Summary
In Holland Banking Company v. Republic National Bank, 328 Mo. 577, 41 S.W.2d 815, a draft was drawn on another bank (though in this case the payment was held to be good under a statute).
Summary of this case from Fine v. Harney Co. National BankOpinion
September 5, 1931.
1. ACTION AT LAW: Findings of Fact: Conclusive. In an action in conversion, being an action at law, tried to the court without a jury, the trial court's findings of fact, based on conflicting evidence, are conclusive in the appellate court.
2. ____: ____: Direction to Bank to Apply Draft to Payment of Individual Debt: Knowledge of Payee. The finding of the trial court that the board of directors of the plaintiff bank did not authorize its president, by order or draft, to use the bank funds to pay the individual note of its former directors held by the defendant bank, and that the defendant bank, at the time it received said order and applied the draft to the payment of said note, had no actual knowledge that said order was made and said draft was issued without authority of plaintiff bank, is binding upon this court upon appeal.
3. BANKING: Credit on Authority of Order: Draft: Applied to Payment of Individual's Note: Bookkeeping. Where the defendant bank received a written order from the president to charge the account of the plaintiff bank with a named sum of money and to credit the amount on the individual note of former directors of plaintiff held by defendant, and on receipt of the order defendant charged the account of the plaintiff with the amount and credited the note with a like amount, and wrote the plaintiff bank to send a draft, signed by some officer not interested in the note, to take the place of the debit ticket, which was done, the president without the knowledge of defendant causing to be used the funds of plaintiff to the amount of the draft, the payment, or credit on the note, was made by the draft of plaintiff, signed by its vice-president, and not simply upon the authority of its president's order, and defendant is not liable to the plaintiff, as for conversion, for the amount so used. The draft, upon the demand of defendant, not satisfied with the president's order, was sent by plaintiff to take the place of the debit ticket, and was substituted for it, and the credit or the note and the charge against plaintiff's account were not made to rest upon the authority of the president's order; and the fact that no change in defendant's books was made after the draft was received did not alter the substance of the transaction, but this method of handling it was a mere matter of bookkeeping.
4. BANK DRAFT: Charged Against Account of Plaintiff Bank: Credited on President's Individual Note: Recovery: Finding of Trial Court. It being conceded that the amount of money sought to be recovered was charged against the plaintiff bank's account in the defendant bank and was credited on the note of plaintiff's president held by defendant, and that the amount so charged and credited was represented by a draft drawn by plaintiff on and payable to defendant, and it being shown by substantial evidence that the amount was so charged and credited in compliance with plaintiff's direction, the question whether the defendant, at the time it charged the draft against plaintiff's account, had actual knowledge that the draft had been issued without the authority of plaintiff, was a question of fact, to be determined by the trial court sitting as a jury, and the trial court having found, upon substantial evidence, that the defendant had no such knowledge, that question is foreclosed, and the judgment in favor of defendant must, under the statute (Sec. 2838, R.S. 1929), be affirmed, absent prejudicial error in other respects.
5. JUDGMENT: Correct: Immaterial Errors. If alleged errors are not inconsistent with and do not tend to contradict the findings of the facts which authorized the judgment rendered by the trial court in the action at law, such alleged errors, although erroneous, are not prejudicial.
6. ____: Bank: Order to Credit Account: Draft. Where the defendant bank received a letter from the president of plaintiff bank, directing defendant to credit a note, made by former directors of plaintiff and held by defendant, with a named amount and charge the amount to plaintiff's account in defendant's bank, and the letter was promptly followed by plaintiff's draft for the amount, the treatment, by the trial court, of the letter as an order within the meaning of the statute (Sec. 2838, R.S. 1929), even if erroneous, did not prejudice the rights of plaintiff. If the order did not come within the meaning of the statute, the draft did.
