American Credit Indem. Co. v. Ellis
| Decision Date | 20 February 1901 |
| Parties | AMERICAN CREDIT INDEMNITY CO. v. ELLIS et al. |
| Court | Indiana Supreme Court |
OPINION TEXT STARTS HERE
Appeal from circuit court, Elkhart county; Henry D. Wilson, Judge.
Action by the American Credit Indemnity Company against John W. Ellis and others. From a judgment in favor of defendants, plaintiff appeals. Reversed.
James S. Dodge and Irwin Z. Hubbell, for appellant. Orville T. Chamberlain and Perry L. Turner, for appellees.
In this action, the appellant sought to charge the directors of the Eagle Knitting Company, a manufacturing corporation organized under the laws of the state of Indiana, with a liability, under the statute, for a debt due to the Beargrass Woolen Mills, to whose rights of action the appellant claims to have succeeded. Three paragraphs of complaint were filed, and a demurrer to each was overruled. The answers of the defendants, excepting the Beargrass Woolen Mills, were the general denial and the statute of limitations of two years. Demurrers to the answers, setting up the defense of the statute of limitations, were overruled, and thereupon judgment was rendered in favor of the directors, who were the defendants below. The plaintiff appeals, and assigns for error the rulings of the court upon the demurrers to the second and third answers to the first and second paragraphs of the complaint, and to the second answer to the third paragraph of the complaint.
The material allegations of the first paragraph of the complaint are as follows: The plaintiff, the American Credit Indemnity Company, is a corporation organized under the laws of the state of Indiana. On the 18th day of January, 1893, and long before that time, and up to and including the 26th day of September, 1893, the defendants, excepting the Beargrass Woolen Mills, were officers and stockholders of the Eagle Knitting Company, a manufacturing corporation organized under the laws of the state of Indiana. On the 18th day of January, 1893, the defendants John W. Ellis, Jedediah M. Hughes, William H. Quaife, and Aaron Work were members of the board of directors of said Eagle Knitting Company, and constituted a majority of said board. On the 19th day of January, 1893, the said Eagle Knitting Company, by its president and a majority of its directors, as aforesaid, published and caused to be published in the Elkhart Daily Review, a newspaper of general circulation, published in the city of Elkhart, etc., said city being the place where the home office of said Eagle Knitting Company was situated, a statement showing the condition of the said corporation at the close of its business on the 31st day of December, 1892, said statement being as follows:
“Statement of the condition of the Eagle Knitting Company, of Elkhart, Indiana, at the close of the business on the 31st day of December, 1892:
We solemnly swear that the foregoing statement is true, to the best of our knowledge and belief. John W. Ellis, J. M. Hughes, W. H. Quaife, Aaron Work, Majority of Board of Directors.
Subscribed and sworn to before me this 18th day of January, 1893. Orville T. Chamberlain, Notary Public.”
The said report was signed by the president and a majority of the directors, and was verified by the oaths of the president, directors, and secretary of the said Eagle Knitting Company. On the 20th day of May, 1893, the Beargrass Woolen Mills, of Louisville, in the state of Kentucky, relying upon said statement so published as aforesaid, and believing the same to be true, at the request of said Eagle Knitting Company furnished said company goods and merchandise of the value of $3,985.48, the particulars of which are set forth in an account filed with said complaint, marked “Exhibit A.” On the 31st day of August, 1893, the said Eagle Knitting Company executed its note to the said Beargrass Woolen Mills in the sum of $1,217.30, and said note was taken by the said Beargrass Woolen Mills in partial settlement of its said claim and account. A copy of the note is filed with the complaint. Relying upon the said published statement, and believing it to be true, the Beargrass Woolen Mills accepted the said note in partial payment of the said account. Relying upon the said statement, and believing the same to be true, the Beargrass Woolen Mills extended said credit to the said Eagle Knitting Company; but, in truth and in fact, the said statement of the condition of the said Eagle Knitting Company was wholly false, and the said Eagle Knitting Company was wholly insolvent at the time of said publication, as the said officers and directors well knew. The American Credit Indemnity Company, the plaintiff herein, was on the 20th day of May, 1893, and ever since has been, engaged in the business of indemnifying persons carrying on a wholesale trade in goods and merchandise against loss by reason of the failure of the purchasers of such goods to pay for the same, and it entered into a contract with the said Beargrass Woolen Mills, agreeing to indemnify it against loss on account of the credit extended to the said Eagle Knitting Company. On the 10th day of May, 1893, and thenceforward, the said Eagle Knitting Company was wholly insolvent, but the defendants herein concealed the fact from the said Beargrass Woolen Mills, and from this plaintiff, until the 26th day of September, 1893, when the affairs of the said Eagle Knitting Company, by the order of the Elkhart circuit court, were placed in the hands of a receiver. Such receivership was long since wound up, and the receiver discharged by the order of the court. The account and note of the said Eagle Knitting Company, due to the said Beargrass Woolen Mills, were filed with the receiver, but said receiver had no funds with which to pay the same, and, though long past due, said account and note remain wholly unpaid, and there is due upon the same $3,985.48, with interest from August 31, 1893. On the 24th day of April, 1894, the defendant, the Beargrass Woolen Mills, for a valuable consideration, sold and transferred the said note, by indorsement in writing, to this plaintiff; and on the same day, for a like consideration, it also sold, assigned, and transferred in writing to this plaintiff the said account, a copy of such transfer being filed with the complaint, marked “Exhibit C.” The Beargrass Woolen Mills is made a defendant to answer as to its interest in said note and account. By reason of said false and fraudulent publication, and the fact that the Beargrass Woolen Mills relied upon the same, and had a right to rely thereon, the plaintiff has been damaged in the sum of $5,000. The second and third paragraphs differ from the first, in that they allege that the Eagle Knitting Company failed to make and publish the report required by the statute, and that instead thereof it made and published a false and fraudulent report, which was delivered by the Eagle Knitting Company and the said defendants to the Beargrass Woolen Mills before the sale of the merchandise by the latter to the former, on May 20, 1893, and that by such false statement the said Beargrass Woolen Mills was misled and deceived, to its damage, etc.
The liability attempted to be enforced in this action arises, as it is claimed, from the provisions of Burns' Rev. St. 1894, §§ 5071-5073 (Horner's Rev. St. 1897, §§ 3863-3865; Rev. St. 1881, §§ 3863-3865), which are in these words:
“Sec. 5071. (3863)-13. Every such company shall, annually, within twenty days from the first day of January, make a report, which such company shall cause to be published in some newspaper printed in the county, if any, (otherwise, in this state, nearest thereto,) which shall state the amount of capital, the amount of assessments made and actually paid in, and the amount of existing debts; which report shall be signed by the president, and a majority of the directors, and shall be verified by the oaths of the president, and such directors and secretary.
Sec. 5072. (3864)-2. The word ‘annually,’ as used in the preceding section, shall be construed to mean once a year, after such company has been doing business at least twelve months.
Sec. 5073. (3865)-15. If any certificate or report made or public notice given by the officers of any such company, as required by this act, shall be false in any material representation, or, if they shall fail to give such notice, or make such report, and any person or persons shall be misled or deceived by such false report or certificate, or on account of such failure to make such report, and damaged thereby, then all the officers who shall sign the same, knowing it to be false, or failed to give the notice, or make reports as aforesaid, shall be jointly, and severally, liable for all damages resulting from such failure on their part while they are stockholders in such company.”
The particular clauses of the statute of limitations necessary to be considered on this appeal are these: ...
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