Krieg v. Palmer Nat. Bank

• Decision Date: 30 June 1911
• Docket Number: No. 7,133.,7,133.
• Parties: KRIEG et al. v. PALMER NAT. BANK.
• Court: Indiana Appellate Court

51 Ind.App. 34

95 N.E. 613

KRIEG et al.

v.PALMER NAT. BANK.

No. 7,133.¹

Appellate Court of Indiana, Division No. 1.

June 30, 1911.

Appeal from Circuit Court, Wabash County; A. H. Plummer, Judge.

Action by the Palmer National Bank against George L. Krieg and others. Judgment for plaintiff, and defendants appeal. Reversed, with instructions.

Lesh & Lesh and Shively & Switzer, for appellants. Watkins & Butler and E. Winters, for appellee.

FELT, P. J.

This suit was originally brought by the Palmer National Bank of Danville, Ill., against the appellant, Huntington County Bank, of Huntington, Ind., to recover upon a certificate of deposit which reads as follows: “$4250. Huntington County Bank. Huntington, Indiana, March 14, 1907. George L. Krieg has deposited in this Bank forty two hundred and fifty dollars payable to the order of himself in current funds on the return of this certificate properly endorsed. Roy Gibler, Cashier. Not subject to check. No. 77179.” Said instrument was duly indorsed by the payee to one James W. Price, who, in turn, indorsed the same to the appellee. Upon application of the Huntington County Bank and upon his own petition, appellant Krieg was made a party defendant. The Huntington Bank thereafter filed answer showing that by authority of the court it paid to the clerk, for the use and benefit of the party lawfully entitled thereto, the sum of $4,381, the amount of the certificate and interest to the date of such payment. The venue was changed from the Huntington to the Wabash circuit court, where, after the issues were formed, the case was tried and judgment rendered against appellant Krieg and the Huntington County Bank for $4,560.50, from which judgment this appeal is taken.

Appellant Krieg has separately assigned as error: (1) The sustaining of the demurrer of appellee to the amended second paragraph of his answer to the complaint; (2) overruling of his demurrer to the third paragraph of the reply of appellee to the third and fourth paragraphs of the separate answer of appellant Krieg; (3) sustaining the demurrer of appellee to the second paragraph of Krieg's reply to the fourth paragraph of appellee's answer to the cross-complaint of appellant Krieg; (4) overruling the motion for a new trial. The appellant Huntington County Bank, by separate assignment of error, presents the same questions, and there is also a joint assignment of the same errors. The amended second paragraph of the answer of appellant Krieg avers, in substance, that the certificate of deposit sued upon was obtained by his assignee, Price, by fraud; that said Price claimed to be the patentee of a “farm derrick,” and he and his associates made certain false statements and fraudulent representations to appellant in regard to the utility and value of said patent (the details of which appear in the answer), and also made bogus sales of territory and rights in his presence, all of which he believed to be true and genuine, and, relying thereon and wholly by reason thereof, he purchased an interest in said patent and executed his note therefor to said Price, in the sum of $4,300; that said Price had not complied with the law by filing with the clerk of the Huntington circuit court a copy of said letters patent; that said sale was made and said note executed in Huntington county, Ind.; that said Price did not show upon said note over appellant's signature that it was given for a patent right; that thereafter and on the same day the note was executed at the solicitation of said Price, and while still in ignorance of the fraud that had been practiced upon him, and believing the false representations made to him to be true and said bogus sales to be genuine, he indorsed to said Price said certificate of deposit for $4,250 in exchange for his said note; that said patented device had no value whatever and no element of utility, and appellant Krieg received no consideration whatever for said certificate of deposit; that the same was executed and delivered to said Price in Indiana, and is not negotiable under the laws of Indiana; that the indorsement and transfer of said certificate by Price to appellee was made in Illinois, and is governed by the laws of that state; that by the laws of Illinois a person who takes a nonnegotiable instrument by indorsement in blank and delivery, as in this case, does not acquire a legal, but only an equitable, title, subject to the rights and equities of all prior holders thereof.

The third paragraph of appellant's answer to the complaint avers that there was no consideration for the successive transfers of said certificate and appellee accepted same with knowledge thereof. The fourth paragraph of his answer charges that appellant Krieg was induced to purchase an interest in said letters patent by the fraud of Price and his associates, and gave his note therefor in the sum of $4,300, and, before discovering the fraud, took up said note by giving to said Price the certificate in suit; that appellee took said certificate with knowledge of said fraud; that, after ascertaining said fraud, appellant tendered a return of the instrument conveying to him an interest in said letters patent, and demanded from said Price said certificate of deposit, but Price refused to accept the same or return to him said certificate of deposit. The substance of the third paragraph of the reply of appellee to the third and fourth paragraphs of answer of appellant Krieg is that appellee is a corporation organized as a national bank and doing business under the laws of Illinois; that it trades in and buys notes and commercial paper as any national bank; that it purchased the certificate in question before maturity from James W. Price in the due course of business for $4,250 in money, without any notice or knowledge that the consideration thereof had failed, or that it was procured by fraud. Appellant's cross-complaint set up the alleged fraud by which Price obtained the certificate of deposit, and alleged a total failure of consideration. The fourth paragraph of appellee's answer to the cross-complaint of appellant alleged substantially the same facts that are averred in its third paragraph of reply to the third and fourth paragraphs of appellant's answer. The second paragraph of appellant's reply to the fourth paragraph of appellee's answer to the cross-complaint of Krieg alleges, in substance, that the certificate sued upon was executed in Indiana, is payable in said state, and its negotiability is governed by the laws of Indiana; that the indorsement of Price and the delivery by him of said certificate to appellee was in the state of Illinois; that by the laws of that state appellee obtained only an equitable title to said certificate, subject to the rights and equities of all prior holders thereof.

[1] The assignments of error raise the question of the negotiability of the certificate of deposit sued upon. Certificates of deposit in the usual form substantially like the one sued upon have been held in this state to be the promissory notes of the bank issuing them, and, as such, governed by the same rules as to negotiability that apply to promissory notes. Drake v. Markle, 21 Ind. 433, 83 Am. Dec. 358;Gregg et al. v. Union County Nat. Bank, 87 Ind. 238;First Nat. Bank v. Stapf, 165 Ind. 162, 74 N. E. 987, 112 Am. St. Rep. 214;Long, Ex'x v. Strauss, 107 Ind. 94, 104, 6 N. E. 123, 7 N. E. 763, 57 Am. Rep. 87.

The further question arises whether the certificate of deposit is negotiable under the law merchant or only negotiable by virtue of our statute. Upon this question, outside our own state, there is a great diversity of opinion; but we think it is settled in Indiana that a certificate of deposit payable “in current funds” is not negotiable under the law merchant as an inland bill of exchange, but is negotiable by virtue of our statute. Section 9071, Burns' Ann. St. 1908; Nat. State Bank of La Fayette v. Ringel, 51 Ind. 393;Conwell v. Pumphrey, 9 Ind. 135, 68 Am. Dec. 611; Drake v. Markle, supra; First Nat. Bank v. Stapf, supra. In 1 Daniel, Negotiable Inst. (5th Ed. 1903) §§ 55, 56, numerous decisions are cited upon both sides of the question and the...