First Nat.Bank of Indianapolis v. Root

• Decision Date: 26 June 1886
• Citation: 8 N.E. 105,107 Ind. 224
• Parties: First Nat. Bank of Indianapolis v. Root and others.
• Court: Indiana Supreme Court

107 Ind. 224

8 N.E. 105

First Nat.

Bank of Indianapolis

v.Root and others.

Supreme Court of Indiana.

June 26, 1886.

Appeal from Marion superior court.

Claypool & Ketcham and H. J. Milligan, for appellant. F. Winter, for appellees.

Mitchell, J.

The First National Bank of Indianapolis brought an action against Deloss and Jerome B. Root, composing the firm of D. Root & Co. From the averments in the complaint it appears that Deloss Root and D. Root & Co., being largely indebted to the bank, pledged, as collateral security, certain bonds and stocks, taking at the time, as evidence of the terms upon which the pledge was made, a paper writing, signed by the cashier of the bank, of the tenor following: “Received of D. Root & Co. the following named stocks and bonds, which we are to hold as collateral security for any indebtedness which said D. Root & Co. or D. Root may owe to the First National Bank. Should said D. Root or D. Root & Co. reduce their indebtedness to said bank, they shall be entitled to select from the securities an amount equal to the reduction so made. The securities so left shall be strictly held as collateral, and shall in no case be sold until the real and personal property of said D. Root and D. Root & Co. shall have been exhausted.” Following the above is a schedule of the stocks and bonds referred to in the writing, with a statement of their face value, aggregating $82,000. Included in the schedule is the following item: “Certificate No. 34, belonging to D. Root, 200 shares of the Franklin Fire Insurance Co., paid up in full, $5,000.” All of the stocks and bonds, except the certificate above mentioned, had been withdrawn or sold, and the proceeds applied on the indebtedness to secure which it was pledged. There remained due of this debt to the bank $25,736.60, which, at the time the complaintwas filed, was in judgment. The complaint charged that the amount of property withdrawn exceeded the amount of reduction of the debt, and that the Roots, at the time the suit was commenced, were possessed of no real nor personal property which was subject to execution. The relief prayed was that the lien of the bank on the stock remaining in its possession might be foreclosed; that a sale might be ordered, and the proceeds applied on the judgment against Root & Co.

Kate H. Root filed an intervening petition, upon which she was admitted as a party defendant. By a cross-complaint, in which the bank, Deloss and Jerome B. Root were named as defendants, she exhibited, in substance, the following facts: That the individual liability of Deloss Root to the bank grew out of the indorsement of a note by him for certain parties, and amounted, at the time the pledge was made, to $7,000. It was averred that substantially all of the property which had been pledged was the individual property of Deloss Root, and that all the proceeds of that which had been sold or withdrawn had been applied exclusively in reduction of the debt of D. Root & Co. Deloss Root, since the pledging, had paid out of his individual funds and property, and had procured to pay, on account and in reduction of the indebtedness, the sum of $7,500; that being more than the full amount of all his individual liability to the bank. The claim was that he thereby became entitled to withdraw the stock of the Franklin Insurance Company, theretofore pledged by him, and that, after his right to withdraw had accrued, he sold, assigned, and transferred the stock in question to the cross-complainant, Kate H. Root. In her cross-complaint she alleges a previous demand for the stock, and prays that it be adjudged her property, and that the bank may be required to transfer it, and account to her for the dividends received since demand made by her.

The joint answer of Deloss, Jerome B. and Kate H. Root need not be noticed. The second paragraph presented a state of facts not materially different from those contained in the cross-complaint.

Separate demurrers were overruled to the special answer and to the cross-complaint. The plaintiff's special answer to the cross-complaint was, in substance, that Kate H. was the wife of Deloss Root, and knew that the latter was indebted to the bank in the sum of $30,000 at the time she received the pretended transfer of the stock from her husband; that the transfer was without consideration, and was made for the purpose of defrauding the creditors of Deloss Root. A demurrer was sustained to this answer. The cause, having been put at issue, was tried by the court. A special finding of facts having been duly made, conclusions of law were stated thereon favorable to the cross-complainant.

On behalf of the appellant it is contended that the answer, in which Mrs. Root joined, as well as her cross-complaint, in which substantially the same facts are alleged, were bad, and that in overruling demurrers to them the court erred. The argument is that, the bank having recovered a judgment against D. Root & Co. which remained unsatisfied, it had the right, without regard to and independent of the contract under which the stock was delivered in pledge, to maintain a bill in equity for the purpose of subjecting it to sale. This position assumed, it is thence insisted that, because it does not appear that Mrs. Root paid a valuable consideration for the transfer of the stock in controversy, and because she did not, as it is argued, acquire an equity therein superior...