7. ____: Bank Draft Applied to President's Debt: Unauthorized: Negligence of Directors: Actual Knowledge. Negligence on the part of the board of directors of plaintiff bank in failing to discover that its president was using its funds in paying his individual debts, did not destroy the statutory right of the defendant bank, to which was sent the plaintiff's draft, with directions that the amount be charged to plaintiff's account and credited on the president's note held by defendant, to accept the draft in payment of the president's note, absent knowledge by defendant that the issuance of the draft was unauthorized.
Appeal from Boone Circuit Court. — Hon. David H. Harris, Judge.
AFFIRMED.
Roscoe C. Patterson, Orin Patterson, Harris Price, Ruby M. Hulen and Farrington Curtis for appellant.
(1) Conversion is a distinct act or dominion wrongfully exerted over another's personal property in the denial of or inconsistent with his rights therein. Mercantile Co. v. Fitch, 23 L.R.A. (N.S.) 573; Hootin v. County, 178 S.W. 310. (2) The foundation for the action of conversion rests neither in the knowledge nor the intention of the defendant. It rests upon the unwarranted interference of the defendant with the dominion over the property of the plaintiff from which injury to the latter results. Therefore neither good nor bad faith, neither negligence nor care, neither knowledge nor ignorance, are the gist of the action. Poggi v. Scott, 51 L.R.A. (N.S.) 925; Mfg. Co. v. Bank (Ill.), 137 N.E. 793. (3) The person receiving the corporation's money in payment of an individual debt of an officer who knows it is the corporation's money cannot rely on the actual knowledge provision of the Act of 1917 with reference to authorization, unless the instrument by which the money is paid and upon which he makes the collection falls within the class of instruments designated in Sec. 996, R.S. 1919, that is, a check, draft or order such as is contemplated in the act. Prior to enactment of same the reception of a check, draft or order under the facts of this case is taken at the payer's peril. McCullam v. Hotel Co., 198 Mo. App. 107, 199 S.W. 417; Kitchen v. Teasdale Co., 105 Mo. App. 463; St. Charles Coal Co. v. Lewis, 154 Mo. App. 548; Coleman v. Stocks, 159 Mo. App. 43; Reynolds v. Gerdelman, 185 Mo. App. 176, 170 S.W. 1153; Reynolds v. Title Co., 189 S.W. 33; Blake v. Bank. 219 Mo. 644; Napoleon Hill Cotton Co. v. Stix, Baer Fuller D.G. Co., 217 S.W. 323; St. Charles Bank v. Edwards. 243 Mo. 553; Reynolds v. Whittemore, 190 S.W. 594; Lee v. Smith, 84 Mo. 304; McCullam v. Jewelry Co., 218 S.W. 345; McCullam v. Bank, 237 S.W. 1051; Bidderman v. Jewelry Co., 242 S.W. 127, 268 Mo. 64; O'Bannon v. Moerschel, 222 S.W. 1035; Cook on Corporation (7 Ed.), sec. 774, p. 293; 14A C.J. 337. (4) The letter of April 7, 1922, which is the sole authority upon which defendant acted when it charged the plaintiff's account in its bank on April 8, 1922, is not such an order as requires the plaintiff to establish actual knowledge in order to recover, and if that is true then as to the letter the rule in Missouri as to this case is the same as it was before the 1917 Act was passed. (5) The common law of Missouri was changed by the Act of 1917 only as to those who receive in payment and collect (a) "check, draft or order." The section was passed as an amendment to the Negotiable Instruments Law under which title it will be found as Sec. 996, R.S. 1919, and from the title to the bill found in Laws 1917, pp. 143 and 144, it is apparent from its language that it was not intended to cover all directions or orders given where a corporation's money is used to pay one of its officer's debts, such as orders that might be given in letters or oral orders, but only in cases where the payment was made in a class of instruments mentioned in the Negotiable Instrument statute, to-wit, "check, draft or order." (6) We concede that there is evidence in this case upon which the trial court could find that the defendant did not have actual knowledge that the letter of April 7 was written without authority of the corporation, if the letter is an order within Sec. 996. R.S. 1919, and there is evidence upon which the court could make the same finding as to the defendant on the payment of July 10, 1922. But we further contend that there is substantial testimony upon which a contrary finding could be made. This necessarily drives appellant to the point of showing error in the trial of the cause by the trial court in reaching the judgment he did as to declarations of law, finding of facts, admission or exclusion of testimony. (7) A finding of facts when requested should embrace all the material facts bearing on the issues