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REHEARINGS DENIED.

[Cases in which rehearings have been denied, without the rendition of a written opinion, since the publication of the original opinions in 46-48 N. E. This list does not include cases where an opinion has been filed on the denial of the rehearing.]

Anderson Glass Co. v. Brakeman (Ind.) 47 N. | Fifth Ave. Sav. Bank v. Cooper (Ind.) 48 N. E. E. 937.

Barnard v. Shirley (Ind.) 47 N. E. 671.

Chicago & C. T. Ry. Co. v. Hammond-Whiting & E. C. Electric R. Co. (Ind.) 46 N. E. 999. Chicago & S. E. R. Co. v. Harris (Ind.) 46 N. E. 1010.

Dresslar v. Citizens' St. R. Co. (Ind.) 47 N. E. 651.

236.

Jackson v. Jackson (Ind.) 47 N. E. 963.
Royse v. Bourne (Ind.) 47 N. E. 827.
Seisler v. Smith (Ind.) 46 N. E. 993.

Union Sav. Bank & Trust Co. v. Indianapolis
Lounge Co. (Ind.) 47 N. E. 846.

See End of Index for Tables of Northeastern Cases in State Reports.

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THE

NORTHEASTERN REPORTER.

VOLUME 50.

DAVIS V. STEUBEN SCHOOL TP. OF WARREN COUNTY. (Appellate Court of Indiana. April 8, 1898.) DEFAULT JUDGMENT-VACATION ·

SCHOOL TOWNSHIPS LIABILITY FOR FRAUDULENT ORDERS -NEGOTIABILITY OF ORDERS-AGENCY.

1. A party asking relief for a default judgment on the ground of mistake, inadvertence, surprise, or excusable neglect must also show that he has a meritorious defense to the cause of action.

2. A school township is not liable for an order in the hands of an innocent holder, which was issued by its trustee to the payee without any consideration, in pursuance of an agreement between the trustee and the payee to defraud the township.

3. School-township orders are not negotiable under the law merchant.

4. A school township is not entitled to have a default judgment opened on the ground that the subject-matter of the action was based on orders fraudulently issued by its trustee without consideration, where the summons served on such trustee, and plaintiff was no party to the fraud.

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5. That a default judgment was rendered against the township through the negligence of its trustee, who had knowledge of the action, is no ground for opening the judgment.

Appeal from circuit court, Warren county; J. M. Rabb, Judge.

Action by Steuben school township of Warren county against Isaac Davis to set aside a default judgment. From a judgment in favor of plaintiff, defendant appeals. Reversed.

Nebeker & Simms, for appellant. C. V. MeAdams and Hanley, Braden & Billings, for appellee.

WILEY, J. The appellee, through its trustee, issued to one G. W. Boyd its three several township orders or warrants. One of these was issued April 20, 1893, and became due on or before August 15, 1894, and was for $247. The other two were issued March 2, 1894, and became due, respectively, on or before June 25, 1894, and September 25, 1894; the one becoming due first being for $235, and the other for $240. The order dated April 20, 1893, purported to have been given for "school supplies"; the one due

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June 25, 1894, for "school desks"; and the one due September 25, 1894, for "said sup plies." These several orders were assigned by indorsement to the appellant before maturity, and for a valuable consideration. Appellant commenced an action against appellee upon these orders, and recovered judgment by default. The complaint was in three paragraphs, each paragraph being based upon one of the said orders. Judg. ment was rendered January 16, 1895. At the time the orders were issued, one Miles Starry was trustee of appellee township, and continued in that capacity until the first Monday in August, 1895, when he was succeeded by one Robert A. Chandler. On August 15, 1896, the appellee filed its complaint or motion, under section 396 of Horner's Statutes of 1897, to be relieved from the judgment, and to be permitted to defend against the action. Proper notice served, appellant appeared, and such proceedings were had as that the relief prayed for was granted, and the judgment vacated and set aside. The appellee then appeared to the original action, and demurred severally and separately to each paragraph of the complaint. The court sustained the demurrer to the second and third paragraphs, and overruled it as to the first. Issues were then joined as to the first paragraph. Trial by the court, and judgment for appellee.

was

Appellant has assigned errors as follows: "(1) The court erred in overruling the demurrer of appellant to the complaint and application of the appellee to set aside and vacate the default and judgment in said cause; (2) said complaint to set aside said default and judgment does not state facts sufficient to constitute a cause of action; (3) the court erred in making its order, and adjudging that the default and judgment in said cause be set aside, and in sustaining said application therefor; (4) the court erred in sustaining appellee's demurrer to the second and third paragraphs of complaint; and (5) the court erred in rendering a final judgment against appellant, and that he take nothing by his suit." Waiving any technicality that might be urged against

some of the specifications of the assignment of errors, we will address ourselves to a discussion and determination of the controlling questions presented by the record, to wit: (1) Did the court err in setting aside and vacating the original judgment? And (2) did the court err in sustaining appellee's demurrer to the second and third paragraphs of complaint?

