Hindman v. First Nat. Bank

• Citation: 112 F. 931
• Decision Date: 04 February 1902
• Docket Number: 902.
• Parties: HINDMAN v. FIRST NAT. BANK OF LOUISVILLE et al.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

112 F. 931

HINDMAN v. FIRST NAT. BANK OF LOUISVILLE et al.

No. 902.

United States Court of Appeals, Sixth Circuit.

February 4, 1902

This was an action by Thomas C. Hindman to recover damages for the fraudulent and false representations of the defendants whereby he was induced to buy shares of the capital stock of the Columbian Fire Insurance Company of America, which shares have proven worthless. A demurrer to the petition was sustained, and the plaintiff's petition dismissed. At a former term of this court we held that the court below had erred in sustaining the demurrer, and the cause was remanded with directions to overrule same. 39 C.C.A. 1, 98 F. 562, 48 L.R.A. 210. Thereupon the defendants answered, and issue was joined. There was a verdict and judgment for defendants.

The outlines of the case necessary to be stated are these: The insurance company in which Mr. Hindman became a shareholder was a Kentucky corporation. Under the law of that state, it could not begin business until all of its capital had been actually paid in in cash, nor until the state insurance commissioner should be satisfied that this was a fact, and should issue his license accordingly. On December 31, 1892 he authorized the company to begin business, and issued a certificate or license, which, among other things, certified that the company 'had a paid-up capital of $200,000, and a net surplus of $48,182.90,which is in cash, and deposited in the First National Bank of Louisville, Kentucky, as shown by the certificate of the cashier of said bank and the sworn statement of the president and secretary of said company ' The cashier's certificate referred to is in these words: 'Thos. R. Sinton, being duly sworn, deposes and says that he is cashier of the First National Bank of Louisville, Ky., and that said bank, on this December 31, 1892, has on deposit to the credit of the Columbian Fire Insurance Company of America, of Louisville, Ky., two hundred and forty-eight thousand one hundred and eighty-two and 90/100 ($248,182.90) dollars, of which amount two hundred thousand ($200,000) dollars has been paid in as the full amount of the capital stock of said Columbian Fire Insurance Company of America, and forty-eight thousand one hundred and eighty-two and 90/100 ($48,182.90) dollars has been paid in as the net surplus of said company. ' There was evidence tending to show that there was a shortage in paid-up capital shares of not less than $100,000 when these certificates were issued and the company launched in business. It was shown that the company did have a deposit in the First National Bank on that date of $248,182.90, which was subject to its check. But there was also evidence tending to show that about $60,000 of this sum was proceeds of notes discounted by the insurance company, purporting to be notes made by subscribers for shares, and secured by stock attached as collateral, and that the insurance company was bound on these notes either as indorser or guarantor. There was also evidence tending to show that $25,000 of this credit was made up by the deposit of a certificate of deposit issued by the Tradesman's National Bank of New York, and that this deposit was procured by the discount in New York of the note of the New York agents of the company upon an agreement by which the premiums received by the New York agents were to be deposited with the Tradesman's Bank, and appropriated to the payment of the discounted note; the note being also secured by shares of the company as a collateral. It was not shown that the bank knew the history of this certificate of deposit, though it is shown that it was requested to hold the certificate for 30 days, and that in fact it was so held until March 23d before being sent on for collection. Five of the notes discounted by the defendant bank were notes purporting to be made by subscribers for stock, and these notes were secured by the shares and the indorsement of the company. The sixth note discounted by the defendant bank was made by Mr. A. W. Hart, the principal organizer of the company, and its general manager. Hart's note was for $46,875. It was discounted December 28, 1892. Shares aggregating 375 were attached to it as collateral, and it was indorsed or guarantied by the company. Hart was not financially good for this sum, or anything like it. There was evidence tending to show that the officials of the bank knew that this note was made to take the place of subscribers who had failed to take their stock, and that it was represented to the bank that there were persons who had promised to take these shares who were good, and that as they came forward and took the stock the proceeds of such allotments would be paid on the note, and stock withdrawn in proportion to payments. Mr. Hart himself testified that he told the officials of the bank that it was desired to begin business January 1, 1893, and urged as a reason for discounting this and other notes standing for stock that 'we would have a large account in the bank, and would continue always to have a large balance for the necessities of the business, and that the stock would be taken up, and the notes would be paid. ' It may therefore be stated that there was evidence tending to show that the bank knew that at least to the extent of $60,000 the capital stock of the bank had not been paid in when the certificate of December 31, 1892, was made, and that to this extent, at least, the statement in the certificate was misleading and deceptive, inasmuch as to that extent the deposit did not represent capital stock or surplus paid in, but arose from discounted paper upon which the company was liable. In January, 1893, Mr. Hindman began negotiations with the insurance company looking to securing the general agency for California, his dealings being chiefly with a. W. Hart, the company's general manager, and Mr. C. B. Sullivan, one of the defendants, who was actively engaged as a member of its executive committee. He testified that these gentlemen pressed upon him the necessity of becoming a shareholder, as it was the policy of the company to have its important agents interested in that way; and that in answer to his inquiries they represented that the entire capital had been paid in at a premium of 25 per cent.; that some subscribers had not taken their stock, but that such stock had been taken by other of the promoters, who had therefore acquired more stock than they wished; and that he could have 80 shares of stock so taken. He says that he was referred to the defendant bank as the company's depository for information as to the capital of the company. He further testified that he did call at the bank, and was informed by its president that the stock was good, and that the bank had made a statement to the insurance commissioner showing that its entire capital had been paid in, and was on deposit, and that such a statement would not have been made unless true. He further testifies that he subsequently visited the state insurance commissioner, and asked to see the certificate of the bank, and was shown same; and that, in reliance upon the truth of that certificate, and of like statements made by defendant Sullivan and others, he agreed to take and did take and pay for 80 shares in the capital of the company, paying therefor, on February 6, 1893, the sum of $10,000. The stock delivered to him was part of the stock attached as collateral to the note of A. W. Hart, above referred to, which shares purported to have been originally issued to the defendant C. B. Sullivan. In about one year the company failed. Its assets were insufficient to pay its debts. The shareholders will receive nothing. Mr. Hindman did not discover the facts stated in respect to the shortage in capital until after the failure of the company, and still holds his shares.

