Larsen v. Utah Loan & Trust Co.

• Citation: 65 P. 208,23 Utah 449
• Parties: ANDERS LARSEN v. UTAH LOAN & TRUST CO
• Decision Date: 24 April 1901
• Court: Supreme Court of Utah

65 P. 208

23 Utah 449

ANDERS LARSEN v. UTAH LOAN & TRUST CO

Supreme Court of Utah

April 24, 1901

Appeal from District Court, Weber county.--Hon. Charles H. Hart Judge.

Action by Anders Larsen against the Utah Loan & Trust Company for fraud in loaning plaintiff's money. From a judgment in favor of the defendant, plaintiff appeals.

The plaintiff complains, alleging, in substance, that on the twenty-seventh day of April, 1894, he, having a large amount of money, made an agreement with the defendant bank that it should loan the same, taking good inside real-estate security therefor, within the business portion of Ogden City, Utah, at thirty per cent of the value thereof, with ten per cent interest, and collect the interest and principal for the plaintiff, and charge him one per cent on the capital loaned and five per cent from the interest so collected, as compensation for its services, and that the defendant should use due diligence, care, and caution to prevent any loss to plaintiff, and that in consideration thereof plaintiff's money was left with said bank; that on the twenty-seventh day of April, 1894, defendant carelessly, negligently, and fraudulently loaned $ 700 of the plaintiff's money so deposited to L. C. Henderson and H. H. Henderson on their promissory note, maturing April 27, 1896, without taking any security whatever for the payment of the note, defendant at the time well knowing that each and both of said makers of said note were wholly insolvent, and that said note was worthless; that no interest or principal has ever been collected on said note, and that the same was lost to the plaintiff, to his damage, etc.; that plaintiff did not discover the fraud, negligence, and carelessness of the defendant until March 1, 1898. As a second cause of action plaintiff alleges that in pursuance of the same agreement the defendant took of the money belonging to plaintiff, so in said defendant's hands, $ 800, and carelessly negligently, and fraudulently, in violation of the rights of the plaintiff, and in disregard of the agreement, loaned the same to one William Russell, on or about the first day of May, 1895, without taking any real estate security whatever therefor, and without taking any security except one hundred shares of the capital stock of the South Ogden Land and Building Company, which was wholly worthless, and that said Russell was then and there, and since has been, insolvent and that by reason of the negligence, carelessness, and fraudulent conduct of the defendant aforesaid, plaintiff has lost said $ 800 and interest thereon; that said plaintiff did not discover the fraud, carelessness, and negligence of the defendant herein until March, 1898. For a third cause of action, plaintiff alleges, in substance, the same agreement as aforesaid, and that on the first day of April, 1894, the defendant loaned $ 12,000 to L. W. Shurtliff, taking therefor eight promissory notes payable to defendant, due January 1, 1896; that subsequent to said loan, and about the twelfth day of July, 1894, plaintiff having on deposit in said defendant bank $ 3,000, said defendant, without plaintiff's knowledge or consent, and in violation of his rights, took and appropriated said $ 3,000 of plaintiff's money so deposited with it, and in lieu thereof fraudulently pretended to give said plaintiff two of the eight promissory notes so given to the defendant by said Shurtliff, aggregating $ 3,000, said sum being secured by a trust deed, which trust deed also secured the further payment of $ 9,000 represented by the other notes so held by the defendant; that by the terms of the agreement plaintiff left said money with said bank to be loaned as aforesaid, in said first count set forth, and defendant was to collect the principal and interest thereon, and to account to the plaintiff therefor, without any loss whatever to the plaintiff, and to use due diligence and care in the transaction of the business; that said defendant did not use due care or diligence in loaning out said $ 3,000, or any other amount, but, on the contrary, not regarding its duty to plaintiff in that behalf, carelessly, negligently, and fraudulently, and without regard to the rights of the plaintiff, represented to him that it had loaned said sum to Mr. Shurtliff, who was the vice-president and a director of the defendant corporation, and that it had taken as security for the said $ 3,000 a trust deed on good real estate to secure its payment, whereas, in truth and in fact, as defendant well knew, it had not loaned $ 3,000 of plaintiff's money to said Shurtliff, but, on the contrary, had loaned $ 12,000 of its own money to Shurtliff, and had taken a trust deed to secure its payment to itself, which security was wholly inadequate to secure the payment of said notes, said bank knowing that the said Shurtliff was then and there wholly insolvent and unable to pay his obligations; that on March 1, 1897, in fraud of plaintiff's rights, defendant indorsed two of said notes, amounting to $ 3,000, to plaintiff, without recourse, and, without the knowledge or consent of the plaintiff, took $ 3,000 of plaintiff's money and passed it to the credit of the defendant, by reason of which fraud, negligence, and carelessness the plaintiff has lost said $ 3,000 and interest; that until March 1, 1898, plaintiff did not know and was not informed that said real estate was given to secure $ 9,000 in notes held by the defendant, in addition to said $ 3,000 so indorsed to the plaintiff; that said notes and said money all the time remained in the possession of the defendant, and are still in its possession; that plaintiff is a Scandinavian by birth, and can not understand, or read, write, or speak, the English language, except in an imperfect manner, and was incapable of looking after and taking care of his own business, and therefore committed the same to the defendant, that, because of the negligence aforesaid of the defendant, he has suffered and claims $ 4,500 damages; that plaintiff did not discover the fraud, negligence, and carelessness of the defendant as aforesaid until about March 1, 1898. The answer admits loaning the money under authority from plaintiff, denies the material allegations of the complaint, and sets up the statute of limitations, and a release from all liability in the premises, signed by the defendant.

