Farmers & Merchants State Bank v. Perry

Doerfler, J. The defendant was the prime mover in the organization of the association, and its promoter. He was also a subscriber to the capital stock of the association. The execution of the note was merely a part of the financial scheme. As part owner of the hotel property, Amundson in securing this note represented his individual interests. The defendant, by executing the note with the conditional agreement, attempted to serve his own personal interest, which afforded an opportunity to be released from his liability on his subscription. Under such circumstances the knowledge of Amundson and that of the defendant did not become the knowledge of the bank. Johnson v. Blumer, 183 Wis. 369, 197 N. W. 340, 198 N. W. 277; In re Plankinton Bank, 87 Wis. 378, 58 N. W. 784; Shaw v. Crandon State Bank, 145 Wis. 639, 653, 129 N. W. 794; Timme v. Kopmeier, 162. Wis. 571, 575, 156 N. W. 961. The conditional secret agreement resulted in the acceptance of the note by the bank and the disbursement of the amount represented by it for the benefit of the association. The bank, therefore, became a bona fide purchaser of the note for value. [98] Under the agreement as testified to by the defendant, the bank was to hold the note aS' an unconditional asset, to be submitted to the bank examiner upon his making an official examination of the affairs of the bank. It was thus designed by the parties to the secret agreement to exhibit a false report or showing to the bank examiner in order to deceive him with respect to the true condition of the bank, in violation of the provisions of sec. 221.17 of the Statutes. The agreement was therefore void on the ground of public policy, and the defendant, being a party to the fraud, cannot successfully maintain his defense. The defense interposed operates not only as a fraud upon the bank but also upon the association. The defendant was the prime mover and promoter of the association. He was also an officer and a member of the building committee. Amundson was its secretary and individually interested as a part owner of the property. The defendant’s subscription was absolute and unconditional and operated as an inducement to secure other subscribers. Both Amundson and the defendant, therefore, held a fiduciary relationship to the association, which required of them the exercise of absolute good faith towards it and a disclosure to the association and to the subscribers of the stock of all knowledge in their possession with respect to the transaction. Such disclosure does not appeal- from the evidence. The interests of both Amund-son and the defendant being adverse to the interests of the association, as far as the secret agreement was concerned, the knowledge thereof by these two persons is not imputed to the association, and the enforcement of this secret agreement would therefore operate as a fraud on the association and upon the subscribers to its capital stock. The defendant accepted the stock and retained it. Thereafter he participated in the meetings of the association and enjoyed all the privileges of a stockholder. Assuming, therefore, that he had an option to return the stock and to demand the return of his note, he fully declared upon such option in [99] favor of the retention of his stock. Under such circumstances his liability became absolute. Plaintiff’s counsel also insist that the trial court had no authority to extend the time for serving the bill of exceptions beyond the period of one year during which, under the statute, an appeal might be taken from the judgment. In view of the foregoing opinion it will not be necessary to consider this point. By the Court. — Judgment affirmed.