State V. LONG
Attorneys and Law Firms Stratton Shartel, Atty. Gen., and Ray Weightman, Asst. Atty. Gen., for the State.
Opinion
HENWOOD, District Judge.
By an information filed in the circuit court of Cedar county, the defendant was charged, as president and as a director of the People’s Bank of Jerico Springs, with assenting to the reception of a check for $200 as a deposit in the bank, on March 13, 1929, after he had knowledge of the fact that the bank was in failing circumstances. On the defendant’s application, the venue was changed to the circuit court of Vernon county, where a jury found him guilty, and assessed his punishment at imprisonment in the penitentiary for two years. He was sentenced accordingly, and, in due course, appealed.
Prior to the introduction of any evidence, the following stipulation was read into the record: “It is admitted that the defendant, W. T. Long, was a director and president of the People’s Bank of Jerico Springs, Cedar County, Missouri, on the 13th day of March, 1929; that it was a banking institution, a corporation duly organized and doing business under the laws of the State of Missouri, at Jerico Springs, Missouri; that a check for $200.00 was given on said People’s Bank of Jerico Springs, of Cedar County, Missouri, by I. E. Needham, in the sum of $200.00, to Z. F. Pittman, on the People’s bank of Jerico Springs, Missouri; that the said Z. F. Pittman deposited said $200.00 check in the People’s Bank of Jerico Springs, Cedar County, Missouri, on March 13, 1929; that it was of the value of $200.00, lawful money of the United States; that said money was accepted by E. F. Peer, as cashier of said bank, for payment to the said Z. F. Pittman; that said Z. F. Pittman was given credit by said bank, through its cashier, E. *68 F. Peer, for the said sum of $200.00; and that a certificate of deposit for said sum was duly issued and signed by E. F. Peer. It is also admitted that the said deposit was received by the said E. F. Peer for said bank in Cedar County, Missouri.”
Frank Davis, the chief witness for the state, testified: He had lived in Jerico Springs for forty years, and had been engaged in the general merchandise business there for thirty years. He liquidated the Farmers’ Bank of Jerico Springs which was taken over by the Jerico State Bank, and was cashier of the Jerico State Bank for about two years and a half. The Jerico State Bank was taken over by the People’s Bank of Jerico Springs. The People’s Bank was closed in the evening of March 15, 1929, and from March 27, 1929, to May 27, 1930, he had charge of the liquidation of the People’s Bank as special deputy commissioner. He knew “about all” of the makers of the notes held by the People’s Bank at the time it was closed, and knew “in a general way” the financial condition of “the most of them.” He attempted to collect these notes. The daily statement of the People’s Bank for March 13, 1929, shows loans approximately $60,000, cash $1,878.32, deposits approximately $41,000, bills payable $16,390. In his judgment, the market value of the assets of the bank on March 13, 1929, was about $40,000 less than their value as carried on its books. At the preliminary hearing of this case, the defendant said he had received a letter from the finance department. The letter, marked “State’s Exhibit A,” contains “the same things” that the defendant said were contained in the letter he received from the finance department. The paper, marked “State’s Exhibit B,” is the account of W. T. Long & Son with the bank. On crossexamination this witness testified: The daily statement of the bank for March 13, 1929, shows loans and discounts, $53,271.59; real estate loans, $6,400; bank building, $5,500; furniture and fixtures, $4,500; other real estate, $8,500; expense account, $1,471.34; overdrafts, $122.41; cash and cash items, $1,878.32; cash on deposit in other banks, $3,137.31; total assets, $84,800.97, total liabilities the same amount, less $24,000, or $60,800.97. He estimated the loss to depositors and creditors of the bank on March 13, 1929, at $40,000. The closing of the bank caused a material depreciation in the market value of its assets. The daily statements of the bank show that the deposits shrank from about $53,000 on February 5, 1929, to about $43,000 on March 13, 1929. On redirect examination he testified that the accounts of the defendant and of other officers and directors of the bank show a gradual shrinkage in their deposits with the bank from February 5 to March 13, 1929.
In connection with the testimony of this witness, the State’s Exhibits A and B were admitted in evidence. The State’s Exhibit A reads as follows:
“February 28th, 1929.
“Mr. W. T. Long, President, People’s Bank of Jerico Springs, Jerico Springs, Missouri.