involved, and not merely state conclusions or inferences therefrom. Karneman v. Davis, 281 Mo. 234, 219 S.W. 908; Buschow Lbr. Co. v. Ry. Co., 220 Mo. App. 743, 276 S.W. 413; Pemiscot Co. Bk. v. Tower Grove Bank, 204 Mo. App. 441, 223 S.W. 115; Downing v. Bourlier, 21 Mo. 149. (8) It is beyond the powers of a director or of a board of directors to give away the assets of a corporation, either by resolution, inaction, negligence fraud, ratification or estoppel. Nothing short of the unanimous consent of the stockholders can do that. Holland Banking Co. v. Continental National Bank, 22 S.W.2d 821; Brinkerhoff v. Boyd. 192 Mo. 597. (9) Randall did not purport to represent the plaintiff in borrowing the money and the trial court so found, and the defendant did not treat Sanford as the sole representative of Holland Banking Company for it demanded a letter signed by some other officer, therefore knowledge of the wrongdoing on the part of Sanford and Randall is not imputable to the plaintiff. Kegan v. Park Bank, 8 S.W.2d 858; Bartlett v. McAllister, 289 S.W. 814.
W.D. Tatlow and John M. Atkinson for respondent.
(1) Sanford's letter of April 7, 1922, directing the defendant to charge the account of the Holland Banking Company $50,000, and credit amount on note of C.E. Randall and J.L. Hine, is an "order" within the express terms of the statute, Sec. 996, R.S. 1919. 46 C.J. 1131; Finnigan v. Railroad Co., 261 Mo. 481; Dennett v. Kirk. 59 N.H. 10. There is nothing in the terms or subject-matter of Sec. 996, R.S. 1919, to indicate that the word "order" is used therein in any other sense than its ordinary well-understood meaning. Sec. 7058, R.S. 1919; Roxford Knitting Co. v. Moore and Tierney, 265 F. 177, 253 U.S. 498, 64 L.Ed. 1031; Hopkins v. State, 11 Ga. 92, 102. (2) Sanford's letter must be judged by its contents and not by its name. Whether this letter is a negotiable or a non-negotiable instrument, it is a direction to apply a fund of $50,000, which was in defendant's hands, as a payment on the note of Hine and Randall due the defendant. Judged by its contents, as it must be, it is just as appropriate and effectual an instrument therefor as a negotiable or non-negotiable instrument would have been, if not more so. It was not intended to be negotiated, assigned or transferred. In addition to the authorities, supra, expressly holding that a letter is an order within the meaning of such a statute, there is nothing in the statute or the subject-matter of the statute to suggest or require an instrument that is negotiable or non-negotiable could be assigned and transferred, as it was not intended for that purpose. "Drafts, as used in the collection of debts, are not usually negotiable." Ben v. English, 84 Ga. 406. "The word `draft' does not necessarily, or even usually, imply negotiability." Calif, etc., Co. v. Phoenix etc. Bk., 177 N.Y.S. 41; Brennan's Neg. Inst. L. (4 Ed.), sec. 126. Instruments much less formal than Sanford's letter have been held by this court to be a non-negotiable note. McGowan v. West. 7 Mo. 569; Brady v. Chandler, 31 Mo. 28; Locher v. Kuechenmeister, 120 Mo. App. 701; Kessler v. Clayes, 147 Mo. App. 88; Reyborn v. Casey, 29 Mo. 129. (3) Under the express terms of the statute, the actual knowledge that the defendant must have had "is that the said check, draft or order was issued without authority of" the said Holland Banking Company. If Sanford had, in fact, paid the Holland Banking Company $50,000, he would have had as undoubted authority to have issued the letter as he would to have sent a check or draft for the amount. The letter was as appropriate and effectual to accomplish that purpose as a check or draft would have been. Downs v. Horton, 287 Mo. 414, 230 S.W. 106; Mayes v. Robinson, 93 Mo. 114. (4) No actual knowledge on the part of the defendant that Sanford did not have authority to write the letter directing the first payment is shown. The court could not find, and did not find, under the testimony that the original transaction by which the money was loaned was a fraudulent or illegal pledging of the funds of the Holland Banking Company to pay the individual debt of Hine and Randall. Holland Banking Co. v. Continental National Bank, 22 S.W.2d 821. (5) Holland Bank's standing is no better than Hine's and Randall's was. Holland Banking Co. v. Continental National Bank, 22 S.W.2d 821. (6) To authorize a reversal there must not only be error, but the error must be prejudicial to the appellant. Bellisimme v. McCoy, 1 Mo. 318. This rule has been announced over and over again. (7) None of the errors alleged by appellant were prejudicial. (8) There is no substantial evidence of actual knowledge. Troll v. St. Louis, 257 Mo. 626.
