Court Opinion

ID: 7891134
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:49:05.311907+00
Date Added: 2024-06-11T16:31:55.158864
License: Public Domain

Tuck, J.,
delivered the opinion of this court.
This is a very important case, as well on account of the doctrines of equity governing the afFairs of persons of unsound mind, as because, by their application at this time, loss must fall on one of two innocent parties, in consequence of the fraudulent conduct of another, who took advantage of the mental imbecility of the complainant, to whom, as well by legal duty as by his unfortunate condition, he was placed in loco parentis.
The material facts are as follows: Samuel Chew loft real and personal estate, and an only child, the complainant, who is shown to have been of unsound mind from his infancy, and altogether incapable of managing Ins affairs, or attending to business. The father died in 1840, and Chew Schnebly, one of the defendants, a near relative of the complainant, obtained administration on his estate. After paying the debts, he, on the 1st of May 1844, obtained from the complainant a paper in the form of a bill of sale for certain shares of stock in the *316Bank of Baltimore, that had belonged to his father, on the alleged consideration of two thousand, six hundred dollars, containing, also, a power of attorney to Schnebly to transfer the stock to bimseif or to others. Afterwards, about the 13th of August of the same year, as we my infer from the date of the certificate to the order, the orphans court passed an order, on the application of Chew Schnebly, directing him “to pay to the legal representative of the deceased, the balance of the estate, including any bank stock that may be in his possession,” and, on the 23rd of August 1844, he exhibited these papers at the bank, and made to himself a transfer of the stock, as follows:
“Being duly authorized, I do hereby transfer to mj'self ten shares of stock heretofore standing in the name of Samuel A. Chew. (Signed,) Chew Schnebly, Adm’r.”
The stock has since been transferred to others, and cannot now be traced, as is alleged by the Bank.
On the 15th of February 1849, the complainant, by his committee, fled a bill against Schnebly and the bank, claim, iug to have the stock replaced, and payment of the dividends accrued since the transfer. The answer of the bank denies fraud and knowledge of the mental condition of Lowmars Chew, insisting that it had valid authority to make the transfer. A decree, pro confesso, was taken against Schnebly, and, on final hearing, the bill was dismissed as against the bank. The record comes before us on the complainants’ appeal from this decree.
Before considering the merits of the controversy, we will dispose of the objections urged against the frame of the proceedings. There is no doubt that where a defendant omits to demur for multifariousness, the court may, sua sponie, take the objection and dismiss the bill. But whether this will bo done or not, must depend on the nature of the case, and the course of proceedings at. the time of the hearing. Without intimating whether the present bill is obnoxious to the objection, we think it is not a case in which the court should interfere. The trouble and expense which the demurrer, if well taken, Vvould have prevented, have been incurred. The case is fully *317presented on the record, and the reasons for allowing the objection do not apply. Story’s Eq. Pl., sec. 281, and notes.
. The second point is made on the supposed variance between the allegations and proof, so far, at least, as ihe bank is concerned, there being no exceptions taken to the bill, under the Act of Assembly. As we understand the case, the charge of fraud is made against Schnebly alone, though it is alleged that, by construction of law, the bank is responsible for the consequences of the means employed by Schnebly to obtain the transfer, for the reason that the papers presented by Schnebly, and on which the transfer was made, did not show that he had legal authority for doing what he proposed to do. There is no averment that the bank had any agency in procuring the execution of the bill of sale. On the contrary, the procurement is ascribed to Schnebly, and the bank is charged with liability, by reason of the mental imbecility of Chew, rendering that paper null and void. As to the fraud, the case is made out against Schnebly, and against the bank, as to the charges on which its responsibility was said to depend. We do not consider the bill as having charged fraud, in fact, against the bank, and, it is proper to add, that its conduct in the matter is not open to censure on that ground, however incautious its officers may have been in recognizing papers of the validity of which they had no knowledge.
It was contended, on the part of the appellants, that conceding the incapacity of bowman Chew does not avoid the transfer, the bill of sale, and the order of the orphans court, singly or together, did not warrant the act of the bank. We need not pass upon the arguments based on this view of the case, because, if the transfer was liable to objection only on the ground of the legal insufficiency of these instruments, we suppose that the party who sold the stock, and received the consideration, as Chew must be assumed to have done in this aspect of the question, would not be allowed, in equity, to defeat the rights of others, acquired by the transfer. Having obtained the benefit of the transaction, he could not impeach it, and claim to have the stock replaced for his use. The effect of Chew’s incapacity, therefore, is a controlling question, *318which it is necessary to decide. The bank’s liability depends upon that circumstance. And here we may remark that it is immaterial whether the transfer be void, or merely voidable, because, if only voidable, the very object of the proceeding is to annul it, though it would seem, from the current of authorities, that the acts of a lunatic or person non compos, are of the latter class, and do not belong to that which the law deems absolutely void. Key vs. Davis, 1 Md. Rep., 32.