To a determination of the first question, it will be necessary to state as briefly as possible the facts upon which appellee based its motion to be relieved from the judgment: In the motion it is averred that Miles Starry was duly elected as trustee of appellee township, and entered upon the discharge of his duties the first Monday in August, 1890, and vacated said office on the first Monday of August, 1895; being succeeded by Robert A. Chandler. The motion then recites that, as trustee, said Starry issued the three orders above described; that they were indorsed to appellant; that he commenced an action thereon, and that summons was duly served on said Starry as trustee of said township; that while said suit was pending said Starry made payments to appellant on said orders aggregating $440, $400 of which were applied on the principal and interest, and $40 upon attorney's fees; that on January 16, 1895, on appellant's motion, appellee township was defaulted, and judgment rendered for $416.85, the balance due, which included $34 attorney's fees; that said Starry, as trustee, or otherwise, did not appear to said action, either in person or by attorney, to defend, but suffered default and judgment; that at the succeeding term of said court said Starry employed counsel, and filed a motion in said cause to reduce the amount of judgment in the sum of $34, on account of the attorney's fees included therein, which motion was overruled. It is then averred that there was no consideration passed from said Boyd to the said township, or from any other person to it, for which said pretended orders or warrants were issued, and that neither said Boyd nor any other person delivered to appellee township any school desks or school supplies for which said orders were issued, and that no school desks or supplies were received or accepted therefor; that, at the time said suit was commenced and judgment rendered, said township was not indebted to appellant or any other person for school desks or supplies for which said orders were given; that when said Starry filed his final report with the board of commissioners of Warren county, on the first Monday of August, 1895, when he retired from the office of trustee, he did not take credit for the $440 paid by him on said orders, nor did he ever take credit therefor in any of his reports and settlements; that said Starry, as such trustee, did not keep in his office record, nor file in his final account, nor post up near his office, or at any other place, any statements of the indebtedness of appellee township outstanding at the time he retired from said office; that the board of commissioners refused to approve his final report; that

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while he was trustee he received and disbursed about $30,000 belonging to said township, and that after the refusal to so approve his final account his successor in office commenced an investigation of the affairs of said township, and of the receipts and disbursements of its funds, while said Starry was trustee; that such investigation involved great labor and long time; that, on account of the indefinite character of the many vouchers taken by him the investigation required the identification of all the property in the possession of the township, and a comparison thereof with the credits claimed by Starry in his several accounts, and, after fully completing said investigation, said Chandler, as such trustee, became satisfied that improper credits had been claimed by said Starry, and suit was instituted by him on his official bond, and he recovered in said action, on behalf of said township, the sum of $2,600, in April, 1896; that a large proportion of said sum was for money claimed by Starry to have been paid by him to said Boyd for school supplies which were never purchased, received, or accepted by appellee; that pending said action there was also pending a suit by one Stafford against appellee on alleged warrants issued by said Starry to said Boyd, which suit was finally, in April, 1896, determined in favor of appellee, and that there are still outstanding against appellee alleged warrants issued by said Starry to said Boyd, and by him assigned to various persons, aggregating in amount about $10,000, which upon investigation said Chandler found to be invalid, and issued without any consideration; that repeated demands have been made upon said Chandler, as trustee, for the payment of said warrants, and that since assuming said office he has had almost continually some alleged claim against said township growing out of the transactions between said Starry as such trustee and said Boyd, until the month of July, 1896, when he completed his investigations of matters then pressing upon him for settlement; that since said time he has been pressing, through his counsel, an investigation of the judgment rendered in this cause; that said Starry and said Boyd before the dates of the warrants sued on in this action entered into a conspiracy to rob and plunder said school township of its special school revenue, by the issuing of alleged warrants by said trustee to said Boyd without any consideration, which said warrants were to be sold by said Boyd, and the proceeds of said sales to be divided between them, and, in keeping with said unlawful combination, said Starry paid on the warrants sued on $440, and refrained from taking any credit therefor, thereby concealing the fact of said payments, and the discovery thereof came about by the investigation aforesaid, and that, in keeping with said unlawful combination, said Starry failed and neglected to defend or cause to be defended the interests and rights of appellee in said action; and that he corruptly and unlawfully suffered said judgment to be rendered against appellee. It was further charged that appellee could not defend against said action, except through its

