3 Sandf. 137 | The Superior Court of New York City | 1849
This is a bill for the foreclosiu’e of a mortgage, for securing the payment of 25,000 dollars, executed and delivered by the defendant, Henry Yates and his wife, in September, 1838, to The Horth American Trust and Banking Company, an association organized under the general banking law of this state. The consideration of the mortgage was the nominal amount, or par value, of two hundred and fifty shares in the capital stock of the company, for which the defendant, Yates, as an original associate, had subscribed; and the legality of the consideration, and consequently the original validity of the mortgage, is not impeached or denied. It is, however, contended, that the debt which the mortgage purports to secure, has been in effect extinguished by an actual payment of one third of the amount, and by a set-off exceeding the residue to which the mortgagor is said to be entitled, and which is composed of various sums of money, alleged to have been due to him, from the company, when, in consequence of its insolvency, a general receiver of its property and effects was appointed.
The title of the plaintiff to enforce the payment in this suit, of whatever amount may appear to be due upon the mortgage, is just as unquestionable, as the validity of the mortgage. This title is derived from two sources, one or the other of which must be valid. In the early part of 1840, the bond and
In an ordinary case, it would be needless to inquire whether the real title of the plaintiff is derived from the trustees, or the general receiver; but owing to the peculiar nature of the defence in this suit, this inquiry is, in our judgment, certainly proper, and perhaps necessary. If the assignment to the trustees were valid, and the defendant is chargeable with actual or constructive notice of its existence, prior to the transactions, upon which his defence is founded, the whole of his defence will be excluded, and a decree such as the plaintiff asks, must of necessity follow. And upon this supposition, it will be unnecessary, and, as we think, inexpedient to consider, whether as against a title, derived solely from the general receiver, the defence could be sustained. The questions which the suit, if founded solely upon the title of the general receiver, would involve, may and probably will arise in other cases; and from the nature of these quesions, we are unwilling to commit ourselves by any intimation of opinion, in relation to any of them, until it shall become our duty to decide them.
The only questions, therefore, that we propose to consider, and in relation to which any explanation of our views will be necessary, are, first, whether the assignment to the trustees, Curtis, Blatchford, and Graham, was operative and effectual; and, second, whether the defendant is to be charged with notice of that
The validity of the assignment is denied, upon the single ground, that, contrary to the provisions of the revised statutes, it was unauthorized by any previous resolution of the board of directors of the company. (1 R. S. eh. 18, Tit. 2, sec. 8, page 591.) In considering this objection, we shall assume that those provisions of the revised statutes which relate to moneyed corporations are applicable, so far as without inconsistency they may be applied to associations organized under the general banking law; but it is proper to add, that the position we assume is regarded by us as far more questionable than it seems to have been considered in the cases, reported and unreported, to which we were referred upon the argument. Whether these banking associations are corporations at all, in the sense of the revised statutes, and whether the general banking law does not include all the provisions, restrictions, and liabilities, to which the legislature meant that the associations organized under the law, their directors and officers, shoidd be subject, are questions upon which we forbear to express any opinion, but which we hold ourselves at liberty to examine, and shall feel it our duty to examine with the care and attention which their importance demands, if they shall arise in any case in which it will be necessary to decide them. We think that no decision of controlling and paramount authority has hitherto been made in relation to either of them, unless that of the court of errors in Warner v. Beers may be so construed.
Conceding, however, that the views of the defendant’s counsel upon these doubtful questions are correct, we are still of opinion that the objection upon which they relied cannot be sustained, first, because the assignment to the trustees was in fact authorized in the mode that the statute requires; and, second, because the want of such an authority would not, in this case, be construed to render void the assignment.