This case comes to the writer on reassignment. It is an action in conversion, and was instituted in the Circuit Court of Greene County on August 19, 1926, by C.E. French, then Commissioner of Finance of the State of Missouri in charge of the business and property of the Holland Banking Company of Springfield, Missouri, hereinafter called Holland Bank, against the Republic National Bank of St. Louis, Missouri, hereinafter called National Bank and one E.L. Sanford. The cause was dismissed as to defendant Sanford, and later the venue of said cause was changed to the Circuit Court of Boone County, where, by agreement, S.L. Cantley who succeeded C.E. French as Commissioner of Finance, was substituted for said French as party plaintiff. The petition was in two counts, the first charging the conversion of $50,000 and asking judgment for that amount; the second charging the conversion of $50,083.35 and praying judgment for that sum. The cause was tried to the court, without the aid of a jury. The court gave certain declarations of law, made certain finding of facts, then rendered judgment for defendant on both counts of the petition, from which plaintiff appealed.
Both the pleadings and the evidence are quite lengthy. The pleadings are not assailed and they sufficiently present the issues. We will state the pertinent facts in connection with the questions discussed.
C.E. Randall and J.L. Hine were officers of and stockholders in the Holland Bank, having purchased from E.L. Sanford and others a majority of the stock therein. In August, 1921. Randall and Hine borrowed $100,000 from the National Bank and executed to said National Bank their individual notes therefor. The $100,000, the proceeds of the loan, was placed on deposit in the National Bank to the credit of the Holland Bank and in turn Randall and Hine were given a deposit credit of $100,000 in the Holland Bank, which they thereafter used in paying Sanford for the stock in the Holland Bank which they had purchased from him. The evidence of both parties shows that at the time the loan was made, it was agreed between Hine and Randall on one side, and the president of the National Bank on the other, that at all times during the life of the loan, the Holland Bank would keep on deposit to its credit in the National Bank an amount equal to the $100,000 loan and at any time the National Bank became dissatisfied with the loan, it was authorized to charge the notes representing the loan against the Holland Bank's deposit. The evidence of appellant tended to show that during the negotiations for the $100,000 loan, Randall informed the president of the National Bank that he and Hine had purchased the majority of the stock in the Holland Bank and desired to borrow $100,000 for their individual use to assist them in completing the purchase of said stock. On the contrary, the evidence of respondent tended to show that Randall did not tell the president of said National Bank anything about the purchase of stock in the Holland Bank, but did tell him that they wanted to borrow $100,000 for the benefit of the Holland Bank, for the purpose of increasing the reserve of said bank. Hine and Randall paid the National Bank interest on the $100,000 loan from their own private funds. The National Bank paid the Holland Bank interest on the $100,000 deposit.
