Harris v. Randolph County Bank

• Decision Date: 19 June 1901
• Docket Number: 19,008
• Citation: 60 N.E. 1025,157 Ind. 120
• Parties: Harris et al. v. Randolph County Bank
• Court: Indiana Supreme Court

60 N.E. 1025

157 Ind. 120

Harris et al. v. Randolph County Bank

No. 19,008

Supreme Court of Indiana

June 19, 1901

From Randolph Circuit Court; J. W. Headington, Judge.

Action by the Randolph County Bank against William Harris and another on a note executed by the latter to the Citizens Bank and assigned to plaintiff, and to foreclose a mortgage. From a judgment in favor of plaintiff, Jesse Canaday, receiver of the Citizens Bank, who had been made a party, defendant appeals.

Affirmed.

J. W Thompson, J. W. Ryan and W. A. Thompson, for appellants.

J. J Cheney, J. W. Macy, J. P. Goodrich, J. S. Engle and W. G Parry, for appellee.

OPINION

Jordan, J.

The Randolph County Bank, of Winchester, Indiana, as plaintiff, sued William Harris and Eneas H. Turpen to recover a personal judgment against them upon a promissory note for $ 3,000 executed by them to the Citizens Bank of Union City, Indiana, and to foreclose a mortgage upon certain real estate in said county executed to said bank by said parties and their respective wives to secure the payment of the note in suit. Appellant Jesse Canaday, who had previously been appointed receiver of the Citizens Bank, an insolvent institution, and other persons who, along with said receiver, claimed to have and hold liens upon the mortgaged premises, were made party defendants, and expressly challenged, by each paragraph of the complaint, to answer as to any liens or interests which they had or held against said premises. All of the defendants, except Canaday, the receiver of the Citizens Bank, were defaulted. He alone appeals, and assigns that the court committed the following errors: (1) Overruling his demurrer to the complaint; (2) in striking out and rejecting his cross-complaint; (3) in sustaining the demurrer of appellee to the second and fourth paragraphs of his answer; (4) overruling his demurrer to the second paragraph of appellee's reply to the third paragraph of answer; (5) overruling his motion for a new trial.

The complaint is in two paragraphs. The first paragraph among other things, after alleging that the plaintiff is an incorporated bank, sets out the execution of the note and mortgage by Harris & Turpen, and that said note was properly indorsed by the said Citizens Bank by N. Cadwallader, president, to the plaintiff as collateral security to secure the payment of $ 5,000, which latter sum is alleged to be now due and unpaid. It is further charged that the makers of the note in suit have failed to pay the same, and that it is now due and unpaid, and judgment is demanded against said makers for the sum of $ 4,000, and for a foreclosure of the mortgage against all of the defendants. Copies of the note and mortgage are filed with and made parts of each paragraph of the complaint, and each of the paragraphs discloses that permission has been obtained from the court by the plaintiff to make said receiver a party defendant to this action.

The second paragraph alleges the execution of the note and mortgage in suit by Harris & Turpen to the Citizens Bank, and then alleges that on March 2, 1896, the plaintiff, the Randolph County Bank, loaned to said Citizens Bank the sum of $ 5,000, and received from said bank as evidence of said loan the following, to wit: "The Citizens Bank. Union City, Indiana, March 2, 1896. $ 5,000. Randolph County Bank, Winchester, Indiana, has deposited in this bank $ 5,000, payable to the order of itself sixty days (in current funds) after date, with no per cent. interest per annum only for the time stated on return of this certificate properly indorsed. C. H. Cadwallader, Cashier." This certificate is indorsed as follows: "We hereby guarantee the payment of this certificate."

(Signed) C. H. Cadwallader, Nathan Cadwallader.