It cannot be doubted that a banking association under the general law, may, by its articles of association and by-laws, divide the business it is authorized to transact into several
It is not denied that the by-laws which were produced and given in evidence were duly made in pursuance of this authority, and we are clearly of opinion that they are neither inconsistent with law nor with the articles of association. The first section in the first article of these.by-laws, declares that the business of the company shall be conducted under two divisions. The first division to embrace the business relating 'to bonds, mortgages, and other securities; and the second, the business of discount- and deposit, that is, the banking business, strictly so called. It is plain that these divisions were meant to cover the whole business of the company, and consequently that the words “ the business,” in the first division, must be construed to mean all business relating to the subjects there mentioned, and therefore, that they include the transfer and assignment, as well as the taking of mortgages and other securities. The second section in the same article establishes two departments, corresponding with the preceding divisions, and places them under the immediate supervision and direction of two distinct committees, and then, in connexion with the fourth section in the same article, gives to the committee of the first department, denominated the committee of investments and finance, the exclusive charge of all the business belonging to the first general division of the ' business of the company; not, it is true, making this delegation of power in expréss words, but in language that was evidently
The construction that we have now given to the articles of association and by-laws of this company, is by no means novel. It was adopted and acted upon by the supreme court in this district, sitting as a court of equity, in the case of David Leavitt, the General Receiver, v. Richard M. Blatchford and others.
Nor is this the only authority to which we may appeal, although alone it would he sufficient to justify, if not control, our decision. In the case of the Farmers’ Loan and Trust Company v. Wm. Blake and wife, Chancellor Walworth, in affirming the decree of the vice chancellor of the fourth circuit, expresses very clearly his opinion, that an assignment of a bond and mortgage, made by the president of the St. Lawrence Bank, an association under the general law, was valid, upon the ground that it sufficiently appeared from the evidence, that it had been made with the knowledge and approbation of a majority of the finance committee; and that by the by-laws of the bank, the sanction of this committee was alone necessary to authorize the act. The by-law of this bank is set forth in the opinion of the Vice-Chancellor Willard, and it corresponds exactly in its terms with those of the third section in the second article of the by-laws which we have read.
If then a resolution of the committee of investments and finance, must be deemed a resolution of the board of directors, within the meaning of the statutes, and such is our decision, the objection that the assignment to the trustees, of the bond and mortgage of the defendant, was an unauthorized act, and therefore invalid, falls to the ground, for that such a resolution was actually passed, has not been denied. It was adopted, as appears from the book of minutes produced in evidence, on the 30th April, 1840. ' It creates a new trust for 500,000 dollars, called the first half million trust, by authorizing an issue of the bonds of the company, payable in London, to the amount of 500,000 dollars, in the form previously adopted in a trust for one million of dollars, to be secured in a similar manner by a pledge of bonds and mortgages ; and for the purpose of securing the payment of the bonds, so to be issued, it directs the officers of the company, to select bonds and mortgages upon property in this state, to the amount of 600,000 dollars, and authorizes the president to transfer the same to Messrs. Blatchford, Curtis, and Graham, the trustees named in the former trust. The assignment and trust deed, produced and read upon the hearing,, are
, It is not necessary, however, to place our determination of the question we have considered solely or at all upon the grounds that have been stated; for, admitting that a resolution of the entire board of directors was necessary to give validity and effect to the assignment, by the president, a resolution, that we hold to be not only sufficient, but conclusive proof of the knowledge and assent of the board, was adopted, and has been given in evidence.
It was adopted on the 15th June, 1840, and its terms are so material, that they require to be fully stated.
“ Resolved, That the finance committee be authorized to transfer to Messrs. R. M. Blatchford, Lewis Curtis, and John L. Graham, in trust, bonds and mortgages, not exceeding $1,800,000, as a security for the bonds of the company, payable in three years, for not exceeding 331,500 pounds sterling, with 6 per cent, interest, payable in London, and that the said committee be authorized to add any amount of secmities that may be required to render the said bonds negotiable.”
That this resolution directly refers to the million, and half million trusts that had been previously created by the finance committee, and that the meaning is, that 1,200,000 dollars of the bonds and mortgages, which the committee are directed to transfer, should be held by the trustees, under the first trust, and the residue under the second, cannot be doubted, and has not been denied; but that the true import and effect of the reso
■It has been proved, that the only bonds of the company that have been issued, and the payment of which the trusts before created could operate to secure, in conformity to the terms of the resolution, were payable in three years from their date; and although it does not appear that the finance committee, in the exercise of their discretion, made any alteration in the securities previously assigned, or any addition to their number, this is only a proof that its members were satisfied with the selection of bonds and mortgages already made, and therefore ratified and confirmed it; but we are clearly of opinion, that the title of the trustees to the bonds and mortgages they were thus permitted to retain, is just as certainly to be referred to the discretion and choice of the finance committee, acting under the resolution of the 15th June, as it must have been to substituted bonds and mortgages, had those first assigned been wholly withdrawn. It is the assent of the finance committee, acting under the resolution, that alone gave effect to the prior assignment.
