« ForrigeFortsett »
should follow, we think, that if in carrying port of this contention, it is insisted in efon such business she adopted a fraudulent fect that appellee defended solely on the method, and thereby secured an unfair ad- ground of fraud and no consideration; that vantage or an unearned and unconscionable the paragraphs of answer based on fraud benefit to such estate, she as administratrix, did not plead a return or offer to return the while her estate retains the fruits of such powders for which the notes were given, but fraud, ought not to be heard to defend, as alleged that they were of no value; that against such wrongful act, that she had no the evidence discloses that such powders had right to make the representations whereby value; and hence that under the pleadings she secured to the estate such advantage and the defense must fail. benefit. The consummation of the fraud While the evidence on this branch of the having been made possible by the court's or- case was by no means conclusive, there was der, a holding in accord with appellant's con- some evidence to the effect that said stock tention would, in effect, make the court a powder was in a solidified state when it party to the fraud. Suppose this were a reached appellee, and when in such state it suit by the administratrix to recover on the had no value. This was sufficient to prenote given for said powders, and there was vent a reversal of the case on said ground. an answer setting up the fraud, would a It is insisted that the court erred in adcourt, under the circumstances here shown, mitting in evidence a pamphlet upon which, permit the administratrix to avoid such de- and the statements therein made, appellee fense and recover for the estate the fruits bases his proof of fraud in part. The objecof her fraud on the ground that she as such tion made thereto was, in substance, that administratrix could not be bound by her the administratrix could not bind the estate fraudulent representations. To so hold by her representations. This objection is, in would be not only to give to such fraud the effect, disposed of by what we have said in sanction and approval of the court, but the regard to the sufficiency of the seventh paracourt would thereby aid in its consummation graph of answer. by assisting and making it possible for the  Appellant next insists that the court estate to obtain the fruits thereof.
erred in permitting appellee to testify that The instant case is not essentially differ- Larimer told him that he was the agent for ent from the supposed case. The fact that the Medical Chemical Company—that he was the estate has obtained the fruits of the a general agent. While it is true, as appelfraud from the assignee of said note does lant contends, that agency cannot be proved not in our judgment affect the question un-by statements made by the agent himself, der consideration.
there was testimony of other witnesses in The assignee steps into the shoes of his this case, which was uncontradicted, to show assignor and is in no better situation than such agency, and if in fact such agency such assignor would be, unless a purchaser seems not to have been controverted. The in good faith without knowledge of the error, if any, was therefore harmless. fraud.
The action of the court in refusing to give As especially applicable to the facts of certain instructions tendered by appellant this case, we quote the following language and in giving other instructions is relied on of the Supreme Court of Texas in the case and urged as ground for reversal. Among of Able v. Chandler, 12 Tex, 88, 92, 62 Am. the refused instructions tendered by appelDec. 518:
lant was the following: While “the administrator of an estate cannot "The court instructs the jury that where the bind the estate by his warranty, or render it re- party elects to rescind a contract on the ground sponsible in damages for frauds or torts, commit- of fraud, where he had actually been defrauded, ted by him, yet in his dealings with third per- he must restore, or offer to restore, everything sons, in respect to the estate, he is not, by his of any value which he received under the conrepresentative character, absolved from the uni- tract. He will not be permitted to undo the versal obligation to observe the dictates of natu- contract while retaining money or other thing of ral justice and common honesty, which require value delivered him under the terms of the conthat he shall act fairly and not fraudulently. tract.” Nor can the estate which he represents be permitted to derive an unjust-and unconscientious
of the instructions given by the court, advantage, to the injury of those with whom its complaint is made of No. 5. In this instruclegal representative contracts, by, means of his tion the court, after indicating what should unauthorized fraudulent conduct."
be shown to establish fraud, said: See, also, Crayton v. Munger, 9 Tex. 285 ; Williamson v. Walker, 24 Ga. 257, 71 Am. tablished by a preponderance of the evidence, the
"In such case, if the facts above recited are esDec. 119; Ramsey y. Blalock, 32 Ga. 376, 380; defense of fraudulent representation is made out, Rice v. Richardson, etc., 3 Ala. 428; Atwood and will reduce the amount of recovery upon the v. Wright, 29 Ala. 346.
note to the extent of the difference between the We therefore conclude that the trial court note was given, in the condition it actually was
fair market value of the property for which the did not err in overruling the demurrer to when delivered, and what such market value said seventh paragraph of answer.