“Dear Mr. Long: Examiner D. B. Reist examined your bank as of February 19th, and as a result of this examination, it was thought advisable to hold a conference with your Board of Directors and for your convenience, it was arranged to have this conference at Springfield, and the same was held at the Colonial Hotel; your bank being represented by the following duly qualified directors:—W. T. Long, E. F. Peer, J. W. Farmer, and J. A. Brown. The Department of Finance was represented by Examiner D. B. Reist and Deputy Commissioner S. L. Wonsetler.
“During this conference, the attention of your representatives was called to the fact that in increasing your capital stock from $10,000.00 to $20,000.00, you certifying to this Department that the additional $10,000.00 had been paid in actual cash; however, this cash was never supplied, and in view of the fact that in taking over certain assets from the Jerico State Bank you took an additional amount over and above the liabilities to equal the $10,000.00 and issued stock to the Jerico State Bank stockholders to this amount, it is very evident that the assets were not liquid enough to constitute cash and your bank finds itself in an embarrassing condition.
“You have $8,500 ‘other real estate’ with $3,900.00 second mortgages and with doubtful paper on which some loss has been admitted to the amount of $6,642.85. In view of the fact that you had certified to this department, over the signatures of the President and Cashier, and sworn to by the President, that the $10,000.00 had been put up in actual cash when in reality it was supplied by questionable assets, it was believed by those present at the conference that the best way out of a bad situation would be for your board in some way to supply the necessary $10,000.00 to offset the amount that should have been supplied for the increased capital stock.
“In supplying this cash, you will not only correct the discrepancy of the cash supplied for the increased capital, but you will relieve your bank temporarily at least, from its embarrassing condition. You have now bills payable to the amount of $17,500 which under this plan can be reduced to $7,500. It was agreed that the assets to be removed when cash is supplied are, ‘other real estate’ to the amount of $8,500.00, and the second mortgage notes of W. L. and Emma Davis, amounting to $1,500. It was understood that this $10,000.00 was to be supplied and this Department so notified within *69 ten days from the date of our conference in Springfield; however, owing to the condition of the roads and the fact that you may have some trouble in getting in touch with the proper parties to supply this necessary $10,000.00, I am willing to allow you an additional five days, which will make the time for the same to be due, Monday, March 11th.
“This Department is anxious to help you in every way possible and I hope that you will be able to put your bank in a condition that will not only meet the approval of this Department but also convince your customers that you are able to take care of their money as well as any other bank, and that you should have their full support.
“I am inclosing herewith a copy of the examiner’s report and he has fully set out the reasons for his criticism of the various items checked and you will, within thirty days, report to this Department over the signatures of the several members of your Board, as to the solvency of each item checked.
“Yours very truly,
“SLW: W Deputy Commissioner of Finance.”
The State’s Exhibit B shows the deposits, drafts, and daily balances in the account of W. T. Long & Son with the bank from December 2, 1928, to March 15, 1929.
Two other witnesses for the state testified that, at the preliminary hearing of this case, the defendant was shown the State’s Exhibit A, and said he received the original letter ov which said exhibit is a copy.
On behalf of the defendant, George W. Freund testified: He had been a state bank examiner for about seven years. He went to Jerico Springs in 1927 to investigate the increase in the capital stock of the People’s Bank from $10,000 to $20,000. He found that this increase in the capital stock of the bank had not been paid up in cash, and reported the result of his investigation by telephone and also by letter to the state finance commissioner. The People’s Bank took over the assets and liabilities of the Jerico State Bank, and the increase in the capital stock of the People’s Bank, following the consolidation, was represented by assets of the Jerico State Bank. In his opinion, the closing of the People’s Bank depreciated the market value of its assets about 25 per cent.
Two other witnesses for the defendant, experienced bankers who were acquainted with banking conditions in Jerico Springs, testified that in their opinion the closing of the People’s Bank depreciated the market value of the notes held by the bank from 20 to 25 per cent., and depreciated the market value of its real estate at least 40 per cent.
The Defendant’s Exhibit 2, which was admitted in evidence, is a certified copy of a certificate, signed and sworn to by W. T. Long, as president of the People’s Bank, and attested by E. F. Peer, as secretary, on May 24, 1927, in which said officers state that, at a meeting of the stockholders of the bank on May 23, 1927, the holders of a majority of the stock voted to increase the capital stock of the bank from $10,000, to $20,000, and that the full amount of said increase in the capital stock of the bank is bona fide subscribed and paid up in cash to its board of directors.
