Marion Trust Co. v. Blish

• Decision Date: 27 November 1906
• Docket Number: No. 5,644.,5,644.
• Citation: 79 N.E. 415
• Parties: MARION TRUST CO. v. BLISH.
• Court: Indiana Appellate Court

79 N.E. 415

MARION TRUST CO.

v.BLISH.

No. 5,644.¹

Appellate Court of Indiana, Division No. 2.

Nov. 27, 1906.

Appeal from Circuit Court, Jackson County; Thos. B. Buskirk, Judge.

Action by the Marion Trust Company, receiver of the Vernon Insurance & Trust Company, against Tipton S. Blish. From a judgment overruling plaintiff's demurrers to defendant's affirmative answer and counterclaim, and sustaining defendant's demurrer to plaintiff's reply and affirmative answer to the counterclaim, plaintiff appeals. Reversed.

James W. Noel, for appellant. Baker & Daniels, for appellee.

COMSTOCK, J.

The Marion Trust Company, as receiver of the Vernon Insurance & Trust Company, brought this suit against appellee upon a stock note executed by him to said insurance and trust company, a corporation, organized under special charter from the state of Indiana, and engaged in the business of fire insurance. The issues are presented by the stock note sued upon in the complaint, an answer alleging fraud and misrepresentation as to the condition of the corporation in securing the subscription and the execution of the note by appellee, and a reply alleging that the rights of creditors had intervened after the subscription by appellee and upon the faith thereof. The errors relied upon are the decisions of the court in overruling the demurrers of the plaintiff to the defendant's affirmative answer and counterclaim, and in sustaining the demurrers of defendant to plaintiff's reply and affirmative answer to the counterclaim. The plaintiff excepted to the action of the court in sustaining the demurrer of the defendant to the plaintiff's reply and answer to the counterclaim, and stood on said reply and answer and upon the ruling of the court upon said demurrers, and refused to plead further, whereupon the court gave judgment against the plaintiff, the receiver, on its complaint, and gave judgment against the plaintiff on the counterclaim for $100 and costs, from which judgment the plaintiff appeals.

A summary of the facts presented by the pleadings is as follows: The complaint alleges: The existence and organization of the corporation, its engagement in the business of fire insurance, and that on December 28, 1901, the plaintiff was appointed receiver of said corporation. That the receiver qualified and was duly authorized to prosecute a suit. That on December 29, 1898, the defendant subscribed to the capital stock of said corporation in the amount of 40 shares at $50 each, aggregating $2,000, and, at the time, executed his stock note to said corporation in the language following, to wit: “Indianapolis, Ind. Dec. 29, 1898. $2,000.00. No. Cert. 107. On or before the date hereinafter mentioned I promise to pay to the Vernon Insurance & Trust Company, at the office of said company, in Indianapolis, Indiana, the sum of two thousand dollars for balance of my subscription for 40 shares at $50.00 each of the capital stock of said Vernon Insurance & Trust Company, which said sum of $2,000.00 shall be payable in installments, as follows: $100.00 on or before the first day of January, 1899, and $60.00 on or before the first day of each three calendar months thereafter, until such payments, together with the dividends declared, shall amount to the full face value of this note. No installment herein specified shall bear interest before maturity. After maturity installments shall bear interest at 8 per cent. per annum until paid, value received, without relief from valuation or appraisement laws. This note is nonnegotiable. T. S. Blish.” The said corporation thereupon issued to the defendant a certificate of stock, representing 40 shares, at $50 each, of the capital stock thereof. That said note was held by the receiver, and was a portion of the assets of said corporation. That on the 5th day of January, 1899, the defendant paid on said stock note the sum of $100, and afterwards made no further payments. That the balance, to wit, $1,900, with interest, is long past due and unpaid, and that, notwithstanding the note provides for payment in installments; all of the same is now due for the benefit of creditors and said creditors have no assets to rely upon for the payment of their debts. That plaintiff has presented said note for payment and demanded the same but the same is unpaid. That the plaintiff was engaged in winding up the affairs of said corporation under order of court, and administering the assets thereof for the benefit of creditors, and that the policy claims of said corporation were much more than could be realized from the assets thereof if all the stock subscriptions and stock notes and all other assets could be converted into money.

In the first paragraph of answer, the defendant admits the allegations of the complaint to be true, and alleges that the note was given in payment of a subscription to the capital stock of said corporation, and for no other consideration, and charges that the execution of the note was procured by false, fraudulent representations, in that the agent and representative of the corporation falsely and fraudulently represented and stated to the defendant that said corporation was a solvent and properous one; that it then was, and for two years last past had been, earning large profits and paying dividends on its capital stock of 8 per cent. per annum from earnings and profits, and that its capital stock was of great value and a profitable investment; that the defendant relied upon said representations, and was thereby, and not otherwise, induced to execute said note; that said statements and representations, and each of them, were wholly false; that the capital stock was wholly worthless, and that an investment therein was a total loss, and that said agent knew said representations to be untrue.

For a second paragraph of answer the defendant filed a general denial. The allegations in the counterclaim are identical with the allegations of the first paragraph of answer, alleging, in addition thereto, that the defendant had paid $100 on said note and that since the defendant learned of the falsity of such statements, he demanded the repayment of his money; that payment thereof was refused, and praying for judgment against the plaintiff for $150, payable out of the assets of said trust.

The plaintiff's second paragraph of reply to the answer and plaintiff's second paragraph of answer to the counterclaim, were almost identical as to their averments, and allege that, on or about the 29th day of December, 1898, the time of defendant's subscription and the execution of said stock note, the Vernon Insurance & Trust Company was engaged in the business of fire insurance, and in the course of said business accepted risks and executed its policies, insuring property against loss by fire. Said answer alleged further that, by reason of his said stock subscription and execution of said note, the defendant became a stockholder in said corporation, and that the stock note represented the liability of said defendant upon his stock subscription, and that no amount thereof had ever been paid, excepting the sum of $100; that after the said subscription and the execution of said stock note, said corporation continued the fire insurance business, and wrote many hundreds of policies, and incurred large risks and suffered fire losses in large amounts, and after the execution of said stock note, and prior to the appointment of a receiver, the liabilities thereafter incurred on account of fire losses, amounted to $46,000, for which valid claims had been filed against the assets of said corporation, and that upon the appointment of a receiver the valid claims for unearned premiums under policies written during said period, had been filed in the amount of over $35,000, which claims the receiver had found to be valid and enforceable. The reply and answer further alleged that said claims of creditors in the amount of over $81,000 were unpaid, were charged against the assets of said corporation, and that the owners of said claims became creditors of said corporation after the subscription of the defendant to its capital stock, and upon the faith of said subscription; that the entire assets of said corporation, including the stock subscription of defendant, and all other unpaid stock subscriptions were not sufficient to pay the valid claims of said creditors contracted after the subscription of the defendant and the execution of...