Beiswanger v. American Bonding & Trust Co.

McSherry, C. J., delivered the opinion of the Court. This is an action to recover damages for a malicious prosecution. It was instituted in the Superior Court of Baltimore City by the appellant, Beiswanger, against the appellee, The American Bonding and Trust Company. The declaration alleges in substance that on the 20th of January, 1900, the Bonding Company falsely and maliciously and without any reasonable or probable cause procured the plaintiff to be ar ²⁸⁹ rested and brought before Eugene E. Grannan, a Justice of the Peace, at the Central Police Station, for a hearing upon the false charge of the embezzlement of the sum of $400 trust funds belonging to the estate of the E. A. Jones Paper Box Manufacturing Company, and that he was held for trial and was presented by the grand jury, but that the grand jury thereafter reconsidered its action and finally dismissed the plaintiff from custody and discharged him from the Baltimore City Jail wherein he had been incarcerated for a number of days.

The appellee, the defendant below, pleaded to this declaration that it did not commit the wrongs therein alleged. Issue was joined on this plea and the case proceeded to trial before a jury. Upon the conclusion of the evidence on both sides, the appellant, the plaintiff below, presented three prayers for instructions to the jury and the defendant offered one.. Those proffered by the plaintiff were rejected; whilst the one which the defendant asked was granted.

By the granted instruction the jury were told that there was no evidence legally sufficient to prove that any of the officers or agents of the defendant corporation were authorized by the company to have the plaintiff arrested, and that there was no evidence legally sufficient to show that the company subsequently adopted and ratified the acts of its officers or agents in connection with that arrest, and that, therefore, the plaintiff was not entitled to recover and the verdict of the jury must be for the defendant. In obedience to that instruction, the jury returned a verdict for the defendant, the appellee here, and upon the verdict a judgment was duly entered. From that judgment the pending appeal was taken. If the action of the Superior Court in taking the case from the jury for the want of legally sufficient evidence to entitle the plaintiff to recover, was right, there will be no occasion to consider the rejected prayers which the appellant asked the Court to grant but which were refused, as has just been stated.

There is but one bill of exception in the record. There are no questions respecting the admissibility of evidence. The inquiry with which we have first to deal is whether there ²⁹⁰ was legally sufficient evidence to go to'the jury and the solution of this inquiry requires that we should state somewhat in detail the evidence which the record contains. It is not disputed that the appellant was arrested on the 21st of January, igoo, on a warrant, sworn out before Justice Grannan by Millard Leonard, who was the Chief Clerk of the Judicial Department of the Bonding Company, charging the appellant with the embezzlement-of $400 of the trust funds of the E. A. Jones Paper Box Company.

On the 24th of January, the charge against the appellant was heard by Justice Grannan and according to the testimony of the Justice, the appellant prior to the hearing admitted that he had misappropriated the trust funds, and that the Justice held the case for several days to enable the appellant and his brother to raise the money to make good the deficit. On January 24th, the shortage not having been made good, the appellant was committed to jail in default.of $1,000 bail, and on February 6th, the grand jury finally dismissed the charge of embezzlement and he was released from custody. It appears from the docket entries and the papers in the proceeding wherein the appellant had been appointed trustee for the benefit of the creditors of.the Jones Paper Box Company that an auditor’s account had been -finally ratified in April, 1897, and that therein the sum of $5,551.02 had been distributed amongst the creditors of that company. It further appears that in August, 1899, a petition was filed on behalf of some of the creditors of the Paper Box-Company, wherein it was alleged that the appellant, since filing his first account, had collected certain other funds of the Paper Box Company, but had failed to state an account thereof; and the petition prayed that he be required to file a statement of the sums collected since the former audit, and that the papers be referred to an auditor so that a distribution of these subsequently collected funds might be made.

