The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1903-04-19
Auditor Sherrfck Determined to Clear
Up Alleged Irregularities i'm Loans
from College Funds.
DEFENDANT ATTACKS NEW LAW
PROCEEDINGS CLOSED BY FORFEIT
URE CANNOT BE REOPENED.
Theory of Retroactive Legislation Alb
surd, He DecIares-A. &. Daily's
Statement-Other Details.

In the Spencer Circuit Court against Sam
uel z. Kercheval and his wife, Cornela
Kercheval to recover on a loan made in
1896 by the State to the Kerchevals is a
test case, IL is stated by one familiar with
the purpose of the State in bringing action.
The suit Is expected to settle beyond cavil
all question Of the right of the Legislature
to enact a retroactive statute for the pur-
pose Of remedying irregularities or mis-
| takes in the loaning Of college funds to
private citizens.
Should the suit against Kercheval result
in the recovery by the State of the judy
ment asked for. 1t is stated authoritatively
that other actions similar in nature will
be brought. That the auditors department
has made a number of bad loans in years
past Is beyond question. Through the
courts the procedure by which certain per-
sons obtained money on tracts of land
which afterward were forfeited to the
State and had to be sold by the State for
| a song will be made public. The actions
at law will be brought primarily to recover
moneys loaned under misconceptions from
the college funds. If there were shady
transactions, 1t is stated by Auditor Sher-
rick that they will be cleared up, no matter
of ignorance of realty values the same will
be true. In any event. the State auditor
| states, the whole matter will be cleared.
KERCHEVAL CASE FIRST.
The opinion is given that to, facilitate
matters the State will sift the Kercheval
loan before instituting proceedings to re-
cover from others to whom loans Of similar
| character, made under similar circum-
| stances were made. AS to who will be
made defendants in the future, Auditor
| Sherrick and Attorney General Miller re-
| fuse to express an opinion. They state
| that the Kercheval matter will be pushed
| to it's conclusion and that at present no
| immediate action is contemplated against
| others.
| Mr.. Kercheval and his attorney, Smiley
| N. Chambers, while adhering to the state
ment that the lands offered as security by
Mr.. Kercheval in 1896 for a loan of 5000
from the Indiana University endowment
| fund are worth the full amount of the loan,
| and expressing amazement that the State
was forced to dispose Of the Spencer county
| tract on which the loan was made for $771,
| take the position that the recent act of the
Legislature, passed for the purpose of al
lowing the auditor to recover bad loans, is
clearly unconstitutional. They say that
the theory of the act by which the state
auditor will try to get back to proceedings
closed by forfeiture before the act was
passed Is ridiculous. The suit In the Spen-
Ger Circuit Court is expected to settle that
contention, and upon the settlement made
there or in the Supreme Court eventually
the State will act in cases of other bor-
rowers from the college fund.
THE NEW Law.
Before being enacted the bill was sub
| mitted to two Supreme judges. who de-
clared it water-tight Its provisions are as
ditor Of state has made loans from the uni
versity fund, college fund or the permanent
endowment fund of the Indiana State Uni
versity, which said loans were secured by
| mortgage upon real estate. and when said
mortgaged premises have been heretofore
|. or which may be hereafter forfeited to the
State for nonpayment of the amount due
thereon, or have been heretofore or here
after shall be bid by the auditor of state
for the benefit of said respective funds, and
where said 'mortgaged premises when sold
according to law have failed or shall fail to
sell for a sum sufficient TO satisfy the prin-
cipal and interest of the loan made and the
damages accrued by reason of such failure
and costs, the auditor of state shall bring
suit on the note executed by the mortga geor
for the deficiency, for which deficiency the
maker shall be liable; and when judgment
shall be rendered thereon no appraisement
of property shall be allowed on execution
issued on such judgment"
The complaint of the State, as prepared
by Deputy Attorney General Hadley. makes
no specific charge of fraud. 1t sets out that
a mistake was made whereby valuable
lands appraised were not described in the
mortgage, but that other lands OF far less
value were therein described.
STATES COMPLAINT.
The complaint alleges that 'by mistake
OF the scrivener who drew said mortgage
the description contained therein was in
of Kerchevars land other than that de-
scribed in the mortgage), and which was
intended to be inserted by the plaintiff and
defendant and said scrivener.
THAT by the mutual mistake of the par
ties said mortgage was executed, delivered
and accepted with said erroneous descrip-
ton by said plaintiff in the belief that it
contained the true and correct description.
THAT the land described in said mort
gage was of a value not to exceed $500 and
was wholly inadequate as security for said
loan, and was not the land intended to be
covered by said mortgage to secure said
loan"
In the complaint the State asks the court
TO correct the mortgage by striking out the
erroneous description and by inserting the
description OF adjoining land owned by
kercheval; that the mortgage be then fore
closed and the land sold to satisfy the
amount due the State. In the complaint all
OF the realty owned by Kercheval in Spen-
should be specifically described in the mort
gage Is named.
The suit is entitled THE State of Indiana.
on the relation of David E Sherick State
Auditor, against Samuel E Kercheval and
Cornelia kercheval." The amount sought
to be recovered is 5000, and a correction of
the mortgage given in 1896 to secure the
loan of 5000 is asked for. Instead of 243 80
acres Of alleged poor land. the State wants
foreclosure proceedings on good land owned
by the defendant adjoining the tract alleged
10 be OF poor quality and small value.
TRANSACTION REVIEWED.
Kercheval borrowed 5000 of the perma-
nent endowment fund OF Indiana University
in 1896. He paid only the first installment
OF interest at 6 per cent. which was de-
Quoted from the principal. The land was
forfeited to the State in 1899, and April /
of this year the State sold the land for
s771.
The appraisers that placed value Of
$4,000 on the land were James A. Haines
and w. NJ. Wright. farmers OF Spencer
county. 1t is reported that the men were
I'm good standing in their community, and
that one OF the men has said since that
OF KerchevaPs. and did not realize that
the land described in the mortgage did not
include the choice part of the land
A map or the kercheval land shows that
six forties were described In the mortgage
These forties adjoin the rest OF Kefcheval's
land. but are on the outer edge. One OF the
forties Is entirely separated from the other
forties mortgaged. lying on the opposite
side OF the large 760-acre farm.
fer fhn a. Int