The trial court found that the $100,000 loan was an individual loan to Hine and Randall for their own private purposes and not for the benefit of the Holland Bank; that when Hine and Randall deposited $100,000, the proceeds of said loan, in the National Bank to the credit of the Holland Bank and took a deposit credit to themselves for a like amount in the Holland Bank, the $100,000 deposit in the National Bank became the property of the Holland Bank. This being a law case, the trial court's finding on these issues, based on conflicting evidence, is conclusive here.
In February, 1922, E.L. Sanford purchased from Hine and Randall a controlling interest in the Holland Bank and became its president. As part payment of the purchase price, Sanford assumed and agreed to pay the $100,000 in notes which Hine and Credit of Randall had theretofore executed to the National Bank Letter or at the time the loan in question was made. Thereafter Draft. and on April 7, 1922, Sanford, as president of the Holland Bank, wrote the president of the National Bank the following letter:
"Please charge the account of Holland Banking Company $50,000 and credit amount on note of C.E. Randall and J.L. Hine, and enclose to us by registered mail as near half of the stock of the Holland Banking Company issued in the name of Messrs. Randall and Hine that you hold as collateral to the note."
On receipt of this letter the National Bank charged the account of the Holland Banking Company with $50,000, credited Hine and Randall's note with a like amount, and on April 8, 1922, so notified Sanford, as president of the Holland Bank, by letter in which was enclosed one-half of the Holland Bank stock which was held as collateral to the Hine and Randall note. On April 10, 1922, the National Bank wrote Sanford, as president of the Holland Bank, the following letter:
"As directed by you on the 8th inst., we charged the account of Holland Banking Company with $50,000 crediting the same on note of Messrs. Hine and Randall. In order to have our records clear, wish you would kindly send us a draft on the Republic National Bank for this amount, under above date, to take the place of the debit ticket, to be signed by some officer not interested in the note."
On the next day, April 11, 1922. Sanford, as president of the Holland Bank, wrote the National Bank a letter, enclosing therein a draft for $50,000 drawn on and payable to the Republic National Bank and signed by C.F. Wright. Assistant Cashier of the Holland Bank. When the National Bank received this draft it made no change on its records, as it had theretofore charged the $50,000 against the Holland Bank's account and credited a like amount on Hine and Randall's note on the authority of Sanford's letter under date of April 7, 1922. On July 6, 1922, the National Bank wrote Sanford a letter insisting upon payment of the balance due on the Hine and Randall notes, the payment of which Sanford had assumed. On July 8, 1922, Sanford as president of the Holland Bank replied to that letter enclosing a draft for $50,083.35, drawn on and payable to the Republic National Bank, and signed by C.F. Wright, assistant cashier of the Holland Bank. This draft was charged against the Holland Bank's account and the amount thereof credited on the Hine and Randall notes, thus completing their payment. It appears from what we have thus far stated that the individual notes of Hine and Randall, the payment of which Sanford had assumed, were paid out of funds which belonged to the Holland Bank.
Prior to 1917 it was the rule in this State that where one accepted corporate funds in payment of the debt of an officer, agent or employee of a corporation, he did so at the risk of being required to return to the corporation the funds so received, in event the payment to him was not authorized by the corporation. [Bank v. Edwards, 243 Mo. 553, 147 S.W. 978; Blake, Trustee, v. Bank, 219 Mo. 644, 118 S.W. 641; Reynolds v. Whittemore, 190 S.W. 594.] This rule was changed to some extent by the enactment of Section 996, Revised Statutes 1919, now Section 2838, Revised Statutes 1929. This statute reads as follows:
"If any check, draft or order of any corporation, firm or copartnership shall be given in payment of the debt of any officer, agent or employee, of said corporation, firm or copartnership, the payee or other person collecting such check, draft or order shall not be liable to said corporation, firm or copartnership therefor, unless it shall be shown that such payee or other person, at the time of collecting same, had actual knowledge that said check, draft or order was issued without authority of said corporation, firm or copartnership."
Respondent invokes the provisions of this statute in support of the trial court's judgment on the ground that there was no showing that the National Bank had actual knowledge, at the time it received the two payments on the notes in question, that such payments were made without authority of the Holland Bank.
