Schemmel v. Hill
| Decision Date | 16 January 1930 |
| Docket Number | 13,448 |
| Parties | SCHEMMEL v. HILL, RECEIVER |
| Court | Indiana Appellate Court |
Rehearing denied March 12, 1930. Transfer denied May 14 1930.
From Henry Circuit Court; J. R. Hinshaw, Judge.
Suit by the Atlas State Bank against Robert C. Schemmel to rescind a sale of real estate to the bank. From a judgment for plaintiff, the defendant appealed, and Roll L. Hill as receiver for the bank was substituted as appellee.
Affirmed.
F. S Caldwell and Eichhorn, Gordon & Edris, for appellant.
J. W. Macy and William O. Barnard, for appellee.
OPINION
This action was commenced by the Atlas State Bank of Union City against Robert C. Schemmel to rescind and set aside a deed from the defendant to the plaintiff and to recover the purchase price of $ 25,000 with interest paid the defendant therefor. From a judgment for plaintiff, the defendant appealed, and Roll L. Hill, having been thereafter appointed receiver for the bank, was, on his motion, substituted and made appellee herein, in place of the bank.
The complaint alleges: That, while the defendant was a director and vice-president of the bank, he induced it to purchase the real estate from him for $ 25,000, when he knew it was not worth more than $ 15,000; that the real estate so purchased was not necessary for the bank's business, was not purchased for any of the uses or purposes recognized by the statute, and was not worth the price paid; that the defendant, in selling the property to the bank and in accepting the $ 25,000 therefor, was not acting for the interest of the bank, but used his position as director to promote his own financial interest; and that the bank was insolvent, was in process of liquidation, and needed the $ 25,000 to pay its depositors and creditors.
A demurrer to the complaint was overruled, after which the defendant filed an answer in denial, ratification by the stockholders, and ratification and acquiescence by the directors.
The facts were found specially, and are, in substance, as follows: Appellee, a bank of discount and deposit, was organized under the laws of this state March 3, 1906; its place of business was Union City; on October 15, 1923, C. C. Fisher, Robert C. Schemmel, William W. McClure, Charles J. Gunckel and Thomas Dunn, Jr. were the sole and only members of the board of directors, Fisher being president of the board and Schemmel vice-president; Schemmel, on said day, was the owner of a building known as the "Fisher Building," located across the street from the bank building, and which he, a few days before, had purchased from Fisher; the directors, on that day, at a regular meeting, adopted a resolution authorizing the president and cashier of the bank to sign a contract for the purchase of said building from appellant, on or before March 1, 1924, for $ 25,000; all of said directors, including Schemmel, who was the defendant below and appellant herein, were present at said meeting and voted for the adoption of said resolution; at the next meeting of the board, held November 1, 1923, the board adopted a resolution authorizing the president and cashier to consummate a contract with appellant for the purchase of his building by accepting a warranty deed therefor from appellant and by delivering to him certain interest-bearing notes then owned by the bank, and which were of the market value of $ 25,000; appellant was present at each of said meetings and voted for each of said resolutions; he seconded the motion for the adoption of the resolution of November 1, and was in the director's room at each of said meetings when the resolutions were under consideration by the board; immediately after the meeting of November 1, Fisher and the cashier and appellant signed a contract for the purchase and sale of such building, and, on the next day, appellant, by warranty deed, conveyed the same to the bank; this deed was accepted by the bank, and, in payment therefor, appellant received from appellee the notes mentioned in the contract, of the value of $ 25,000, the proceeds of which, with seven per cent interest from November 2, 1923, appellant received and appropriated to his own use; said deed was not recorded until December 15, 1924; the bank has been in possession of said building, and has collected the rents therefrom and paid taxes, insurance and for certain repairs thereon, and holds the record title thereof; such real estate had not been mortgaged to the bank nor conveyed to it in satisfaction of any debt, and was not purchased by it to satisfy any judgment, decree or mortgage held by it; the building so purchased from appellant was not constructed, equipped or furnished for banking purposes, but, for many years, had been used for business rooms, offices and living apartments, and, at the time it was conveyed to the bank, was of the fair value of $ 16,500; the building then