Savings Bank v. Denker.

such a statement shall be made at the expiration of the treasurer's term."

That case as approved by this court, 84 Mo. 406, is the last utterance of this court upon the subject, so far as we are able to find, and places this court squarely in line with the authorities cited above which hold that a statement made by the principal during the continuance of a term for which the sureties are bound concerning any transaction during that period is admissible. The bond in that case required him to make monthly reports and to make an accounting at the end of his term. The statement, apparently, was not a regular report required of him by his duties. It was obtained after his discharge and after repeated attempts by his principal to secure it.

In the present case the conditions of the bond were that Mispagel "shall well and faithfully perform all the duties of such cashier either under his present appointment or under any further appointment," and the sureties were required to hold the bank harmless for any loss occasioned by any act of such cashier. While it is not shown that Mispagel was required to make definite, periodical reports to his employer, his duties necessarily implied that he should render an accounting to his bank or a statement of its condition whenever required to do so by the board of directors or officials of the bank, and particularly that he should fully explain its condition at the termination of his employment.

The objection that he was virtually out of office at the time he made this statement is fully answered by the Fitzwilliam case where the statement was made after the discharge but while the employee still had a duty to account. While Mispagel was brought to book by his employers on November 5th, and forbidden to make entries in the books or perform other responsible acts connected with the business, he was still the cashier of the bank. The fact that the sphere of his activities was limited by his employers' knowledge of his misconduct does not alter the fact that his duty remained to render an accounting to explain fully the

Savings Bank v. Denker.

conditions of the bank as it had fared under his management.

We think, under the authorities, the evidence was properly admitted.

Dishonesty.

V. The principal defense urged against any recovery by the plaintiff is that the plaintiff knew that Mispagel had fraudulently attempted to conceal his Knowledge of violations of duty by making false entries, by permitting overdrafts contrary to instructions; that Mispagel had fraudulently attempted to conceal his violations of duty by making false entries and that the defendants were ignorant of those breaches of duty and the plaintiff permitted them to sign the bond, fraudulently concealing from them the previous misconduct of which Mispagel was guilty. The evidence of knowledge on the part of the directors and officers of the bank that Mispagel had been guilty of misconduct, is treated by the referee as contained probably altogether in the unfinished and incompetent deposition of Theodore C. Bruere, Sr. The referee found against the contention of the defendant on that defense after admitting the deposition in evidence. His discussion of the case turns upon his theory of the law relating to such knowledge as that deposition seemed to show the officers had. Outside of that deposition the referee finds no evidence indicating that the directors and officers had any knowledge of Mispagel's dishonest practices, his false entries or concealment of the transactions by which the bank had lost money. He finds that the directors and officers of the bank were negligent in failing to keep more in touch with the business and acquaint themselves with the way things were going. For years he had been causing losses to the bank by allowing overdrafts and other dealings by which other persons had got the money of the bank. He had persistently and continuously concealed and covered up these transactions from time to time in a way which would have failed of its purpose if any great diligence had been exercised by the directors in the examination

Savings Bank v. Denker.

of the bank's affairs. But the most that can be said of their conduct in this respect is carelessness and negligence; that they knew or suspected dishonesty on the part of Mispagel does not appear from the competent evidence.

Mispagel had presented bonds at various periods of his employment; the third and last one, which he presented January 2, 1904, is the one sued on here. It is not shown that the proposed sureties made any inquiries of the officers regarding Mispagel's character or capacity. He got his securities on his bond for the bank officials' approval and they approved it. If they had knowledge of Mispagel's dishonesty and retained him in office with that knowledge and accepted the bond with knowledge of dishonesty, without discovering what they knew of his character to his sureties, the sureties would not be liable on the bond. [Third Nat. Bank v. Owen, 101 Mo. 558, 1. c. 582.] But as stated, the only thing that could be urged against them was that they were careless in failing to ascertain the character of the man whom they had employed as cashier. In that case the sureties cannot be excused from liability on the bond. [Hartford Fire Ins. Co. v. Casey, 191 S. W. 1072; State to use, etc. v. Atherton, 40 Mo. 209, 1. c. 216-17; Farmers Bank of Deepwater v. Ogden, 192 Mo. App. 243, 1. c. 247; Harrison v. Ins. Co., 8 Mo. App. 37.]

