Shepard v. Meridian Nat. Bank

• Decision Date: 23 November 1897
• Citation: 149 Ind. 532,48 N.E. 346
• Court: Indiana Supreme Court
• Parties: SHEPARD v. MERIDIAN NAT. BANK et al.

149 Ind. 532

48 N.E. 346

SHEPARD

v.MERIDIAN NAT. BANK et al.¹

Supreme Court of Indiana.

Nov. 23, 1897.

Appeal from superior court, Marion county; P. W. Bartholomew, Judge.

Action by Silas M. Shepard, as trustee, etc., against Meridian National Bank, for an accounting and other relief. A demurrer to the complaint was sustained, and plaintiff appeals. Reversed.

Wm. A. Ketcham and Henry N. Spaan, for appellant. A. C. Harris and Frank Cutter, for appellees.

HOWARD, C. J.

It is shown in appellant's complaint that on November 12, 1886, John E. Sullivan entered upon the duties of the office of clerk of the Marion circuit court, succeeding Moses G. McLain, who had held that office for the four years ending on said day. Sullivan held the office until January 31, 1889, when he resigned, and the appellee John R. Wilson was appointed to succeed him, and was afterwards elected as his own successor. During the early period of Sullivan's incumbency of the office, his predecessor, McLain, paid to him moneys in custody of the clerk, belonging to insolvent and decedents' estates, and other trust funds, amounting to nearly $120,000; and Sullivan himself, during the time he held the office, received, in addition, about $75,000 of like trust funds. Previous to his election as clerk, Sullivan had been engaged in business, and had kept an account with the appellee national bank. On November 15, 1886, this account was overdrawn in the sum of $17,791.02. On that day McLain made his first payment of trust funds to Sullivan, giving him, as clerk, a check for $10,000 on the Indianapolis National Bank. In the body of this check the money was described as paid “on account of trust judgment and fees.” Sullivan delivered this check, indorsed by him, to the appellee bank, and said appellee drew the money thereon from the Indianapolis National Bank, and credited the same on Sullivan's individual account, leaving the same still overdrawn. It is alleged that “at the time of receiving said check and crediting said Sullivan with the amount thereof, said Meridian National Bank well knew that said McLain had been the clerk of said court as the predecessor of said Sullivan, and that said Sullivan was then and there the clerk of said court, and that said check was given to him in order to transfer to him, as such clerk, the sum of $10,000, which had theretofore been in the hands of said McLain, as such clerk, in trust for divers and sundry parties.” Thereafter, on November 20, 1886, McLain delivered to Sullivan, as such clerk, his second check, being for $5,000, payable to the order of Sullivan as clerk, the payment being also designated in the body of the check as made “on account of trust and judgment funds and fees.” On the indorsement and delivery of this check to the appellee bank said appellee opened an account with John E. Sullivan, clerk, delivered to him a pass book therefor, and gave him credit upon the pass book and upon his account as clerk for $4,000, but applied the remaining $1,000 of said check to the payment of the individual indebtedness of Sullivan to the bank, knowing at the same time that said $1,000 was a part of the trust funds in the hands of Sullivan. Thereafter, on December 13, 1886, a third check, for $653.10, drawn by McLain, as clerk, upon the Indianapolis National Bank, and reciting in the body of the check that it was given on account of “trust in asst and estates (in F. & S.),” was given to Sullivan, and indorsed by him as clerk, and delivered to the appellee bank, and was by said appellee applied on Sullivan's personal debt to the bank, the bank at the same time knowing that said trust funds were not the individual or private property of the said Sullivan, but were in his hands as clerk, in trust for divers and sundry parties. Like allegations are continued in detail, showing the application by Sullivan, with the co-operation and knowledge of the appellee bank, of other trust funds in his hands as clerk, in payment of his personal obligations to the bank, and to other creditors who were paid through the bank, from said trust funds. During Sullivan's continuance in office he was, besides, engaged in business for himself, in which occupation he also received large sums of money. And it is further alleged in the complaint “that, by means of his earnings, borrowings, and other methods of obtaining money, although said Sullivan had during his continuance in office as such clerk misappropriated and embezzled, from time to time, very great sums of money, amounting in the aggregate to more than $150,000, he had succeeded in reducing the extent of his defalcation on the 29th day of January, 1889, to the sum of $47,993.84, as to which he was then, and has ever since been, and now is, a defaulter.” The names of the particular persons for whom he received and to whom he failed to pay over this money, in number about 1,500, and the amount due each, are set out in an exhibit to the complaint. Among the sums of money so misappropriated was $440 due to the state of Indiana, and it is alleged that the state, by its attorney general, on the 5th day of March, 1889, filed in the Marion circuit court “its certain complaint in the nature of a creditors' bill, in its own behalf and on behalf of all others similarly situated who should desire to participate therein and contribute to the expense of the litigation against the said Sullivan and others, asking, among other things, for judgment against Sullivan for the money so collected by him as clerk, * * * for the appointment of a receiver to collect the fees due to said Sullivan as such clerk that had not theretofore been collected, and for the appointment of a trustee as the successor of said Sullivan in relation to the matters that had come to his hands as such clerk, and to recover the trust funds that had come to the hands of said Sullivan as such clerk, and had been used by him in the payment and discharge of his private indebtedness from the parties who had received the same, for the use and benefit of the parties entitled thereto, in such proportion as the court might adjudge. And such proceedings were had in said cause that thereafter, to wit, on the 6th day of March, 1889, this plaintiff was by said court duly appointed receiver of certain of the assets of said Sullivan, and was also appointed as a trustee as the successor of said Sullivan in the various trusts which had, by the statute in such cases made and provided, been imposed upon and confided in said Sullivan.” In the order of appointment, as set out in this complaint, it is declared that the court “does hereby order, adjudge, and decree that Silas M. Shepard be, and he is hereby, appointed as a receiver of this court, for the purpose of collecting and reducing to cash the rights, credits, choses in action named and described herein, and also as trustee in the matters appertaining to the office of clerk of this court, with respect to the funds collected by said Sullivan as such clerk, as the successor in said trusts of said Sullivan, late clerk.” Appellant is particularly directed in said order, among other things, “to institute and maintain actions against any and all persons whom he may have reasonable cause to believe have heretofore received from said Sullivan, as such clerk, trust funds that were then and there in his hands as such clerk, in payment of his individual indebtedness, or that were otherwise misappropriated by him.” It is further shown that the fees due Sullivan and collected or to be collected by the receiver will amount to not over $5,000, and will be totally inadequate to pay the liabilities of Sullivan as clerk. It is also made to appear that the sureties on Sullivan's official bond have been exhausted, leaving all the creditors except those who have obtained judgments on his bond wholly unpaid; that Sullivan has fled the country, and is wholly insolvent, and said creditors of said trust funds will be wholly remediless unless the funds misappropriated can be followed, and applied to the liquidation of their claims.