occupied by the bank was ample and commodious for its use, was furnished and equipped for a bank, and the bank had a written lease therefor at a rental of $ 60 a month, expiring in October, 1926, which was about seven months after the expiration of the bank's charter; several years prior to October 15, 1923, the bank had leased additional room which was a part of the same building and connected with its banking house, and had remodeled, altered and equipped the same for use as a part of its banking house, and was paying a rental of $ 18 a month therefor; the real estate purchased from appellant was not, and never has been, necessary for the bank's business; the capital stock of the bank, at the time of such purchase, was impaired, and the bank was insolvent, with a large amount of "frozen" assets, which were worth less than par; since the expiration of its charter, the bank has been engaged in winding up and liquidating its business, and the $ 25,000 so invested in the property purchased from appellant is necessary for use in winding up its business; Fisher, at the time of said sale, was indebted to the bank in the sum of $ 29,000, to appellant in the sum of $ 9,000, and to other persons in various amounts, and was then insolvent; his financial condition was such that he went to former Governor Goodrich for advice; a conference was held at the Goodrich home, at which time appellant was induced to purchase the building in question in order to avoid a financial crash which would have resulted in the closing of the bank; appellant and Goodrich agreed to and did purchase other property from Fisher, the proceeds from all such sales, including the sale of the building to appellant, were used for the purpose of raising money to pay Fisher's debts, aside from the debts he owed the bank; Fisher conveyed the balance of his property to appellant as trustee, for the protection of his debts to the bank; the Fisher building, so conveyed to the bank by appellant, was not a part of the trust assets; appellant, in payment for said building, paid Fisher $ 16,000, and canceled a debt of $ 9,000, which Fisher then owed appellant; Fisher applied the $ 16,000 to the payment of debts other than his debt to the bank; appellant, when he purchased the Fisher building, knew it was not worth in excess of $ 16,500, and a few days after he paid Fisher for the building, he gave Fisher $ 1,000 as a present, and, at the next meeting of the board of directors, held October 15, 1925, appellant offered the building to the bank for $ 25,000; appellant did not inform the other directors of the circumstances under which he acquired the building from Fisher; Fisher and appellant were the only members of the board of directors who then knew of the facts concerning the transaction, the facts relating thereto not being disclosed to or learned by the other members of the board, nor did any of the other members know or learn that appellant had made a present of $ 1,000 to Fisher; the purchase of the building by the bank was not for the best interest of the bank, and appellant did not sell the property to the bank for the purpose of furthering its interests; he made the sale to the bank without making a full and fair disclosure of the facts, and for the purpose of advancing his own interest; the board of directors did not change until May 23, 1924, when Gunckel resigned; Dunn and appellant resigned from the board January 9, 1925, and Fisher resigned September 4, 1925; on September 21, 1925, the new board of directors ordered an investigation of the purchase of such building, and, on November 11, 1925, placed the facts in the hands of the bank's attorney, with a view of rescinding the purchase, and, on February 1, 1926, by resolution, ordered the execution of a conveyance of said building to appellant, and ordered that such conveyance be tendered to appellant with a statement of the receipts and disbursements on account thereof, and a tender of the net amount in the hands of the bank on account of said building, and also ordered that a demand be made of appellant to restore the bank to its former position by delivering to it the securities received by appellant for said building, with interest, or the equivalent in cash, and, on February 8, 1926, by resolution, the then directors declared the purchase of the real estate from appellant ultra vires and without authority, and again ordered its officers to execute a deed therefor to appellant, to account to him for all rents and income received therefrom and to demand from him the repayment of the sum of $ 25,000; on February 27, 1926, a warranty deed properly executed by the bank was tendered to appellant, with an itemized statement of the receipts and disbursements on account of the building, with a tender of $ 2,000 in cash, that being the net income received by appell...
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