It is evident that the facts which have now been stated, constitute a full reply .to the objection that was strenuously insisted on by the counsel for the defendant, namely, that the resolution of the 15th June, being subsequent in date to the assignment, could not be relied on as evidence of a compliance with the terms of the statute, which expressly require a “ previous resolution.” This resolution was previous to any assignment that either was, or was intended to be, operative and effectual. It was previous to any assignment that, under the state of facts
Were the circumstances of this case, however, such as they were supposed to be by the defendant’s counsel; were it true that the resolution of the 15th June must be regarded as subsequent to the assignment; yet, thus construed, it would be amply sufficient to repel the objection founded upon the statute, since upon the narrowest construction it is impossible to deny that the resolution recognises and sanctions the trust previously created; and this sanction is all that the statute in. its just construction requires. We are fully convinced that the sound and most reasonable maxim of the common law, “ RatihabiUo priori mmdato rngm/pa/rai/u/r^ that a subsequent ratification is equivalent to a prior authority, (i. e. gives the same validity to an act that upon the ground of a want of authority is sought to be impeached,) a maxim borrowed from the Roman law, and now an element in the jurisprudence of every civilized nation, is just as applicable to this case as to any other to which it has ever been applied. We believe this maxim to be universal in its application, since we have been unable to discover that there is or can be any exception from the reasons upon which it is founded. It is a mistake to suppose that the word “ previous,” in the statute, creates such an exception. In every case to which the maxim is or can be applied, a previous authority is necessary to give an immediate validity to the act that is alleged to be confirmed ; the very words of the maxim imply that this necessity exists, and whether it arise from a rule of the common law, or a provision in a statute, must be immaterial. By the rule of the common law, a previous mandate or order is just as necessary to make the act of a person assuming to be an agent, binding upon the principal, as by the terms of this statute, a previous resolution of the board of directors to make the act of the president binding upon the corporation; and we know no reason why it is not just as competent to the directors to adopt
Hor is it necessary to rest' our opinion upon the reasons that have been stated. It has been repeatedly decided, that when a prior authority is rendered necessary by a statutory provision, the want of such an authority may be supplied, and the act impeached be rendered valid, by proof of its adoption by the person by whom it might have been authorized. An act of parliament, which is still in force in England, (28 Geo. HI. ch. 56.,) declares, that where an insurance is made by an agent, the name of the principal, or of the person who has received the order to insure, must be inserted in the policy; and it is admitted, as the plain and necessary import of the words of the statute, .that where the policy is in the name of an agent, the absence of a previous order to insure, received by him, renders the contract inoperative and void.
There is a single case, in which Lord Ellenborough doubted whether the words of the statute are not so express and imperative, as to exclude the evidence, when no previous order is shown, of a subsequent adoption of the policy, (Bell v. Jansen, 1 M. & S. 201;) but the doubts of his lordship do not appear to have been shared by his learned brethren, and the law is settled by many successive decisions, that the adoption by the principal of an insurance made by a voluntary agent, supplies the want of a previous order to insure, and renders the contract valid in its origin. (Wolff v. Hardcastle, 1 Bos. & Pull. 316; Sterling v. Vaughan, 11 East 619; Hagedorn v. Oliverson, 1 M. & S. 485; Routh v. Thompson, 12 East 274; Lucena v. Crawford, 2 New Rep. 269.) The terms of our statute are not more plain and positive than those of the English act of parliament, and if the construction given to the latter is not unjust or unreasonable, we are justified in following it.