The defendant, testifying in his own behalf, said: He was fifty–seven years of age, had been a farmer the greater part of his life, and had been engaged in the hardware business in Jerico Springs for about ten years. He became president of the People’s Bank a little more than two years before it was closed. At the time the People’s Bank took over the Jerico State Bank, the assets of the Jerico State Bank exceeded its liabilities by $10,000, a sufficient amount to represent the increase in the capital stock of the People’s Bank. A state bank examiner assisted in the consolidation, and advised the officers of the People’s Bank as to the form of certificate that should be filed with the state finance department relating to the increase in the capital stock of the bank. Some time in February, 1929, the directors of the People’s Bank were called to Springfield by two state bank inspectors to confer with them concerning the increase in the capital stock of the bank. The directors told the inspectors that the increase in the capital stock of the bank had not been paid up in cash, that they did not understand that it had to be paid up in cash, and that the assets of the Jerico State Bank, over and above its liabilities, were sufficient to represent the increase in the capital stock of the People’s Bank. He made deposits with the bank up to and including the last day it was open for business, and he and his wife had money on deposit with the bank at the time it was closed. On March 13, 1929, when the deposit in question was received by the cashier of the bank, he had no knowledge that the bank was insolvent, and did not believe it was insolvent. In the evening of March 15, 1929, the cashier called the directors of the bank together, and told them that withdrawals of deposits indicated “a run on the bank,” and advised them to close the bank. After some discussion of the matter, the directors voted to close the bank. On cross–examination he was asked, if at the Springfield meeting the inspectors told the directors of the bank that they “had to get ten thousand dollars in ten days,” and he said the inspectors told the directors that it would help the condition of the bank to get the money for the increase of the capital stock of the bank, but did not tell the directors that they “had to get anything” or that they “had to do anything.” He was also cross–examined concerning withdrawals of deposits from the bank, shortly before it was closed, by its officers and directors, and said he had no knowledge of such withdrawals at the time the bank was closed.
*70 Other pertinent evidence will be noted in the discussion of the appellate issues.
The defendant has not favored us with a brief. However, we will consider the complaints which are preserved for our consideration in his motion for a new trial.
This is a companion case of the case of State v. Peer (Mo. Sup.) 39 S.W. (2d) 528, 530. Peer was convicted of receiving, as cashier of the bank, a check for $61.50 as a deposit in the bank, on March 9, 1929, when he knew the bank to be insolvent, and the judgment was reversed because of the errors of the trial court in admitting the testimony of the state’s witness Frank Davis relating to the insolvency of the bank and in admitting in evidence a copy of a letter, dated February 28, 1929, addressed to W. T. Long, as president of the bank, and signed “Deputy Commissioner of Finance.” The testimony of the state’s witness Frank Davis in this case is substantially the same as the testimony given by him in Peer’s Case, and the copy of the letter admitted in evidence in this case is the same copy of the same letter that was admitted in evidence in Peer’s Case. Therefore the judgment in this case must be reversed for the same reasons that the judgment in Peer’s Case was reversed, and the Attorney General so concedes.
[1] I. Referring to the same testimony and the same letter in Peer’s Case, Cooley, C., said, in part:
“We think the qualification of witness Davis to testify as he did to the value and solvency of the bank’s assets was not sufficiently shown. As above stated, his estimate of the amount of loss that would be sustained was based, not alone upon the personal loans, but upon the entire assets, which included real estate loans, furniture, and fixtures and real estate owned by the bank. There was no evidence that he knew the value of the real or personal property (other than the notes) owned by the bank, or the value of the real estate securing the real estate loans, or the value of that kind of property. State v. Sanford, 317 Mo. 865. 297 S. W. 73. As to the personal notes, he stated in answer to leading questions that he knew the makers of the notes, and knew the value of their assets ‘in a general way’ and ‘had made attempts’ to collect the notes. * * * There was no showing as to the manner or extent of his ‘attempts’ to collect. We are not willing to say that on such vague and indefinite showing of qualification as this record presents the witness was qualified to testify to the solvency and value of the bank’s assets and the amount of loss that would be sustained.
“To justify the admissibility of the abovementioned testimony, the state relies upon State v. McClure, 325 Mo. 1228, 31 S.W.(2d) 39. An examination of that opinion, loc. cit. 47, 48 of 31 S.W.(2d) will reveal that the witness’ qualification to give the testimony there in question was much more fully shown than in the instant case. We do not regard the McClure Case as supporting the state’s contention.