It is further alleged that at the time said loan of $ 5,000 was negotiated and made by the plaintiff to the Citizens Bank, that the latter by its officers and agents, in order to induce plaintiff to make said loan, promised and agreed with plaintiff to turn over and deposit with it as collateral and additional security for the payment of said loan the note and mortgage in suit, together with other notes, as such collateral security, at any time when the plaintiff should request the said Citizens Bank to do so. It is then averred that after making said loan to the Citizens Bank that the latter, upon request of plaintiff, did turn over and assign and indorse to plaintiff as collateral security upon said loan the note and mortgage in suit, together with other notes which plaintiff now holds as such security. That at the time said notes were assigned to plaintiff it was agreed that the time for paying the loan of $ 5,000 should be extended until the money from the collaterals so assigned could be collected and applied in payment upon the loan. It is further alleged that the note and mortgage sued upon were assigned to plaintiff by said Citizens Bank by indorsement, in pursuance of the agreement heretofore mentioned, etc., and that the note in suit and the loan in question are averred to be due and unpaid, and judgment is demanded against Harris & Turpen for $ 5,000 and foreclosure of the mortgage against all of the defendants.

Appellant as receiver of the Citizens Bank demurred to each paragraph of the complaint upon the ground that neither stated facts sufficient to constitute a cause of action against him as defendant in said suit. His demurrer was overruled, to which ruling he excepted, and, thereupon, he filed an answer in four paragraphs, the first being the general denial. Each of the other three paragraphs was addressed to the complaint generally, and not specially to either of its paragraphs. Appellant also filed what is denominated a cross-complaint, consisting of four paragraphs, which cross-complaint, upon motion of appellee, was stricken out and rejected in its entirety over the objections and exceptions of appellant. Appellee demurred for insufficiency of facts to the second, third, and fourth paragraphs of the answer, and its demurrer was sustained to the second and fourth and overruled to the third. Thereupon appellee replied in two paragraphs to the third paragraph of appellant's answer, the first being a general denial. The demurrer to the second paragraph of reply was overruled. Upon the pleadings as they stood after the several rulings of the court as heretofore stated, the issues were joined between appellant and appellee and a trial by the court resulted in a finding in favor of appellee to the effect that it was entitled to recover against Harris & Turpen upon the note in suit in the sum of $ 3,703.95 and to foreclose the mortgage against all of the defendants. The court further finds that appellee held the note and mortgage involved in this action as collateral security to secure the payment of a debt owing to it by the said Citizens Bank, which indebtedness is evidenced by a certificate of deposit; that a part of said indebtedness has been paid from other collaterals, leaving a remainder due to appellee of $ 1,496.24, which amount, the court finds, together with $ 242 allowed as attorneys fees, together with costs and interest accruing subsequent to the rendition of the judgment, should be paid to the appellee out of the first money collected on the judgment to be rendered upon said note and mortgage. The residue thereof to be paid to appellant as receiver of the Citizens Bank, or to whomsoever may be entitled to receive the same. Over appellant's motion for a new trial, judgment was rendered in accordance with the court's finding.

The second paragraph of appellant's answer, after alleging the appointment of appellant as receiver of the Citizens Bank and the acceptance by him of said trust, and that said bank was organized and incorporated under the laws of this State as a bank of discount and deposit, then avers, among other things, that said Citizens Bank, for a long time prior to its suspension and the appointment of said receiver, was an insolvent institution, and was the owner of a large number of bills and notes, including the mortgage note in suit; that on May 6, 1896, the bank suspended and ceased to do business and soon thereafter passed into the hands of appellant as receiver; that on the 27th day of April, 1896, while the bank was in an insolvent condition, the president thereof, Nathan Cadwallader, without any authority from the board of directors, and without any authority whatever, transferred and assigned to appellee the note in suit, together with other notes and bills of said bank, by indorsing upon each the name of the said Citizens Bank; that the assignment of said notes was made as collateral security for the purpose of securing the payment of said deposit of $ 5,000 made by appellee; that it was agreed by and between appellee and said Cadwallader at the time the notes were assigned and delivered to the former that all of the proceeds arising from the collection thereof, over and above what was necessary to pay the $ 5,000 deposit, should be paid over to the Citizens Bank for its benefit. It is then alleged that no part of the proceeds of the notes so assigned has been paid over to said bank by appellee, and the further averment is made that appellee has not and never did have any valid title to the notes in question in this action. The paragraph closes with a denial of all other matters contained in the complaint.

The third paragraph of answer proceeds upon the theory that after the Citizens Bank had become insolvent, Cadwallader, its president, by the assignment of the note in suit, along with the other notes mentioned as a security for the $ 5,000 deposit, thereupon preferred appellee over the other creditors of the Citizens Bank, in violation of § 2934 Burns 1894, § 2697 Horner 1...