It is not, however, necessary to say that a resolution of a board of directors, ratifying an assignment made by the president
We have deemed it expedient to reply fully to the objections we have been considering, in order that we might explain our views as to the true construction of a very important statutory provision ; but were there no evidence in this case of a previous or subsequent resolution of the board of directors, sanctioning the act of the president, it would still be necessary to hold, according to our understanding of the facts and the law, that his assignment to the trustees, of the bond and mortgage of the defendant, was valid and effectual, from the time that the bonds of the company, which the assignment was meant to secure, came into the hands of holders, for a valuable consideration and without notice. We think that it appears clearly, from the evidence, that Messrs. Palmer, Macldllop, Dent & Co., became such holders, and as such became entitled to the protection of the statute, as embraced within the exception, which declares that no conveyance, assignment, or transfer, is to be construed as void, “ in the hands of a purchaser for a valuable consideration and without notice.” It will not be supposed that the words “ in the hands,” must be literally construed, so as to exclude the possession of a trustee or agent; nor that the word “ purchaser” is to be understood, in its limited popular sense, as applying only to a person who derives his title from an-actual sale. Every person who, for any consideration that the law judges to be valuable, has acquired directly or indirectly, a legal or equitable title, or interest, by an assignment or transfer from a moneyed corporation, is to be deemed a purchaser, within the meaning of the statute; and within this definition every assignee of a bond and mortgage, whether the assignment is made to him directly or to a trustee for his benefit and security, and whether it is made absolutely or as a collateral security, is plainly included. Hence the holders for value of the sterling bonds of the company, which the half million trust was created to secure, as they
It appears from the testimony of Mr. Murray, who acted as the agent of the company in London in 1840-41, that none of the bonds of the company belonging to the half million trust, were ever sold in market; but that, during the summer and autumn of 1840, they were from time to time transferred to Palmer, Mackillop, Dent & Co., as a portion of their security for a very large debt antecedently owing to them from the company. When they consented to accept these bonds, they gave up to Mr. Murray for the benefit of the company, other securities, principally state stocks, at least of equal value, which were then in their hands ; and it is needless to refer to the decisions to show, that by the surrender of these securities, they became the purchasers of the bonds for a valuable consideration. It is not to be doubted, that they became so just as certainly and effectually, as if the whole sum for which the bonds were given, had been advanced by them in cash when they received them. By the same act, they became the purchasers of the bonds and mortgages, included in the half million trust, held by the trustees; and from that time, every one of these mortgages was, in judgment of law, in their hands.
It is equally certain that they became such purchasers without notice, that is, without notice of any fact by which the validity of their title could be affected. So far from believing or suspecting that the statute had been violated, they were solemnly assured, and doubtless believed, that its provisions had been fully complied with. The recital in the trust deed, a counterpart of which was in their possession, contains the assurance to which we refer; and had they not thoroughly believed this recital to be true, there is no hazard in saying they would never
As the imputation of actual notice is thus effectually disproved, it remains only to consider whether upon any grounds Palmer, Mackillop, Dent & Co. are chargeable with notice by construction of law, that is, whether the facts of the case suggest any principle upon which the doctrine of constructive notice—a very reasonable doctrine when properly understood—can be justly applied to them. It has been frequently said, and in the recent case of Johnson v. Bush, (3 Barbour’s Chan. Rep. 201) the argument was pressed by the defendant’s counsel with much ingenuity and force, that as the statute forbids any transfer of the property and effects, exceeding a limited value, of a moneyed corporation, not authorized by a previous resolution of the board of directors, every purchaser from such a corporation is bound to ascertain whether the title which he receives is sanctioned by the provisions of the law, and if he omit to inquire, and the fact prove to be otherwise, is chargeable with notice. He is bound to know, and is presumed to know, that a resolution of the board is necessary, and is therefore, at his peril, bound to know whether it was actually passed. The argument is specious, and but for the exception which the statute contains, would be conclusive. But for this exception, the duty to inquire would, in every case, attach upon a purchaser, and his omission to inquire would charge him, in every case, with a knowledge of the facts that an inquiry would have disclosed. But we cannot listen to an argument that, if admitted to prevail, would reduce the exception in the statute to a dead letter, and render the promise it holds forth to purchasers, a delusion and a mockery. If the duty to inquire exist in any case, it must in all; and in all, the omission to inquire must be followed by the same consequences, and hence there is no possible case to which the exception, in favor of purchasers without notice, would be found to apply. That there may be purchasers without notice, the words of the exception necessarily imply; the argument would prove that there can be none. We believe that the words of the statute have a meaning that must be followed, and therefore reject an argument that
It may possibly be thought that there is another ground upon which the imputation of notice to Palmer, Mackillop, Dent & Co. may be legally rested. It may be said, that the trustees were their agents, and that the rule of law is positive, and without excejDtion, that notice to an agent is notice to his principal. We are very far from thinking that notice to trustees selected and appointed by the Company, could operate as notice to the innocent purchasers of the bonds; but this is a question that we refuse to consider, since we are satisfied that the trustees are no more chargeable with notice, than the purchasers whom they represented. Hot only is there no evidence of the fact, but its admission would convict them of a very gross fraud, in becoming parties to a trust deed, containing a recital, which they knew to be false, and which could only have been meant to deceive those for whom they consented to act, and whose rights and interests they solemnly agreed to protect. Hone other than the clearest and most incontrovertible proof would justify us in saying that such a fraud was committed or meditated; and we should do violence to our own convictions, if we uttered a word by which the imputation might seem to be countenanced. We reject it utterly; there is no more reason for doubting the perfect good faith of the trustees, than that of the purchasers. If the purchasers were deceived and mistaken, so were the trustees.