trustee, and that, on account of the neglect and failure of said Starry to defend in said action, the appellee was prevented from making its defense therein, without any fault or negligence on its part, and that appellee's defense to said suit is a total want of consideration for the issuing of the warrants sued upon. Appellee's application to vacate the judgment, and to be permitted to defend against the action, was accompanied by copies of each of the orders sued upon as exhibits, and was verified by Chandler, as trustee, and Charles V. McAdams, his attorney. As above stated, appellant appeared to this motion, and demurred thereto. This demurrer was overruled. Appellant excepted, and has brought the question into the record by bill of exceptions. The statute under which appellee's motion to vacate the judgment was based is a part of section 396 of Horner's Statutes of 1897, which is as follows: "The court ... shall relieve a party from a judgment taken against him, through his mistake, inadvertence, surprise, or excusable neglect, and supply an omission in any proceeding on complaint or motion filed within two years." The The question of a meritorious defense to aprule prevails in this state that a party who has pellant's cause of action having been made suffered a judgment to be rendered against him out, we come next to the consideration of by default has no standing in court, except for the remaining question, to wit, has the aptwo purposes. The one is to have the default pellee shown or stated facts sufficient to enset aside, and the other is to appear and con- title it, in law, to relief against the judgment, test the amount of damages. Fisk v. Baker, under the provisions of the statute cited? It 47 Ind. 534. A party asking relief from a seems to us that in principle, at least, the judgment by default must show (1) that he has very question we are considering has been a meritorious defense to the cause of action; decided by the supreme court in the recent and (2) the facts which tend to show that such case of Adams School Tp. v. Irwin, 49 N. E. judgment was taken against him through his 806. That case differed from the one before mistake, Inadvertence, surprise, or excusable us only in this: There appellant prayed for neglect. Such facts should be clearly and dis- relief from a judgment taken by default, on tinctly set forth. Clandy v. Caldwell, 106 Ind. account of alleged fraud; and here appellee 260, 6 N. E. 360; Nord v. Marty, 56 Ind. 531; is asking to be relieved from a judgment by Ratliff v. Baldwin, 29 Ind. 16. The provision default taken against it on account of its alof the statute above quoted has often been be- leged mistake, inadvertence, surprise, and exfore the supreme and this court, and, as a result cusable neglect. In the application for relief of the many decisions construing it, it is the in that case the trustee is charged with havsettled rule that no formal pleadings are neces- ing issued to one George W. Ray a township sary, beyond the complaint or motion of the warrant purporting to have been issued for party seeking relief. Lake v. Jones, 49 Ind. school supplies and certain apparatus to be 297; Buck v. Havens, 40 Ind. 221; Nord v. used in the public schools; that Ray transferMarty, supra. In the case last cited, however, red the warrant to appellee, who instituted an the appellee demurred to appellant's verified action upon it, and obtained a judgment by complaint, which was sustained. The court default; that said supplies, etc., were not held that this was tantamount to a submission purchased by said Ray, nor received by the of the cause to the hearing of the court below township, nor used in the schools thereof; on the facts set out in the complaint. In the that the warrant was executed and delivered case before us the facts stated in appellee's to Ray in pursuance to a corrupt and frauducomplaint are confessed as true by the demur- lent bargain and conspiracy by and between rer. The appellant stood on his demurrer, and the trustee and Ray to defraud the township; submitted the questions thus raised to the judg- that the trustee, at the time the suit was comment of the court, resulting in a finding against menced and judgment rendered, had knowlhim on all the issues. Upon the question as edge of all of said facts; that he concealed to whether or not the appellee stated facts the same from the court, and permitted judgshowing a meritorious defense to appellant's ment to be taken against the township by decause of action, it seems to us there can be no fault, for the purpose of practicing a fraud controversy. We have referred to the facts at on the court; and that thereby a fraud was length, and it seems clear to us that such facts, practiced on the court, and a judgment recovproperly and timely pleaded, would have con- ered by appellee. It is then shown that after stituted a good, meritorious, and complete de- said judgment was rendered another trustee fense to appellant's cause of action. Township

orders are not negotiable under the rules of the law merchant, and appellant took them charged with a knowledge of all of their infirmities. The boundary lines of the authority of a township trustee to bind his township by his con. tracts are well defined by the numerous decisions of the supreme and this court, and all persons dealing with him are bound to know the limit of his authority, and that beyond such limit, which is defined by the statute and law, he cannot go. Of the many cases so holding, we cite the following: First Nat. Bank v. Adams School Tp., 17 Ind. App. 375, 46 N. E 832; Bloomington School Tp. v. National SchoolFurniture Co., 107 Ind. 43, 7 N. E. 760; Board v. Fertich, 18 Ind. App. 1, 46 N. E. 699; Snoddy v. School Tp., 17 Ind. App. 284, 46 N. E. 588; Board v. Hemphill, 14 Ind. App. 219, 42 N. E. 760; Board v. Galloway, 17 Ind. App. 689, 47 N. E. 390. Hence it follows that appellant had no greater or superior rights on account of his being the assignee of the orders than the original payee, and the question of innocent purchaser or holder is not to be considered.

came into office, and upon investigation dis

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