resulted from a voluntary agreement on the part of Morgan with the firm to secure them $5,000 for the losses which he admitted they had sustained by the fraud of himself and his son while in their employment. ITe took no steps to set it aside, and never even protested against it, though it had stood against his property for about four years, and consequently had been due for a year when this suit was brought.”

The extension of time of payment and forbearance to bring suit against the son were sufficient consideration for the promise.

3. If proof that this obligation was given by defendant to secure a defalcation of his son would be a valid defense, defendant, upon whom is the burden of proof, has failed to establish it. Can a bank cashier avoid his written obligation by simply stating that A. or B. or C. told him that he had stolen $2,000 of the bank funds? Such a defense does not depend upon who stole, — whether he be a stranger or employé. If the position of the learned counsel for the defendant be true, then a bank cashier can defend against his written obligation securing a deficit by coming into court years afterwards and saying: “I told the directors or president at the time I secured this deficiency that one A., a stranger, told me that he went into the bank one day and stole the funds.” Such a statement is hearsay, and wholly incompetent when the question comes up between employer and employé, and it is essential for the employé to establish a theft in order to relieve him from liability. The testimony was received under objection and exception. It is immaterial that Mr. Barnes, the president, believed what defendant told him. This neither bound the bank nor proved the theft. Furthermore, the money, if taken by the son, might have been taken under such circumstances as not to relieve defendant from liability, and upon this point there is an entire absence of proof. In order to avoid his voluntary agreement, entered into and accepted in good faith, and acted upon for a long period, the defendant now seeks to defend by proclaiming his son a felon, and to do so without giving his son a chance to be heard. Courts will not permit such a defense to be established by bare hearsay.

Judgment reversed, and new trial ordered.

Moore, J., concurred with Grant, C. J. Long, J. I think the case should be reversed upon the last point suggested by my Brother Grant. I cannot agree with him, however, upon the other questions. Hooker, J., concurred with Long, J.