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(158 Ind. 508) INTERNATIONAL BUILDING & LOAN ASS'N v. WATSON et al. (Supreme Court of Indiana.

May 20, 1902.) MORTGAGES-MARRIED WOMEN-CONTRACT OF

SURETYSHIP-ESTOPPEL-PLEADING

AGENCY-NOTICE TO AGENT.

1. Horner's Rev. St. 1901, § 5119, provides that a married woman's contract of suretyship shall be void. Held, that where, in an action to foreclose a mortgage given by a married woman, she pleaded by cross complaint that she had given the mortgage as a surety, her cross complaint was not insufficient for not alleging that the mortgagee knew such fact.

2. Facts creating an estoppel, to be available, must be specially pleaded.

3. Where an attorney, who was at times employed by a loan company to collect dues, fines, etc., and at times secured loans from the association, he filling out the blank application, and being paid by the applicants, secured a loan for defendant, filling out the blank application, he did not act as agent for the company, so as to render it chargeable with his knowledge that the mortgage given to secure the loan was given by defendant as a surety.

Appeal from circuit court, Adams county; D. D. Heller, Judge.

Suit by the International Building & Loan Association against Augusta M. Watson and another. From a decree for defendants, plaintiff appeals. Transferred from the appellate to the supreme court under the act of March 13, 1901. Reversed.

C. J. Lutz, Shaffer Peterson, and Harding, Hovey & Wiltsie, for appellant.

JORDAN, C. J. Appellant, the International Building & Loan Association, is a corporation whose domicile is at the city of Indianapolis, Ind. As a part of its business, it conducted a loan department, and was engaged in loaning money on real estate security throughout the state. Augusta M. and Lawrence W. Watson, appellees, are husband and wife. On February 6, 1895, appellant claims to have loaned to Augusta M. Watson $500, which loan is evidenced by a bond executed to appellant by her and her said husband, and secured by a mortgage executed by them on real estate owned by the wife, situated in the town of Geneva, Adams county, Ind. Appellant's complaint in this action embraces two paragraphs. By the first paragraph it sought to recover a personal judgment against these appellees on the bond above mentioned, and a foreclosure of said mortgage. Augusta M. separately answered this paragraph of the complaint by (1) a general denial; (2) that she was a married woman, and the owner of the mortgaged premises, at the time she executed the bond and mortgage in suit, and that she executed each as the surety for her said husband; (3) that no part of the consideration was ever received by her for her own use or for the betterment of her separate estate, and that all of the consideration was received and used by her husband in the payment of his debts; (4) payment. The fifth paragraph of her answer was a cross com

plaint, in which she alleged substantially the same facts set up in her answer in respect to her suretyship, and thereby sought to have the mortgage and bond adjudged void as to her, and her title in and to the mortgaged real estate quieted. Appellant replied to appellee's answer by a general denial only, and hence, so far as its reply was concerned, tendered no issue of estoppel. An answer in two paragraphs was filed to the cross complaint, the first being a general denial. The second contained averments in the nature of a special denial, and also set up affirmative matter in estoppel, in substance and to the effect that appellee Augusta M., in order to induce appellant to make her the loan in question, made and delivered to it an application, whereby, under her oath, she stated and represented that the loan which she applied for and sought to obtain was for her own use and benefit, and for the purpose of paying and discharging her own indebtedness; and it is further averred that, believing such statements and representations to be true, and relying thereon, it made the loan to her, and paid over the money to her, etc. Appellee Mrs. Watson replied to this answer to her cross complaint: (1) General denial; (2) that appellant, at the time it loaned the money, had full knowledge and notice that the same was borrowed for the benefit of her husband, and for the purpose of paying his debts, and that the bond and mortgage in controversy were accepted by appellant with the full knowledge of all these facts, etc. There is no averment in the second paragraph of answer to the cross complaint to the effect that appellant had no notice or knowledge that the representations and statements made by the appellee in her application that the money which she sought to borrow was for her own use and benefit were not true. As the paragraph stands unchallenged in this appeal, therefore as to whether it is sufficient in all respects as an estoppel we need not and do not decide. Appellant unsuccessfully demurred to the cross complaint, and contends that this pleading is bad. The only infirmity urged against the cross complaint is that there is no averment therein to the effect that appellant had knowledge that she was executing the bond and mortgage in controversy as surety, and not as a principal. This was not required. The facts set up in the cross complaint fully disclose her disability under the statute (section 6964, Burns' Rev. St. 1901; section 5119, Horner's Rev. St. 1901) to enter into the contract in suit as a surety for her husband. In order to maintain her cross action it was not necessary, therefore, to allege that appellant had notice that she executed the instrument in dispute as a surety only. If she had in any manner legitimately estopped herself from asserting the alleged invalidity of the contracts in question on the ground that she, a married woman, had entered into the same as a surety merely, such matter of estoppel was required to be set up by appel