W. W. Thum, for plaintiff in error.

Alex. P. Humphrey, for defendants in error.

Before LURTON, DAY, and SEVERENS, Circuit Judges.

LURTON Circuit Judge, having made the foregoing statement of the case, .

The plaintiff in error has presented no less than 182 assignments of error, an unnecessarily prodigious number. No less than 41 of these are errors assigned upon the charge of the court. These are all based upon 8 exceptions taken to the charge. Objection is made that these exceptions are too general; that each is an exception covering several distinct propositions; and that, if any proposition be good, the whole exception must fail. Johnson v. Garber, 19 C.C.A. 556, 73 F. 523. An exception to a charge should be taken before the jury retire. It should be sufficiently definite to call the judge's attention to the particular matter objected to, in order that he may have an opportunity to correct it. Neither should an exception cover two distinct propositions, for such an exception is insufficient if either one should prove correct. Railroad Co. v. Jurey, 111 U.S. 596, 4 Sup.Ct. 566, 28 L.Ed. 527; Bogk v. Gassert, 149 U.S. 25, 13 Sup.Ct. 738, 37 L.Ed. 631; Holloway v. Dunham, 170 U.S. 619, 18 Sup.Ct. 784, 42 L.Ed. 1165; Felton v. Newport, 34 C.C.A. 470, 92 F. 470. This objection must be regarded as fatal to most of the executions taken to the charge as delivered, though there is one objection which may fairly be regarded as sufficiently definite to base assignments of error upon. That exception is in these words: 'We desire to also except to the court's measure of damages in this case. ' What the court has said on this subject was this:

'If the jury should conclude that the plaintiff is entitled to recover anything, then the measure of the plaintiff's damages would be the difference between the value of the eighty shares of stock on the 31st day of December, 1892, and its value of February 6, 1893, when the plaintiff bought it.

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