It is alleged that before the bringing of this action the appellant had applied to the appellee bank for an accounting of the trust funds of Sullivan so used by it, but the bank refused to so account, or to pay any of said funds, to him. The appellant concludes his complaint saying, therefore: “That a cause of action has accrued to him as such receiver and trustee, as the successor of said Sullivan in his various trusts, to compel the said defendant the Meridian National Bank to account and show what amount of trust funds it received from said Sullivan as such clerk that it applied to the payment and discharge of his individual and personal liabilities; that as to such funds it be adjudged and decreed to be a trustee of its own wrong for the misappropriations, embezzlements, and conversions of said Sullivan in which it participated, and of which it obtained the benefit; and plaintiff prays the court to decree accordingly, and that he have judgment.” The appellee bank filed its motion to require the appellant to elect whether he would sue as receiver or as trustee, which motion was sustained by the court. This ruling is one of the alleged errors complained of by appellant, but, as the motion has not been brought into the record by bill of exceptions or otherwise, no question is presented on the ruling. Besides, we are of the opinion that appellant has suffered no harm by the action of the court. He elected to sue as trustee, and anything that he might be entitled to recover in any capacity he may recover in this action as trustee. He was appointed receiver to collect fees and other amounts due Sullivan, but not collected by him, and also trustee “with respect to the funds collected by said Sullivan as such clerk.” It is not apparent, however, nor do counsel satisfactorily show, why appellant, as receiver, had not authority to take possession, not only of funds due...