Federal Deposit Ins. Corp. v. Cloonan

• Decision Date: 08 May 1948
• Docket Number: 37025.
• Citation: 165 Kan. 68,193 P.2d 656
• Parties: FEDERAL DEPOSIT INS. CORPORATION v. CLOONAN et ux.
• Court: Kansas Supreme Court

193 P.2d 656

165 Kan. 68

FEDERAL DEPOSIT INS. CORPORATION v. CLOONAN et ux.

No. 37025.

Supreme Court of Kansas

May 8, 1948

Rehearing Denied June 21, 1948.

Appeal from District Court, Labette County; Larue E. Goodrich Judge.

Two replevin actions by the Federal Deposit Insurance Corporation against H. J. Cloonan and wife, which were consolidated for trial. Judgment for the plaintiff, and the defendants appeal.

Judgment reversed with directions.

Syllabus by the Court.

1. The so-called plea of nolo contendere, sometimes permitted in the Federal Court but not used in our state practice, is but a formal declaration by the accused that he will not contend with the prosecuting attorney under the charge. It is in the nature of a compromise between the government and the accused and may indicate the government does not care to prosecute. The accused may not make it as a matter of right. It is allowable only by leave of and acceptance by the court. When accepted by the court it becomes an implied confession of guilt for the purpose of that case only. It cannot be used against the accused as an admission in any civil suit involving the same matters.

2. Upon the trial of a civil action in replevin predicated upon notes and mortgages given to a bank, under facts more fully stated in the opinion, it was error for the court, over defendant's objections, to permit plaintiff to show on cross-examination of defendant that he had been permitted to enter a plea of nolo contendere to certain counts of an indictment which charged Federal offenses in relation to transactions with the bank, to permit certain counts of the indictment to be read to the jury, to receive all the indictments in evidence, to send the indictment to the jury room to be considered by the jury, and to permit counsel for the plaintiff to make a condemnatory argument of defendant to the jury, based upon such indictment.

3. A witness, employed by plaintiff to examine defendant's books more than three years prior to the trial, shortly before he was called as a witness prepared what he called an explanatory statement of transactions between defendant and the bank which contained certain statements of what the record showed, and also contained his assumption of what they proved. Held, it was error to admit this statement in evidence and to send it to the jury room to be considered by the jury.

4. The Federal Deposit Insurance Corporation, created and functioning under 12 U.S.C.A. § 264, in insuring certain depositors of a bank, is a compensated insurer, the compensation being paid by the insured bank, not by one who is indebted to the insured bank.

5. When a bank, whose depositors are insured by the Federal Depositors Insurance Corporation, fails, the Federal Deposit Insurance Corporation, under 12 U.S.C.A. § 264(n)(4), is authorized to make a contract with some other bank insured by it to assume the insured deposit liabilities of the failed bank. There are but two parties to this contract,--the Federal Deposit Insurance Corporation and the insured bank with which it makes the contract. A creditor or a debtor of the failed bank is not a party to that contract and his rights or liabilities are not affected by the terms of such contract.

6. The jury trial of a civil action should be limited to issues of fact presented by the pleadings.

Elmer W. Columbia, of Parsons (John B. Markham and Herman W. Smith Jr., both of Parsons, on the brief), for appellants.

A. L Foster, of Parsons, for appellee.

HARVEY Chief Justice.

These were two replevin actions, consolidated for trial in the district court. The jury answered special questions and returned a verdict for plaintiff in each of the cases. Defendants have appealed.