VI. The largest item showing shortages covered up by Mispagel, amounting to $18,596.10, was represented by the item of $20,000 sued on, and a credit of $1,403.90 to reduce the amount. This $20,000 was explained by Mispagel in his confession as caused by drafts drawn by one W. J. Baird, directed to the Connery Commission Company, and cashed by Mispagel in the St. Charles Savings Bank.

Losses in

Former Years.

The statement of Mispagel identified a number of drafts of the character mentioned, dated in October and September of 1904, the most of them for $5,000, but ranging from $2300 up to $6100. These, Mispagel explained, represented cash of the St. Charles Savings

Savings Bank v. Denker.

Bank, paid to Baird. The total amount of all the drafts was more than double the amount of this item; some of them were renewals of similar drafts, drawn in the same way. It seems none of them ever was paid by the party on whom they were drawn and were returned to the bank, and, as stated by Mispagel, $20,000 represents the amount lost at the bank during the year.

Appellants argue that notwithstanding the explanation of Mispagel, assuming it to be competent evidence, it is not shown that these drafts represent $20,000 taken from the assets of the bank during that year 1904, but they argue the inference is reasonable that they were used to cover up shortages which had been caused by the misconduct of Mispagel in former years. The evidence is quite positive that the money was paid out and lost during the year 1904. The referee, on the evidence, found that to be the case, and we think the evidence fully supports the finding.

VII. The four remaining items of shortage found by the referee are attacked by appellant. The first item of $504.12, called the "interest item," consists of sixty or seventy small items extending from January 2 to October 14th, showing where Mispagel would collect interest and make false entries of the amounts collected. He would collect the interest earned on different notes at different dates and enter in each case on the books a less amount, sometimes a few cents and sometimes a few dollars less, the total of all the differences between the amount collected and the amount charged being the above sum. There seems no reasonable objection to the finding of the referee that these items represent a loss to the bank in the amount mentioned, during the life of the bond.

The second and third items were represented by two drafts. As cashier of the St. Charles Savings Bank, Mispagel, on February 13, 1904, drew a draft of three thousand dollars upon the American Exchange Bank of St. Louis, payable to the order of the Beaumont National Bank. He entered this on the stub of the

Savings Bank v. Denker.

draft of the St. Charles National Bank as $3.00; on February 19, 1904, he drew a draft on the American Exchange Bank of St. Louis for $800, payable to the order of Dillon & Crandall Bond & Stock Company, and entered it on the stub-book of the plaintiff bank as eight dollars. These drafts were paid by the American Exchange Bank of St. Louis a few days later. Referee found on the evidence that the amounts were lost to the plaintiff bank during the year.

The appellant excepts to this finding and assigns error here to the action of the trial court in sustaining the finding of the referee on the ground that the evidence fails to show a loss to the plaintiff bank by reason of these drafts. The plaintiff always carried a deposit with American Exchange Bank and during the period under consideration Mispagel made the books always show a larger balance with that bank than it actually had. This was true of other banks where plaintiff had deposits. These shortages varied from time to time as the exigencies of Mispagel's frauds required. The evidence shows that the shortage of the plaintiff's account with the American Exchange Bank of St. Louis was less in November 7, 1909, when the malfeasances of Mispagel were uncovered, than they were in January of that year. It is argued that, since the discrepancy between the amount the bank had on deposit with the American Exchange Bank and what the books of the plaintiff bank showed it had, was less at the time the bond was signed than when Mispagel was discharged, for that reason there could have been no shortage there.

The fact that the drafts were paid and the plaintiff's deposit in that bank thereby depleted showed a loss. If the shortages varied from time to time, either before or after the drafts were actually cashed, by replacing other shortages, or shifting the deficit from the account of one bank to that of another on plaintiff's books, that would not tend to rebut the actual proof of loss at the time the drafts were paid. Appellant claims further that it is possible that the drafts represented no loss to the bank, because they might have been sold to