GAINES, Associate Justice.
The appellants brought this suit in the court below. The petition contains substantially the same allegations as grounds of recovery as were set up in the petition in the case of Seale against these same defendants, decided in this court and reported in 70 Texas, 283. In addition to the grounds of action common to the two petitions, in this case it is alleged in effect that the plaintiffs were induced to make their deposits in the City Bank of Houston by false representations as to its solvency made by defendant Baker to the plaintiff D. C. Giddings.
A demurrer to the petition as to all the defendants was sustained except as to Baker, and as to him it was overruled. At a subsequent
term of the court the cause came on for trial against Baker and resulted in a verdict and judgment in his favor.
The first error assigned is the action of the court in sustaining the demurrer of defendants Rice, Brewster, McIlhenny, Botts, and Weems to the plaintiffs’ petition. In Seale v. Baker,
supra,
it was held upon similar allegations that the petition showed a cause of action. The magnitude of the interests involved in the immediate question and the importance of the principles which are to control its determination have induced us carefully to reconsider the rulings made in that case, with the result, however, that we adhere to the opinion that the conclusions announced are correct. The elaborate opinion there delivered renders any further discussion of the subject unnecessary. It follows that the court erred in sustaining the demurrer of the defendants last named. This error requires a reversal of the. judgment as to these defendants, but not as to defendant Baker. It is an action of tort, in which a recovery against a defendant does not in any manner depend upon a recovery against any other. Hence, whether or not the judgment in favor of Baker is to be reversed must depend upon the question whether any error was committed in the trial of the case as to him.
The evidence disclosed that the City Bank of Houston was incorporated in 1870 and that it began business with a paid up capital of $500,-000, which was subsequently increased. In 1885 its capital had been greatly impaired, and in September of that year defendant Baker was elected its president. In December next thereafter, upon his own petition, its assets were placed into the hands of a receiver for the purpose of distribution among its creditors. There was evidence tending to show that when he' took charge of the business of the bank as president it was hopelessly insolvent. On the other hand there was testimony to support the conclusion that while its capital had been in part wasted and its affairs mismanaged there were assets sufficient, by a prudent management and continuance of the business, to pay all its debts and to leave a surplus for the stockholders. Before Baker became president a signboard had been for many years posted up in front, of the bank building which contained the words, “Capital $500,000.” The same statement appeared in a standing advertisement of the bank in a daily newspaper of the city, and also upon the letter heads used in transacting the correspondence of the bank. All of these were continued from the time that Baker was elected president until the assets of the institution were placed in the hands of a receiver. In addition to this the plaintiff D. C. Giddings testified in effect that the bank was the regular correspondent of his firm in the city of Houston, and as such was accustomed to collect and hold on deposit for plaintiff large sums of money; that in November, 1885, having heard a rumor indicating that the bank was not in a sound condition, he went to Houston for the purpose of ascertaining the truth of the matter and called upon
defendant Baker, who was then president, stated to him that he had deposits there, and asked him directly as to the financial standing of the institution; that Baker “replied unequivocally that there was no question of the ability of the bank to meet all liabilities,” and that relying upon this representation the plaintiffs were induced to continue business with the bank until, it failed, owing .them approximately $10,-000. Defendant Baker testified on his own behalf that in the conversation referred to he told Giddings that the stock of the bank had been depreciated by. loss of capital, but denied that he made the representation testified to by Giddings or any representation of a similar import. He further testified that very soon after he assumed the management of the bank as president he became aware that the capital of the concern had been in part wasted, but that he believed that it would be able to continue its business, pay all its debts, and leave an amount sufficient to pay from 15 to 30 per cent to its stockholders. • He continued of this belief, as he swore, until it was found necessary to put the property in the hands of a receiver. This necessity was brought about by a run on the bank. Giddings also testified in effect that Baker told him the affairs of the bank had been mismanaged and that the stock had been greatly depreciated.