Appellant concedes that if the payments were made by check, draft or order of the Holland Bank, the statute invoked would prevent a recovery in this case, unless it was shown that the National Bank, at the time it received such payments, had actual knowledge that the check, draft or order representing such payments was issued without authority of the Holland Bank. It is claimed, however, that the $50,000 payment sought to be recovered under the first count of the petition, was not made by check, draft or order of the Holland Bank, but was made by the National Bank charging $50,000 against the account of the Holland Bank and crediting that amount on the notes, under authority of Sanford's letter of April 7, directing that it be done in that manner. The contention is that Sanford's letter was not an order of the Holland Bank within the meaning of the statute, and for that reason the statute has no application, and the case should be determined by the law extant prior to the passage of the statute.
It is true that the officers of the National Bank charged the $50,000 against the Holland Bank's account and credited a like amount on Hine and Randall's notes on the authority of Sanford's letter and before they received the draft. While these officers testified that in making this charge they acted on the authority of Sanford's letter and not on the authority of the draft and made no change on the bank records after receiving the draft, yet a fair consideration of all their testimony justifies the conclusion that they were relying on the draft as their authority for what was done. Mr. Hobbs, vice-president of the bank, was asked this question:
"Q. You acted upon the letter, and not upon the draft? A. At first, yes."
Mr. Lewis, president of the bank, testified that this letter came at a time when he was out of the bank; that when he returned two days later his attention was called to the letter and he then directed Mr. Bainbridge to write a letter requesting that a draft be sent to take the place of the charge ticket, the draft to be signed by some officer of the Holland Banking Company who was not interested in this loan. The evidence shows that this letter was written on April 10. On April 11, Sanford replied to this letter, enclosing a draft for $50.000 drawn on and payable to the National Bank and signed by C.F. Wright, assistant cashier of the Holland Bank. The National Bank received the draft on April 12, marked it paid, substituted it for the charge ticket which had been placed in the files of the bank on the authority of the letter, and at the end of the month, in accordance with the usual custom, the draft was returned to the Holland Bank as a paid voucher, together with a statement of its account.
There is no question but what this transaction was initiated on the authority of Sanford's letter, but when the president returned two days later and learned what had been done, evidently he was not satisfied to rest the transaction on the authority of that letter. His request for the draft and the manner in which the draft was handled after the National Bank received it, tends to show that the transaction, although initiated on authority of the letter, was finally concluded on authority of the draft. The fact that no change was made on the books of the bank after the draft was received, does not necessarily alter the situation. True the charge of $50,000 against the Holland Bank's account, entered on April 8, on the authority of the letter, could have been cancelled and a like charge entered on April 12, the date the draft was received, but the bank could have treated the charge of April 8, as a payment of the draft, and the manner in which the draft was handled tends to show that it did so treat it. This part of the transaction was a matter of bookkeeping. The rights of the parties should be determined by what actually happened and not by the method of bookkeeping adopted by the National Bank.
The fact that the National Bank, in the first instance, made the $50,000 charge against the Holland Bank's account on the authority of Sanford's letter of April 7, did not destroy the efficacy of the $50,000 draft which it received on April 12, or prevent it from using the draft as a basis for the charge, absent actual knowledge on its part that the draft was issued without authority of the Holland Bank. Whether or not the National Bank used the letter or the draft as its final authority for making the charge against the Holland Bank's account, was, under the evidence, a question of fact. There was evidence that the $50,000 charge was first made on the authority of Sanford's letter. Three days later when the president of the National Bank discovered what had been done, he asked for and received a draft for $50,000, stamped the draft paid, substituted it for the ticket which represented the $50.000 charge made on the authority of Sanford's letter, and at the end of the month, in reconciling the accounts between the two banks, the cancelled draft was returned to the Holland Bank as a paid voucher.
