at Connersville, and took possession of the same under the provisions contained in the chattel mortgage, and placed the same in a garage operated by appellees Utsley and Mallory. This action followed with the result above indicated. Appellee security company was organized and doing business under and by virtue of the Petty Loan Act, chapter 125, Acts 1917, p. 401, section 9777 et seq., Burns'

1926.

A study of the evidence in the instant case prompts the remark that there was a time when check kiting was quite common, but appellant's method of doing business indicates that check kiting has, with the advent of automobiles, been superseded by something akin to automobile kiting, or at least the kiting of phony conditional sales contracts. This is not the first time this method of doing business has been before this court. See Guaranty Discount, etc., v. Bowers (Ind. App.) 158 N. Ε. 231.

Appellant's first contention is that:

The "automobile in question having been sold for a use other than resale, the title thereof could not be disposed of nor incumbered in any manner by Davis so far as to defeat the title owned by appellant under and by virtue of its conditional sales contract and assignment."

The weakness of this contention is that the automobile was not sold for a use other than resale. It was sold by appellant to the Connersville Motor Sales Company, that is, to Davis, for the purpose of a resale by Davis. Partlow-Jenkins Motor Co. v. Stratton, 71 Ind. App. 122, 124 N.. E. 470, and authorities of that character are not of controlling influence in the instant case.

[1] Where a manufacturer or distributor sells an automobile to a dealer for the purpose of resale, knowing such automobile is to be put in stock for resale to the public, it does so with knowledge that, as between it and a good-faith purchaser from the dealer, its rights under such a contract are fraudulent and void and must give way to the rights of the good-faith purchaser. If this were not the rule, no one would be safe in purchasing an automobile from the salesroom of a dealer. [2] Paul S. Preston, a salesman employed by appellant, testified that after the car was returned to Indianapolis from Connersville he, acting for appellant, sold the car to Fred Zipp on a contract conditioned that title should remain in appellant until the purchase price was paid. The contract shows that Zipp was to pay $1,750.20 for the car; that he paid in cash or trade $565; that he was to pay $50 a month for the first three months thereafter and $1,185.20 four months thereafter. If this was a good-faith sale as appellant claims it was, appellant was not entitled to recover in the instant case without proof that Zipp had not paid the balance of the purchase price. The evidence is silent upon that question. In the absence of any evi

dence that Zipp had not paid the balance of the contract price, appellant was not entitled to recover the possession of the car.

Appellant calls attention to the fact that the mortgage from Davis to the Security Company was given to secure the payment of a note in excess of $300, and for that reason insists that the mortgage is void. But in view of the conclusion reached we need not and do not decide that question. Appellant was entitled to recover only on the strength of its own title, and, there being no evidence that it has not received from Zipp all of the purchase price, the contention that the decision is not sustained by the evidence cannot prevail.

[3] Appellant next contends that the decision is contrary to law, because there is no finding that the property should be returned to the defendant. Appellant's complaint was verified, and a writ of replevin was by the clerk issued to the sheriff. There is no showing that either the plaintiff or the defendants gave a bond for the possession of the property. Appellant says the failure of the court to find there should be a return of the property to the defendants and to render a judgment for the return makes the "judgment" contrary to law.

There is nothing in the record to show who has possession of the property. The complaint alleges the defendants had possession of it, and there is no showing that they were ever deprived of that possession. If the sheriff did not take the property under the writ, or if he did take it and later returned it to appellees, there would be no necessity for a judgment directing that it be returned to

them.

In Baldwin v. Burrows, 95 Ind. 81, there was a general verdict in favor of the defendant. The plaintiff challenged the sufficiency of the verdict by a motion for a venire de novo, which was overruled.

The Supreme Court, in discussing the sufficiency of the verdict, said:

"A verdict for the defendant was equivalent to a verdict that the plaintiffs were not the owners and entitled to the possession of the property. If the property had been taken by the plaintiffs under the writ, this would have entitled the defendant to a verdict for the return of the property and damages for the taking of it; if it had not been so taken, no return could have been awarded or damages assessed for taking. But if the defendant was entitled to a sufficient verdict to warrant a judgment for the return of the property and for damages for taking it, but failed to obtain such a verdict, how can that harm the plaintiffs? The plaintiffs cannot complain of an error committed in their favor, and that cannot possibly do them any injury. There was no error against the plaintiffs in overruling the motion for a venire de novo."