The testimony of Colonel Giddings himself, in our opinion, restricts the questions in the case to a very narrow compass. It is evident that after fie had “heard some intimation” derogatory to the standing of the City Bank he no longer relied upon the statements placed upon its letter heads or in its advertisements or upon its signboard in front of the bank in extending credit to it. He then determined to inquire directly of Baker, and if the result was not satisfactory to cease his business connections with the institution/ He called upon Baker for that purpose and, as they both agree, they had a conversation in which the standing of the bank was discussed. In Giddings’ testimony he says emphatically: “I relied upon his [Baker’s] statements. * * * I came down with a view to ascertain the condition of the bank, and intended if I found it was not safe to withdraw the account. He satisfied me that it was safe, and as an evidence of his satisfying me I left the money there.” Hnder these circumstances it was immaterial what occurred before the interview, and it is not claimed that anything occurred thereafter by which the plaintiffs were deceived. It follows that the real questions at issue as presented by the evidence were: 1. Did Éaker make the representations to Giddings as alleged? 2. If so,wére these representations true or false? 3. If false, did Baker know them to be false, or could he by the exercise of the reasonable diligence required of one occupying his position have known them to be false? and 4. Were plaintiffs induced by these representations to continue their deposits in the bank? In this connection we remark that in our opinion the plaintiffs’ right to recover did not depend upon a specific intent on
Baker’s part to deceive. As to the transactions between the plaintiffs and the bank, Baker did not occupy the position of an indifferent third person. He was the principal officer and manager of the corporation. It was his duty to use reasonable diligence to acquaint himself with the affairs of the bank. But if by the use of such diligence he had been unable to do. so, and he made a statement as to its condition which he believed to be true but which was in fact false, he would not be personally liable for the consequences of that statement.
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GAINES, Associate Justice.
The appellants brought this suit in the court below. The petition contains substantially the same allegations as grounds of recovery as were set up in the petition in the case of Seale against these same defendants, decided in this court and reported in 70 Texas, 283. In addition to the grounds of action common to the two petitions, in this case it is alleged in effect that the plaintiffs were induced to make their deposits in the City Bank of Houston by false representations as to its solvency made by defendant Baker to the plaintiff D. C. Giddings.
A demurrer to the petition as to all the defendants was sustained except as to Baker, and as to him it was overruled. At a subsequent
term of the court the cause came on for trial against Baker and resulted in a verdict and judgment in his favor.
The first error assigned is the action of the court in sustaining the demurrer of defendants Rice, Brewster, McIlhenny, Botts, and Weems to the plaintiffs’ petition. In Seale v. Baker,
supra,
it was held upon similar allegations that the petition showed a cause of action. The magnitude of the interests involved in the immediate question and the importance of the principles which are to control its determination have induced us carefully to reconsider the rulings made in that case, with the result, however, that we adhere to the opinion that the conclusions announced are correct. The elaborate opinion there delivered renders any further discussion of the subject unnecessary. It follows that the court erred in sustaining the demurrer of the defendants last named. This error requires a reversal of the. judgment as to these defendants, but not as to defendant Baker. It is an action of tort, in which a recovery against a defendant does not in any manner depend upon a recovery against any other. Hence, whether or not the judgment in favor of Baker is to be reversed must depend upon the question whether any error was committed in the trial of the case as to him.