lant as a defense, for the rule is that facts creating an estoppel, to be available, must be specially pleaded. Center School Tp. v. State, 150 Ind. 168, 49 N. E. 961. In Trimble v. State, 145 Ind. 154, 44 N. E. 260, 57 Am. St. Rep. 163, this court said: "The disability, as to suretyship, imposed by the statute upon a married woman, must be considered in connection with another provision of the same act, to the effect that she shall be bound by an estoppel in pais; and no construction ought to be given to this exception by the statute of her ability to contract as will place in her hands a sword to defend her own fraud and imposition on others, instead of a shield for her protection, as the law intended." It follows that the cross complaint is not open to the objection urged by appellant.

On the trial below, Augusta M., for the purpose of rebutting or disproving the matter of estoppel interposed by appellant based on her sworn representations and statements made by her in her application for the loan, sought to establish that appellant, through its proper and lawful agent, had notice at the time the loan was made that the money was to be borrowed solely for the purpose of paying her husband's debts, and that her relation to the transaction in borrowing the money and in executing the bond and mortgage in suit was that of a surety only. Appellee's husband, when testifying in her behalf on this issue, was permitted by the court, over the objection and exceptions of appellant, to testify to and detail a conversation which he had with one John H. Runyon immediately prior to the time the loan in controversy was applied for and obtained. Runyon, whom appellee asserted was the agent of appellant, resided at and prior to the time of the loan in the town of Geneva, and was engaged in the practice of the law. He made insurance business and the collection of claims a specialty. Appellees also resided in the same town. It appears that he had for collection some claims against Mr. Watson, the husband, and was pressing him for the payment thereof. The witness Watson, in regard to this conversation with Runyon, and what was said by each therein, testified as follows: "He [Runyon] wanted to know if I could not work some way for to pay him the claims he had for collection. I told him I didn't know how in the world I could raise the money, unless I had a good long time to pay it. He suggested to me why didn't I take out a loan, and pay these debts off. I said: 'John, I cannot get the money. The property is in my wife's name, and we can't get it because a married woman can't mortgage her property to pay her husband's debts;' and he said to me, 'Let me work that matter.' I told him to go ahead." The witness further stated that soon after this conversation the loan was made, and that Runyon filled out the blank application which his wife executed to obtain the loan in controversy. Appellant ob

jected to this evidence on the ground, among others, that there was no evidence to show that Runyon was at the time of the conversation the agent of appellant, or in any manner connected with the corporation, or that he was acting as its agent in making the loan in dispute or in making any other loans. The home office of appellant was at the city of Indianapolis, Ind. Runyon testified on the trial that he was not the agent of appellant, and had nothing whatever to do in loaning its money. Mr. Sherman, appellant's secretary, also testified that Runyon had no authority to act for the company as its loan agent. The only connection Runyon had with appellant, as disclosed by the evidence, is that it employed him to collect dues, interest, premiums, and fines from some of the members of the association. He at times, it appears, would undertake to secure loans of money for persons from banks and other companies having money to loan, including appellant. The latter, it seems, furnished him with some printed blank applications to be used by persons who might apply for loans, and he would sometimes solicit persons who were desirous of borrowing money to apply to appellant for the same. If they decided to apply, he would, at their request, fill out their applications, and send them to the home office of appellant. The question of making the loan in each particular instance was a matter to be determined by the agents of appellant in the control and management of its affairs at the home office, after the applications for loans were received. In making out these applications, and for assistance rendered by Runyon in securing loans, he was paid by the applicant, and not by appellant. He filled out the application for appellee in the case at bar, but did so at her instance, and not at the instance of appellant. This is substantially the only evidence upon which appellee relies to establish that Runyon was the agent of appellant in making the loan to her. This, it is insisted, is sufficient to prove that he was its ageut, and hence it is contended that it must be held to be bound by the notice which he, as its agent, received from the husband in the conversation in controversy. In fact, this evidence seems to have been admitted for the particular purpose of proving notice to appellant of the alleged suretyship of appellee through Runyon as its duly authorized agent, and the special finding discloses that the court found that he was its agent in making the loan. It is a familiar rule that, where the acts of an agent are binding on the principal, the representations, declarations, and admissions of such agent made at the same time and constituting a part of the res gestæ, will also bind his prin- . cipal. But, of course, in such cases, or where notice or knowledge is sought to be imputed to the principal through the agent, it is essential and requisite that such agency or authority to act for the principal in the

