Kidder v. Biddle

Davis, J. The facts out of which this controversy arises are as follows: On January 4, 1890, tbe Sandford Fork & Tool Company, by its then president, Robert Nixon, executed to appellees its note, of which the following is a copy, to-wit: — 654 — “$1,935.20. ' Terre Haute, Ind., Jan. 4, 1890. “Four months after date, I promise to pay to the order, of C. M. Biddle & Co., nineteen hundred and thirty-five and tVV dollars, at National State Bank of Terre Haute, Ind. For value received without any relief whatever from valuation or appraisement laws, with eight per cent, interest from maturity until paid, and attorney’s fees. [Signed] Sandford Fork & Tool Co., Robert Nixon, President.” Appellees, before its maturity, negotiated this note in hank and endorsed it. The Sandford Fork & Tool Co., shortly before said note matured, discovered that it would be unable to meet said note at maturity, and it wrote a letter by said Nixon, who was their superintendent of the Sandford Fork & Tool Co. (the appellant in the meantime having been elected president of said company), requesting appelleesto send said Sandford Fork & Tool Co. their acceptance for $1,935.20 to be discounted by said Tool Company, and the proceeds to he used by said Tool Company to take up said note. This letter is as follows : “Terre Haute, Ind., April 30, 1890. - “Messrs. C. M. Biddle & Co., Philadelphia Pa. : “Gentlemen- — -Kindly send us your acceptance for $1,935.20 to take up note for like amount due May 1th. Kindly let us have it dated a few days ahead of the other, so we can get it discounted out of town, if necessary. Yours very truly, [Signed] Sandford Fork & Tool Co., n.” The appellees answered said letter and inclosed their — 655 — acceptance to the Sandford Eorlc & Tool Co., which letter and acceptance are as follows: . “Philadelphia, Pa., May 3, 1890. “To Sandford Fork & Tool Co., Terre Hante, Ind. : “Gentlemen — Please find enclosed acceptance for §1,935.20, per your request of 30th. Kindly send us your note for like amount and date, and oblige, Respectfully, [Signed] C. M.- Biddle & Co.” The acceptance is in words and figures, as follows, to-wit: “§1,935.20. Terre Haute, Ind., May 3, 1890. “Four months after date, pay to the order of Sandford Fork & Tool Co., nineteen hundred and' thirty-five and -fVo dollars, value received and charge the same to account of Sandford Fork & Tool Co., Per Willard Kidder, Pres’t. “To Clement M. Biddle & Co., 168 Church Street, ¡fs ’ New York City.” ^ p,1-1 ^ Jj d The appellees had a branch office in New York City and branch offices in several other cities, but their principal office and place of business were in the city of Philadelphia, Pa. The letter containing the above acceptance was received by the Sandford Fork & Tool Co., and opened by Emory Gibbs, the book keeper of the Sandford Fork & Tool Co., and the acceptance was by him.delivered to appellant, as president of said company, on the street, in Terre Haute, with a number of other bills, checks, and drafts belonging to said Tool Company. Appellant took said acceptance to the First National Bank of Terre Haute, Ind., and procured it to be discounted, he indorsing it — 656 — as follows: “Sandford Pork & Tool Co., per Willard Kidder, President,” and obtained thereon the sum of $1,883.60, with which money so obtained he paid the wages due the employes of the Sandford Pork & Tool Co. Appellant did not use one dollar of it for his own personal or individual use or benefit. No part of this money so obtained on the acceptance was used to pay the note of $1,935.20, dated January J, 1890, and subsequently appellees paid said note and acceptance. The Sandford Pork & Tool Co. shortly thereafter, to-wit, on ■ or about the......day of May, 1890, passed into the hands of a receiver. It clearly appears that appellees placed the acceptance in the hands of the Sandford Pork & Tool Co. for the sole and express purpose of paying the note. The acceptance was not a loan for consumption by said corporation, but it was placed in the hands of the corporation to use in extinguishing the note on which appellees were liable. It is not claimed that the appellant had any actual knowledge of the correspondence hereinbefore referred to, between the corporation and the appellees. Neither does it appear that he knew of the purpose for which the acceptance was sent by the appellees to said corporation. Instead, however, of using the money realized on the acceptance to the payment of the January note, the corporation, through the appellant, used the money to pay off the employes. The note was suffered to be protested for nonpayment, and ultimately -was paid by the appellees, who were later, and after it had become due in like manner, obliged to pay the draft. The Sandford Fork and Tool Company never sent appellees “the note of the date and amount” of the acceptance. This action was instituted in the court below by appellees against appellant to recover the money realized on — 657 — the acceptance. A trial by the court resulted in a judgment for the amount so