Hartlep v. Murphy

• Decision Date: 27 January 1926
• Docket Number: No. 24378.,24378.
• Citation: 197 Ind. 222,150 N.E. 312
• Parties: HARTLEP v. MURPHY et al.
• Court: Indiana Supreme Court

197 Ind. 222

150 N.E. 312

HARTLEP

v.MURPHY et al.

No. 24378.

Supreme Court of Indiana.

Jan. 27, 1926.

Appeal from Newton Circuit Court; Geo. W. Williams, Judge.

Action on promissory notes by Otis Murphy and others against Charles B. Hartlep and others. From a judgment for plaintiffs, the named defendant appeals. Reversed, with directions.Ringer & Ringer and Ele Stansbury, all of Williamsport, for appellant.

Fraser & Isham, of Fowler, for appellees.

EWBANK, C. J.

Appellees other than William Marko, as plaintiffs, brought an action against William Randall, Aaron Larch, and appellant to recover on certain promissory notes payable to them purporting to have been executed by Randall as principal and Larch and appellant as sureties, and also to foreclose a mortgage executed by Randall conveying certain land to said sureties to secure the payment of the notes, and to indemnify and protect the sureties against loss on account of such suretyship. The notes were dated April 24, 1920, and purported to have been signed by William Randall and Aaron F. Larch, and executed by appellant by “his mark”; W. C. Taylor signing as witness to such mark. The mortgage was dated and acknowledged November 18, 1920, seven months after the notes were given, and recited that it was “made to secure and completely indemnify the said Aaron F. Larch and Charles B. Hartlep on account of their suretyship for the said William Randall on five promissory notes,” describing them, and it was conditioned that, in case Randall should fail to pay the notes or any of them when due, and all expense which the mortgagees (sureties) might be caused on account thereof, such mortgage might be foreclosed and the mortgaged premises sold. The complaint alleged that plaintiffs (appellees) owned a certain tract of land as tenants in common, and through the agency of one of them, acting for all, sold it to said William Randall, and received in payment $12,000, which Randall borrowed on a mortgage that he gave on said real estate, and also four notes, aggregating $12,000 in amount, signed by Randall, Larch, and appellant, as above described, copies of which were filed with the complaint as exhibits; that thereafter, on November 18, 1920, Randall executed his mortgage on the land so purchased, securing and indemnifying Larch and appellant, as above stated, and it was duly recorded; that the notes were long past due, and wholly unpaid, but said sureties refused to foreclose the mortgage for the benefit of plaintiffs; and that plaintiffs had no other security for payment of said unpaid purchase money, except the personal liability of the makers, and the mortgage sued on. Answers of general denial and of payment were filed on behalf of all the defendants, and appellant answered separately, under oath, “that the note sued on, and each and all of them, were not executed by this defendant.” To this separate answer denying the execution of the notes plaintiffs filed a reply, the material averments of which were “that the defendant (appellant), with full knowledge that said notes were outstanding with his name signed to each of them as thereon appearing, and with full knowledge that the plaintiffs took said notes for purchase money of lands sold to the defendant Randall, *** promised and agreed to pay said notes, and took and accepted the mortgage sued on, *** in consideration of which said defendant Hartlep ratified said notes, and agreed to pay the same and each of them, with full knowledge that said notes and each of them purported to be binding upon him as maker in the hands of the vendors of said real estate. Wherefore *** plaintiffs aver and charge that the said Charles B. Hartlep is estopped to deny the execution of said notes or any of them.” Appellant demurred to this reply, specifying that it did not state facts constituting an estoppel, nor facts showing that with knowledge of the existenceof the notes and for what they were given appellant ratified or agreed to pay them upon a new consideration. Overruling this demurrer is the first error assigned.

[1] To constitute an estoppel by conduct there must have been a representation or concealment of material facts, made with knowledge of the facts, to a person who was ignorant concerning such matter, with intent that such person should act thereon, and he must have been induced thereby to act in reliance on such representation or concealment differently from what he would otherwise have done. Hosford v. Johnson, 74 Ind. 479, 485;Lewis v. Hodapp, 14 Ind. App. 111, 113, 42 N. E. 649, 56 Am. St. Rep. 295;Pierce v. Vansell, 35 Ind. App. 525, 533, 74 N. E. 554.

[2] But the reply, as set out above, does not allege that, at the time when appellant “took and accepted the mortgage sued on” (long after the notes were executed), plaintiffs were ignorant of the fact that the notes were forgeries, nor that appellant took the mortgage with intent that plaintiffs should be influenced thereby in any way, nor that plaintiffs were influenced thereby to act or refrain from acting, or that they really did do anything or omit doing anything thereafter, whether in reliance upon appellant's acceptance of the mortgage or otherwise. The reply did not sufficiently plead matter of estoppel to avoid the defense of non est factum.

[3] The verified answer that the notes were not executed by appellant was broad enough to embrace the defense that they had been forged, in violation of the criminal law, and to be sufficient a reply thereto must meet and avoid that defense. But, where one person has signed the name of another to a note under such circumstances as to constitute a forgery, the act from which the crime springs cannot, upon considerations of public policy, be ratified or confirmed, and, in the absence of an estoppel, the debt can only become binding by reason of a new promise, supported by a new and valid consideration. Henry v. Heeb (1887) 114 Ind. 275, 280, 16 N. E. 606, 5 Am. St. Rep. 613;Barkley v. Barkley (1914) 182 Ind. 322, 326, 106 N. E. 609, L. R. A. 1915B, 678;Henry Christian B. & L. Ass'n v. Walton, 181 Pa. 201, 206, 37 A. 261, 59 Am. St. Rep. 636;Garrott v. Ratliff, 83 Ky. 384, 390;Shinew v. Bowling Green, etc., Bank, 84 Ohio St. 297, 304, 95 N. E. 881, 36 L. R. A. (N. S.) 1006, Ann. Cas. 1912C, 587;Woodruff v. Munroe, 33 Md. 146; Merchants' Bank v. Lucas, 18 Canada S. C. 704; Brook v. Hook (Eng.) L. R. 6 Exch. 89.

[4][5] And in order to recover on such new promise the plaintiff must sue upon it, alleging in his complaint the subsequent promise to pay the notes and the consideration by which it is supported. To allege in a complaint that the defendants are indebted on certain promissory notes, and, upon a defense to the notes being pleaded, which shows that they are void and incapable of ratification, to reply by alleging that at another time, for another and different consideration, the defendant made another and different promise than the one sued on, does not “support the complaint” by showing that plaintiff is entitled to recover on the cause of action originally sued on, which is the only legitimate function of a reply. Section 381, Burns' 1926; section...