transaction in question be first proven by either positive or circumstantial evidence; at least to the extent of establishing a prima facie case of such agency. The declarations or admissions, however, of the alleged agent are not competent to prove the agency or authority to act in the premises. It may be asserted as a general rule that it is an irregularity to admit the acts and declarations of an agent, or to admit evidence in respect to notice given to or acquired by him before his agency or authority to act is shown by legitimate proof. However, as the order of introducing evidence upon a trial is to an extent within the sound discretion of the trial court, subsequent proof of such agency or authority will suffice, and thereby cure the irregularity of admitting the acts of the agent prior to introducing the evidence of his agency. But, in the absence of such required proof, any evidence previously introduced relating to the acts, declarations, or knowledge of such agent must be rejected or excluded by the court. The following authorities fully support the rules asserted: Jones, Ev. §§ 256, 257, 359, 360; Applegate v. Moffitt, 60 Ind. 104; Trustees v. Bledsoe, 5 Ind. 133; Railway Co. v. Adamson, 114 Ind. 282, 15 N. E. 5. As a general rule, an agent is one who is either expressly or impliedly invested with authority from his principal to act in his place and in his behalf. It is true that notice to an agent of a corporation relating to any matter or transaction in which he has been given the control or management thereof by such corporation is notice to it. Railway Co. v. Ruby, 38 Ind. 294, 10 Am. Rep. 111; Railway Co. v. Snyder, 140 Ind. 647, 39 N. E. 912. It is, however, only where the agent is acting within the scope of his agency when he acquires such knowledge or notice that this rule obtains. Under such circumstances it becomes his duty to act upon the notice, or communicate it to his principal, and if he fails to do so the principal will nevertheless be bound by the notice. A person may be the agent of a corporation in regard to some of its particular matters or business,-for instance, as serving as an attorney or collecting agent in making collections or in the settlement of claims; but under such circumstances notice or knowledge received or acquired by him in the transaction of such business or matters, or in connection therewith, when it relates or pertains wholly to matters or affairs of the corporation other than those in which he is engaged in transacting or over which he has control, cannot be legally considered as notice to the corporation, for the reason that such notice, under the circumstances, in the eye of the law is not received or acquired by the agent within the scope of his agency, and hence he is not required to communicate the same to such corporation as his principal. Bank v. Butterfield, 100 Ind. 229; Shaffer v. Insurance Co., 17 Ind. App. 204, 46 N. E. 557;

Trentor v. Pothen, 46 Minn. 298, 49 N. W. 129, 24 Am. St. Rep. 225; Insurance Co. v. Parsons, 47 Minn. 352, 50 N. W. 240; Union Nat. Bank v. German Ins. Co., 18 C. C. A. 203, 71 Fed. 473. It certainly cannot be controverted that, if Runyon was the agent of appellant in making or negotiating the loan to appellee, notice received by him within the scope of his agency to the effect that she was to become the surety of her husband would in law have been notice to appellant of such fact, and evidence of such notice would have been competent for the purpose of rebutting the estoppel which appellant interposed under its answer. But can it be asserted that there is any legiti mate evidence to show that Runyon had any connection with the matter of making the loan in controversy, or that the same was under his control as the agent of appellant? It is true that he served the latter at times as its attorney or collecting agent in collecting money for it, such as dues, premiums, and fines due from some of its members; but authority to make collections for it would not necessarily imply authority to make or negotiate loans. The further facts that Runyon, who, as it appears, was to some extent engaged in securing loans for persons from banks and other loan companies, including appellant, and that he would fill out the applications for such loans, for which service he was paid by the applicant, and that he filled out the application made by the appellee for the loan in controversy, certainly cannot be said to establish that he was the agent of appellant in loaning its money or in making the loan to appellee. Under the circumstances in filling out the application for appellee, if he acted as the agent for any one, it was for her, and not for appellant. As there is an entire absence of evidence to prove the agency of Runyon, his declarations and what was said by ap

pellee's husband in the conversation introduced in evidence on the trial were wholly incompetent, and ought to have been excluded.