The Holland Bank requested the trial court to find "that said draft was not actually used to reduce the account of the Holland Banking Company in the defendant bank, the same having already been fully accomplished on April 8, 1922, pursuant only to the authority contained in the letter of E.L. Sanford, dated April 7, 1922." The trial court refused to make the finding as requested, but on the contrary did find in paragraph fifteen of its finding of facts that the draft was used as a basis for the charge made against the Holland Bank's account. That finding reads as follows:
"That the board of directors of the Holland Banking Company did not authorize by any order shown by the minutes of said board the issuance of the letter of April 7, 1922, or of the draft for $50,000 dated April 11, 1922, set forth in other items or sections supra, and used by the Republic National Bank as the basis for the credit made by it in April, 1922, on the Hine and Randall notes then held by it." (Italics ours.)
The language of this finding shows that the trial court found that either the draft or both the letter and the draft were used as a basis for the charge made against the Holland Bank's account. In either event the draft would have authorized the National Bank to make the charge against the Holland Bank's account, absent actual knowledge on its part that the draft was issued without authority of the Holland Bank. There was substantial evidence that the draft was marked paid, substituted for the ticket which represented the charge made against the account on the authority of Sanford's letter, and returned to the Holland Bank as a paid voucher. The finding of the trial court that the draft was used as a basis for the charge was supported by substantial evidence and is, therefore, binding on us. This conclusion renders it unnecessary to determine whether or not Sanford's letter of April 7, directing that a charge of $50,000 be made against the Holland Bank's account and a like amount credited on the notes in question, was an order within the meaning of the statute heretofore quoted.
It is conceded that the $50,083.35 sought to be recovered under the second count of the petition was charged against the Holland Bank's account in the National Bank and a like amount credited on the notes in question, on the authority of a Holland Bank draft for that amount drawn on and payable to the National Bank.
We must proceed on the theory that the amount sued for in each count of the petition was charged against the Holland Bank's account and credited on the notes in question on the authority of two Holland Bank drafts drawn on and payable to the National Bank because the trial court so found on substantial evidence. This being true, the next question is whether or not the National Bank, at the time it charged the drafts against the Holland Bank's account, had actual knowledge that the drafts were issued without authority of the Holland Bank. It is conceded that, under the evidence, this question was one of fact to be determined by the court sitting as a jury. The trial court's finding against the Holland Bank on that issue, put that question at rest.
It was necessary for the trial court to find two facts before a judgment in favor of the National Bank would be authorized, (1) that the National Bank accepted the two drafts in payment of Sanford's indebtedness to it, and (2) that the National Bank did not have actual knowledge at the time it accepted the drafts and charged them against the Holland Bank's account, that such drafts were issued without authority of the Holland Bank. The trial court found these two facts and rendered judgment in favor of the National Bank. That finding and judgment is supported by substantial evidence. Absent prejudicial error in other respects we cannot do otherwise than affirm the judgment. [Sec. 996, R.S. 1919; Sec. 2838. R.S. 1929.]
Appellant contends that the trial court did not commit reversible error, in its finding of facts, its refusal to find certain facts and in the giving and refusal of declarations of law. If the alleged errors are not inconsistent with and do not tend to contradict the finding of the two facts Non-Prejudicial which authorized the judgment, such alleged Error. errors, although erroneous, would not be prejudicial. Appellant reduces its contention in this regard to two propositions. The language of its brief on that subject is as follows:
"The appellate court looks to the trial court's finding of facts and refusal to find facts requested, and to the declarations of law given and refused in order to get the theory upon which the judgment is based. When we apply that rule in this case there can be but one conclusion drawn and that is that the trial court denied recovery upon but two theories: First, that the letter of April 7, 1922, heretofore discussed, was an order within the meaning of Section 996, Revised Statutes 1919. Second, that the board of directors of the plaintiff bank were negligent in their failure to discover that Sanford was paying his indebtedness with Holland Bank funds and in lieu thereof putting bogus notes in the Holland Bank."