In the trial court, in case No. 5437, the petition was filed February 3, 1942, and an amended petition April 2, 1943. In this plaintiff alleged that it is a corporation organized and existing under Federal statutes, 12 U.S.C.A.§ 264; that the defendants are husband and wife, and their address in Parsons was stated; that plaintiff has a special ownership and interest in and is entitled to the immediate possession of certain personal property, in a list attached to the petition as 'Exhibit A.' by virtue of a certain not and chattel mortgage executed by defendants, and that on June 9, 1941, defendants executed and delivered to the Exchange State Bank of Parsons their promissory note in the sum of $2500 and a chattel mortgage upon the property described in 'Exhibit A' to secure the payment thereof; the note and mortgage were attached to the petition as 'Exhibits B' and 'C'; that on June 21, 1941, the note and chattel mortgage were sold, assigned and delivered by the Exchange State Bank to plaintiff for a good and sufficient consideration, being as follows: That the Exchange State Bank of Parsons, on January 1, 1934, became a member of the temporary Federal Deposit Insurance Fund, created pursuant to section 12B of the Federal Reserve Act, sec. 8 of the Act of June 16, 1933, 48 Stat. 168, and was insured under that fund until August 23, 1935, when it became an insured bank under 12B of the Federal Reserve Act, as amended, sec. 101 of the Act of August 23, 1935, 49 Stat. 684, 12 U.S.C.A. § 264, and was insured under that act until June 21, 1941, on which date, because of its insolvent condition, it quit business, and as provided by paragraph (4), subsequent (n), 12 U.S.C.A. 264, the deposit liabilities were assumed by the State Bank of Parsons, which purchased certain assets of the Exchange State Bank, referred to as acceptable assets; that all the remainder of the assets of the Exchange State Bank were purchased by plaintiff, the consideration therefor being paid to the State Bank of Parsons on the basis of the difference between the value agreed upon between plaintiff and the State Bank of Parsons of its acceptable assets of the Exchange State Bank of Parsons and the deposit liabilities of the Exchange State Bank of Parsons, which difference amounted to the sum of $420,259.87; that included in the assets acquired by plaintiff from the Exchange State Bank of Parsons was a note and chattel mortgage, previously mentioned; that plaintiff is a governmental agency and instrumentality, created by an act to stabilize and promote the stability of banks, to protect depositors, and to preserve the solvency of insured banks and to keep open channels of trade, commerce and exchange, and for such reasons plaintiff corporation is endowed with a public interest; that the note and mortgage previously mentioned were given to the Exchange State Bank at the time that bank was insured by plaintiff and was a part of the assets of such bank, shown on its books as such and relied upon by plaintiff as a part of the assets of the bank; that the note was complete and regular on its face, was dated June 9, 1941, and due July 9, 1941; that plaintiff became a holder of the note and mortgage before they were due, to-wit, on June 21, 1941, without notice of any infirmity in the instrument or defect in the title of the Exchange State Bank, and that plaintiff took the note in good faith and for value, as above set forth, and is a holder in due course of the note and chattel mortgage. There were further allegations that the conditions of the note and mortgage had been broken; that payment had been demanded and refused, and possession of the property had been demanded and refused, and that the total value of the property disted in 'Exhibit A' is $1407.70. The prayer was for judgment awarding plaintiff the possession of the property, and if its possession could not be given that plaintiff have judgment against defendants for the value as set forth in plaintiff's petition, and for its costs. In this case the sheriff took possession of the personal property and a redelivery bond was given.

In the other case (No. 5439) the petition was filed on February 5, 1942, and an amended petition filed April 2, 1943. This was to recover a number of automobiles in which plaintiff alleged a special ownership and interest by virtue of a note for $9350 executed by defendants June 9, 1941, and delivered to the Exchange State Bank of Parsons, and a chattel mortgage executed by defendants to the bank on the same date upon automobiles described in a list attached to the petition as 'Exhibit A.' A copy of the note and mortgage was attached to the petition as 'Exhibits B' and 'C.' It was alleged that certain payments had been made upon the note and that there was a balance due at the time of the amended petition of $5,749.84. It was alleged the value of the property described in 'Exhibit A' was $8,355. There were other allegations in the petition substantially the same as in case No. 5437 pertaining to plaintiff's existence under the Federal statutes and how it procured possession of the note and chattel mortgage. The prayer was for possession of the property described in 'Exhibit A,' and if such possession could not be given that plaintiff have judgment for the value of the property together with its costs. Upon the order for delivery the sheriff found none of the property listed in 'Exhibit A.' On June 11, 1943, the cases were consolidated by an order of the trial court and thereafter all pleadings were filed in the consolidated case.

H. J Cloonan filed his amended answer in the consolidated cases in which he admitted plaintiff's corporate existence, as alleged, and that the Exchange State Bank was an insured bank at the time it closed, June 21, 1941, under 12 U.S.C.A. § 264, and alleged that the Exchange State Bank paid a consideration for the insurance, as provided in the Act. He further alleged that about May 1, 1941, the exact date being unknown to defendant but known to plaintiff, the plaintiff...