The evidence disclosed that the City Bank of Houston was incorporated in 1870 and that it began business with a paid up capital of $500,-000, which was subsequently increased. In 1885 its capital had been greatly impaired, and in September of that year defendant Baker was elected its president. In December next thereafter, upon his own petition, its assets were placed into the hands of a receiver for the purpose of distribution among its creditors. There was evidence tending to show that when he' took charge of the business of the bank as president it was hopelessly insolvent. On the other hand there was testimony to support the conclusion that while its capital had been in part wasted and its affairs mismanaged there were assets sufficient, by a prudent management and continuance of the business, to pay all its debts and to leave a surplus for the stockholders. Before Baker became president a signboard had been for many years posted up in front, of the bank building which contained the words, “Capital $500,000.” The same statement appeared in a standing advertisement of the bank in a daily newspaper of the city, and also upon the letter heads used in transacting the correspondence of the bank. All of these were continued from the time that Baker was elected president until the assets of the institution were placed in the hands of a receiver. In addition to this the plaintiff D. C. Giddings testified in effect that the bank was the regular correspondent of his firm in the city of Houston, and as such was accustomed to collect and hold on deposit for plaintiff large sums of money; that in November, 1885, having heard a rumor indicating that the bank was not in a sound condition, he went to Houston for the purpose of ascertaining the truth of the matter and called upon
defendant Baker, who was then president, stated to him that he had deposits there, and asked him directly as to the financial standing of the institution; that Baker “replied unequivocally that there was no question of the ability of the bank to meet all liabilities,” and that relying upon this representation the plaintiffs were induced to continue business with the bank until, it failed, owing .them approximately $10,-000. Defendant Baker testified on his own behalf that in the conversation referred to he told Giddings that the stock of the bank had been depreciated by. loss of capital, but denied that he made the representation testified to by Giddings or any representation of a similar import. He further testified that very soon after he assumed the management of the bank as president he became aware that the capital of the concern had been in part wasted, but that he believed that it would be able to continue its business, pay all its debts, and leave an amount sufficient to pay from 15 to 30 per cent to its stockholders. • He continued of this belief, as he swore, until it was found necessary to put the property in the hands of a receiver. This necessity was brought about by a run on the bank. Giddings also testified in effect that Baker told him the affairs of the bank had been mismanaged and that the stock had been greatly depreciated.
The testimony of Colonel Giddings himself, in our opinion, restricts the questions in the case to a very narrow compass. It is evident that after fie had “heard some intimation” derogatory to the standing of the City Bank he no longer relied upon the statements placed upon its letter heads or in its advertisements or upon its signboard in front of the bank in extending credit to it. He then determined to inquire directly of Baker, and if the result was not satisfactory to cease his business connections with the institution/ He called upon Baker for that purpose and, as they both agree, they had a conversation in which the standing of the bank was discussed. In Giddings’ testimony he says emphatically: “I relied upon his [Baker’s] statements. * * * I came down with a view to ascertain the condition of the bank, and intended if I found it was not safe to withdraw the account. He satisfied me that it was safe, and as an evidence of his satisfying me I left the money there.” Hnder these circumstances it was immaterial what occurred before the interview, and it is not claimed that anything occurred thereafter by which the plaintiffs were deceived. It follows that the real questions at issue as presented by the evidence were: 1. Did Éaker make the representations to Giddings as alleged? 2. If so,wére these representations true or false? 3. If false, did Baker know them to be false, or could he by the exercise of the reasonable diligence required of one occupying his position have known them to be false? and 4. Were plaintiffs induced by these representations to continue their deposits in the bank? In this connection we remark that in our opinion the plaintiffs’ right to recover did not depend upon a specific intent on
Baker’s part to deceive. As to the transactions between the plaintiffs and the bank, Baker did not occupy the position of an indifferent third person. He was the principal officer and manager of the corporation. It was his duty to use reasonable diligence to acquaint himself with the affairs of the bank. But if by the use of such diligence he had been unable to do. so, and he made a statement as to its condition which he believed to be true but which was in fact false, he would not be personally liable for the consequences of that statement. But on the other, hand, if he could have ascertained the true condition of the bank by the use of due diligence and failed to do so, then we are of opinion he should be held liable for any false representation in regard to that condition, although made in good faith. Seale v. Baker,
supra.
Admitting for the sake of the argument that an officer of a bank Avhen inquired of by a customer as to its condition may keep silent, yet if he speaks it is his duty to speak the truth if he know it, and lie should not be permitted to assert his want of knowledge when it is his duty to know, and by the use of ordinary diligence he has had the opportunity to know..