That case is decisive of the sufficiency of the finding in the instant case. See Cabell v. McKinney, 31 Ind. App. 548, 68 Ν. Ε. 601. [4] Attention is also called to the fact that

1. Appeal and error 846(6)-Reviewing court is confined exclusively to trial court's findings in determining whether conclusions of law are erroneous.

In determining whether there was error in the conclusions of law as stated by the court, reviewing court is confined exclusively to findings of fact of the trial court.

2. Corporations 189(5)-Right of action of purchaser of stock against corporation for fraud held not available to purchaser's transferee.

Alleged fraud of corporation in issuing second preferred stock subject to prior payment of dividends to first preferred stock was available only to person to whom stock was issued, and right of action against corporation for damages did not pass from original purchaser of stock to his transferee; transferee's right of action being against his transferor only.

of

3. Corporations 189(5)-Transferee stock from original purchaser held not entitled to recover from corporation, notwithstanding claim that stock was void for failure to comply with Securities Act (Acts 1920, Sp. Sess. c. 26, § 11, as amended, see Burns' Ann. St. Supp. 1921, § 4359c1).

If second preferred stock issued by corporation was void because of failure to comply with Securities Act (Acts 1920, Sp. Sess. c. 26, § 11, as amended, see Burns' Ann. St. Supp. 1921, § 4359c1), right of action against corporation was in first purchaser only, and transferee of stock did not become creditor of the corporation but had right of action against his transferor only.

4. Corporations 71-Corporation's issuance of part of authorized preferred stock held not to preclude subsequent issuance of remainder subject to preferential dividends on stock first issued (Burns' Ann. St. 1926, § 4994).

Where corporation was authorized to issue $125,000 preferred stock by its articles of incorporation, its issuance of $75,000 of first preferred stock did not exhaust its power so that it was thereafter precluded from issuing remaining $50,000 as second preferred stock sub ject to prior payment of dividends on first preferred stock, since stockholders, under

Burns' Ann. St. 1926, § 4994, may authorize issue and sale of preferred stock upon such terms and conditions as directors may deem best. 5. Licenses 8(1)-Local corporation organized before August 1, 1920, was not required to apply to Securities Commission for authority to sell remaining portion of authorized preferred stock (Blue Sky Law, § 11, as amended, see Burns' Ann. St. Supp. 1921, § 4359c1).

Where articles of incorporation filed in Indiana before August 1, 1920, authorized issuance of preferred stock, which corporation had been selling, corporation was not required to make application to the Securities Commission before it could lawfully sell portion of authorized preferred stock still remaining unsold, under Blue Sky Law (Acts 1920, Sp. Sess. c. 26, § 11, as amended, see Burns' Ann. St. Supp. 1921, § 4359c1).

6. Licenses 8(1)-Transferee of preferred stock issued after but authorized before August 1, 1920, held not entitled to recover as creditor on sale of corporation's property, though stock was not authorized by Securities Commission (Blue Sky Law, § 11, as amended, see Burns' Ann. St. Supp. 1921, § 4359c1; Burns' Ann. St. 1926, § 4994).

Transferee of shares of second preferred stock of local corporation organized before August 1, 1920, whose stock was made subject to prior payment of dividends on first preferred stock, held not entitled to rescind sale and recover from corporation as creditor on sale of corporation's property, on ground that the issuance of the second preferred stock was not authorized by the Securities Commission, where the issuance of preferred stock was permit. ted by the corporation's charter and was therefore outside terms of Blue Sky Law (Acts 1920. Sp. Sess. c. 26, § 11, as amended, see Burns' Ann. St. Supp. 1921, § 4359c); issuance of second preferred stock being authorized, under Burns' Ann. St. 1926, § 4994.

Appeal from Probate Court, Marion County; Mahlon E. Bash, Judge.

Petition by John W. Kern, receiver of the Pioneer Realty Company, for the sale of the corporation's real estate and the distribution of the proceeds to the holders of first preferred stock, in which Robert Elliott intervened. From an adverse judgment, intervener appeals. Affirmed.

Walker & Hollett and Victor R. Jose, Jr., all of Indianapolis, for appellant.

Charles Remster, Henry H. Hornbrook, Albert P. Smith, Paul Y. Davis, and Kurt F. Pantzer, all of Indianapolis, for appellee.