Granting that the trial court did treat Sanford's letter of April 7 as an order within the meaning of the statute, how could that prejudice the rights of the Holland Bank? If the court was right in treating the letter as an order within the meaning of the statute, then the National Bank had two Order documents, the letter and the draft, either of which and Draft. would have authorized it to make the charge against the Holland Bank's account. On the other hand, if the court was wrong in treating the letter as a valid order, the National Bank still had the draft which authorized it to charge the amount thereof against the Holland Bank's account. Of course, plaintiff claims that the National Bank did not use the draft as a basis for the charge, but for reasons heretofore stated, we have ruled otherwise.
As to the second proposition. Conceding, without deciding, that the court was wrong in finding that the board of directors of the Holland Bank was guilty of negligence in not discovering that Sanford was paying his indebtedness with Holland Negligence. Bank funds, that finding would not change the situation. Neither negligence nor diligence of the board of directors of the Holland Bank would destroy the statutory right of the National Bank to accept the drafts in question in payment of Sanford's indebtedness to it, absent actual knowledge on its part that the issuance of the drafts was unauthorized.
If it should be conceded, as appellant contends, that the trial court erred in finding that Sanford's letter of April 7, was an order within the meaning of the statute, erred in finding that the board of directors of the Holland Bank was negligent in the respects mentioned and erred in basing its judgment Correct on these alleged erroneous findings, we still have Judgment: the finding that the National Bank accepted the Immaterial drafts in payment of Sanford's indebtedness and used Error. them as a basis for the charges made against the Holland Bank's account, without actual knowledge that drafts were issued without authority of the Holland Bank. This finding was based on substantial evidence and is sufficient to sustain the judgment in favor of the National Bank because the statute expressly so says. [Sec. 996, R.S. 1919; Sec. 2838, R.S. 1929.] Where certain findings of fact made by the trial court are sufficient to support the judgment rendered, the judgment should be upheld even though the trial court based the judgment on other insufficient findings of fact, provided such insufficient findings are not inconsistent with or contradictory to the findings which do support the judgment. The findings on which appellant claims the trial court based its judgment are not inconsistent with or contradictory to the finding that the National Bank used the drafts as a basis for the charges made against the Holland Bank's account, without actual knowledge that the issuance of the drafts was unauthorized. A correct decision will not be disturbed because the court gave a wrong or insufficient reason therefor.
The recent case of Holland Banking Company v. Continental National Bank, 324 Mo. 1, 22 S.W.2d 821, is cited in support of the contention that corporate funds may not be given away or taken to pay the individual obligations of the officers or employees of the corporation without the unanimous consent of the stockholders.
The proposition contended for is sound law, but it has no application to the facts of this case. In the cited case, Hine and Randall borrowed $100,000 from the Continental National Bank on their individual notes, under an agreement that the Holland Bank would keep a deposit account with the Continental National Bank of at least $100,000 at all times during the life of the loan, and at any time the Continental National Bank became dissatisfied with the loan, it might charge the notes representing the loan against the Holland Bank's account. The Continental National Bank collected the notes by charging them against the Holland Bank's account. We held the agreement that the Holland Bank's money might be taken to pay the individual notes of Hine and Randall was void and for that reason the Continental National Bank was liable to the Holland Bank for the amount taken from its account under the void agreement.
The facts in the case at bar which distinguish it from the Continental National Bank case is the manner in which the notes were paid. It is true that Hine and Randall borrowed the $100,000 involved in this action from the Republic National Bank on their individual notes, under an agreement that the notes might be collected by charging them against the Holland Bank's account in the Republic National Bank, but this agreement was not relied or acted upon in the collection of the notes and the trial court so found. When the time came to collect the notes, the Republic National demanded payment from Sanford who had assumed the obligation. In response to this demand. Sanford sent the Republic National Bank two Holland Bank drafts drawn on and payable to said National Bank in payment of the notes. For reasons heretofore stated the Republic National Bank could accept the drafts in payment of the notes without becoming liable to the Holland Bank for the amount thereof.
The judgment should be affirmed. It is so ordered. All concur.