The plaintiff's testimony tends to show that on the twenty-seventh day of April, 1894, the defendant bank held a note against H. H. Henderson for about $ 800, and had been carrying said loan since March, 1892; that on the fourth day of May, 1894, the bank charged the plaintiff on its books with $ 700, and cancelled the Henderson note, transferring the said loan from itself to the plaintiff, but took a new note to the plaintiff for the same debt; that the note made in favor of the plaintiff is signed by H. H. Henderson and L C. Henderson, and bears date April 27, 1894. Said note was in the handwriting of Mr. H. H. Rolapp, cashier of the bank. It was conceded that Mr. H. H. Henderson was insolvent at that time. The note could not be collected. It was not secured by mortgage on any real estate. Proof was also given tending to show a contract by the defendant to loan plaintiff's money upon inside real estate in Ogden City, secured by mortgage, as charged in the complaint. Testimony was also offered by the plaintiff tending to show that the bank loaned Russell $ 800 of plaintiff's money May 1, 1895, taking ten shares of the capital stock of the South Ogden Land and Building Company as security, and twenty-one shares of Barton stock. The note was due in one year, but no real estate was taken to secure the same. This note was also uncollectible, and remained with the bank, with other notes, in a pouch marked "Larsen," in the bank vaults. It also appears from the testimony that Mr. Shurtliff was vice-president of the defendant bank from the time of its organization in 1889 to 1896, and was indebted to the bank, and borrowed money from it with which to pay for his stock. In June, 1894, he was indebted to the bank in the sum of $ 13,396, and on that date gave the bank eight notes for $ 12,000 of such indebtedness, secured on real estate by a trust deed, but did not include his residence in such security. The bank having use for money on July 12, 1894, transferred to the plaintiff, through Mr. Rolapp, its cashier, two of the $ 12,000 Shurtliff notes, which aggregated $ 3,000. This transfer was made by charging plaintiff in his account $ 3,000, and placing the two notes in question in plaintiff's pouch in the bank, and the bank indorsed the note without recourse. These notes were marked in pencil on the back "Larsen." On the following month a statement was sent to the plaintiff stating the loan to Shurtliff of $ 3,000, but without mentioning any security. Plaintiff did not know that the trust deed secured $ 9,000 additional indebtedness to the $ 3,000. Mr. Rolapp says that in making loans for the plaintiff he transferred notes held by the bank without plaintiff's knowledge at that particular date, and without advising with him about it; that notes were frequently taken from one loan customer, and transferred to another loan customer, by changing the account of the customer. Sometimes the bank would want to give Larsen $ 5,000, when he only had $ 3,000 in the bank, and it would then take some paper from him and transfer it to another loan customer. These transfers were made by simply rubbing off the pencil name written on the back of the note, and substituting another name in its place in pencil, and making an entry in the books of the loan customer's account. The trust deed was not placed in the plaintiff's pouch. The Shurtliff trust deed was foreclosed by Mr. West, Mr. Rolapp's successor...