Morrison v. Bank Of Mount Hope

• Decision Date: 09 June 1942
• Docket Number: (CC 648)
• Citation: 124 W.Va. 478
• Court: West Virginia Supreme Court
• Parties: E. L. Morrison, Receiver, etc. v. Bank of Mount Hope

124 W.Va. 478

E. L. Morrison, Receiver, etc.

v.Bank of Mount Hope

(CC 648)

Supreme Court of Appeals of West Virginia.

Submitted April 28, 1942.

Decided June 9, 1942.

1. Corporations

A corporation is liable for the fraudulent acts of its officer made within the apparent scope of his authority, though the officer is acting for his own benefit and the corporation does not receive the benefit therefrom. A fortiori this rule applies to a corporation engaged in the general banking business.

2. Fraud

Where, in an action for fraud and deceit, plaintiff relies upon a recorded release of a lien of a deed of trust on real property, given to secure payment of a negotiable note payable to a third party, which release was executed prior to enactment of Code, 38-12-4, by a bank, as the holder and owner of the note, when such is not the case, and, upon inquiry made by another bank investigating the title to such real estate, the facts stated in the release are verified by an official of the releasing bank acting within the apparent scope of his authority, no further inquiry is required in the absence of circumstances reasonably indicating the necessity therefor.

3. Judgment

"The estoppel of a judgment does not extend to a matter not directly in issue, although it may have arisen in the case collaterally and have been judicially passed on." Pt. 4, Syl., State ex rel. Lambert v. Board of Canvassers, 107 W. Va. 109, 147 S. E. 484.

Certified from Circuit Court, Fayette County.

Action of trespass on the case by E. L. Morrison, receiver of the Bank of Pax, against the Bank of Mount Hope for fraud and deceit. A demurrer to the declaration was sustained, and the trial court certified its rulings to the Supreme Court of Appeals.

Rulings reversed.

William L. Lee and George Love, for plaintiff. Mahan, Bacon & White and File, Scherer & File, for respondent.

Riley, Judge:

E. L. Morrison, receiver of the Bank of Pax, sought recovery in the amount of $2,721.73 against the Bank of Mt. Hope for fraud and deceit in an action of trespass on the case instituted in the Circuit Court of Fayette County. The trial court sustained a demurrer to plaintiff's declaration, and its rulings were certified here upon the court's own motion.

The following are the pertinent allegations of the declaration, which, for convenience, will be stated in narrative form:

On July 1, 1926, H. F. West and wife, then owners of two lots in the town of Pax, Fayette County, West Virginia, executed a deed of trust, dated July 14, 1926, and recorded in the county clerk's office of Fayette County on July 31, 1926, conveying said lots to C. E. Mahan, Jr., trustee, to secure two negotiable promissory notes, one in the sum of $1500.00, made by West and payable to defendant's order, and the other for $2250.00, made by West and wife, payable to the order of L. S. Tully at the Bank of Mt. Hope. Subsequent thereto two dwelling houses, located on the lots, covered by insurance, were destroyed by fire. West, after collecting the proceeds under the insurance policy, paid both notes to Tully, "the executive vicepresident, director and agent of said bank, its active manager, in control and active management of its affairs, and being the sole and exclusive representative of said bank in charge of said transaction for it, and thereunto duly authorized, and who, as such agent of such bank accepted from said West payment in full of both of said notes; and, thereupon the bank, by Tully, its vice-president, authorized to execute release deeds for it and in its behalf, who had exercised such authority over a long period of time, executed a release of the deed of trust on both lots."

The release recites that the defendant is the holder and owner of the notes secured by the deed of trust, and the signature of Tully, "vice-president of said Bank of Mt. Hope, and its common seal are by the order of its board of directors hereunto set." Attached thereto is a notary's certificate to the effect that Tully, being duly sworn, deposed that he is defendant's vice-president, authorized by defendant to execute and acknowledge deeds and other writings of said defendant, and that the writing was signed and sealed by him "in behalf of said corporation by its authority duly given, and the said L. S. Tully acknowledged the said writing to be the act and deed of said corporation." Tully delivered the release to West, who caused it to be recorded in the county clerk's office.

About November, 1930, West applied to the Bank of Pax for a loan of $2500.00 for the purpose of again erecting a dwelling house on one of the lots (Lot No. 3), and proposed to give a deed of trust on the lot and the building to be erected thereon as security. Before passing on the proposed loan, one Legg, cashier of the Bank of Pax, examined the records in the county clerk's office to ascertain whether there were any liens or incumbrances against Lot No. 3; found the Mahan deed of trust marked "released" on the margin of the page of the record book, and the recorded release. As a matter of precaution, he saw Tully at his office in the defendant bank, explained to him that the Bank of Pax was considering the loan, inquired whether Lot No. 3 was free of the deed of trust lien, and was advised that it was. Legg, having no information to question the validity of the release deed or the recitals therein or the information received from Tully, and relying upon the release and the information, made a loan on behalf of the Bank of Pax of $2500.00 to West, represented by a note from West and wife secured by a deed of trust on Lot No. 3.

On September 3, 1931, the Bank of Pax was closed by the Commissioner of Banking, and plaintiff, Morrison, was appointed receiver thereof. In order to collect the $2500.00. note, plaintiff caused the lot and dwelling house to be offered for sale under the deed of trust, and, no adequate bid having been received, purchased the same, and on March 25, 1932, the trustee executed a deed conveying the property to said receiver.

On February 2, 1933, R. E. Kelly, as conservator of the Oak Hill National Bank, instituted a suit in chancery in the Circuit Court of Fayette County, alleging that the Oak Hill National Bank was the owner and holder of a note originally in the amount of $2250.00, being a renewal of the original note described in the Mahan deed of trust, which note is alleged to have been assigned by Tully to the Oak Hill National Bank as collateral security for the former's obligations, and praying that the release be set aside in so far as it applied to said note; that the deed of trust from West and wife to secure the Bank of Pax be set aside and cancelled, and the lot with improvements be sold to pay the said debt of the Oak Hill National Bank. The Circuit Court of Fayette County entered a decree in that suit substantially granting the relief prayed for, setting aside the release, the deed of trust securing the Bank of Pax, the deed from Aliff, trustee, to the receiver, in so far as the Oak Hill National Bank's debt was concerned, and decreeing the property be sold to satisfy the claim of said bank. An appeal was taken from this decree to this Court, which affirmed the trial chancellor.. The recitals contained in the deed of release executed in the name of the Bank of Mt. Hope by Tully, the declaration further asserts, were false and fraudulent, made and intended to defraud and deceive the Bank of Pax, and that in reliance thereon, said bank made the loan to West, and sustained loss and damage thereby; and further, that Tully, at the time the release was executed, and the representations made to Legg, was the executive vicepresident of the Bank of Mt. Hope, who...