17 Ky.L.Rptr. 732
Court of Appeals of Kentucky.
ANDERSON et al. v. BLACK et al.
Oct. 17, 1895.


Appeal from circuit court, Knox county.
"Not to be officially reported."
Action by W. B. Anderson and another against John A. Black and another to cancel a conveyance of land on the ground of fraud. From a judgment for defendants, plaintiffs appeal. Affirmed.

PRYOR, C. J.
The appellants, Anderson and wife, are seeking, by their petition in equity, the cancellation of a conveyance made by them to the appellee Black of a house and lot in the town of Barboursville, on the ground of fraud, alleging a collusion between Black and one England, by which the appellants were induced, as a consideration for the conveyance, to accept worthless bank stock, upon the false and fraudulent representations made by Black to Anderson and wife that the stock was worth above par, when Black in fact knew that it was not worth exceeding 40 or 50 cents to the dollar; that the value of the stock was unknown to the appellants, and they relied upon the representations made by Black, as to its value, that were false and fraudulent, and so known by Black when made. The conveyance of the house and lot was made to Black on the 25th of October, 1891, and at that date he was the cashier of the Cumberland Valley Bank, the stock of which was then transferred to the appellants. The original petition seeks relief on the ground this property was sold to Black, and false representations made by him to the appellants as to the value of the stock, to induce the execution of the contract. During the progress of the case, it developed that one England, a merchant of the town, was the real purchaser, and that negotiations had been conducted between England and the appellants for several months before they were finally consummated; and upon this state of proof the pleadings were amended, charging collusion between the appellee and England in the effort to induce the appellants to accept this stock. The value of the stock, including the large indebtedness to the bank,-the solvency of those liable being questioned,-was about $1.10, but when Black retired from the bank, and in fact when he accepted the position of cashier, it is evident these large loans were ' liable to result in loss; and, when the stock was sold by Black to England, it was not worth exceeding 40 or 50 cents to the dollar, and England sold it to the appellants for $1.10. Both of the appellants say that the appellee, in repeated conversations, urged them to make the trade, and represented to them, without any qualification, that this stock was worth above par, and would likely advance in the market. It seems, also, that Black had sold other of his stock, and afterwards took it back, but for a reason that is satisfactorily explained, being perfectly consistent with business transactions. The appellee acquired his stock that he transferred to Anderson and wife in November, 1890, and was appointed cashier in October of the same year, and left the bank in May, 1892.

The testimony conduces to show that appellee, during the period in which he acted as cashier, improved the condition of the bank, by collecting and securing a large amount of the debts due the corporation. The bad or doubtful debts that seem to have caused the depreciation of the stock, or its value, were created before Black became cashier or a stockholder, and he was in no wise responsible for making such heavy loans, or involving the bank in financial trouble; and these large loans were doubtless made when the property of that part of the state, and its business interests, made each and all of the stockholders sanguine of the success of the bank, and the ultimate collection of its loans. The appellant Anderson was a stockholder in the bank from its organization. The largest debtor to the bank (Davidson) lived with him when this debt was created, or during its existence. He lived in the same town where the corporation was located, and must have known of these loans, and, upon the slightest inquiry, could have ascertained the value of the stock, as negotiations were pending between himself and England for months in reference to this property; yet if the appellee, by false statements, and in order to sell his stock, induced these parties (appellants) to make the trade, the deed should be canceled. The appellee denies making any such representations, and says that he had no interest whatever in the trade other than that of furnishing the stock to pay for it. The proof shows that England was a merchant, and was desirous of buying him a home, but was without the means at that time to make the purchase. The appellee made an effort to sell England some town property that he owned, and failed, when finally England began negotiations to buy the home of the appellants. He applied to Black to aid him, and the latter responded that he had no money, but would let him have bank stock at par to pay for the house and lot. That when the trade was made he transferred the stock directly to Anderson and wife, and took a conveyance to himself of the property,-the deed acknowledging the consideration paid,-and then gave to England a bond for title. The deed was made in this way at the instance of England, for the reason, as he states, that he was relying on his credit as a merchant to obtain his supplies, and did not wish the records to show his indebtedness, as it might impair his credit. The appellee was not present when the trade was made by appellant and England. The possession was delivered to England, and he has paid all but the last note due the appellee for this stock; and there can be no doubt, from the testimony, as to England's being the real purchaser, and that he agreed to pay par for this stock, and, in the trade, sold it to the appellants for $1.10. That the appellee made statements to Anderson as to the value of this stock, is established, but appellants' own witnesses, or some of them, state that Black told Anderson, if the bank had good luck in collecting its paper, the stock would be worth $1.10, and perhaps more; that he was doing the best for the bank that he could. These debts involving the bank then existed, and efforts were being made to collect them, and those interested had the right to anticipate that the money on them would at some day be realized; and the opinion expressed by the appellee, if not sustained by subsequent events, ought not to be held as sufficient to establish fraud on his part, on both England and the appellant. The appellee was not on such intimate terms with England, nor can we presume the latter so reckless of his character as to be made the tool of the appellee, to enable him to defraud the appellants. The appellant Anderson became a director in this bank after the appellee had retired as cashier, and in the written statement as to the condition of the bank, signed eight or ten months after this trade for the property by him, as one of the directors, showing that the stock was above par in value, and nearly two years after the purchase of the stock, Anderson, as director, signed another statement, showing still further increased value of the stock. The stock of the bank sold for more than par about the time this conveyance by Anderson was made, and in fact we find nothing in the record showing that up to that time it sold for less than par, and no statement by any of the officers of the bank indicating a belief on their part that the bank was financially embarrassed by reason of the insolvent condition of its debtors. Elliot, who was at one time president of the bank, told Anderson that it was not possible to tell what the stock was worth; that it was not worth exceeding par, and the chances were that the Davidson debt would be lost; and this debt seems to have been the cause of the bank's collapse. The face of the paper due the bank showed that the value of the stock, if collected, would have been beyond par. It was a matter of opinion as to whether these claims could be collected, and Anderson certainly had every opportunity of investigating for himself, and in fact sought the advice of others, as well as that of the defendant; and, if he has sustained loss, it is the result of a bad judgment, and not from the fraud of either England or the appellee. It is shown that the property is not worth exceeding $1,300; and the inquiry is, why would England give as much as $2,200 for a $1,300 home. He gave as a reason that it was near his storehouse; his wife was anxious to own the property; and getting it on long time, with 6 per cent. interest, was the inducement for him to buy. Anderson was a stockholder in this bank, and was advising with others, who were familiar with its condition, and was evidently speculating on the chances of collecting the outstanding liabilities to the bank; and, as conclusive of the manner in which the parties regarded or estimated the value of this stock, Anderson, when he became director, and nearly two years after this trade was consummated, presented a statement as favorable to the bank as any made by the appellees, evidencing on the part of each of the parties (appellee and appellant) an opinion only that the value of the stock depended upon the collection of these outstanding claims. The chancellor below knew, doubtless, all the witnesses called to testify in this case, and, being a question of fact, much importance should be attached to his ruling; and while the testimony for the appellants, uncontradicted, would create a suspicion of unfair dealing, when looking to the testimony for the appellees it is manifest that Anderson must have not only known the condition of the bank, but with the advice given him by those who did know, and familiar with its affairs, it results that his own judgment has caused the loss, if any, and not the mere opinion of the appellee as to the value of this bank stock.

Affirmed.
Ky.App. 1895.
ANDERSON et al. v. BLACK et al.
32 S.W. 468, 17 Ky.L.Rptr. 732



     

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