Wilson v. Davis

• Decision Date: 31 March 1919
• Docket Number: 163,193,194
• Citation: 211 S.W. 152,138 Ark. 111
• Parties: WILSON v. DAVIS
• Court: Arkansas Supreme Court

211 S.W. 152

138 Ark. 111

WILSON v. DAVIS

No. 163,193,194

Supreme Court of Arkansas

March 31, 1919

Appeal from Benton Chancery Court; B. F. McMahan, Chancellor modified and affirmed.

Decree modified, affirmed.

Holloway & Holloway, for appellant.

1. The payment of the bonus was not ultra vires, and the court erred in so holding. There was no testimony that the bank through its officers exceeded its charter powers in paying the $ 3,100 bonus. The bank had the power to expend this sum to preserve its assets and protect its securities and a debt due to the bank. And it had the power to acquire by purchase the Texas ranch and cattle. Act No. 113, Acts 1913, § 29; 5 Cyc. 492. As it acquired title to the ranch and cattle subject to the incumbrance held by appellant, it became liable for the payment of the principal and interest of the notes held by appellant, and it was the bank's privilege and lawful right to bring about a change in the person of the mortgagee, in order to bring the incumbrance into friendly hands and reduce its interest liability to 6 per cent. Therefore the payment of the bonus was a benefit to the bank and it can not recover, regardless of the charter powers of the bank. It could not accept the benefits of an ultra vires act and at the same time avoid the burdens. 91 Ark. 367; 96 Id. 594.

2. The bank was not defrauded in the transaction with the Mississippi Valley Trust Company, but if Talley and Felker perpetrated a fraud, which is not conceded, appellant did not participate in the fraud so as to become liable therefor. The testimony shows conclusively that appellant had no connection with the arrangement with the trust company to take up and carry the notes, and had no knowledge of such arrangement but if he had endorsed the notes to the trust company that was no fraud on the Bank of Rogers. There is no evidence of fraud or conspiracy. The burden was on appellee to show fraud. 3 Cyc. of Ev. 415; 92 Ark. 586. The decree should be reversed and the cross-bill dismissed.

Moore Smith, Moore & Trieber and Duty & Duty, for appellee.

1. The bank was defrauded out of $ 3,100, the bonus paid Wilson, and appellant clearly promoted the fraud and was a co-conspirator in the fraud. The conspiracy was proven by circumstances if not by direct evidence. 98 Ark. 575; 98 Id. 609; 77 Id. 444; 95 S.W. 477. See also 98 Ark. 975; 20 Id. 216; 59 Id. 422; Am. Ann. Cases 1918 p. 459; 5 R. C. L. 1061, 1091; Words & Phrases (2 Series), 1910; 20 Ark. 216.

2. A recovery may be had against two or more conspirators, if the charge is sustained against one, since damage and not the conspiracy is the gist of the action. Am. Ann. Cases 1917 E, 1022; 169 F. 259; 79 Conn. 414; 48 S.W. 429.

3. After the conspiracy is established, whatever is done in pursuance thereof by one is the act of all. 5 R. C. L. 1093; 176 Ill. 608; 68 Am. St. 203; Note 6, L. R. A. 630. This is true irrespective of the fact that they do not actually participate therein or to the extent to which they benefit thereby. 209 Ill. 159; 103 Wis. 125.

4. Every person entering into the conspiracy is in law deemed a party to all acts done by any of them in furtherance of the common design. 5 R. C. L. 1093; 77 Vt. 294; 60 A. 74; 107 Am. St. 765.

5. The bank was defrauded by the payment of the bonus of $ 3,100 and in addition thereto of interest. Where an officer of a bank takes a portion of its assets or funds and misappropriates them the bank can sue for and recover from the party who receives them with knowledge. 105 Mo.App. 463; 79 S.W. 1177. Where an agent of a bank certifies a check which he issues whereby the funds of the bank may be withdrawn for his benefit, the person receiving the check in order to give it validity is bound to make inquiry of other officers as to its validity. 47 Ore. 562; 85 P. 81; 6 L. R. A. (N. S.), 365.

6. Where a contract is manifestly ultra vires as here, there can be no enforcement thereof, yet the party benefited can be compelled to return the property or money received. 103 U.S. 99; 98 Id. 640; 77 F. 85; 25 Id. 812.

7. Under all the circumstances in the record the chancellor was correct in holding that the payment of $ 3,100 to Wilson was an ultra vires and fraudulent transfer of the money of the bank to him and that the negotiation of the notes to the trust company for $ 10,000 was a fraud upon the bank and participated in by appellant to such an extent as to render him liable in an action for civil conspiracy. The decree should be affirmed, even if based on an erroneous conclusion of fact. 55 Ark. 112; 170 Id. 304; 85 Id. 1; 86 Id. 140.