In due course the sale, however, was made, and later the court determined the rights of distributees against appellant. From the judgment rendered this appeal, appellant presenting as error the court's conclusions of law.

It appears by the special findings that the Pioneer Realty Company is a corporation, duly organized July 7, 1920, under the laws of this state; that by its articles of incorporation, it has an authorized capital stock of $225,000, divided into 2,250 shares of the par value of $100 each, of which stock the amount of $100,000 in par value is authorized to be common stock, and the amount of $125,000 in par value is authorized to be preferred stock; that it is further provided in said articles of incorporation that such preferred stock shall contain such terms and conditions and be sold at such prices as the board of directors of the corporation may authorize and approve; that after the incorporation of said company, and on July 7, 1920, said corporation, by the lawful and proper action of its board of directors and officers, issued and sold to Breed, Elliott & Harrison, who are interveners herein, 750 shares of its preferred stock of the par value of $100 each, and duly issued certificates evidencing such stock ownership, in which certificates it is provided, inter alia, that in the event of liquidation the holders of the preferred stock shall be entitled to receive from the assets of the company the par amount of the preferred stock, plus all accumulated dividends, before any sum whatever is paid to or set aside for the benefit of the holders of the common stock: that of the preferred stock so issued and sold, there are now outstanding 600 shares of the par value of $100 each, upon which no dividends have been paid since October, 1924, of which 600 shares outstanding the firm of Breed, Elliott & Harrison is the owner of 75 shares of the total par value of $7,500; that on January 23, 1923, at a time when there was outstanding $65,000 of the preferred stock issued and sold, the common stockholders of the company, in duly assembled meeting, unanimously adopted a resolution, in substance, that: Whereas, by the articles of association, the common capital stock is fixed at $100,000 and the authorized preferred stock is fixed at not more than $125,000, or $225,000 in all, and all of said $100,000 of common stock has been issued and is outstanding, and $75,000 of first preferred stock has been issued, and $65,000 thereof is outstanding, $10,000 thereof having been redeemed by the company agreeably to the provisions of the stock certificates, and no stock, common or preferred except as above stated, has at any time been issued, and within the authorization of the company's articles of association and without violating any agreement between the company and its first preferred stockholders, the company can now issue and sell second preferred stock, which

shall in all respects be junior and subordinate to the said outstanding first preferred stock at least up to the amount of $50,000 of second preferred stock, therefore the stockholders authorize the board of directors to take such action as may be necessary or proper to issue and sell second preferred stock to the amount, at par, of $50,000, the same as to payment or redemption of principal, and as to payment of dividends to be junior and subordinate to the company's first preferred stock.

It is stipulated in each of the certificates of the second preferred stock, that, in the event of liquidation, the holders of the first preferred stock shall be entitled to receive from the assets of the company the par amount of their first preferred stock, plus all accumulated dividends before the holder of any shares of second preferred stock shall be paid any sum from such assets, but in such event the holders of second preferred stock shall, out of the remaining assets of the company, be entitled to receive the par value of their second preferred stock, plus all accumulated dividends, before any sum whatever shall be paid to or set aside for the benefit of the holder of any shares of the common stock of the company; that thereafter on or about March 17, 1923, the officers of the company sold to one E. C. Kriel 70 shares of the second preferred stock, and issued to him therefor a stock certificate containing the provision as to the priority of the first preferred stock, and that thereafter, on or about March 20, 1923, said Kriel sold said 70 shares of stock to appellant, and the certificate so issued to Kriel was surrendered to the company and a new certificate with like provisions was issued and delivered to appellant; that there were issued, and are now outstanding, 500 shares of second preferred stock, issued and sold under the resolutions passed by the stockholders and directors of the company January 25, 1923, the stock certificates being in all respects identical with the certificates issued to said Kriel and to appellant, except as to names, dates, and amounts; that no dividends have been paid on any of said 500 shares since October 11, 1924; that at the time appellant received the certificate of stock from Kriel he paid $6,650 therefor; that the company did not secure any permission from the Indiana State Securities Commission for authority to issue such second preferred stock, as set out in the resolution of January 25, 1923, nor did it file any proceedings or take any action to increase its capital stock, or file any papers or proceedings with reference to its second preferred stock issue, either in the office of the secretary of state or in the office of the Indiana State Securities Commission; that Kriel was, at the time he sold said certificate of stock to appellant, in the employ of Breed, Elliott & Harrison; that the transaction between Kriel and appellant was the individual business of Kriel and was without the knowledge, consent, or acquiescence of Breed, Elliott & Harrison, which firm took no part in the proceedings wherein the officers, stockholders, and directors of the company authorized the second preferred stock issue on January 25, 1923,