For the error of the lower court in admitting this evidence the judgment rendered against appellant on the issues tendered and joined on the first paragraph of the complaint and also on appellee's cross complaint is reversed, and the cause remanded, with instructions to the lower court to grant appellant a new trial in respect to these issues, with leave to reform the same, if desired.

(158 Ind. 531)

GROSS v. BOARD OF COM'RS OF WHITLEY COUNTY.

(Supreme Court of Indiana. May 22, 1902.)

COUNTY TREASURER — CONTRACTUAL RIGHT TO EMOLUMENTS ESTOPPEL-ALLOWANCE OF CLAIM BY COMMISSIONERS-EFFECT-RES JUDICATA-COLLECTION OF TAXES-FEES. 1. A county treasurer elected for two terms drew his yearly salary as provided by the act

of 1891, which prohibited him from receiving any other compensation. While he was in office the act of 1891 was declared unconstitutional by the supreme court, which decision was subsequently reversed. The treasurer filed his claim to additional fees as provided by the act of 1879, which claim was paid. Held, that the officer did not acquire a contractual right to be paid according to the provisions of the act of 1879 during the time the decision declaring the act of 1891 unconstitutional remained unreversed, as he had no vested interest in the office, and his right to compensation was not founded in contract; and hence the county was entitled to recover the additional fees paid him.

2. A county officer, having accepted and retained his salary as provided by an act of the legislature, was estopped from questioning the validity of such act, or from claiming additional compensation under a former statute by reason of a decision of the supreme court declaring the later act to be unconstitutional.

3. The allowance of a claim of a county treasurer by the board of commissioners for fees in addition to his salary, expressly prohibited by Acts 1891, p. 452, § 135, was not a judicial determination of the validity of such claim, and was not binding upon the county.

4. The fact that a county treasurer contributed to the expenses of a suit in which an act allowing such officers a fixed salary was declared unconstitutional did not make his right to additional fees under a former statute res judicata.

5. Even if a statute allowing fees to a county treasurer applied during his first term in office, he would not be entitled to fees on taxes collected during his second term, when during such term he was paid a salary in lieu of all other compensation, although he had been enjoined from collecting such taxes during his first term.

Appeal from circuit court, Wabash county; H. B. Shively, Judge.

Suit by the board of commissioners of Whitley county against John Gross to recover the amount of a claim unlawfully paid to him as county treasurer. From a judgment for plaintiff, defendant appeals. Transferred from appellate court under Act March 13, 1901 (Acts 1901, p. 590). Affirmed.

Thomas R. Marshall, Wm. F. McNagny, and P. H. Clugston, for appellant. ler and B. E. Gates, for appellee.

F. J. Hel

DOWLING, J. Appellant was elected treasurer of Whitley county, at the general election held in November, 1890, and was re-elected to that office at the November election, 1892, serving two full terms. He was allowed and paid his salary of $1,800 per year as fixed by the act of 1891. After the expiration of his second term, he filed with the board of commissioners of said county a claim for $2,360.31, which he demanded in addition to the $3,600 he had received, on the ground that he was entitled to compensation under the fee and salary law of 1879. The board allowed and paid the claim out of county funds. This suit was brought to recover the sum so paid. The complaint was in three paragraphs, the first of which alleges that the appellant was in November, 1892, duly elected treasurer of said county; that he served as such treasurer from December 1, 1892, until December