There are cases in England to show that such persons are held bound by their contracts, unless fraud or imposition has been practiced, but to this we cannot assent. The doctrine in this country is the other way, and. as we think, is sustained by better reasoning than the English rule, as announced in some of their decisions. The effect, in many cases, would be to place lunatics on the same footing with persons of sound mind, with less effective means to protect the injured partjr against the fraud, for, at law as well as in equitjr, fraud or imposition may be relied on, without reference to the mental capacity of the parties, except so far as such defect may give weight to other facts from which the fraud may be deduced. The most cautious persons are liable to be deceived and overreached, and all, of whatever degrees of intelligence, may be relieved when the fraud is made to appear. It would deprive these persons of the protection which the law designs to throw around their helplessness if they were held to the same measure of evidence as others, because, by reason of this incapacity, they have not the same opportunities of reaching the facts and exposing the fraud. Their weakness would give strength to the other party. Instead of protecting them, it would arm their adversaries. The present case furnishes an illustration. Here is a bill of sale of a person confessedly of unsound mind, with no evidence adduced by the defendant of the circumstances attending its execution, and no ability on the part of the complainant to furnish them, however fraudulent they may have been. The bank stands on this paper and the subsequent transfer, insisting that they are binding, unless it be shown by proof that he was defrauded or imposed upon, a condition with which it is evident he cannot comply, if his want of capacity is not accepted as evidence of the fraud.
*319There are cases where the courts have declined to interfere. In these, however, as far as we have examined, the lunatic had had the benefit of the contract, and relief was refused, because of lapse of time, the changed condition of the property or other circumstances, and especially where the party appeared to be sane. But these considerations cannot apply here. The case does not show that Chew received one cent for the stock. The presumptions are very strong that he did not. The papers produced by Schnebly, as authority for the transfer, did not warrant it in the form in which it was made, so as to pass the title at law, whatever effect they should have in equity, between parties competent to contract. The bank cannot say that Lowman Chew appeared to be sane, and that there was nothing to excite suspicion as to the state of his mind, for its officers dealt with Schnebly, without, even seeing Lowman Chow, and if misled or deceived by Schnebly, the consequences ought not to fail on Chew, ft is true, that transfers may be made under power of attorney, but this means a valid power, and the bank takes the risk depending on its execution. The corporation is the custodian of the stock-books, and is concerned to see that all tranfers are duly made, either by stockholders themselves, or by sufficient authority to others. In cases of forged powers, the bank is liable, and so as to the acts of femes covert and infants. In all such instances, it may be said that everything appeared to be fair and plain; that the officers did not know the instrument was forged, or that the party was a married woman or an infant, yet the corporation must meet the consequences, because the law declares that forged instruments are void, that married women are not sui juris, and that infants are incapable of contracting, except in specified cases. According to the established doctrine, the acts of lunatics and infants are treated as analogous, and, in this view of the present case, the transfer may be avoided. 1 Md. Rep., 43. In all these instances, there may be no actual fault on the part, of the bank, but the legal conclusion results from the justice and expediency, in such transactions, of casting the loss on those who can best provide against it. A bank may refuse to recognize the power of attorney if not satisfied of its *320entire genuineness. It may require the personal attendance of the party, for the very purpose of determining such matters of fact as may give rise to disputes. Considering the evidence touching the appearance and conduct of Chew, we think this transfer would not have been allowed, if he had offered to make it in person. As the bank has acted without this precaution, and recognized his bill of sale and power, the consequences attach in the same manner as in many other cases where corporations deal with persons in whom they, too late,, discover they have misplaced their confidence.
(Decided July 15th, 1859.)
As the decree must be reversed and the cause remanded, it is necessary to give directions as to the allowance of interest. There is not the least pretence for charging compound interest, though simple interest should be paid on the dividends accrued since the transfer, from the time that the bank should have settled with the committee of the lunatic. We are not prepared to say that, in this case, the liability commenced at the filing of the bill, but it may be safely and justly claimed from the time that the bank knew (hat Chew was of unsound' mind at the execution of the bill of sale, and this we may certainly take to have been at the date of the first decree, (1st of June 1855,) which was passed orv an agreement of the parties embracing that fact. The bank ought then to have settled the case without further litigation.
Decree reversed and cause remanded,