On these findings the court stated conclusions of law; that the law is with the intervening petitioner, Breed, Elliott & Harrison, and the holders of preferred stock issued and sold July 7, 1920, being the first preferred stock, and that the holders are entitled to be paid pro rata the par amount thereof, with all accumulated and unpaid dividends, before any distribution whatever is made to appellant, or any other persons holding preferred stock issued and sold pursuant to the said resolutions of January 25, 1923, being the second preferred stock.

Appellant presents no question by its motion for a new trial and the court's ruling thereon that is not presented by the court's alleged error in its conclusions of law. We therefore need consider only errors of the court in stating its conclusions of law upon its findings of fact. In oral argument appellant presented at length his interpretation of evidence drawing his conclusions therefrom as to what was proved, but we can give no consideration whatever to such interpretations by appellant.

[1,2] In determining whether there was error in the conclusions of law as stated by the court, we are confined exclusively to the findings of fact. From these findings it is clear that appellant purchased his stock which is here involved, from Kriel, and that Kriel, not appellant, purchased the stock from the corporation. If, then, any fraud was committed on the part of the corporation, it was committed against Kriel and not against appellant; and Kriel, not appellant, had such right of action as existed if any, against the corporation. Such right of action did not pass from Kriel to appellant with the purchase of stock by appellant. Huston v. Ohio, etc., Co., 63 Colo. 152, 165 P. 251; Fox v. Hirschfield, 157 App. Div. 364, 142 N. Y. S. 261; Steele v. Brazier, 139 Mo. App. 319, 123 S. W. 477; Kennedy v. Benson (C. C.) 54 F. 836.

In the Huston Case the court, quoting from 1 Cook on Corp. (6th Ed.) § 355, says:

"A sale of stock does not transfer the right of action for damages caused by false representations made to the vendor by the party from whom the vendor purchased."

[3] In the instant case it is appellant's contention that the stock which he purchased from Kriel was void because of the failure of

the corporation to comply with the Securities

Act hereinafter mentioned. If such were the fact, appellant's right of action was against Kriel and appellant did not by reason of his purchase from Kriel become creditor of the company. The court has expressly found

that Kriel was acting for himself, and that he did not represent the intervening petitioner, the firm of Breed, Elliott & Harrison.

It is expressly provided in appellant's certificate of stock that, in the event of liquidation, the holders of the first preferred stock shall be entitled to receive from the assets of the company the par amount of their first preferred stock, plus all accumulated dividends, before the holder of any shares of second preferred stock shall be paid any sum out of such assets. With this certificate in his hands, clearly reciting that it represents second preferred stock, appellant contends that he should be given priority with the first preferred stock, for the reason, as he claims, the company could only issue first preferred stock.

[4] It appears by the articles of incorporation that the company was fully authorized to issue $125,000 of preferred stock, and appellant contends that, having issued the $75,000 of stock, the company had lost its power to change the terms and conditions upon which it should issue the remainder. But the statute (section 4994, Burns' 1926) expressly empowers the stockholders, either when the stock is created or at any subsequent meeting, to authorize the issue and sale of preferred stock "upon such terms and conditions as such board of directors may deem best or as such company may prescribe." There is no provision in the statute which requires this stock all to be issued at the same time, nor that the shares shall have equal rights, nor is there any limitation, here involved, as to the terms and conditions which may be prescribed. We hold that the company, having issued $75,000 of first preferred stock, did not thereby exhaust its power so that it was precluded from thereafter issuing the remaining $50,000 of stock as "second preferred" upon the terms and conditions prescribed by its board of directors.

[5, 6] Finally, appellant contends that because there was no authority for the issuance of the $50,000 of second preferred stock obtained from the Securities Commission, such issue was therefore void, that the certificate of stock which he held therefor was void, and that he has a right to rescind the sale and occupy a position of a creditor of the company, thereby having priority in the payment of his claim over the holders of the first preferred stock. It is provided by what is commonly known as the "Blue Sky Law" (Acts 1920, Sp. Sess. c. 26, § 11), as amended in 1921 Burns' Supp. 1921, § 4359c1, that: