90 F. 545 | 8th Cir. | 1898
after stating the case as above, delivered the opinion of tlie court.
It is claimed in behalf of the appellees, who were the complainants below, that the Clarke Mercantile Company indorsed the individual notes of A. K. Clarke, which were at the time held and owned by the appellant, the National Bank of Commerce in Denver, without receiving any consideration therefor, and that tlie indorsements in question were for ihat reason ultra vires and void. On the assumption that the indorsements were without consideration, it seems to be further contended that, when the Mercantile Company discharged its liability to the bank on account of sucli indorsements by paying the notes, it acted wrongfully and in fraud of tlie rights of the appellees, and that tlie money so paid oil account of tlie indorsements can be recovered by them from the bank, notwithstanding the admitted fact that none of the debts now due to tlie appellees were contracted by the Mercantile Company until more than a year after the indorsements were executed. We think it sufficient to say, concerning this contention of the appellees, that the proof does not support the charge that the indorsements were executed without consideration. The trial court was of the same opinion, and we fully concur in its views on that point. Tlie record discloses that, at the first meeting of tlie directors of the Mercantile Company, Clarke proposed to sell and convey to said company his entire stock in trade, consisting of liquors, cigars, fixtures, and all other property, provided tlie company would issue to him its entire capital stock as full paid aud nonassessable, and provided, further, that the company would indorse the notes of said Clarke to the National Bank of Com
The appellees also predicate a right to relief on the ground that the appellant bank conducted a wholesale and retail liquor, cigar, and tobacco business under the name of the Clarke Mercantile Company, for the bank’s exclusive use and benefit, and that while doing so it made certain false and fraudulent representations to the business world concerning the amount that had been paid on the stock of the Mercantile Company, and concerning its assets and liabilities, whereby the appellees were deceived and induced to extend credit to that company. This charge appears to be based on the following facts, and is in the nature of a legal inference therefrom: When the Mercantile Company was formed, Clarke became, and so long as it was engaged in business continued to be, its president and chief managing officer. Buch purchases and sales as were thereafter made by the company were made under his supervision and direction. He was actively engaged in controlling the daily business transactions of the company .from the
Such, in brief, are the material facts on which tbe claim is based that tbe appellant bank transacted business in tbe name of tbe Mercantile Company, for its exclusive use and benefit, and that tbe representations aforesaid concerning that company’s assets and liabilities were in fact made by tbe bank, and that tbe bank should be held accountable therefor.
We are of opinion, however, that tbe claim in question is not well founded. Tbe Mercantile Company was a distinct legal entity, subject at all times to tbe control of its own officers, and it is clear, we think, that it did not become an agent of tbe bank either because Clarke hypothecated tbe bulk of its stock which be happened to own to secure a debt due to tbe bank, or because Morrison, an employe of the bank, served for a time on tbe board of directors of the Mercantile Company, or for both of these reasons combined. In a legal sense, a corporation does not become tbe agent of another, be it a corporation or an individual, because tbe latter bolds a part of its stock in pledge to secure a debt; nor is tbe relation of principal and agent established, as between two corporations, because an officer or employé of one is a member of tbe board of directors of tbe other. It has even been held that, where tbe same person is acting as director in two corporations, knowledge acquired by him, while serving in tbe capacity of a director in one corporation, is not imputable to tbe other. Thomp. Corp. § 5214,- and cases there cited. Moreover, while it may. be conceded that one corporation may act as agent of another in a given transaction, or even
It is further urged that the decree of the lower court, compelling the bank to pay the appellees’ claims out of the money which it received from the Mercantile Company on the sale of its property and good will, can be sustained upon the theory that the bank had a secret lien on the property of the Mercantile Company, or what was tantamount thereto, which was fraudulent as to its other creditors. This claim is based altogether on the state of facts heretofore detailed. It is said, in substance, that the bank held 1,988 shares of the stock of the Mercantile Company by a title which authorized it to vote the stock at all corporate" meetings; that Morrison and Dieter, two of the directors of the Mercantile Company, while serving on its board, were subject at all times to the orders of the bank; and that by these means the bank had acquired a control over the Mercantile Company which was as obnoxious to the law as an unrecorded mortgage or bill of sale covering all of that company’s property and assets.
We think, however, that it is an erroneous view that the bank had the right to vote the stock which stood in the name of Morrison on the books of the Mercantile Company. The testimony shows without contradiction that Clarke was the real owner of that stock, and that it had been placed in Morrison’s name merely as collateral security for Clarke’s indebtedness to the bank, without any agreement between Clarke and the bank that while it was so held it should be voted by the latter. Under these circumstances, the right to vote the stock depends upon a local statute of Colorado (1 Mill’s Ann. St. Colo. §§ 495, 496), which is as follows:
“Sec. 495. No person holding stock in any corporation as executor, administrator, conservator, guardian or trustee, and no person holding such stock as collateral security, shall he personally subject to any liability as stockholder of such corporation, but the person pledging such stock shall be considered as holding the same and shall be liable as a stockholder accordingly, and the estate and funds in the hands of such executor, administrator, conservator, guardian or trustee, shall be liable in like manner and to the same extent as the testator or intestate, or the ward, or person interested in such trust funds would have been if he had been living- and had been competent to act and held the stock in his own name.