[2] “Neither do we think the testimony of Mr. Davis as to what the bank’s assets would have brought if sold for cash on the day the deposit was made was the proper test of the bank’s solvency. A bank might be perfectly solvent and able to meet its obligations or provide for their payment in the usual course of business as a going concern, and yet not be able to realize from its assets sufficient to meet its obligations if forced to sell in bulk, as the question objected to implied, and without reasonable time and opportunity to find a purchaser able and willing to buy. Notes that are thoroughly solvent and collectible would probably bring much less than their face value, if put up and sold for cash in the manner suggested, especially if the sale were of a large number at once. Banks do not and are not expected to collect or dispose of their notes in that way. Defendant’s objection to that evidence should have been sustained.
[3] “About February 19, 1929, the bank was examined, and a report was made by the examiner to the commissioner of finance, following which a conference was held at Springfield between two representatives of the department of finance and four directors of the bank, including defendant and the president, W. T. Long. The bank examiners’ official report was not offered in evidence, nor did the state offer any witness to testify to what occurred at the conference in Springfield. It did offer, however, and was permitted to introduce, a copy of a letter written to the president of the bank, Mr. Long, by a deputy commissioner of finance, whose name was not disclosed. The letter was dated February 28, 1929. * * *
“It is plain that the letter contained statements and implications damaging to defendant, and we think it was clearly incompetent as hearsay. See Home Exchange Bank of Jamesport v. Koch (Mo. Sup.) 32 S.W.(2d) 86, 90. The state cites, as sustaining its admissibility, State v. Salmon, 216 Mo. 466, 530, 115 S. W. 1106, holding admissible in this class of cases the official reports of bank examiners, but the reasons there assigned for holding such official reports admissible do not apply to the letter introduced in this case. It was not the official report of the examiner. It did not purport even to be based thereon, but rather upon occurrences and the discussion at the Springfield conference and other matters and conditions which may or may not have been referred to in the examiner’s official report. Its admission was prejudicial error.”
*71 [4] [5] II. It appears from the defendant’s own testimony that he controlled the account of W. T. Long & Son with the bank. So, he is not in a position to complain of the admission in evidence of a statement of said account on the ground that said account was not his account. Said statement shows a gradual shrinkage in the daily balances of said account for several weeks prior to the reception of the deposit in question, and was admissible on the issue of the defendant’s knowledge of the failing circumstances of the bank at the time the deposit in question was received.
[6] [7] III. The trial court improperly permitted the state to show, in its case in chief, that officers and directors of the bank other than the defendant withdrew all or the greater part of their money from the bank shortly before the bank was closed, in the absence of proof of the defendant’s knowledge of such withdrawals on March 13, 1929, when the deposit in question was received. But, in view of the defendant’s testimony, on direct examination, that the bank was closed on March 15th, 1929, because “there had been money drawn out” of the bank which indicated “a run on the bank,” it was not improper to permit counsel for the state to cross–examine him concerning the shrinkage in his deposits with the bank, or concerning withdrawals of money from the bank by its other officers and directors, shortly before the bank was closed. (See rulings on the admission of similar evidence and on similar cross–examination in Peer’s Case.)
IV. For the purposes of this opinion, it will suffice to consider the complaints relating to instructions in a general way.
The state’s instruction 3 was approved by this court in Peer’s Case. It is quoted in full as instruction 3, and discussed at length, in Peer’s Case.
The State’s instruction 6 in this case is substantially the same as instruction 4 in Peer’s Case. And, for the reasons mentioned in Peer’s Case, this instruction should not be given in the event of another trial of this case. (See discussion of instruction 4, and quotation of the objectionable part thereof, in Peer’s Case.)
[8] No error was committed by the trial court in modifying the defendant’s instructions B, D, N, O, and P, or in refusing to give said instructions in their original form. By each of said instructions as offered, the jury would have been directed to acquit the defendant, unless they found that the bank was insolvent, and that the defendant had “actual” knowledge of the bank’s insolvency, at the time the deposit in question was received. The trial court modified each of said instructions by striking out the word “actual.”
Other specific complaints in the motion for a new trial relate to matters which are not likely to occur at another trial of the case.
Because of the errors of the trial court in admitting incompetent evidence on behalf of the state, the judgment is reversed, and the cause remanded.
All concur.
Jerico Springs on parade 