Crook v. International Trust Co.

32 App. D.C. 490 | D.C. Cir. | 1909

Mr. Chief' Justice Si-iepard

delivered the opinion of the ■Court:

1. The first and third assignments of error relate to the refusal of the court to direct a verdict for the defendant, as well as to give the second and third special instructions. Under these the contention is that the plaintiff has no right to maintain the action as assignee of the subscription contract, because, on October 22, 1906, when assigned, the first call had not been made.

Without regard to the question of the general right to assign such contracts, whereon no call shall have been made, or of the operation of the special clause of the contract authorizing assignment, we think the right is settled by sec. 433 of the Code [31 Stat. at L. 1256, chap. 854], which reads: “All non-negotiable written agreements for the payment of money, including non-negotiable bills of exchange and promissory notes, or for the delivery of personal property, all open accounts, debts, and demands of a liquidated character, except claims against the United States, or the salaries of public officers, may be assigned in writing, so as to vest in the assignee a right to sue for the same in his own name.”

2. The second and fourth assignments of error are founded on exceptions taken to refusal of instructions relating to the binding effect of the representation of defendant by proxy. One of these is to the effect that, if the purpose of the meetings was to make a misrepresentation to the plaintiff, the defendant ■could not be bound. Another is to the effect that a proxy is given for the purpose of empowering the holder to vote at meetings on ordinary matters; therefore, if the said proxy was not voted by the holder at either meeting on October 25 and 27, in favor of a call of the first 10 per cent of the subscription; and, further, that if the only indication of the first call having been made was the “mental impression or understanding” of the persons present, and that no call was made by vote, there never was a first call, and defendant would be entitled to a verdict.

(1) It was not necessary that in order to bind defendant By a call, if made, his representative must actually have voted therefor. A member in attendance may vote against a proposition, or not at all, at his option, and yet be bound by it if .adopted by the votes of others. Absentees, even, are bound by corporate action if within the powers of the meeting, and a quorum be present. If the mere ordering of a call was the only thing requisite to defendant’s liability, he would be bound even if absent and unrepresented. By becoming a member of a corporation he subjects himself to liability for all corporate action taken in regular course, without his presence.

Defendant’s presence in person or by proxy at the meetings in question is important only in so far as affecting his notice of the call, if made. Under the subscription contract the making of the call is the first and essential step to render the subscriber liable. To complete this liability he must have notice ■of the call; that is to say, action does not lie against him until notified. But if he is in the meeting voting the call, whether in person or by proxy, and therefore has actual notice, no additional notice would seem to be necessary. A general agreement to consider a call as made may not operate as ordering the same, but it would certainly amount to a waiver of the formal notice by the proper officer.

(2) As regards the power to be bound by the misrepresentation of a fact, we think that the rule is the same as in all other matters of agency. One may be bound by the misrepresentation of his agent, if it is made in the exercise of his apparent authority, relates to the matter intrusted to his management or control, and the party dealt with has no knowledge of the misrepresentation. In this case the subscription contract provided that a call should be made, and it was within the ordinary power of the corporation, as well as its duty, to make it in due season. The written power of representation contemplated his proxy’s participation in all corporate meetings, and action, upon all matters within the scope and powers of the assembled meeting. Nor does the evidence furnish a foundation for the instruction in respect of the power to make a misrepresentation. If a call was made, it was a fact to be communicated te the plaintiff. Whether it was or was not the secret intention of the persons ordering it, that its payment by the subscribers, would not be enforced, is immaterial. That they did so intend is apparent from the subsequent simulated payment through the arrangement with the Alexandria bank. ' The effect of the misrepresentation, if there was one, as to the ordering of the-call and as to the payment, will be considered under the exceptions to the charge of the court on that point. The general charge correctly stated the case in relation to representation by-proxy.

(B) The necessity of the call was stated at the meeting, as-shown by the minutes, of October 25, and the same was ordered.' On October 27 those minutes are recorded as read and approved.. The letter informing plaintiff that the call had been made was. then authorized to be sent, and was signed by the proper persons. Testimony tended to show that all understood that the call was made, and that no notice to subscribers by the president-was necessary. Aside from the question of estoppel, it was a matter for the jury to determine whether a call had been made,, as a fa'ct, and that issue was submitted to them.