would have been if the property had been as rep Under its motion for new trial appel- resented. In such a case, if the property in the lant contends that the verdict of the jury is $500 but would have been worth $1,000 if it had
condition that it was when delivered was worth not sustained by sufficient evidence. In sup- been as represented, then the recovery upon the note would be reduced in the sum of $500, or de was of no value, or in the second instance, feated altogether if such sum of $500 equaled in an action against him for the purchase the amount of the note and interest."
price of the property, defends with an anAppellant, in effect, concedes that this in- swer in bar which proceeds on the theory struction would be correct if appellee had tuat the obligation sued on was fraudulently sued appellant directly for damages, or had procured and given for property of no value, defended by way of counterclaim or set-off, he should in either case be confined to the but insists that appellee pleaded only answers remedy to which his pleadings entitle him, in bar which proceeded on the theory that and not be given the advantage of an opthere was no liability on the notes sued on portunity to recover upon the theory that because they were procured by fraud and the his pleadings in the one case might be treatstock powder for which they were given was ed either as an action to rescind or an action of no value whatever.
for damages, and in the other case as an  We are of the opinion that appellant is answer in bar or as a counterclaim for damright in its contention as to the theory of ap- ages. pellee's answers. Each of said answers are While there is language in some of the depleaded as a complete bar to the action. Nei- cisions which may seem to authorize the inther of them is pleaded as a counterclaim, struction, supra, given by the court, the efand neither alleges that appellee was dam- fect of such instruction was to give to appelaged by the fraudulent representations set lee the advantage of having his answer in up therein. True, they each allege that the bar, based on the theory that the notes sued powders for which the notes were given were on were obtained by fraud in exchange for valueless; but such averment, in the absence property of no value, treated also as a counof averments showing a return or an offer to terclaim for damages for the fraud reducing return such powders, was proper and neces- appellant's recovery in whatever amount the sary to make the answers sufficient as an an- jury might find to be the difference between swer in bar, and, as before indicated, when the true value of the property received by such answers are read in their entirety, it is appellee and its value if it had been as repreevident that such is their theory, rather sented, and hence, for the reasons above inthan as a counterclaim for damages.
dicated, the giving of such instruction was [7-9] Where one has been induced to pur- error. Crow v. Carver, 133 Ind. 260, 32 N. E. chase property by the fraudulent representa- 569; Reichert v. Krass, 13 Ind. App. 348, tions of the seller, such purchaser has a 40 N. E. 706, 41 N. E. 835; Cleveland, etc., R. choice of remedies : (1) He may, if he so de- Co. v. Rudy, 173 Ind. 181, 186, 89 N. E. 951; sires, rescind the contract, in which case he Cates v. Bales, supra. must, in his action to rescind, aver and prove
[10, 11] For the same reason, it was error a return of the property received by him, or to refuse to give the instruction, supra, an offer to return it, or otherwise aver and tendered by appellant. However, the verdict prove that such property was of no value. in this case being a verdict for appellee, it (2) He may stand by his contract and keep necessarily follows that the jury found that what he received and in an action for dam- the stock powders for which the notes in ages recover the damages resulting from the suit were given were of no value, and hence fraud, which, ordinarily, will be the differ- no harm could have resulted to appellant ence between the actual value of the property from that part of the instruction given which as it was when received by the purchaser we have held to be erroneous, and likewise and what its value would have been if it had no harm could have resulted from the court's been as represented. Wulschner-Stewart Co. failure to give the instruction, supra, tenv. Hubbard, 44 Ind. App. 526, 89 N. E. 794; dered by appellant. Southern R. Co. v. Jarrett v. Cauldwell, 47 Ind. App. 478, 94 N. Crone, 51 Ind. App. 300, 310, 99 N. E. 762. E. 790; Brier v. Mankey, 47 Ind. App. 7, 93 Appellant complains of the court's refusal N. E. 672; Love v. Oldham, 22 Ind. 51, 52; to give other instructions; but, in so far as Cates v. Bales, 78 Ind. 285. If the purchaser, such instructions are not covered by the inas in the instant case, has given his note or structions given, the errors alleged to have obligation for such property, he has the same resulted from such refusal present the same remedies in an action brought by the seller questions already considered. So likewise the on such note or other obligation. In either errors insisted upon as resulting from the case, however, as in all other cases, the rem- giving of other instructions present questions edy to which he is entitled must be determin- which are in essence and substance the same ed from his pleadings, and if in the first in- as those already considered and disposed of stance he retains the property and brings an adversely to appellant's contention. action to rescind the contract because of We find no reversible error in the record, the fraud, alleging that the property received and the judgment below is therefore affirmed. INSOL-appellee.