received on the acceptance, with interest, against the appellant. The errors assigned are: The overruling of appellant’s demurrer to the several paragraphs of the complaint and the overruling of his motion for a new trial. The first paragraph sets out the facts in detail substantially as hereinbefore stated. It is urged that it fails to aver ownership by appellees of the acceptance or the money which was obtained on it by discounting it. The contention is that the facts clearly show that the relation of debtor and creditor was created between appellees and the corporation, and that the use of the money obtained by discounting said acceptance to other purposes than taking up the note constituted simply and only a breach of contract, for which a right of action for money had and received might have been maintained by appellees against the corporation. The second paragraph is for. money had and received. The third paragraph is for conversion. It is insisted that the demurrer should have been sustained to the third paragraph, for the reason that it does not aver that appellees had a general or special property in the money therein referred to, or that they were entitled to the possession thereof at the time of the alleged conversion. As to the objections mentioned, the first and third paragraphs of the complaint are sufficient. It. clearly appears in the first paragraph, that appellees furnished its acceptance to the corporation for the express purpose of paying the note, and in the third paragraph it is expressly averred that appellees furnished the-appellant the money for that purpose. It is also urged that there is a misjoinder of causes of action. Assuming this position to be true, a reversal — 658 — would not necessarily result. The facts hereinbefore set out are admissible under each paragraph, and the evidence, if sufficient to establish the cause of action in any one paragraph, would suffice to establish those in the others. The general rule is that where one sends money to another with directions that he shall pay a particular debt due from the sender to a third party, and that direction is disregarded, and the money is converted to his own use by the receiver, or to the use of some one else, the sender can sue for conversion, or for money had and received to his use. Ferguson v. Dunn's Admr., 28 Ind., p. 58; Terrell v. Butterfield, Exr., 92 Ind., p. 1. The serious and meritorious question is whether the facts alleged in the first paragraph of the complaint are sufficient to constitute a cause of action against the appellant for conversion. It seems clear that the acceptance was by the appellant, acting as president of the corporation, converted to the use of said corporation in' defiance of appellees’ rights. The fact that appellant was acting for the corporation, and that he may have been ignorant of the fact that the acceptance was placed in the hands of the corporation for use in paying the note, cannot avail him. Shearer v. Evans, 89 Ind. 400, 404; Alexander v. Swackhamer, 105 Ind. 81, 86, 87; McPheters v. Page, 22 Atl. Rep. 101; Waverly, etc., Co. v. St. Louis, etc., Co., 20 S. W. Rep. 566. In. Poverty v. Snethen, 68 N. Y. 522, the court says : “The plaintiff was entitled to the absolute dominion over the property as owner. He had the right to part with so much of that dominion as he pleased. ” So in this case appellees were entitled to the absolute dominion over the acceptance. They parted with that dominion — 659 — to the extent that it was placed in the possession of the corporation for the express purpose of extinguishing the note. The use of it for any other purpose was an unlawful interference with the appellees’ property, which resulted in loss to the appellees, and such disposition, under the circumstances of this case, constituted a conversion. In the case last cited the court said: ‘ ‘ The question of good faith is not involved. A wrongful intent is not an essential element of the conversion. It is sufficient if the owner has been deprived of his property by the act of another assuming an unauthorized dominion and control over it. ” In this case, as we have seen, the acceptance was sent by appellee, by mail, to the corporation, to discharge the January note on which appellees were liable as indorsers, and the appellant, as president of said corporation, discounted the acceptance and used the proceeds thereof in paying its employes. This act of appellant was a conversion whether he had actual knowledge of the correspondence between the parties or not. As president of the corporation he ought to have known all the facts. If this were a case where a party could be charged only when he had notice of the facts, we are not certain that appellant would not be liable, upon the principle that he should be held to have such knowledge as he might have secured by such diligence as he ought to have exercised. In our opinion there was no error in overruling the demurrer to each paragraph of the complaint. What we have heretofore said in the course of this opinion disposes of all the questions