First National Bank v. Lincoln

Gilfillan, C. J. The principal question in this case is presented here, as it is evident it was presented to the court below, only as a matter of pleading. In its construction of the answer of the defendant How, the district court was right. The complaint alleged the misappropriation by E. B. Lincoln of $2,958.17 of insurance money due upon policies of insurance, upon property of Lincoln Bros, held as collateral security to their note to plaintiff for $5,000, and contained allegations intended to show the right of the plaintiff to receive the money. The answer of How put these allegations in issue by a denial of “each and every allegation in said complaint not hereinbefore admitted.” It is claimed, however, by plaintiff that this general denial cannot operate as a denial of the allegations in question, for the reason that the answer contains a previous allegation that the said insurance money “was paid to the plaintiff by said E. B. Lincoln, before the commencement of this action, by the transfer to plaintiff of two thousand dollars of its capital stock, and by the payment in cash.” This fact is not inconsistent with want of right in plaintiff to demand the money, — with want of title to it. Hence the allegation of the fact is not an admission of such right or title, and the allegation is not inconsistent with, and does not modify, the effect of the general denial. But the district court fell into error as to the amount recoverable on account of the insurance money. If the payment of that amount [135] by the insurance companies is to be deemed a payment to plaintiffs as of its date, extinguishing pro tanto the amount due on the note held by it against Lincoln Bros., then the misappropriation of it by E. B. Lincoln was a conversion of its money, and the measure of recovery would be the amount so converted, with interest, at the legal rate, to the date of the referee’s report, with the proper deduction on account of so much of it as was returned to plaintiff by the payment of the $640; and it would be immaterial what became of the remainder due on the note after applying the insurance money as a payment. But both the referee and the district court held that plaintiff’s right to recover on account of the insurance money is to be limited by the amount due at the date of the recovery on the note held by it; thus treating the money when misappropriated, and the claim to recover on account of the misappropriation, as collateral security to the note, — just as the right to receive it from the insurance companies before they had paid it was. Assuming this to be the correct theory, — and none of the parties complain of it,— then the conversion of the collateral security,' — the payment of the money by the companies to Isaac Lincoln on the order of E. B. Lincoln, so that it never actually reached the plaintiff, nor became subject to its use, — did not in any way affect the amount due on the debt,— the note held by plaintiff. And the referee adopted the proper rule to ascertain the amount due; that is, by computing interest according to the terms of the note, making proper deductions for payments. The order appealed from will be modified by the court below, by •hanging therein the figures $2,814.63 to $3,016.45.