SMITH J. McCULLOCH, C. J., dissenting.

OPINION

SMITH, J.

The Bank of Rogers was incorporated in 1912, with a capital stock of $ 150,000, and in the latter part of that year was sold to W. E. Talley and his associates by W. R. Felker, who owned the bank and operated it as a private banking institution before its incorporation and who owned most of its stock after its incorporation. At the time of this sale Felker was personally indebted to the bank to the extent of about $ 85,000 and was also obligated to the bank as endorser on a large amount of paper held by the bank.

Prior to the month of July, 1913, Felker was the owner of a large cattle ranch situated in Texas, and J. B. Wilson, the appellant herein, held a mortgage on this ranch and the cattle thereon to secure a loan of $ 40,000 made by Wilson to Felker, the loan being evidenced by four notes, each for the sum of $ 10,000, and bearing interest at the rate of 8 1/2 per cent. per annum, payable, respectively, in the years 1913, 1914, 1915 and 1916.

After Talley and his associates had purchased the bank from Felker, the bank began to press Felker for the payment of his indebtedness to it, whereupon Felker sold the ranch and the cattle thereon to the bank for the consideration of about $ 129,000. The sale was, of course, subject to Wilson's mortgage, the payment of which was assumed by the bank as a part of the purchase price. The balance of the purchase price was evidenced by two certificates of deposit in the sum of $ 5,000 each which were issued to Felker, who immediately negotiated them to appellant Wilson. Shortly after this transaction was closed the bank sold a large number of calves off the ranch for something over $ 18,000, and out of the proceeds of this sale paid to the appellant Wilson one of the $ 10,000 notes. This note was marked "paid" by Wilson and surrendered by him to the bank.

The bank closed its doors on July 6, 1914, and appellant Wilson filed with the Bank Commissioner for allowance the two certificates of deposit of $ 5,000 each, which Wilson had acquired from Felker. The liability of the bank on these certificates is not questioned; but Wilson and Talley were made defendants in a cross-bill filed by the Bank Commissioner in which judgment was prayed against them for an alleged wrongful conversion of certain funds of the bank. The facts on which this cross-action was based will fully appear from the further statement of the points at issue.

A statement of other facts essential to an understanding of the points at issue appear in the findings of fact made by the court below (and which we think the testimony supports), from which we copy as follows:

"The court finds that immediately after said purchase the said Bank of Rogers paid to the said Wilson ten thousand dollars of said indebtedness, leaving thirty thousand dollars due the said J. B. Wilson, and that thereafter the said W. E. Talley made an arrangement with the Mississippi Valley Trust Company of St. Louis, Missouri, whereby it took up said indebtedness to said J. B. Wilson and that at the said time the said indebtedness to said Wilson as aforesaid was not due, but in order to perfect the arrangement with the Mississippi Valley Trust Company, whereby the said company was to carry the loan of thirty thousand dollars belonging to the said J. B. Wilson, and in order to induce the said J. B Wilson to agree to said contract made by the said W. E. Talley with the Mississippi Valley Trust Company and to permit the Mississippi Valley Trust Company to take up and carry said indebtedness, the said J. B. Wilson required and exacted from the said Bank of Rogers a bonus of thirty-one hundred dollars and that the said W. E. Talley without any authority, authorization or without the knowledge or consent of the board of directors of the Bank of Rogers, took said thirty-one hundred dollars out of the assets of the Bank of Rogers and turned the same over to the said J. B. Wilson as a settlement of said bonus and that the said transaction was well known to the said J. B. Wilson, which act of the said W. E. Talley the court finds to be ultra vires and void and that said Bank of Rogers received no consideration for said thirty-one hundred dollars as aforesaid, which was well known to said Wilson and that said J. B. Wilson was a party to said transaction which amounted to a fraud against the creditors and stockholders of said Bank of Rogers.

"The court further finds that on or about the 3d day of November 1913, that the cross-defendant J. B. Wilson was the holder of forty thousand dollars in promissory notes executed to him by W. R. Felker, the same being and including the thirty thousand dollars notes as above set forth and that all of said promissory notes were secured by a mortgage on lands, leaseholds and cattle situated in Mitchell, Howard and Sterling Counties, Texas. That said mortgage was dated December 18, 1911, and of record in said counties and that on or about the said date W. R. Felker was the owner of said lands, leaseholds and cattle and that on or about said date he sold said properties to the Bank of Rogers, the said Bank of Rogers assuming and...