64 Ind. App. 217)
determination of a cause is correct, there is no DRUDGE v. CITIZENS' BANK OF AKRON. ground for reversal of an action for conver.
sion, where there could be no conversion because (No. 9147.)
the property was taken in pursuance of law. (Appellate Court of Indiana, Division No. 1. [Ed. Note.-For other cases, see Appeal and June 8, 1916.)
Error, Cent. Dig. $$ 4032, 4066, 4454, 4540;
Dec. Dig. m1170(1).] 1. BANKS AND BANKING 77(2)-INSOLVENCY-ASSETS—TRUST PROPERTY-RECORDING Appeal from Circuit Court, Marshall CounOF TRUST INSTRUMENTS.
ty; Harry Bernetha, Judge. Acts 1907, c. 113, § 10 (Burns' Ann. St. 1914, § 3411), providing that trust property in
Action by Francis M. Drudge against the the hands of a bank shall be considered as as- Citizens' Bank of Akron. Judgment for desets of the bank where its funds are insufficient fendant, and plaintiff appeals. Affirmed. to pay depositors when such bank is wound up, unless the trust agreement has been recorded Julius Rowley and Isaiah Conner, both of and filed, applies to notes and mortgages held Rochester, and Harley A. Logan, of Plyin trust by bank.
[Ed. Note.-For other cases. see Banks and mouth, for appellant. Holman, Bernetha & Banking, Cent. Dig. 88 169, 170; Dec. Dig. Bryant, of Rochester, Reuben R. Carr, of 77(2).]
Akron, and M. A. Baker, of Rochester, for 2. BANKS AND BANKING Om77(2) - INSOL
FELT, J. This is a suit to recover dam. Such statute operates only in favor of depositors while the bank is being wound up and ages for the conversion of the proceeds of five where the assets are insufficient to pay all de-promissory notes. The complaint is in five positors, and has no application where the assets paragraphs, and each is for the recovery of are sufficient to pay depositors.
the amount of the proceeds of a separate [Ed. Note. For other cases, see Banks and note. The paragraphs are alike except in Banking, Cent. Dig. $$ 169, 170; Dec. Dig. Om
the description of the notes and the amount 77(2).)
demanded. The first paragraph alleges, iil 3. TRUSTS Ol-NATURE,
substance, that appellee is an incorporated A "trust” is a confidence reposed in one per- bank under the laws of this state, and at the son by another with respect to property held by the former for the benefit of the latter.
times herein mentioned was engaged in the [Ed. Note.-For other cases, see Trusts, Cent. banking business in the town of Akron, Ind.; Dig. 81; Dec. Dig. 1.]
that on July 28, 1910, appellant owned and
held a promissory note executed by one Milo 4. BANKS AND BANKING 109(3) - REPRE
SENTATION BY OFFICERS--PAYMENT TO CASH- Harold for $1,500, which he delivered to anIER.
pellee for safe-keeping; that some time afterWhere notes and mortgages were purchased wards appellee received from said Harold the by plaintiff from cashier of defendant bank dur- full amount of said note, with interest, ing banking hours and payment was made to cashier while he was discharging his duties as amounting to $1,606.50, and wrongfully and such, payment was made to bank.
unlawfully paid out the whole of said amount [Ed. Note. For other cases, see Banks and in discharge of its obligation to its depositors, Banking, Cent. Dig. § 260; Dec. Dig.
Dec. Dig. Om other than appellant, and in that manner 109(3).)
wrongfully and unlawfully converted the 5. TROVER AND CONVERSION 37 – Evimoney to its own use, to the damage of apDENCE-WEIGHT-OWNERSHIP OF PROPERTY pellant in the sum of $2,000. Each para-FALSE RETURNS TO TAX COLLECTOR.
In an action for conversion of notes and graph was answered by general denial and by mortgages held in trust by defendant bank, the two paragraphs of special answer.
A reply fact that plaintiff evaded taxation by not re-in general denial was filed to each of the speturning same as his property is not important cial answers. The second paragraph of anon the issue of ownership.
swer sets out each of the notes in controversy, [Ed. Note. For other cases, see Trover and Conversion, Cent. Dig. ss 225-227; Dec. Dig. together with the respective mortgages secur37.)
ing them, the record thereon, and all indorse6. BANKS AND BANKING E77(4)—ASSETS-ter, or in any wise pertaining thereto and ap
ments and writings of every kind and characTRUST PROPERTY HELD BY BANK.