“Sec. 496. Every executor, administrator, conservator, guardian or trustee shall represent the stock in his hands at all meetings of any such corporations a.nd may vote accordingly as a stockholder, and every person who shall pledge his stock may nevertheless represent the same at all meetings and vote accordingly.”
Beading both, of these sections together, the term “trustee,” as used in section 496, means, we think, a person who holds the legal title to stock for the benefit of some third party, who is the equitable owner thereof, and entitled to the dividends thereon, and whose property, whether held in trust or otherwise, is chargeable with whatever liability may result from the ownership of the stock. Persons holding
Concerning the charge that Morrison and Dieter, while; serving on the board of directors of the Mercantile Company, were mere agents of the bank, we deem it sufficient to say: First, that both of these persons were duly qualified to serve as members of the board by their ownership, in their own right, of one share each of the stock of the Mercantile Company; and, in the second place, that we fail to find any evidence in the record which would justify a finding that Dieter was a special representative of the bank on the board of directors, and that: he was unduly or unlawfully swayed by its influence. He was the bookkeeper of the Mercantile Company, and was employed for that purpose by its president. He devoted all of his time to its service, and was paid for his services by the company. In short, he bore no such, relation to the bank as would indicate that it could or did control his actions in an unlawful manner. Indeed, when the facts of the case are fully analyzed, it will be found, we think, that the control which the bank exercised over the Mercantile Company was mainly due to the fact: that it had made advances to the company and was its largest creditor. It was a moral influence, due to this circumstance, which the bank seems to have exerted over the Mercantile Company, rather* than any legal power that it had acquired to control its actions or business policy. The directors of the Mercantile Company seem to haw; retained the power at all times to transact the corporate business as they deemed best, and two of them, at least (Clarke and Dieter), did not occupy such a relation to the bank as disabled them from exercising an independent judgment, or acting at all times as they thought proper.
We have already stated, in substance, that the evidence does not support the contention that the bank should be held responsible to the appellees for the statements which were made by Clarke and Dieter, relative to the financial condition of the Mercantile Company, and on this branch of the case it is proper to observe, further, that the testimony does not warrant the conclusion that the bank wrongfully concealed its relation as a creditor of the Mercantile Company, or resorted to any artifice to prevent such relation from becoming known. Ho statute of the state of Colorado, and no business usage of which we are aware, made it obligatory on the bank to give public notice of the amount of its claim against the Mercantile Company; and it goes
In view of these .considerations, we are unable to discover any reasons which will warrant a ruling that the control which the bank exercised over the Mercantile Company was tantamount to a secret lien on its property and for that reason fraudulent. Such influence as it exercised over the Mercantile Company it had acquired by means which the law esteems lawful. It concealed no fact which the law required it to make known. Moreover, it had no legal power to -control the corporation, since the majority of that company’s directors were under no obligations to the bank which can be assumed to have Tendered them unduly subservient to its wishes.
In support of the proposition which is now under consideration, the appellees have invited our special attention to the case of American Oak-Leather Co. v. C. H. Fargo & Co., 77 Fed. 671, which seems to .have controlled the action of the trial court in rendering a decree in favor of the appellees. In that case it appeared that an insolvent business corporation had executed judgment notes in favor of three of its creditors, and had agreed that it would not execute like notes in favor of any of its other creditors. To make the latter agreement effectual, and for no other purpose, its president and secretary and the majority of its directors resigned, and their places were' filled by clerks of the attorneys for the favored creditors who had concocted the scheme. The corporation was thus left bound in the hands of the favored creditors who had been vested with power to make the potential liens actual liens at any moment. It was held, in substance, that .judgment notes'executed under such circumstances had all the vices of a secret lien. The facts disclosed by the present record, as heretofore detailed, are, in our judgment, materially different from those last recited. The bank held no obligation of the Mercantile Company which it could transform at will into an actual lien upon its property; neither did it have a like power to control the action of the debtor company. The result is that, if we give to the case cited its full weight, we fail to discover, in the facts upon which it was predicated, anything which will serve to alter the conclusions heretofore announced.
One further question affecting the jurisdiction of the trial court is presented by the record which deserves notice. Several of the appel-lees who intervened in the suit which was commenced by Paris, Allen !.& Co., and who became co-complainants after that suit was instituted, did not have claims against the Mercantile Company amounting to as much as $2,000, exclusive of interest and costs, and with respect to