Thereupon the appellant did file a statement showing that he had collected the sum of $568.15 and the papers were then referred to Mr. Robert -F. Brent to report an auditor’s account. In December, 1899, another petition was filed ²⁹¹ wherein it was alleged that the papers had been in the hands of the auditor for about four months ; that the appellant had refused to pay the auditor’s fees, and the account had therefore not been filed; and the petition prayed that the appellant be required to pay said fees and file said account. On the 22nd of January, 1900, an auditor’s account distributing the sum of $568.15 was filed and on the 2nd of February following it was finally ratified. On the 17th of the same month the appellant paid over to the creditors of the Paper Box Company the-said sum of $568.15.

According to the testimony of Mr. Brent, the auditor, the appellant admitted that he did not have the trust funds in hand and asked the auditor whether he would not file the account and wait for the fees, whereupon Mr. Brent replied that if the appellant could not íaise the money to pay the auditor’s fees and the account should be filed, the appellant would “be up against the creditors in ten days,” and would have to make their claim good, and if he could not raise the money to pay the fees, the witness did not see how, he, the appellant, could raise the money to pay the creditors, nor how the filing of the account would benefit him, and that the appellant agreed to this. When the account was ultimately filed the Bonding Company, the appellee, paid the auditor’s fees. Mr. Curries Willis Haines, a member of the bar who represented some of the creditors of the Paper Box Company, testified that he saw the appellant several times about stating his account distributing this balance of $568.15; that at one of these interviews the appellant offered the witness his individual check, post-dated, and requested the witness to take the check in settlement of the claims which he, the witness, represented and further requested the witness to hold the check until its date, at which time he, the appellant, would have the money in bank to meet it, as he intended getting the funds from his brother in New York. Mr. Haines refused to accept the check, because no account had been stated and he did not know whether the check covered the amount to which he was entitled.

The record does not indicate that the testimony of Justice Grannan, ²⁹² Mr. Brent, and Mr. Haines was contradicted in any particular by the appellant. Its admissibility has not been challenged by any exception. It stands therefore unimpeached and unexcepted to, and must be given credit. It proves beyond peradventure that the appellant, as trustee, had collected funds belonging to the trust estate of the Paper Box Company; that he had made some disposition of them which he was not authorized to make, and that when he was called on for a settlement he had not in hand the funds which he ought to have had.

He had obviously committed a breach of trust. Had this malversation occurred after the first day of June, 1900, when the Act of 1900, ch. 22, making-such a defalcation embezzlement, took effect, the appellant according to ,the testimony herein recited would have been clearly guilty of the crime which that statute created and would have been liable upon conviction to be imprisoned in the penitentiary for not less than one nor more than five years. So much for the facts upon which the arrest was founded. Now as to the connection of the Bonding Company with that arrest.

Of course, it must be conceded that at the time the arrest was made the appellant was not guilty of the crime of embezzlement of trust funds, because the Act creating that offence had not then been passed. His arrest upon that charge was, therefore, a mistake, notwithstanding the facts, as we have already narrated them, clearly indicate that he had misappropriated and misapplied the funds with which he had been entrusted as trustee. But is the Bonding Company liable for that mistake? That is the crucial question in the case.

Let us look for a moment at the testimony by which it is sought to. hold the Company answerable in damages for that arrest. The only witness upon whose testimony reliance is placed to connect the Bonding Company with the actual arrest of the appellant is Millard Leonard, whose name has already been mentioned in a former part of this judgment. It will be-necessary to set forth somewhat in detail the testimony of this witness. The Bonding Company carries on amongst other things a ²⁹³ general surety business.

It has five or six departments; namely, The Executive Department, which consists of the President and Executive Committee, the Bank Department, the Auditing Department, the Loss and Claims Department, the Legal Department, the Mailing Department, and the Judicial Department. The witness Leonard was, as we have stated, Chief Clerk of the Judicial Department. The duties of the Judicial Department are to issue Court bonds and to follow the risks after the bonds have been issued. By following the risks is meant, looking after the bonds and when the cases in which the bonds have been given are settled and concluded, to have the record closed and to cancel the bonds.

