Supreme Court of Missouri, Division No. 2.
STATE v. PEER No. 30968.
June 5, 1931.
Synopsis
E. F. Peer was convicted of receiving a deposit in a bank, of which he was cashier, with knowledge of its insolvency, and he appeals.
Reversed and remanded.
Appeal from Circuit Court, Vernon County; C. A. Hendricks, Judge.
Attorneys and Law Firms
*529 W. M. Bowker, of Nevada, Mo., and Neale, Newman & Turner, of Springfield, for appellant.
Stratton Shartel, Atty. Gen., and Ray Weightman, of Jefferson City, for the State.
Opinion
COOLEY, C.
Appellant was cashier of the People’s Bank of Jerico Springs, and as such officer received for deposit in the bank, on March 9, 1929, a check for .61.50. The bank closed, and was placed in the hands of the state finance commissioner for liquidation on March 16, 1929. Appellant was subsequently charged by information in the circuit court of Cedar county with having, as such cashier, received the deposit, knowing the bank to be then insolvent. On his application the venue was changed to Vernon county, where appellant was convicted and sentenced to two years’ imprisonment in the penitentiary, and he appeals.
The People’s Bank was organized October 4, 1927, and took over the assets and assumed the liabilities of the Jerico State Bank. Following that consolidation, the People’s Bank increased its capital from $10,000 to $20,000. The $10,000 additional stock was not paid for in cash; appellant’s contention being, and his evidence tending to show, that the assets of the Jerico State Bank taken over exceeded the liabilities assumed by that amount, and that by arrangement with and consent of the commissioner of finance the additional stock issued represented and was paid for by said excess of assets so received from the Jerico State Bank. At the time the bank closed, its assets and liabilities, according to its books, were each a little under $84,000. Of the liabilities there was $20,000 capital and $4,000 surplus, leaving about $60,000 of other liabilities. The “loans and discounts” (not including real estate loans) were $53,271.59, and, among other assets listed, were: Real estate loans, $6,400; real estate, banking house, $5,500; furniture and fixtures, $4,500; and other real estate, $8,500.
Such further reference to the facts as may be necessary can best be made in connection with the points to be discussed.
I. It is strenuously urged by appellant that error was committed in the admission of the testimony of Frank Davis as to the value of the bank’s assets when the deposit in question was received and when the bank closed. Mr. Davis was appointed special deputy commissioner to liquidate the bank after it closed, and took charge on March 27, 1929. He was called by the state to prove the insolvency of the bank, and was the state’s only witness on that subject. He testified that he had lived in Jerico Springs about forty years, had been engaged in mercantile business there, and had had some banking experience; that he had been cashier of the Jerico State Bank during the two and a half years of its existence prior to its consolidation with the People’s Bank, and had been special deputy commissioner “to close up” a bank which had been “taken over” by the Jerico State Bank upon its organization. He then testified:
“Q. Do you know the people of Jerico Springs and community in general there, and do you know the note makers of the People’s Bank, those who had notes in there at the time it colsed, and know the value of their assets in a general way? A. In a general way, yes.
“Q. Have you made attempts to collect these notes that were in the bank at that time? A. Yes, sir. * * *
“Q. From your knowledge as you have stated of the people in that community and particularly those who made notes and their property, as known to you at the time and since by investigation for the purpose of trying to collect, are you able to tell the jury whether or not the assets of the bank represented by the notes that were in the bank were equal to, more or less than the face value?”
Defendant objected on the ground that the witness had not shown himself qualified to answer, which objection was overruled, and the witness answered, “Less.” Over defendant’s continued objection, the witness further testified:
“Q. How much less? A. I have looked the papers over several times and I think there will be about a $40,000 loss.”
Then this:
“Q. If the assets of that bank could have been sold for their reasonable market value on March 9, 1929, you may state whether or not in your opinion it would have been a loss.”
Objection was made on the same ground previously urged and the further ground that such sale of the assets would not be a proper *530 test as to whether or not the bank was insolvent. The objection was overruled, whereupon the further question was put:
“Q. Basing your answer on your estimate of the bank as of March 9, 1929, would there have been a loss, and if so, how much? A. About $40,000.”
