Hibernia Building Ass'n v. McGrath

Opinion by

Mr. Justice Thompson,

This action was brought b3r appellee against appellant, who was its treasurer, to recover from him the amount of certain alleged payments made by him to the secretary of the appellee and embezzled by him. The ground of liability was negligence in making these payments, although made upon orders signed by the president and secretary, who also attested the signatures of the payees. The money was either paid in cash to the secretary or by cheques payable to his order. Under the by-laws the president was required to sign all orders drawn upon the treasurer for appropriations made by the board, the secretary to keep accurate minutes, to attest all orders drawn on treasurer for appropriations made by the board, the treasurer to pay all orders drawn on him by order of the board, if signed by the president and attested by the secretary. The orders upon which these payments were made were in the usual form, and signed by the president and attested by the secretary. The appellant having no reason to suspect or doubt the integrity of either the president or the secretary, and acting in good faith, paid them. As the appellant served without compensation for his services he became a gratuitous bailee, and as such is to be held liable for gross negligence only. In Tompkins v. Saltmarsh, 14 S. & R. 275, it was said: “ Tompkins is charged as the bailee of Saltmarsh on an undertaking to perform a gratuitous act, from which he was to receive no benefit and the benefit was solely to accrue to the bailor, in which case the bailee is only liable for gross negligence, dolo proximus, a practice equal to a fraud.” This rule thus stated is repeated in Scott v. Bank of Chester Valley, 72 Pa. 471; Bank of Carlisle v. Graham, 79 Pa. 117. His designation as treasurer did not change the character of the bailment. As provided in the by-law, the money was deposited with him to be paid out when required upon orders drawn in the manner as stated. A treasurer or a director may become a gratuitous bailee, and his official position and designation will not in any degree change his liability as such bailee. In Swentzel v. Bank, 147 Pa. 153, it was held that directors who are gratuitous mandatories were only liable for fraud or such gross neglect that amounts to fraud. In this case the appellant had no office or place in which as treasurer he transacted the business of the association. When orders were to be paid he testifies he would get notice from the secretary to come down and see him, that he had some that he wanted paid, and that he would go to the' secretary’s store and would there pay them to him. The appellee’s business was managed principally by its secretary, who came in contact directly with its members. In view of the by-law and the modes of payment, it is very clear that he was a gratuitous bailee, and is to be held only to that diligence required as such. It is true he gave a bond as required by the by-law for the faithful performance of his duties, but that did not change the duty cast upon him by law as a bailee. The condition of the bond was that he should perform and discharge the duties of the office, and shall keep a just and true account of the moneys received, and shall pay to his successor the moneys received, and shall account for the money so received. The condition of the bond therefore was that he should faithfully perform the duties in regard to the bailment that the law required him to perform.

It is however contended that, as the bond provides that he shall discharge all the duties now required or may hereafter be required of him as treasurer by the constitution, charter,, bylaws, rules and regulations of said association, and as the board passed a resolution that all applications for withdrawals of stock must be approved by the board of directors at regular or special meetings of the association before payments are made, the appellant was guilty of negligence, without examining the minutes and without satisfying himself that the board had acted upon the withdrawals for which the orders in question purported to have been drawn. It is established by the proofs that no entries were made upon the minutes for application of withdrawals after 1884. In point of fact the secretary after this date kept no record in his minutes of any withdrawals. The luty of the president is to preside at all meetings of the board and to sign all orders for appropriations authorized by the board;. that of the secretary is to keep accurate minutes of all meetings of the board, the accounts of the association, and to attest all orders on the treasurer for appropriations of the board. These orders in question were signed by the president and were attested by the secretary in the usual form. The president was and is still regarded as an upright man, the secretary was also at this time so regarded, the association trusted both of them implicitly and had no reason or cause to doubt them. If it treated them thus, it was natural that the appellant should in no manner suspect or doubt them. These orders therefore came to him with the certificate of the presiding officer, whose duty it was to preside at all meetings, and with the attestation of the secretary, whose duty it was to keep all records of the meetings. If the appellant had gone to the secretary he would doubtless have been assured that the board had acted upon these withdrawals, and having been so advised he would have been justified in paying them. It can be scarcely said to be want of ordinary diligence to have paid these orders under these circumstances and with these signatures. They were in fact as express an authorization as if he had seen these officers officially. It was said in Swenzel v. Penn Bank, supra : “Nor do we think the directors were bound to regard the statements submitted to them as false, and the president, cashier and clerks as thieves. They had nothing to arouse suspicion. All of these gentlemen stood high. They were the trusted agents of the corporation.” The appellant was not guilty of negligence in trusting the secretary, and in putting full faith in his action and that of the president in signing and sending to him the orders in question.

It is however argued that the negligence o.f the appellant consisted in paying the amounts to the secretary and not to the payees named in the order. If these payments were unusual or exceptional there might possibly be some force in the suggestion ; but the business of building associations is not carried on with the exact precision of banks in regard to payments. It is uncontradicted that generally orders were paid sometimes at the association if the persons came there, but at other times, if not convenient to these persons to be present at the meeting, they would request the treasurer as a favor to pay them at the secretary’s office, and the appellant states that at times he went to the store of the secretary, saw him, and if orders were to be paid, paid them to him. It was thus usual and customary to pay the money to the secretary for the members. The reason of it was that the secretary, being the active manager of the association, came in constant contact with them, received money from them and paid money to them. It cannot be therefore said that there was negligence in paying the money under these orders to the secretary, with the signatures of the president, attested by the secretary.

In view of the good faith shown by the appellant and in view of the fact that the testimony in this case does not show negligence that would render him liable, the sixth assignment of error, “ That under all the evidence the verdict should be for defendant,” is sustained and the judgment is reversed.