If a trustee or fiduciary becomes a defaulter, the Judicial Department turns the matter over to the Loss and Claims Department and then the witness Leonard would not handle it. That the Loss and Claims Department consisted of a number of attorneys of the Company who were employed to adjust risks and losses. The witness Leonard testified that he had sworn out the warrant for the arrest of the appellant. He was then asked: Q. You did not swear it out for yourself?

A. No, sir. Q. You swore it out on account of the Company? A. I swore it out. Q. As an officer of the Company?

A. Under instructions I got from the Company. Q. Under instructions of Mr. Lee? A. Yes, sir. Q. Mr. Lee belonged to the Loss and Claims Department ?

A. There was not a Loss and Claims Department really in our Company at that time. Mr. Lee was one of the counsel for the Company at that time. Q. It was in the regular course of your business to swear out warrants upon his instructions, was it? A. Yes, sir.

Q. And in the business of your corporation you went and swore it out—you went and swore it out for yourself? A. No, sir; I swore it out. Q. For the Company? A. Yes, sir.

Q. When did Mr. Lee give you that instruction ? A. I cannot tell you that, it was sometime either in the latter part of 1899 or the early part of 1900. I think it was in January, 1900. The same witness further testified that he was not present ²⁹⁴ at the hearing; that Mr. Lee accompanied him to the Station House at the time the warrant was sworn out; that he made affidavit at Mr. Lee’s direction; that Mr. Lee did not belong to the Judiciary Department; that he was counsel for the company; that Mr. Abrahams was Assistant Secretary for the company; that he (Leonard) was summoned to appear before the grand ju'ry, and Mr. Lee instructed him to appear there.

The witness Leonard further testified that his duties ended with the investigation and keeping the company informed of them; that he had nothing to do with the pressing of claims; • that he had no authority to bring suit, or to order suit, or to institute proceedings of any kind for the collection of claims; t,hat he had no authority for the institution of criminal proceedings or to get out a warrant for the company; that the Assistant Secretary, Mr. Abrahams, was his immediate superior; that if he hadn’t authority he would go to Abrahams for anything he did; and he would act in virtue of his authority on anything that was not a part of his duties. That Mr. Lee was counsel for the company, outside of the company—he was not in any of the departments; he was not an off rial of the company; that he was not under the control or orders of Mr. Lee; that he would not have accepted and that it would not have been his duty to accept any order from Mr. Lee, outside of the officials; that he would have to get authority for anything he did from Mr. Abrahams. That he reported the result of his investigations to Mr. Abrahams; and there his duty ended; that the swearing out of a warrant was not any part of his regular duties. That when he reported to Mr. Abrahams the result of his investigation, Mr. Abrahams investigated further and Mr. Beiswanger was sent for.

That after Mr. Abrahams had investigated the matter further, he instructed him to swear out the warrant. That he had got his authority to swear out the warrant from Mr. Abrahams and Mr. Lee; that he would not have taken it from Mr. Lee if Mr. Abrahams hadn’t authorized it. Q. It would not have been part of your duties to take orders from Mr. Lee ? A. No, sir; Mr. Abrahams did that, he was the Assistant Secretary. ²⁹⁵ That he was instructed to swear out the warrant simply because he had investigated the risk; that he had no authority to make out affidavits for warrants ; that he stated both to Mr. Abrahams and Mr. Lee what he had found out.

That Mr. Lee accompanied him to the police station when the warrant was sworn out; that Mr. Lee advised the swearing out'of the warrant and told him to make the specific charge, “Embezzlement of Trust Funds.” Here then we have the Clerk of the Judicial Deparment of the Bonding Company swearing out a warrant not because his duties required him to do so, but solely on the advice of counsel and in obedience to the instructions of Mr. Abrahams, his superior officer ; and we have no evidence whatever of the scope of Mr. Abrahams’ authority. It will scarcely be contended that the Bonding Company is responsible for the unauthorized tortious acts of its officers and servants not done in the line of their duty, unless those acts are subsequently sanctioned and ratified. To bind the Company by the act of Mr. Abrahams, without