Defendant duly excepted to the court’s rulings. Further examination of the witness brought out more clearly that in estimating the loss at $40,000 he was giving his opinion of the difference between the amount at which all assets of the bank were carried on the books and what such total assets would have sold for “if they had been sold for what they would have brought in cash” on March 9, the day the deposit was received.
The testimony of Mr. Davis above set out was the only evidence offered to prove insolvency of the bank, except a copy of a letter from some one in the state finance commissioner’s office, which will be noticed later, and the testimony of two witnesses, denied by defendant, that they had heard him say after the bank closed that it had been in failing circumstances from the time it took over the Jerico State Bank. The importance of Davis’ testimony concerning the value of the bank’s assets is apparent.
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. Another question assumed that he had made investigations concerning the solvency of the makers of the notes “for the purpose of trying to collect,” but the witness had not stated that he had made any such investigation nor did he at any time so testify. 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 (Mo. Sup.) 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.
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.
II. 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, and is as follows, caption omitted:
“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 *531 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 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 signature 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 the cash is supplied are, “other real estate” to the amount of $8,500, and the second mortgage notes of W. L. and Emma Davis, amounting to $1,500. It was understood that this $10,000 was to be supplied and this Department so notified within 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, 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,
“Deputy Commissioner of Finance.”
Defendant objected to the introduction of the above letter on the grounds that it was hearsay, was not a part of the official records of the banking department, was merely a written statement of a deputy commissioner of finance, not binding on defendant, and contained many prejudicial statements which were specifically pointed out. He duly excepted to the overruling of his objection.
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.
III. Since the judgment must be reversed and the cause remanded for the errors above noted, other alleged errors complained of will be given only such notice as we deem appropriate in view of the possibility of another trial. These relate to the admission of certain evidence and certain complaints regarding the instructions.
(a) The court permitted the state to prove in its case in chief that some of the officers and directors other than defendant drew out of the bank, during the last few days it remained open and after the deposit involved herein had been made, all the money they had on deposit. The admission of that evidence, we think, was improper. Defendant was not responsible for that action of the other directors, it was not his act, and it occurred after the deposit in question had been received. State v. Beaghler (Mo. Sup.) 18 S. W. (2d) 423, 427.
(b) Defendant was asked on crossexamination about having withdrawn the money from his own account and also about certain of the directors having withdrawn their money just before the bank closed. This was objected to as improper cross–examination, not being within the scope of his direct examination. Defendant had testified on direct examination to his withdrawal of the money on deposit in his name (or perhaps in the name of himself and wife), claiming that it belonged to a Mrs. Buck, and that just before closing the bank he withdrew it and placed it in another bank, subsequently paying it by check to Mrs. Buck.
*532 He also testified on direct examination that he did not think the bank insolvent when he received the deposit nor when it closed, but claimed that he recommended to the directors to close it, and it was closed because he thought a run was being made or about to be made; that he so believed because there had been a decline in the amount on deposit, and because during the few days or a week just prior to the closing of the bank a number of depositors, whom he named, had closed out their accounts.
We see nothing improper in permitting cross–examination of defendant relative to his withdrawal of the money deposited in his own account or in the name of himself and wife. The cross–examination was relative to a matter about which he had testified on direct examination. Neither do we think there was prejudicial error in permitting him to be asked on cross–examination about the withdrawal by directors of their money. He had testified that there had been withdrawals of money and a number of accounts closed, of which he named several, and that it was because of such withdrawals and closing out of accounts that he believed a run was imminent. In view of that testimony, we think the cross–examination complained of was permissible.
(c) It is claimed that the giving of instruction No. 3 was error, particularly in connection with the refusal of defendant’s requested instruction A. Instruction 3 reads:
“The court instructs the jury that the failure of the Peoples Bank of Jerico Springs, Missouri, on the 15th day of March, 1929, if you find it did so fail, is prima facie evidence of the knowledge of the part of the defendant that the same was in failing circumstances on the 9th day of March, 1929.
