|Appeal from Circuit Court, Bell County.|
|Mrs. Alex Slusher Vs. First State Bank of Pineville|
|ACTION: Reversed, with directions|
Court of Appeals of Kentucky.|
FIRST STATE BANK OF PINEVILLE
Jan. 12, 1937.
Rehearing Denied March 9, 1937.
On June 12, 1929, Mrs. Axie Slusher purchased from the First State Bank of Pineville, Ky., through its president, George R. Reese, six $1,000, 6 per cent. collateral trust gold bonds, series B, numbered 341-346, inclusive, which had been issued by the Central Securities Company of Asheville, N. C., for which she paid the sum of $6,000. The interest on the bonds was payable semiannually on the 1st day of February and the 1st day of August in each year, and she was paid $30 interest due on each bond on August 1, 1930, but received no further payments.
On March 30, 1934, she instituted this action against the First State Bank of Pineville and George H. Reese, setting up the foregoing facts and alleging that at all times mentioned, the bank had been engaged in banking business, and in addition engaged in dealing in stocks and bonds and acted as broker, agent, and seller to various purchasers of stock, receiving commissions on stocks and bonds sold; that when she purchased the bonds from defendant it was broker and agent of the Central Securities Company and the Central Bank & Trust Company of Asheville, N. C., in selling various bonds, particularly $190,000 of bonds sold in Harlan, Bell, and Knox counties; that they represented to her that the bonds which she purchased were high-class securities of approved value and integrity, secured by the personal liability of the Central Securities Company and the Central Bank & Trust Company and by real estate mortgages, the principal and interest of which had in its entirety been guaranteed by the Maryland Casualty Company and the United States Fidelity & Guaranty Company of Baltimore, Md.; that the bonds bore a trustee's certificate or legend which made similar representations which were false; that she relied on these assurances and representations and was induced thereby to and did purchase the six bonds; that on February 1, 1931, the Central Securities Company and the Central Bank & Trust Company defaulted in payment of interest on the bonds and the bank was closed and suspended business and were both insolvent and had no funds out of which to pay their creditors, depositors, and stockholders, including plaintiff. She alleged that the representations made to her concerning the bonds when she purchased them were utterly false, and that when she discovered the bonds were worthless and of no value she approached defendant and offered to surrender the bonds and demanded payment of her money; that at the time of the sale of the bonds to her neither of the defendants had been authorized to vend, sell, or offer for sale bonds in the state of Kentucky; nor had either of them been licensed so to do pursuant to what is known as the Blue Sky Law of Kentucky; and that no license had been taken out by either of them to engage in the sale of bonds or securities in this state.
On September 21, 1934, she filed an amended and supplemental petition in which she reiterated practically all of the allegations of the original petition but without any reference to violation of the Blue Sky Law; and later by a second amended petition she alleged that she did not discover the fraudulent character of the bonds she had bought until February 1, 1931. In addition to a traverse and other defenses, the defendants interposed a plea of limitation.
On final hearing it was adjudged that the petition as against George H. Reese be dismissed and that the contract by which plaintiff purchased the bonds be rescinded, the bonds returned to the First State Bank, or it be privileged to withdraw them from the record at any time it might desire; that plaintiff recover of the First State Bank the sum of $6,000 with interest from August 1, 1930, and it is appealing.
In First State Bank of Pineville v. Wilson, and First State Bank of Pineville v. Taylor, the court had for consideration a sale by appellant of some of the same securities as are involved in this action. In that case, as in this, the bank made the sale to a customer and sent the order for the bonds to the bank at Asheville, N. C., and the bonds were mailed to the bank at Pineville with a draft on the purchaser attached.
Viewing the transaction as revealed by the record in the light of the authorities cited, we are constrained to the view that the two-year limitation period fixed by the quoted provisions of the Blue Sky Law apply.
Wherefore, the judgment is reversed for proceedings consistent with this opinion.
Last Update Tuesday, 18-Dec-2012 01:37:57 EST