101 Ky. 485 | Ky. Ct. App. | 1897
delivered the opinion of the coubt.
March 1, 1SS6, the Fidelity National Bank of Cincinnati, O., was organized and began business on a capital of $1,000,-000, E. L. Harper being vice-president and general manager, but June 21, 1887, it was by the comptroller of currency found to be insolvent, and David Armstrong appointed receiver.
March 1, 1886, the Swift Iron and Steel Works was, and for several years had been, a corporation doing business in Newport, Ivy., E. L. Harper being president and principal stockholder, but June 21, 1887, it was also found to. be in■solvent, and made an assignment for benefit of creditors, Adam Wagner being appointed trustee, who brought the ■present action to. settle the estate and distribute assets among creditors.
And now this is an appeal by John Trapp and others, ■general creditors of that corporation, from a judgment rendered against it in favor of David Armstrong, receiver, for •about $581,942.20.
The demands for which, appellee asked and obtained said
The controversy in the twm cases mentioned was about six promissory notes of $25,000 each, executed about April or May, 1SS7, in the name of Swift Iron and Steel Works, signed by Matthew's, as treasurer, made payable to himself' individually, and endorsed by him to E. L. Harper, who, as (vice-president of Fidelity Bank, endorsed two of them to the Chemical National Bank and four to First National Bank of New York as collateral security tor money loaned-to the Fidelity Bank.
In those two cases, heard together, this court held that as-
This case differs from those two, not only in other features not necessary to particularize, but essentially in that it has been here expressly shown the treasurer by long usage was recognized and held out by the board of directors and president as the officer whose duty it was to sign all obligations of the corporation. So as this record stands, Swift Iron and Steel Works is prima facie estopped to deny authority of-Matthews, its treasurer, to issue and sign the checks and notes in question, and it does not matter that E. L. Harper was at the time an officer of both the corporation and banking association, if the board of directors and. president of the former did in fact, as they had the power, disuse and treat the by-laws as obsolete. Therefore, if the alleged indebtedness was created Iona fide for the benefit of Swift Iron and Steel Works, and be founded on a valuable consideration passing to it from the Fidelity Bank, the right of appellee to the- judgment appealed from is manifest. But without referring to the evidence in detail, or attempting to accurately separate those items of the alleged indebtedness that are valid and just, if any are, from those not so, we have become convinced that much the largest part, if not all, was in an unwarranted manner and by fraudulent devices of Harper created for his own individual benefit, and to promote and sustain a gigantic wheat speculation in Chicago
No doubt the sum of $418,290 -was between May 23d and June 18, 1887, a period of less than one month, actually paid out on the nine checks by the Fidelity Bank, and done ostensibly on the credit of Swift Iron and Steel Works. But it is fully shown that corporation did not at the time have any funds, with either Kuhn & Son, the German National or First National Bank of Cincinnati, and the checks were never intended to be presented to or paid by them, being a fictitious device of Harper to raise money to use in the wheat deal that was then in a critical condition, and at the same time deceive the public as to the financial condition of the corporation and the bank.
Counsel, however, argue that the Swift Iron and Steel Works was then in an insolvent condition, and the large amount of indebtedness to the- Fidelity Bank alleged to have been created from March 1, 1886, to June 18, 1887, was done by Harper to sustain it in business. But it is not at all probable Harper would for that single purpose have caused the Fidelity Bank, of which he was also an officer and stockholder, to advance so much money that he knew it would in the end lose. Besides, the transaction with the Chemical National Bank and First National Bank of New York, by which the Swift Iron and Steel Works was recklessly involved to the extent of $150,000, shows that without particular regard for either the corporation, of which he was president, or the bank, of which he was vice-president, Harper was determined to raise money by all means, legiti
It is too plain for doubt that the money, or largest part thereof, now claimed as a just and subsisting demand:, against the Swift Iron and Steel Works, was used by Harper for his own benefit, and was procured from the Fidelity Bank, with knowledge of the other officers that it was to be so used. In fact appellee, shortly after being appointed, receiver, instituted an action against the president and directors of the Fidelity Bank to recover the enormous sum of $2,500,000, including the amount alleged to have been loaned and advanced to the Swift 'Iron and Steel Works, which he distinctly alleged had, with the knowledge or through gross negligence of the defendants, been fraudulently obtained and used, by Harper in the wheat speculation. In our opinion, not only was the money now claimed to be due from the Swift Iron and Steel Works obtained from the Fidelity Bank for the purpose of being used, and .actually used, by Harper for his individual benefit, but his scheme to thus defraud and wrong that corporation must be held to- have been carried out with the knowledge and connivance of the other officers of the Fidelity Bank, and consequently appellee must look to Harper and not to the Swift Iron and Steel Works for recovery back of the money so obtained and used.
The judgment is, therefore, reversed and cause remanded for reference to the master commissioner, with directions to ascertain and report wdiat, if any, part of the money sued for was actually used and appropriated for benefit of the-
The court delivered the following response to petition for rehearing December 11, 1897:
One of the grounds of appellee’s petition for rehearing and eventual dismissal of the appeal for want of jurisdiction of this court is that, though-the judgment of April 24, 1894, was treated by both court -and counsel as properly before us for revision, there was, as since discovered, really no ¡appeal prayed for or gnanted by the lower court. But though the original transcript did not show the fact, it does appear from additional and correct copy of the record, since brought up, that an appeal from that judgment was ■both prayed for and granted by the lower court to appellants, unsecured creditors of the Swift Iron and Steel Works.
There is no new or sufficient reason offered for a change of a decided opinion that the judgment in favor of the appellee was for a very much larger sum than he is entitled to recover; and the petition for rehearing is, therefore, overruled.
Counsel for appellants ask the opimign. and mandate be so modified that, instead of directing a reference to the master commissioner to ascertain and report what, if any, part of the money sued for was actually appropriated and used for benefit of the. Swift Iron and Steel Works; the lower court be required to disallow and dismiss the entire demand outright.
Of the whole amount claimed $26,000 appears to have been reported by the commissioner as just, and, without exception on part of appellants, allowed by the court, and,
'In view of the failing condition of the Swift Iron and ’Steel Co., culminating in actual failure June 21, 1887, which we are satisfied was known to other officers of the Fidelity National Bank besides Harper, it is altogether unreasonable the enormous sum of SI 18,292 was in good faith loaned to it between May 23, 1887, and June 18, 1887, and when we consider the bank was at the same time being drained of its resources by Harper, and was on the same day closed, it is simply incredible that sum was loaned to or the corporation got the benefit of any part of it. To us it is too plain for discussion that Harper, with knowledge and connivance of other officers of the bank, got and appropriated the entire sum to prop up his wheat speculation, then in a precarious condition, and that about the same fatal day of June 21, 1887, ended in disaster and ruin to himself and the various business associations he was connected with and controlled. To extent at least of said sum of $118,292, we think the ■items of the alleged indebtedness of the Swift Iron and Steel Works to Fidelity National Bank should be rejected and disallowed without further reference to or proof by the commissioner. As to the residue of the claim, additional proof may be taken if necessary.
The opinion and mandate are modified to extent here indicated.