Conversion will not lie to recover value of pearing upon said instruments and the record notes and mortgages held in trust by bank thereof, and alleges that there is no other recwhich were lawfully appropriated to the pay-ord, indorsement or writing of any character ment of depositors, when bank was wound up, on account of trust agreement not having been whatever relating to the ownership of said recorded and filed as required by Burns' Ann. notes and mortgages. The third paragraph St. 1914, 8 3411.
of answer alleges that on the several dates set [Ed. Note.-For other cases, see Banks and forth in the answer, up to the time the bank Banking, Cent. Dig. $$ 173, 174; Dec. Dig. Om was closed, appellee was doing a banking 77(4).]
business at Akron, Ind., under the private 7. APPEAL AND ERROR C1170(1)-REVERSAL banking laws of this state; that the notes
-ERRONEOUS ReasoxS FOR PROPER JUDG- mentioned in the complaint were each given MENT.
Under Burns' Ann. St. 1914, $$ 407, 700, re- and made payable to appellee, together with lating to disregard of errors, where the ultimate the mortgages securing the same, and that
Om For other cases see saine copic and KEY-NUMBER in all Key-Numbered Digests and Indexes
*Rehearing denied. Transfer denied.
isuch instruments and the proceeds thereof were and are the property of appellee and a part of the assets thereof; that the remaining assets of said bank are insufficient to pay in full the bona fide claims of all the depositors; that no instrument of any kind showing that appellee ever held the notes mentioned in the complaint, in trust for appellant, or any other person, was ever executed by appellee, nor was any such instrument ever recorded in the recorder's Office of Fulton county, Ind., nor Was any Copy thereof filed with the auditor of state; that appellee is in voluntary liquidation, and has been since November 3, 1911, and that the depositors are not yet fully paid and satisfied, and that the assets of the appellee bank, including the proceeds of the notes set out in the complaint, are insufficient to pay and Satisfy all the claims of the depositors. Upon request the court made a special finding of facts, and stated its conclusions of law thereon. The court found the facts as alleged in the special answers and many other facts and details of the transactions, the substance of which, as far as material here, is as follows: That appellee was organized as a copartnership in June, 1905, and as such engaged in the business of private banking at Akron, Ind., continuously from that time to November 3, 1911, when the bank was closed by the auditor of state; that this suit was begun on July 15, 1912; that Howard B. Harter was cashier of the bank from the date of its organization until it was closed; that the bank in the usual course of business made the following loans of its funds: Milo Harold, $1,500; Walter L. Rogers, $500; Reuben Kamp, $1,200 and $3,000; Edwin Landis, $800, and took from each a note for the amount So loaned to him, payable to the bank; that each of said notes was secured by a mortgage upon land owned by the borrower, which mortgages were recorded in the recorder's office of the proper county. Copies of the notes and their indorsements and the mortgages are set out in full in the finding of facts. That appellant and said Harter, without the knowledge or Consent of the directors or stockholders of the bank, entered into a pretended sale to appellant of said notes and mortgages, which notes Were indorsed On the back with a rubber stamp, “Citizens Bank, Akron, Indiana, –, Cashier,” except the Harold note, which was not indorsed; that said mortgages were not assigned to appellant; that the cashier, Harter, received from appellant the principal and the unpaid interest accrued on said notes to the date of sale and delivered them to appellant, who immediately returned them to the cashier and took receipts therefor from said cashier, which are as follows:
“July 23, 1910. “Received from F. M. Drudge two notes—Milo Harold $1,500.00 and Walter Rogers $500.00 secured by real estate mortgage—same left for collection and safe-keeping.
