268 F. 780 | 8th Cir. | 1920
Error by plaintiff below from adverse judgment in suit for deceit. Smith was a money lender living in the state of New York. The bank was a national bank located in the town of Casselton, N. D. The amended petition alleges that the bank, through its president, R. C. Kittel, represented to Smith that it had a note for $30,000 secured by a mortgage on North Dakota land, and that it offered this loan to him for sale at a discount of $1,500; that he relied upon the above representations and purchased the loan, paying therefor $28,695.15; that the bank, through Kittel, converted this sum; that it never had the note or mortgage; that the note and mortgage were in fact owned by a business company (the Northern Trading Company), and then were pledged as collateral by it for a loan to a Minneapolis bank; that to protect himself from loss he was compelled to and did pay the pledgee $15,198.65, and thereby secured the note and mortgage and other security; that thereafter he was paid about $8,000 of this $15,198.65, leaving a balance of $7,198.65, for which this suit was brought. The theory of the petition is fraud and deceit by the bank, in representing falsely that it had the note and mortgage. The bank pleaded the general issue, novation and compromise, waiver and estoppel, election of remedies, offset and counterclaim, and ultra vires. The issues concentrated on the liability of the bank for the acts
The pertinent facts follow: The bank was capitalized for $50,000, and had a surplus of $10,000. R. C. Kittel was its president, and personally conducted the business of the bank. For years it had conducted two classes of business respecting loans on real estate: First, it made such loans, later selling them to buyers; and, second, it brought together persons desiring loans upon real estate security and persons who made such loans. The first was a loan business; the second, a brokerage business.. It charged a commission in such cases. R. C. Kittel was the president of the bank; he was also vice president of the Northern Trading Company, and was engaged in the loan brokerage business on his own account. Smith, and his father before him, had for some years bought loans offered by the bank, acting through Kit-tel. He knew the capitalization and surplus of the bank; that it had no authority to make a single loan of $30,000; that it did a brokerage business in real estate loans; that it had no authority to do such business; that Kittel did an individual loan brokerage business, and that he was vice president of the Northern Trading Company. This loan was submitted in January, 1914, by Kittel, who signed the letter “R. C. Kittel, President,” although his reference to possession and control of the loan is, in this and subsequent letters, in the singular, such as, “I have a first mortgage note. * * * ” Smith’s letters were addressed to “R. C. Kittel, Pres. First National Bank, Casselton, N. D.” Smith accepted the loan February 4, 1914, saying he would have the loan assigned to his sister. Kittel, in acknowledging this letter, said he would have that assignment made at once and shown on the abstract of title sent to Smith. Smith made payment through drafts to the order of “R. C. Kittel, President.” These drafts were deposited by Kit-tel to the credit of the Northern Trading Company, and the proceeds used by it. The bank used none of the money and received no commission or compensation of any character in connection with the loan. The note and mortgage were never in possession of the bank, but were, at the time Smith accepted the loan and thereafter, pledged by the Northern Trading Company with a Minneapolis bank as collateral for a loan made to the Trading Company.
On March 5, 1914, 18 days after the final payment by Smith, he examined the abstract for the property, which had been received after the above final payment. It showed the loan made by the Northern Trading Company, with no assignment to or title ever in the bank. From this date, early in 1914, Kittel postponed sending the loan papers. In November, 1915, Smith became suspicious of the loan, but never at any time before this suit was brought communicated with any other official or director of the bank concerning it. December 6, 1915, the bank went into receivership. Ascertaining that the loan papers had been deposited by the Northern Trading Company with the Minneapolis bank as collateral security for a loan, Smith executed a contract, dated February 1, 1916, with the Northern Trading Company and Kit-
With directions to grant a new trial, the judgment is reversed.
HOOK, Circuit Judge, concurs in the result.