1, 1894; that his salary as fixed by the act of 1891 was $1,800 per year, payable quarterly; that at the end of each quarter year, during his said term, he filed his bill for his said salary, which was allowed and paid to him; that as such salary for said two years he received $3,600; that at the expiration of his said term he made his final settlement, and turned over to his successor all cash, papers, books, etc., belonging to his said office; that after such final settlement he filed with the board of commissioners of said county a claim for $2,360.31 for a pretended balance due him on account of commissions on current and delinquent taxes collected by him during the years 1893 and 1894, and paid over by him; that said illegal claim was allowed and paid by said board out of the funds of said county; that appellant was justly indebted to said county for said sum wrongfully paid to him, etc. The second paragraph is substantially the same as the first, except that it avers that appellant, in addition to the salary allowed him by the statute, illegally taxed, against the county, fees not authorized by law to the amount of $2,360.31, which were allowed and paid to him upon the order of the board. The third paragraph contains the same allegations as the first and second, but, with more particularity, charges that appellant collected, during the two years he was treasurer, $350,773.42 on account of current and delinquent taxes; that he unlawfully charged the county 1 per cent. on the first $100,000 so collected, and one-half of 1 per cent. on the excess over $100,000, in addition to his salary of $1,800 per year; that his salary was regularly demanded by him, and was paid to him, but that the board of commissioners wrongfully and illegally allowed and paid to him the sum of $2,448.81 upon said illegal and unauthorized claim, the payment of which has been demanded, etc. The venue of the cause was changed to Huntington county, and subsequently to Wabash county. Demurrers to the several paragraphs of the complaint were filed and overruled. The appellant filed an answer in four paragraphs, the first being a denial, and also his cross complaint in two paragraphs. Appellee demurred to the second, third, and fourth paragraphs of the answer, and to the first and second paragraphs of the cross complaint. These demurrers were sustained. The appellant thereupon withdrew his answer in denial, and, refusing to plead further, judgment was rendered against him. The errors assigned and not waived by failure to discuss them are the rulings upon the demurrers to the answer and cross complaint.

While the answer and cross complaint are of great length, the legal effect of each of them may be stated in a few words. They assert that the appellant was entitled to coinpensation under the act of 1879; that by the decision of the supreme court of Indiana in State v. Boice, 140 Ind. 506, 39 N. E. 64, 40 N. E. 113, the act of 1891 was declared in

valid, and that, while this decision stood, the appellant had the right to claim compensation under the act of 1879; that the act of 1893, amending the act of 1891 and supplying its defects, caused the act of 1891 to operate prospectively only, and that, until the act of 1893 took effect, appellant had the right to charge and collect fees under the act of 1879; that as a consequence of the decision in State v. Boice, holding the act of 1891 invalid, the appellant had a contractual right to compensation under the act of 1879 which could not be devested by a subsequent decision of this court declaring that statute constitutional; that appellant contributed to the expenses of the suit in State v. Boice, and thereby made himself a party, and became entitled to the benefit of the decision sustaining the claim of the county treasurer to fees under the act of 1879; and that the appellant having been enjoined from collecting $1,600 of taxes assessed against railroad property during his first term, and having collected such taxes during his second term, he was entitled to fees for making such collection under the act of 1879. Neither the answer nor the cross complaint stated facts sufficient to sustain the claim of the appellant to fees under the act of 1879. The act of 1891 was constitutional, and it repealed the fee and salary law of 1879. Walsh v. State, 142 Ind. 357, 41 N. E. 65, 33 L. R. A. 392; Legler v. Paine, 147 Ind. 181, 45 N. E. 604; Harmon v. Board, 153 Ind. 68, 54 N. E. 105; Board v. Heaston, 144 Ind. 583, 41 N. E. 457, 43 N. E. 651, 55 Am. St. Rep. 192; Henderson v. State, 137 Ind. 552, 36 N. E. 257, 24 L. R. A. 469. It fixed the compensation of the treasurer of Whitley county at $1,800 per year, and in the clearest manner prohibited the payment of any greater sum to that officer by way of compensation for his official services. Acts 1891, p. 439, § 113; Id. p. 452, § 135. The county officers named in the act can receive no compensation other than that provided therein. Acts 1891, p. 427, § 21. The act of 1893, amending the act of 1891, had the same effect as if incorporated in the original act, and the said act of 1891 fixed the salaries and compensation of the officers named in it from the time it went into force. Sudbury v. Board, 62 N. E. 45, 157 Ind. 446. The appellant was entitled to such compensation only as the statute allowed him. Board v. Johnson, 127 Ind. 238, 26 N. E. 821; Wood v. Board, 125 Ind. 270, 25 N. E. 188; State v. Roach, 123 Ind. 167, 24 N. E. 106; Board v. Barnes, 123 Ind. 403, 24 N. E. 137. The decision in State v. Boice, 140 Ind. 506, 39 N. E. 64, 40 N. E. 113, afterwards overruled by Walsh v. State, 142 Ind. 357, 41 N. E. 65, 33 L. R. A. 392, did not operate to give county officers a right to charge and collect fees under the act of 1879 during the time it remained unreversed. The rule that contract rights acquired under an interpretation of the law made by the supreme court are not devested by a subsequent decision to the contra