If the special instruction, as worded, means, as it apparently does, that there was never anything more than a “mere mental, assent or undertsanding,” unexpressed, or not given effect to in some act, it would be a correct statement of the law if there were any evidence on which to base it. The only' testimony offered by the defendant was that of the witness, Taylor, one of the parties to and the originator of the corporation scheme, who said that he had no recollection of the letter having been presented! or authorized; that he did not vote to make any representation to plaintiff about the call; and that there was never a first call of the 10 per cent “to his knowledge; he never heard about the making of such a call.” The witness appears to have been present at the meeting on the 25th also, but gave no evidence-relating to what had occurred then. What occurred on the 80th. is immaterial. It is not claimed that a call was then made. It was made at the two previous meetings, or not at all. The simulated payment of the call accomplished on the 30th was for the •sole purpose of pretending to answer the demand of the plaintiff that the call, of which it had been notified, should be actually •collected by the corporation.

3. The next assignment of error relates to the charge of the court to the effect that whether the call was made or not, if the plaintiff was informed by the letter of the proper officers that it had in fact been made, and, relying thereon, without'knowledge of its falsity, had advanced the money upon the security of the subscriptions, the defendant would be estopped to deny that the call had been made. The exception of the defendant was limited to this, that the court left out of consideration the ■fact that $22,000 of the money had been advanced on the 22d, and hence not on the faith of the representation.

We are of the opinion that, under the circumstances in evidence, the estoppel was not inoperative either in part or as a whole. The testimony tended to show that plaintiff entered into the agreement to take an assignment of 90 per cent of the subscriptions under the natural belief that the 10 per cent had been collected. Before paying over any money, it was informed that this had not been done. Upon the promise that it would be done immediately, plaintiff paid over part of the money, but notified the parties that nothing more would be paid until the call had been made and paid. Upon the receipt of the. lettei that the call had been made, and the further assurance that it Bad been collected in full, the remainder of the money was paid. Upon failure to perform the condition, the plaintiff would have fhe right to rescind the contract for the loan, and to demand the return of its part payment. It was not only prevented from exercising that right, but induced also to complete the payment of the loan, by means of the representation, whether true or false, in whole or in part. The representation was intended to prevent it from attempting the recovery of its money that Bad been paid, as well as to induce it to pay tbe remainder under the contract. The plaintiff had the right to rely on the statements of the officers of the corporation, and had no information that would put it upon further inquiry. For these reasons we think that the estoppel applied to the entire transaction.

It remains to consider the effect of this estoppel upon the defendant, who was only represented by proxy in making the representation.

A stockholder is ordinarily bound by the action of a meeting in which he is represented by proxy, whether it be extraordinary or not, provided that it is not forbidden by the charter or some general law. Scovill v. Thayer, 105 U. S. 143, 153, 26 L. ed. 968, 973; Dickerman v. Northern Trust Co. 176 U. S. 181, 203, 44 L. ed. 423, 434, 20 Sup. Ct. Rep. 311; Handley v. Stutz, 139 U. S. 417, 423, 35 L. ed. 227, 232, 11 Sup. Ct. Rep. 530.

If, in fact, no action is taken, but a false statement is made-that it has been, and another party is misled thereby to his detriment, the parties making the same, in person or hy proxy, may be estopped.

If, in fact, a formal act within the power of the corporation has not been exercised, and, notwithstanding the omission, the1 proper officers of the corporation represent that it has been, and thereby mislead another into acting on the faith of it, the corporation, and through it the shareholders, are bound. The officers are the representatives of the corporation, charged with dealing with others, and persons dealing with them have the right to assume the validity of their actions, in respect of a matter within their power and authority. Zabriskie v. Cleveland C. & C. R. Co. 23 How. 381, 399, 400, 16 L. ed. 488, 497, 498; Merchants’ Nat. Bank v. State Nat. Bank, 10 Wall. 604, 644, 19 L. ed. 1008, 1018; Louisville, N. A. & C. R. Co. v. Louisville Trust Co. 174 U. S. 552, 573, 43 L. ed. 1081, 1091, 19 Sup. Ct. Rep. 817.