“And you are further instructed that prima facie evidence is such that raises such a degree of probability in its favor that it must prevail unless it is rebutted or the contrary proven.
“Yet, you are further instructed that the burden of proving the State’s case is not really changed. The law enables the State to make a prima facie case, by proof of the taking, having and receiving on deposit in said bank of money or a valuable thing, and the subsequent failure of said bank and then on the whole of the case the burden still rests on the State to establish the defendant’s guilt beyond a reasonable doubt.
“The presumption of innocence with which the defendant is clothed never shifts, but rests with him throughout the case, notwithstanding a prima facie case may have been made by the State.”
The first two paragraphs of the instruction were approved in State v. Darrah, 152 Mo. 522, 539, 54 S. W. 226, with the intimation, however, that a supplementary instruction requested by the defendant should have been given. Instruction No. 3 was doubtless intended to meet the criticism made of an instruction on the same subject in State v. Sanford, supra, wherein the court said that one sentence of the instruction, on retrial, should be omitted or differently worded; the court stating that, notwithstanding the prima facie showing made by the failure of the bank, the burden still rested on the state to prove defendant’s knowledge of the insolvency at the time of receiving the deposit.
In this case the instruction does not in terms say that the burden of showing such knowledge still rests upon the state, but it does say that the burden of establishing defendant’s guilt beyond a reasonable doubt still rests upon the state. In other instructions the jury was clearly instructed that to establish defendant’s guilt and authorize conviction the evidence must show the insolvency of the bank, and that defendant had actual knowledge thereof at the time he received the deposit. We think the giving of instruction No. 3 was not error.
Defendant’s instruction A would have told the jury in substance that to authorize conviction the jury must find that the bank was insolvent, and that defendant knew it to be so when he received the deposit, and, further, that the fact, if found, “that the Commissioner of Finance took charge of said bank, closed it and has since had charge and control of its affairs, is not of itself sufficient to prove said bank was insolvent at the time complained of.”
The necessity of a finding of the insolvency and defendant’s knowledge thereof was sufficiently stated in other instructions given. The above–quoted part of the instruction was incorrect as applied to the evidence, which was that the bank was closed by order of the board of directors, not by the commissioner of finance. But, had it been correctly worded, we think that, in view of other instructions submitting the issues to be determined by the jury, it was not prejudicial error to refuse an instruction singling out the failure of the bank and telling the jury that such fact alone was not sufficient to prove insolvency at the time the deposit was received.
(d) Instruction No. 4 is criticized. It told the jury that, if they found that defendant, as cashier, etc., received the deposit and the bank was then insolvent as defined in other instructions, and defendant had knowledge thereof, it was immaterial how the bank became insolvent and “immaterial for the purpose of this case as to what conversations or arrangements, if any, the defendant had with the Finance Department of the State of Missouri, or any of its officers or agents.” (Italics ours.)
*533 The above–quoted part of the instruction is especially assailed by appellant. He testified at the trial that in his judgment the bank was not insolvent, but was closed because of a threatened run; that the commissioner of finance, or his deputy, who was giving attention to the bank’s affairs, had assured him that there was no intention on the part of the department to close the bank, and had suggested that the bank be kept open. Defendant was entitled to have his testimony considered on the question of his knowledge and good faith. The instruction might have had the effect of minimizing or destroying whatever benefit defendant might otherwise have had from his testimony. We need not determine whether or not the giving of that instruction would constitute reversible error, but we suggest that it was unnecessary, and should be omitted in the event of another trial. It is generally best to omit from instructions such reference to particular facts or evidence.
Appellant in his brief assigns error in the refusal of other requested instructions, but we think the issues therein presented were sufficiently and properly submitted by the instructions given. For the errors pointed out, the judgment is reversed, and the cause is remanded.
WESTHUES and FITZSIMMONS, CC., concur.
PER CURIAM.
The foregoing opinion by COOLEY, C., is adopted as the opinion of the court.
All concur.
Jerico Springs on parade 