German American Indem. Co. v. State Mercantile Bank

• Decision Date: 13 July 1914
• Docket Number: 4038
• Citation: German American Indem. Co. v. State Mercantile Bank, 142 P. 189, 26 Colo.App. 242 (Colo. App. 1914)
• Parties: GERMAN AMERICAN INDEMNITY CO. v. STATE MERCANTILE BANK.
• Court: Colorado Court of Appeals

142 P. 189

26 Colo.App. 242

GERMAN AMERICAN INDEMNITY CO. v. STATE MERCANTILE BANK.

No. 4038

Court of Appeals of Colorado

July 13, 1914

Error to District Court, Denver County; John H. Denison, Judge.

Action by the State Mercantile Bank, a corporation, against the German American Indemnity Company.There was a judgment for plaintiff, and defendant brings error.Affirmed.

Horace G. Benson, of Denver, for plaintiff in error.

Zimmerhackel & Avery, of Denver, for defendant in error.

BELL J.

This action grows out of a decree obtained in the district court of the city and county of Denver jointly against S.N Mitchell and the German American Indemnity Company, plaintiff in error herein, ordering and directing the above-named defendants in the action to return to one L.K. Mulfordplaintiff therein, a certain $2,000 promissory note, together with a duly executed release of a certain trust deed securing said note, that they pay to him the sum of $50 as attorney's fees and the sum of $150 for services rendered by him to said company as auditor, and that he have judgment for his costs.By stipulation signed by counsel of record for the parties, the defendants agreed to waive their right of appeal, and were granted a 60-day stay of execution, at the expiration of which E.C. Harrell, president and general manager of the company, and said S.N. Mitchell, its treasurer, negotiated a loan of $2,550 from the State Mercantile Bank, defendant in error herein, for the purpose of satisfying the decree, at the demand of the plaintiff therein, and gave as security for said loan a certain negotiable promissory note, dated April 19, 1912 signed by the German American Indemnity Company, by E.C Harrell, president, and S.N. Mitchell, treasurer, and by E.C. Harrell and S.N. Mitchell in their private capacities.Upon this note, the present action was instituted by the bank, and resulted in a judgment in its favor in the sum of $3,008.97.

The defenses set up in the instant case by the defendant company, plaintiff in error, were that neither Harrell as president, nor Mitchell as treasurer, nor either of them in any capacity, had any power or authority to execute the note in suit, or any instrument purporting to bind the company for the payment of money; that the note was the result of a conspiracy between them to defraud the company in the Mulford case by agreeing between themselves to permit an adverse judgment to be entered therein, and to satisfy the same with the funds of the company, thereby discharging the personal debt of Mitchell to Mulford; that these facts were known to the plaintiff bank at the time the loan was made; and that the note in suit was made out of the due and regular course of business and was without consideration.Certain by-laws of the defendant company and proceedings of its board of directors were offered and received in evidence to prove the powers, duties, and authority of its officers, and they show that, upon the resignation of said Harrell as secretary and general manager of the company, November 24, 1911, during the pendency of the Mulford case, a rising vote of thanks was tendered him by the board of directors of the company for his efficient services during the year previous, and he was immediately and unanimously elected president of the company to serve for the unexpired term; that at the same time the by-laws of the company were amended, to take effect immediately, and such amendments made it the duty of the president "to sign all deeds, bonds, certificates of stock, checks and documents of any description of the company, and to have general supervision of all meetings, either stockholders' or directors' meetings, *** to secure the services and fix the remunerations of agents, employés, and assistant officers for the general promotion and welfare of the company (which latter duties were theretofore imposed upon the secretary and general manager) and shall have entire charge of the affairs of the company."(The italics are mine.)The records and by-laws thus introduced further show that, by the amendments, the office of general manager was thereupon abolished, in so far as it was connected with the secretary, and that the same became merged in the office of the president; that the by-laws in conflict with said amendments were declared null and void as they previously read; and that the president, secretary, and treasurer should constitute an executive committee to act in the absence of the board of directors, and to have the same relation to the board that the vice president does to the president.On January 9, 1912, said Harrell and Mitchell were again elected president and treasurer of the company respectively.

The evidence developed the facts that Harrell and Mitchell had negotiated paper with the plaintiff bank at various times and on or about November 14, 1911, had borrowed $1,000 on the company's note, which was paid by the company's check, February 6, 1912, and payment thereof credited to the company; that the German American Trust Company also loaned the defendant company, August 19, 1911, the sum of $1,000 on its note indorsed by said Harrell and Mitchell, which was paid October 30, 1911; and that notes had been given to a bank in Trinidad.All of those transactions occurred previous to the date of the note in suit, but it seems that some of them, the loans at least, were never entered upon the books of the defendant company, although an entry was made therein showing a deduction of one thousand and fifteen or twenty dollars from the account of the company at the German American Trust Company Bank, without any explanation being given therefor, and the acts and conduct of the officers in the matters were never questioned by the company.There were 13 directors of the company, a majority of whom, as we understand the record, resided or were frequently out of the city, and it seems that full charge of the entire affairs of the company was placed in the hands of said Harrell, its president and general manager.At the time of making the loan in suit, the plaintiff bank had been dealing with the defendant company for a period of from 18 to 24 months, and Harrell represented to it that, as the highest officer of the company, he had authority to sell paper, negotiate loans, and transact the business of the company, and that the purpose of the loan was to take care of the Mulford judgment.Upon inspection and the strength of past transactions, in part at least, and the representations of Harrell, the loan was made, and the amount...