ry does not apply to the claims of public officers to fees or salaries established by law. Such officers have no vested interest in the offices, and their right to such fees and salaries is not founded in contract. Sudbury v. Board, 62 N. E. 45, 157 Ind. 446, 455. At a very early period in this state it was held that offices were not grants or contracts, the obligations of which could not be impaired, but rather trusts or agencies, which were completely within the power of the legislature, except so far as the constitution of the state forbade interference with them. Coffin v. State, 7 Ind. 157; Gilbert v. Board, 8 Blackf. 81. The doctrine that the incumbent has a vested interest in a public office, its fees and emoluments, has been denied by nearly every court in this country. See the very full note upon Hoke v. Henderson, 25 Am. Dec. 701, and cases cited. See, also, 19 Am. & Eng. Enc. Law, 526. The rule that a judicial construction of a statute becomes a part of the statute, and that rights acquired under it cannot be impaired by any subsequent act of the legislature, or decision of the courts altering the construction of the law, has never been extended, so far as we are advised, to other than contract rights, or rights arising under the statute so upheld as a rule of property. Insurance Co. v. Debolt, 16 How. 416, 14 L Ed. 997; Taylor v. Ypsilanti, 105 U. S. 60, 26 L. Ed. 1008; Douglass v. Pike Co., 101 U. S. 677, 25 L. Ed. 968; Anderson v. Santa Anna Tp., 116 U. S. 356, 6 Sup. Ct. 413, 29 L. Ed. 633; Stephenson v. Boody, 139 Ind. 60, 38 N. E. 331; Williams v. Citizens' Enterprise Co., 153 Ind. 496, 497, 55 N. E. 425; Thompson v. Henry, 153 Ind. 56, 58, 54 N. E. 109; Byrum v. Henderson, 151 Ind. 102, 107, 51 N. E. 94; Center School Tp. v. Board of School Com'rs, 150 Ind. 168, 49 N. E. 961. As the claim of the appellant did not arise out of contract, it was not protected by the erroneous decision in State v. Boice, 140 Ind. 506, 39 N. E. 64, 40 N. E. 113.

The appellant did not change his situation by reason of the decision in State v. Boice. He accepted his salary under the act of 1891, and yet retains it, and, having taken the benefit of the statute, he cannot be permitted to question its validity. Farrior v. Security Co., 92 Ala. 176, 181, 9 South. 532, 12 L. R. A. 856; State v. Baltimore & O. R. Co., 34 Md. 344; In re Tuthill (Co. Ct.) 50 N. Y. Supp. 410; Harris v. Jex, 55 N. Y. 421, 14 Am. Rep. 285; Mayor, etc., of City of New York v. Manhattan Ry. Co., 143 N. Y. 1, 26, 27, 37 N. E. 494; Insurance Co. v. Debolt, 16 How. 416, 14 L. Ed. 997; Gelpcke v. City of Dubuque, 1 Wall. 175. 17 L. Ed. 520; Havemeyer v. Iowa Co., 3 Wall. 294, 303, 18 L. Ed. 38; Olcott v. Supervisors, 16 Wall. 678, 679, 21 L. Ed. 382; Chandler v. State, 69 Tenn. 296; Ferguson v. Landram, 64 Ky. 548, 565; Id., 68 Ky. 230, 96 Am. Dec. 350; Dodd v. Thomas, 69 Mo. 364, 369; Vose v. Cockcroft, 44 N. Y. 415; Manufacturing Co. v. Attorney General, 124 U. S. 581, 598, 8

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