4. The remaining questions relate to the exclusion of evidence’ offered by the defendant, and will be considered together. As we have seen, plaintiff was entitled to recover upon proof of either of two facts: First, if a call had actually been made at either of the meetings of October 25 or 27; and, second, if a call y?as not in fact made, but was represented to the plaintiff as-made, to induce it to part with its money, and it did so on the faith of that representation.

The evidence offered related to the first of these issues. The witnesses relied on by plaintiff to prove that the call was actually rendered consisted of subscribers to the enterprise' who attended the meetings. C. M. Campbell, who was elected president at the second meeting, was one of these. He succeeded the first president, Helphenstine, who was then also elected secretary and treasurer. Campbell had subscribed the subscription agreement to the extent of 1,650 shares of preferred stock. On the cross-examination of plaintiff’s vice president, it was developed that a number of settlements had been made, or agreed upon, with other subscribers to the stock, some of whom had been sued. These included not only Campbell, but Barley, Carlin, and Helphenstine, also, who had subscribed to 100 shares each. It was proved that Barley and Carlin had each settled with plaintiff for $800. Campbell had agreed to pay $2,500 in cash and $500 per month until the entire claim against him of $14,500 should be discharged. He had paid $1,000 of the first payment, and the regular monthly payments thereafter. The witness produced, the agreement for this settlement made with Campbell. Campbell, who had previously been examined and cross-examined at length, was recalled by the defendant for further cross-examination. He was asked if he remembered the eighth clause of the-settlement agreement, and said he did not. He was then asked whether the plaintiff had not promised him that it would proceed diligently against every other subscriber, and, in the event of collecting its debt in full, Avould relieve him of further payments thereafter. Plaintiff objected to his answering, and the court sustained the objection. Defendant then offered the agreement, particularly the eighth and ninth clauses thereof. The agreements with Carlin and Barley were also offered. The offer was,, first, to show the discharge of defendant by reason of those settlements ; and, second, to. show that the three parties were interested witnesses, and thereby affect their credibility.

As the obligations of the parties under the subscription contract were several, and there remained more than $29,000 of plaintiff’s debt unpaid, defendant has not contended that the settlements Avere admissible on the first ground of offer. The-contention is that they were admissible as affecting witness’s credibility. Whether admissible as furnishing the best evidence •of the fact of interest may be questioned. At least, however, the defendant had the right to cross-examine Campbell as to his interest in plaintiff’s recovery, and have him refresh his memory by the aid of the agreement, and, in case of his denial, to contradict him by it. The fact that a witness is interested in the result of a suit is one that may always be brought out on cross-examination. As to Barley and Carlin the situation is different. It was proved that they had settled in full for $800, and were therefore no longer interested either way. At any rate, their interest, whatever it might be, was fully disclosed. If there was but the one issue in the case on which plaintiff could recover, namely, the actual making of the call, the error in excluding ■proof of Campbell’s interest would require reversal of the judgment, for we are not permitted to indulge in speculation as to its probable weight with the jury, slight as it apparently would be in view of all the evidence offered. But the estoppel raised by the representation that the call had been made was ample .ground for the recovery. There was no question but that the letter representing the fact of the call had been sent, without Tegard to the evidence of Campbell. There was no attempt to deny that it was in fact signed and sent. That the plaintiff .acted on the faith of it was proved by the plaintiff’s vice president and by all the circumstances of the transaction. Campbell did not testify to that fact. No possible injury could, therefore, have been done to the defendant by the refusal to admit the evidence. ' Under such conditions a judgment ought not to be reversed. Runkle v. Burnham, 153 U. S. 216, 224, 38 L. ed. 694, 697, 14 Sup. Ct. Rep. 837; Hinckley v. Pittsburgh Bessemer Steel Co. 121 U. S. 264, 278, 30 L. ed. 967, 971, 7 Sup. Ct. Rep. 875; Klein v. Hoffheimer, 132 U. S. 367, 374, 33 L. ed. 373, 375, 10 Sup. Ct. Rep. 130.

Finding no reversible error in the record of the trial, the judgments will each be affrmed, with costs. Affirmed.

A writ of error to the Supreme Court of the United States was allowed March 2, 1909.