Marion Trust Co. v. Crescent Loan And Investment Co.

• Decision Date: 23 October 1901
• Docket Number: 3,594
• Citation: 61 N.E. 688,27 Ind.App. 451
• Parties: MARION TRUST COMPANY, RECEIVER, v. CRESCENT LOAN AND INVESTMENT COMPANY
• Court: Indiana Appellate Court

61 N.E. 688

27 Ind.App. 451

MARION TRUST COMPANY, RECEIVER, v. CRESCENT LOAN AND INVESTMENT COMPANY

No. 3,594

Court of Appeals of Indiana

October 23, 1901

From Marion Circuit Court; H. C. Allen, Judge.

Action by the Crescent Loan and Investment Company against the Marion Trust Company receiver of the Washington Savings and Loan Association on a promissory note. From a judgment for plaintiff, defendant appeals.

Affirmed.

J. W Noel and F. J. Lahr, for appellant.

W. E Hackedorn and G. C. Calvert, for appellee.

OPINION

COMSTOCK, J.

The appellant, The Marion Trust Company, is receiver of the Washington Savings and Loan Association, an insolvent building and loan association, and is engaged in winding up its affairs. The appellee, another building and loan association, filed its intervening petition seeking to recover on two promissory notes given by the officers of the Washington Savings and Loan Association to appellee, payment of which was refused by the receiver.

The petition of appellee was in two paragraphs, in the first of which the petitioner seeks to recover upon a note of $ 1,000, with interest and attorneys' fees, payable to appellee, signed "The Washington Savings & Loan Assn., George C. Calvert, President. John W. Hall, Secretary." In the second paragraph the petitioner seeks to recover upon a note for $ 200, with interest and attorneys' fees, payable to the appellee, signed "Washington Savings and Loan Assn., by H. F. Hackedorn, Vice President" and attested by "F. M. Warner, Secretary." The petitioners alleged further that said notes are not paid, that payment is refused by the receiver, and pray the court to have their claims allowed, with interest and attorneys' fees, as preferred claims against the assets of the Washington Savings and Loan Association in the hands of the receiver. The receiver, the appellant, demurred to the petition of appellee on the ground that said petition did not state facts sufficient to constitute a cause of action, which demurrer was overruled, and exceptions taken.

The appellant answered the petition in three paragraphs, in each of which paragraphs there were general allegations setting out that the Washington Savings and Loan Association was a building and loan association, and that the Marion Trust Company was the duly qualified and acting receiver of said association, and that the Crescent Loan and Investment Company was a building and loan association, the first paragraph proceeding as follows: "That said note alleged and set out in the first paragraph of said petition was executed by George C. Calvert and John W. Hall, in the name of the Washington Savings and Loan Association; that said note was wrongfully and illegally and fraudulently executed to secure money to pay withdrawals in full to certain stockholders; that at said time George C. Calvert was president of said Washington Savings and Loan Association and John W. Hall was secretary thereof; that said John W. Hall was also at the same time secretary of the Crescent Loan and Investment Company and that the said John W. Hall, acting for said Washington Savings and Loan Association, borrowed $ 1,000 of the same John W. Hall acting for the Crescent Loan and Investment Company; that on said date the Washington Savings and Loan Association was largely insolvent; its insolvency amounting to nearly fifty per cent., and that at said time there was not sufficient money in the treasury to pay certain shareholders who were demanding their withdrawals; that on said date one Samuel W. Miles was demanding the withdrawal of certificate number 635, whose face value was $ 613, and one A. T. Stewart and Rhoda Stewart were demanding withdrawals on stock, the face value of which was $ 502.67; that at said time Samuel W. Miles had not been a member of said Washington Savings and Loan Association for sufficient length of time, as required by the by-laws, to have elapsed in order to mature his withdrawal, and said Samuel W. Miles had not given notice of withdrawal as provided by the by-laws; that said A. T. Stewart and Mrs. Rhoda Stewart had, after filing their notice of withdrawal, regularly accepted dividends from time to time thereafter, and had not refiled their notice to withdraw after accepting said dividends, and that there were many stockholders who had filed their notice of withdrawal prior to the notice of withdrawal of said A. T. Stewart and Mrs. Rhoda Stewart and who had not been paid the withdrawal value of their stock and who were demanding the same. And the said money was so paid to the said Samuel W. Miles and to A. T. Stewart and Rhoda Stewart out of turn. That said stock was paid in full in the face value thereof, and was not discounted on account of the insolvency of the association, and that all of said $ 1,000 was borrowed of said Crescent Loan and Investment Company for the purpose of paying said withdrawals of said Miles and said A. T. Stewart and Rhoda Stewart; that at the time said money was borrowed in order to pay said withdrawals there was not sufficient money in the treasury to pay said withdrawals, and that there was no money available at any future time for the payment thereof, and that the officers of said association who executed said note and the officers of the Crescent Loan and Investment Company who made said Loan and accepted said note, all knew of the condition of said Washington Savings and Loan Association and knew that said withdrawals were to be paid and were paid with said money so loaned, and were paid out of turn, and knew the facts and circumstances herein alleged; that said money was borrowed wrongfully, fraudulently, and illegally for the purpose of realizing money with which to permit certain shareholders to withdraw from said association without loss, whereas on distribution of the assets said shareholders will suffer great loss in the depreciation of their stock. That said loan and the execution of said note were not authorized by the board of directors of said Washington Savings and Loan Association, and the officers of said association made said loan and executed said note without authority."

The second paragraph is similar to the first paragraph, but alleges that Hackedorn was an officer of both associations at the time the loan was made and stood in the same relation to both associations and to the $ 200 loan that Hall held to the associations and to the first loan of $ 1,000, and that the loan was made for a similar purpose.

In the third paragraph of answer, which was in answer to appellee's first paragraph, the allegations were similar to the allegations in the first paragraph of answer, the only difference being in the purpose for which the money was loaned, in the third paragraph it being set out that the money was borrowed to take up a void note held by George C. Calvert, said Calvert having advanced money to the association to pay the withdrawal of one Miles, when Miles was not entitled to the withdrawal of his stock, for the reason that the association was insolvent and Miles had given no notice.

The petitioner demurred separately to each paragraph of answer, and the demurrers were sustained. The appellant refused to plead further. Whereupon the court gave judgment against the receiver for the sum of $ 1,386.66 and $ 106.02 attorneys' fees, and costs, which judgment was made a preferred claim against the assets of the association. The specification of the assignment of errors discussed challenge the action of the court in sustaining the demurrers to appellant's first, second, and third paragraphs of answer.

A building and loan association may borrow money and give its promissory note therefor. North Hudson, etc., Assn v. First Nat....