That none of said mortgages were ever delivered to appellant, and the bank never received the money so paid by him, although Credited. On the books of the bank; that the negotiations for the purchase of said notes by appellant and the payment of the money therefor by him all took place in the banking rooms of appellee in Akron, Ind., during banking hours. After said notes were left with the bank said Harter collected the interest on them at about the time it became due up to November, 1911, and paid the interest so collected thereon to appellant; that the cashier squandered the money obtained from appellant for the notes on the Chicago Board of Trade, in speculations on his own account, which resulted in a loss to him of $33,500, which facts were unknown to the other officials and stockholders of the bank until the bank was closed; that appellant did not, after said sale, or at any time, file with the recorder of his county or with the auditor of state any certificate, showing that said bank held said note and mortgages for him in trust, nor did the board of directors or Stockholders know that Said notes and Securities were held by the bank in trust, or that appellant so claimed, until the bank was closed, but believed them to be a part of the assets of the bank, and they Were SO Considered by the state bank examiner, who included them in the totals of his report of loans Secured by mortgage; that appellant is a farmer and was a customer of the bank; that each year after he purchased the notes in Suit he failed to list the notes for taxation upon any of the schedules made by him, except that of 1912, when they were mentioned in his schedule as “in litigation,” but not included in his taxable property; that each of these Schedules was verified as required by statute; that the purchase of said notes by appellant and the execution of the receipts aforesaid and the failure to take assignments of the mortgages were for the purpose and with the design of evading taxa
tion upon the amount represented by the when the bank is being wound up and the
 While we base our conclusion mainly formed, that appellant made any claim to on the apparent intention of the Legislature them; that appellant after the failure of in enacting the statute, we are aided in arthe bank tendered the receipts for the notes, riving at such conclusion by the broad and and demanded the notes of the officials of the comprehensive meaning ascribed to the word bank, who refused to return them to him. “trust.” In its simplest elements, a trust is a The conclusions of law were in favor of ap- confidence reposed in one person by another pellee, that appellant take nothing by his with respect to property held by the former complaint. The judgment followed the con- for the benefit of the latter. 39 Cyc. page 18. clusions of law. The errors assigned and re
As tending to support our conclusion that lied on for reversal are that the court erred the facts of this case bring it within the purin its conclusion of law and in overruling view of the statute, we cite the following: 5 appellant's motion for a new trial.
Cyc. 518; 3 Am. & Eng. Ency. of Law, 824;  The questions presented require con- Story on Bailments, $ 41; Mutual Acc. 'sideration of section 10 of an act approved Ass'n v. Jacobs, 141 Ill. 261, 31 N. E. 414, March 8, 1907 (Acts 1907, page 174), being 16 L. R. A. 516, 33 Am. St. Rep. 302; Hunt section 3411, Burns 1914, which is as follows: v. Townsend (Tex. Civ. App.) 26 S. W. 310;
"Should any bank organized under the pro-Peak v. Ellicott, 30 Kan. 156, 1 Pac. 499, 46 visions of this act, or any owner, or owners Am. Rep. 90; Hale v. Rawallie, 8 Kan. 136. thereof, hold any property in trust for another, the fact of such trust, the general nature and  Appellee contends that the bank did character thereof, the acceptance of the same not receive payment for the notes, and that and the amount so held shall be set forth in an the purchase of the notes was a transaction instrument to be executed by the trustee and acknowledged by him before a notary public. between appellant and the cashier personalWithin fifteen days after the execution of such ly. The transactions all took place in the an instrument it shall be recorded in the office bank with the cashier while he was engaged of the county recorder of the county in which in discharging the duties of his official posi
is . thereafter the original instrument, together with tion. The receipt of the consideration for the the certificate of the county recorder, showing notes by the cashier at the bank during bankthat it has been duly recorded, shall be filed ing hours was a payment of such considerawith the auditor of state with a record fee of
Allison v. one dollar for the state. Should such instru- tion by appellant to the bank. ment not be so recorded and filed and such bank Hubbell, 17 Ind. 559; East River Nat. Bank should be wound up, either voluntarily or in- v. Gove, 57 N. Y. 597; Ellicott v. Barnes, 31 voluntarily, then the property so held in trust shall be considered a part of the assets of such Kan. 170, 1 Pac. 767. bank, provided the remaining assets are not  While there is a finding that the bank sufficient to pay in full the bona fide claims of did not receive the money, it is also found all depositors. Until such claims are paid in full all persons shall be estopped from assert- that appellant paid the cashier for the notes. ing, as against such depositors, any right, title The finding is to be read and considered in or interest in and to the property so held in its entirety, and when so considered, it shows trust.
that the cashier received the money at the  Appellant contends that the statute, bank during regular banking hours, and that supra, is not applicable to the case at bar; it was entered on the books of the bank, that the notes purchased by him were not which is sufficient for the purposes of this held in trust by the bank. The statute does case, since there is no dispute about the fact not define the meaning of the phrase, "prop- that appellant left the notes at the bank afterty in trust for another," but, considering er he purchased them, and that they were the evident purpose of the Legislature in among the apparent assets of the bank when enacting the law, as gathered from all its it was placed in liquidation, and no claim provisions, we think it was intended to ap- that the provisions of the statute, supra, ply to notes and mortgages, property held by were complied with. Neither is it important a bank, as in this instance. The notes so that appellant may have intended to evade held gave to the bank the appearance of pos- taxation on the notes, nor that the cashier sessing assets it did not in fact have. The squandered the funds of the bank in specustatute only operates in favor of depositors lating or gambling transactions.