Bank of Montreal v. Thayer

• Decision Date: 11 May 1881
• Citation: 7 F. 622
• Parties: BANK OF MONTREAL v. THAYER.
• Court: United States Circuit Court, District of Iowa

7 F. 622

BANK OF MONTREAL v. THAYER.

United States Circuit Court, D. Iowa.

May 11, 1881

This is an action to recover damages on the ground of alleged false and fraudulent representations made by the defendant, and the material facts alleged are the following:

(1) That the defendant was on the twenty-second of November 1875, duly appointed receiver of the property and effects of the Chicago, Clinton & Western Railroad Company, by an order made by the district court of Clinton county, Iowa, in a cause therein pending.

(2) That afterwards, on the twenty-seventh of July, 1876, said court made an order authorizing the defendant, as receiver to construct and build all the unconstructed portion of the line of said railroad from Clinton to Iowa City, Iowa, and to repair other portions, for which purpose he was authorized and empowered to borrow, on certain terms, such sum or sums of money, and to make such indebtedness, as should be necessary, not to exceed $8,000 per mile upon the whole line of said road completed and to be completed, and to make and issue to the persons of whom said money might be borrowed and to whom such indebtedness might be due, but only such as might be incurred by him, his debentures or certificates, with interest expressed in their body, or in coupons or interest warrants thereto attached, signed by him as receiver, but not personally, which debentures were to be held as receiver's indebtedness, and as such decreed and adjudged to be a first lien for the principal and interest thereof upon the entire line of said railroad, etc. And in case of the default in the payment of such debentures or certificates, principal or interest, according to the terms thereof, any holder thereof might institute or prosecute a suit in his or their names to enforce the lien and compel payment thereof.

(3) That on or about the twentieth of January, 1877, the defendant made and delivered to the Joliet Iron & Steel Company five several certificates or debentures, all of like tenor, and one of which is as follows:

EXHIBIT B.

Receiver's Certificate Referred to in Above Petition.

No. 28. $5,000.

OFFICE OF THE RECEIVER OF THE CHICAGO, CLINTON & WESTERN RAILROAD.

CLINTON, IOWA, January 20, 1877.

This is to certify, that there is due on July 16, 1877, to the Joliet Iron & Steel Company, or bearer, from Edward H. Thayer, as receiver, (but not personally,) of the Chicago, Clinton & Western Railroad, appointed by the district court of the state of Iowa, in and for Clinton county, five thousand (5,000) dollars, with interest thereon from this date at the rate of 7 per cent per annum, on account of indebtedness incurred by said receiver. This obligation is issued under and by virtue of certain provisions of an order duly entered by the district court of Clinton county, Iowa, on July 27, 1876, and is one of the series of receiver's certificates authorized to be issued by such order, and by virtue thereof constitutes a first lien upon the said line of railroad, its appurtenances, franchises, and income, being for iron rails furnished for constructing said road.

Payable at the Third National Bank, Chicago, Illinois.

(Signed) EDWARD H. THAYER,

As receiver of the Chicago, Clinton & Western Railroad.

(4) That by the terms of said certificate or debentures the said defendant acknowledged and certified that there was due the said Joliet Iron & Steel Company, or bearer, from Edward H. Thayer, as receiver, but not personally, the sums named therein, with interest, on account of indebtedness incurred by said receiver; that said obligation was issued under and by virtue of the provisions of the order of court above named, and was one of the series of certificates authorized to be issued by said order, and by virtue thereof constituted a first lien upon the said line of railroad, etc., being for iron rails furnished for constructing said railroad.

(5) That afterwards, and before the maturity of said certificates, the plaintiff, believing that said certificates were duly made and issued by said defendant under and by virtue of the provisions of said order of court, and that the same were of the series of receiver's certificates authorized to be issued by said order, and that the same were made and issued by said defendant for iron rails furnished for constructing said road, and relying thereon, and upon the said statements and representations contained and made in said certificate, purchased the said certificates from the payee in good faith and in the usual course of business, and without notice or knowledge that the said statements and representations were not true, and paid and advanced to said company therefor the sum of $25,000, and that being the amount expressed upon their face as due and payable thereon.

(6) That after maturity of said certificates plaintiff demanded payment, which was refused; and that afterwards plaintiff instituted proceedings to enforce the lien of said certificates upon said line of railroad, etc., in the district court of Clinton county, Iowa; and that said court, by its judgment, refused to enforce the said lien, or compel the payment of said certificates, which said judgment or decree was afterwards affirmed by the supreme court of the state of Iowa.

(7) It is further averred as follows: 'And the plaintiff further says that said defendant wrongfully, fraudulently, and falsely certified and represented, in and by said certificates, that the same were issued by him in pursuance of said order heretofore referred to, and that they were each of a series of receiver's certificates authorized to be issued by such order, and constituted a first lien upon the said line of railroad, its appurtenances, franchises, and income, and that they were issued for iron rails furnished for constructing said road, whereas in truth and in fact the said certificates were not made and issued by said defendant under and in pursuance of said order; nor were they of the series of receiver's certificates authorized to be issued by such order; nor did they constitute a first lien upon the said line of railroad, its appurtenances, franchises, and income; nor were they issued for iron rails furnished for constructing said road; and the plaintiff further says that by reason of the premises it has sustained damage in the sum of $30,000.'

(8) The second count of the petition repeats the foregoing allegations, in substance, omitting the allegation as to fraudulent representation, and charges that the representations were untrue, and that because they were untrue the certificates were invalid, and the plaintiff sustained the damage for which the defendant is liable.

The grounds of demurrer are stated in the opinion.

E. S. Bailey, for plaintiff.

Geo. B. Young, for defendant.

McCRARY C. J.

We will consider the grounds of demurrer to the first count in the order in which they are presented by counsel.

1. It is insisted that the facts alleged do not constitute fraud. The allegation is that defendant wrongfully, fraudulently, and falsely certified and represented that the certificates were issued in pursuance of the order of the district court of Clinton county, Iowa; that they constituted a first lien, and that they were given for iron rails furnished for constructing said road, whereas none of these things were true.

It is said that a fraudulent intent is not alleged; but it is difficult to see how representations as to a matter of fact can be wrongful,fraudulent, and false, without they are made with a fraudulent intent. It is certainly necessary to prove the intent, and of course it must be alleged, but no form of words is necessary. If the terms employed by the pleader taken in their ordinary signification, necessarily include the idea of a fraudulent intent, that is enough. We must give to the term 'fraudulently,' as found in the petition, the meaning which the law gives it, and which attaches to it in common usage, to-wit, a deliberately-planned purpose and intent to deceive and...