Bank of Coffee Springs v. McGilvray & Co.

MAYFIELD, J. Appellees sued appellant bank upon its own certified check, which was signed by one Helms as its cashier. The check was payable to J. J. & M. J. M. Lewis, and assigned and indorsed to plaintiffs. To the complaint the bank pleaded the fraud of the plaintiffs in procuring the check to be issued and assigned. This defense was attempted to be set up in a number of special pleas, numbered 9, 10, and 11. The fraud, in short, was that plaintiffs, or one of them, procured the check to be issued by false representations as to the security given or to be given to the bank to secure the loan made by the bank to the payees of the check, and, as part of the scheme to defraud the bank, had the check indorsed and-assigned to him. If the matters set forth in these pleas are true, and on demurrer they must be so treated, the plaintiff ought not to recover. They are perfect and complete answers to the complaint, and demurrer thereto could not properly be sustained. To pleas 9, 10, and 11, plaintiff replied that, after the check was transferred and assigned by him, in consider [410] ation of which he had released the payees of the check from their indebtedness to him and delivered up a note and mortgage which secured said indebtedness, one Byrd, the cashier of the defendant bank, procured the Lewises, the payees and transferrors of the check, to execute a note and mortgage to a partnership of which he was a member, to secure the loan made by the bank to the Lewises, evidenced by this check sued upon, and that the bank was therefore estopped from setting up such fraud, or that, after discovering it, defendant had ratified the transaction. The replications were all insufficient, and subject to the demurrers interposed. None of them denied the fraud set up in any .one of the pleas, nor did any one of them confess it, and avoid the effect thereof. There was no attempt to state facts to show that plaintiff was a bona fide purchaser of the check. Certainly Byrd, if he was acting as cashier for the defendant bank, in taking a mortgage from the Lewises to secure the loan, could not thereby estop the bank from setting up the fraud of plaintiff in procuring the loan originally and in having the check transferred to him. It would, indeed, be strange if a party who is thus defrauded should be estopped from setting up the fraud as against the very party who perpetrated it, because his agent tried to indemnify the principal against loss on account of the fraud. Under some conditions the bank might be liable to the Lewises, though it was not liable to plaintiff, and if the Lewises were willing to secure the bank, directly or indirectly, for the loan, it was of no concern to the plaintiff, who, if the pleas were true, had attempted to defraud the bank by making false and fraudulent statements to its acting cashier, Helms, in the absence of its regular cashier, Byrd. If the pleas are true, Byrd knew [411] the facts, and declined to make the loan until the proper security could be given, and during his absence the plaintiff applied to Helms, and fraudulently and falsely represented to Helms that Byrd had agreed to make the loan for the bank, and Helms, relying on this state-. ment, made the loan, and plaintiff, as a part of his fraudulent scheme, had the check assigned to him or to the firm of which he was a member. As soon as Byrd returned, he attempted to repudiate the transaction, and took steps to secure the bank or himself, or both, against plaintiff’s fraud. Surely this cannot be a ratification of the transaction by the bank, or an estoppel against its setting up plaintiff’s fraud, in an action by the latter to reap the fruits of his wrongful act. It follows that the court was in error in overruling the demurrers to these replications, and the judgment must be reversed and the cause remanded. Reversed and remanded. Dowdell, C. J., and Simpson and McClellan, JJ., concur.