arising on the motion for a new trial except one. On the trial the appellant offered to prove that appellees were indebted to the corporation in a sum in excess of the amount of the acceptance, and that the face — 660 — amount of the acceptance was entered as a credit on their account. There was no error in excluding this evidence. The rule, as we understand it, is, that where money or other things is placed in the hands of one person by another for a particular object, as to discharge a particular debt, the application of it to a debt due from the latter to the former is of itself a conversion. Kelley v. Archer, 48 Barb. 68; Northrup v. McGill, 27 Mich. 234; Bank of U. S. v. Macalester, 9 Pa. St. 475; Boil v. Simms, 60 Ind. 162. Who received the benefit of the January note does not clearly appear. Counsel for appellees say that said corporation desired to borrow the credit of the firm of the appellees, and that to this end the note was executed by the corporation to the appellees, and by them negotiated and endorsed. Whether the appellees or the corporation received the benefit of the note originally is, perhaps, not material. It is not controverted that the corporation was primarily bound for its payment. When the note became due, the corporation was not prepared to pay the obligation. At the request of the corpora- ' tion the appellees sent their acceptance to the corporation for the sole and express purpose of paying the note. The appellant, as president of the corporation, by an act subversive of the lights of the appellees, instead of using the acceptance to pay the note, used it to pay the employes.of the corporation. In a sense, the right of the possession of the acceptance was in the corporation, and the appellant, in what he did, acted as the agent of the corporation, but in doing this the express instructions of the appellees in regard to the use which was to be made of the acceptance were disregarded, and if the appellant was ignorant of the instructions it was because he was not familiar with the business of the corporation, in the transaction of which he was engaged. The — 661 — appellees were not asked to execute an acceptance to be used by the corporation in such manner as might best suit its interest, but it clearly appears, as we have seen, that the acceptance was executed by the appellees and placed in the hands of said corporation for an express purpose, and such express purpose was the payment of a note on which appellees were secondarily liable as endorsers for the corporation. Neither the corporation nor its president had any right to convert the acceptance to any other use. The president was the executive officer of the corporation, and the fact that he was acting as president of the corporation when he secured the money on the acceptance and applied it to the payment of the employes is no reason why he should not account to the appellees for the loss sustained by them on account of such conversion. If the corporation had paid the note, the appellees would only have been- liable to the corporation for whatever was due on the account between them, which is said to have exceeded the amount of the acceptance, but how much is not stated. On account of the failure of the corporation to pay the note the appellees were compelled to pay it, and in addition thereto were compelled to pay a like amount on the acceptance, and if they recover in this action are yet liable to the corporation on the account. If the acceptance had not been executed, the corporation would have owed the note, and the appellees would have owed the account. Whether the appellees on payment of the note could have used it as an offset against the account we need not determine. These suggestions are made for the purpose of showing in what manner the appellees may have been injured on account of the failure to apply the acceptance in discharge of the note. As between the appellees and the appellant, we are not able to see any good reason why he should not account — 662 — to the appellees for the amount realized by the conversion. It is true, he did not convert the money to his own individual use, but he did by his own act convert it to the use of the corporation. The appellees gave explicit instructions as to what should be done with the acceptance, and if he was not advised of such instructions his ignorance was not occasioned by anything sgid or done by the appellees, but was the result of the failure on his part to familiarize himself with the business in the transaction of which he was engaged. He says he knew nothing of the transactions between the appellees and the corporation. He did not know that the appellees were indebted to the corporation on account. Neither does it appear that he knew of the existence of the note executed by the corporation to the appellees. Filed November 26, 1895. We have carefully read the entire record, and also the able and exhaustive briefs of the learned counsel for the respective parties, and we are of the opinion there is no reversible error in the record. Judgment affirmed.