Applying what has been said to the instructions of the court which are complained of in appellants’ brief, we find some of them not applicable to the case made by the evidence and others erroneous. Of the' former class is the following: That “although the City Bank of Houston may have been during Baker’s presidency insolvent, and he may have known it, still the jury are charged that whatever they may believe as a question of moral duty, no legal duty devolved upon him, unasked, to inform the plaintiff or any other creditor of the bank’s condition. The law is that mere silence or non-disclosure is no breach of duty, and unless Baker made some false representation concerning the bank’s condition to the plaintiffs, or to some class of persons including the plaintiffs, this of itself defeats the plaintiffs’ action against Baker, and your Amrdict should be in his favor.”
The plaintiffs did not claim because of Baker’s silence; they sought to recover because as they alleged he had spoken falsely. Whether the legal propositions involved in the instruction are correct or not we need not pause to inquire. It was not applicable to the facts of the case and should not have been given.
For the same reason the following charge should not have been given: “The undisputed evidence shows that the defendant Baker neArer became a director of the City Bank until September, 1885; and if the jury believe from the evidence that the plaintiff had been depositing money in said bank long before that date and merely continued to do so after Baker became a director in reliance on impressions previously received concerning the bank’s sol Agency, and not on account of anything said or done by Baker, then this alone requires
your verdict to be in Baker’s favor, even though it should appear that he did make misrepresentations, as charged against him.”
As we have previously said, Giddings’ testimony showed that the plaintiffs, were induced to keep their money in bank solely by the representations of Baker, and unless such was the fact it is clear they had no case. A proper instruction on that point would have been that unless such representation was the inducement which caused plaintiffs to continue their relations with the bank they could not recover.
The following charge was also abstract and calculated rather .to mislead- than to ¿¿Lighten the jury: “In actions of deceit, as this is, a necessary element to be established by the proof is fraud, which is never presumed; on the contrary, presumption of law is always in favor of innocence; and the law is that until from such proof such presumption is overcome that such presumption continues.”
The following charges we think erroneous:
“If from the evidence you find that the plaintiffs, previous to any misrepresentation made by Baker after he became president of the bank, had dealings, with the City Bank, and if after Baker became president they continued to have dealings with said bank upon their-confidence in its credit and standing, and if Baker did not, after he became president, make false representations to D. C. Giddings as charged in the petition, with the intent to deceive him, upon which he (Giddings) relied and reasonably had the right to rely, then if you so find the facts to be from the evidence before you, your verdict should be for the defendant.”
“An officer of a bank or other incorporated institution is not liable to a creditor for its debts, nor can he be held liable for losses sustained by such bank creditor unless the facts in evidence establish to the satisfaction of the jury trying the case that such officer knowingly made false representations to such creditor with the intent to deceive, and of such a character that a man of ordinary care and prudence would or should have relied upon, and that upon the faith of such representation being true he acted in a manner different from what it would have been but for such represehtation, and that loss ensued, and resulted to such creditor directly from placing reliance in such representation.”
“To entitle plaintiffs to recover they must prove to the satisfaction of the jury, first, that Baker had substantially made the representations as alleged, and that they were false and intended to deceive; second, that plaintiff relied thereon, and third, that plaintiffs have sustained loss by reason of such reliance upon such representations by Baker.”
Each of these instructions is erroneous, because ■ they make the plaintiffs’ right to recover depend upon Baker’s having made the alleged false statement with the intent to deceive. The first two are also objectionable, because a recovery is made to depend upon the plaintiffs having a right to rely upon the representations if made. If the repre
sentation as alleged in the petition was in fact made under the circumstances shown by the evidence, we do not see that there could be any question as to the plaintiffs’ right to rely upon it, and it was not proper to submit such an issue to the jury.
It was proper for the court to instruct the jury as to the purpose for which the mortgage given by the bank was admitted in evidence and to limit its consideration to the question of knowledge and intent. Therefore the charge upon that subject was correct.
The court did not err in excluding the petition in the case of the City Bank by Weems, receiver, against W. R. Baker et als. That was a suit brought by the receiver to set aside a deed in trust executed by the bank upon certain of its property to secure certain debts owed by it to the defendants. We think it too plain for argument that the allegations of that petition were not evidence against the defendants in this suit.
For the errors pointed out the judgment is reversed and the cause remanded. •
.Reversed and remanded.
Delivered March 20, 1891.