We have said all, perhaps more than all, that was necessary to be said upon the questions we have considered. Having
During the hearing, it was for a time insisted that the written approval of the bond-holders had been obtained; but in the result, it was proved to our entire satisfaction, that it had been deliberately withheld. Although the refusal of the bondholders, Pahner, Maekillop, Dent & Co., to consent to the proposed arrangement, rendered the agreement as to them inoperative and void, it could not impair the positive evidence which it affords of the defendant’s knowledge and admission of their rights ; and hence not only the payment to which their assent was refused, but the credits which the defendant has claimed, arising from subsequent facts, must of necessity be rejected.
The only question, therefore, is, whether the defendant is to be charged with notice of. the assignment of his bond and mortgage, at any time prior to the month of January, 1841, so as to exclude a set off of the sums which it is said that he advanced to the company in that and the succeeding month. This inquiry will not long detain us. We shall not say that there is conclusive proof of the actual knowledge of the defendant ; but we feel no difficulty or doubt in saying, that the evidence raises a presumption of his knowledge, that, in a court of equity, he could never be allowed to contradict. The fact may possibly be otherwise, but upon the evidence, we are bound to presume that he was himself a party to the transfer of his bond and mortgage to the trustees, and that the trustees derived their title, if not from his individual act, certainly from an act in which he co-operated. The resolution of the board of the 15th June, 1840, furnishes the evidence to which we refer, and all that we have now said is a necessary consequence of the construction that we have already given to that resolution. The defendant was present as a director, at the meeting of the board
Could we even reject from our consideration the resolution of the 15th June, there are other grounds upon which, with entire satisfaction to our own minds, we should place our decision. We doubt whether a director of a moneyed corporation or banking association, should ever be permitted to deny his own knowledge of the lawful transactions of the company, if by such denial the rights of a third person, an innocent dealer with the com
The bond and mortgage of the defendant were an investment of a portion of the capital of the company; but they ceased to be such when they were withdrawn from the charge of the finance committee, and assigned to the trustees; nor could the finance committee, without a violation of duty, have permitted this withdrawal and transfer, unless other securities, which they deemed to be of equal value, were then substituted. Hence, as we must presume that the finance committee performed its duty, the facts of withdrawal, transfer, and substitution must have been known to its members, and as no ground for a distinction can be stated, it is to each of them that this knowledge must be imputed. Could we admit that the presumption of notice to the defendant, arising from these facts, might be repelled, no evidence to repel it has been given. It is true, that the answer contains a denial of notice, but the answer is not under oath, nor is the denial responsive to any allegation in the bill. It is not, therefore, evidence in itself, and it is wholly unsupported by proof. We can lay no stress upon the circumstance that the defendant continued to pay the interest upon his mortgage to the officers of the company, at its banking-house,
We give no opinion upon the question, whether the defence that has been set up, or any portion of it, could have been allowed to prevail, had this suit been brought by the general receiver, or could only have been maintained upon his title; hut as the case stands, and for the reasons that have been given, the defence as a whole, and in all its parts, must he overruled.
The plaintiff is entitled to the usual decree, with costs.
Now reported in 5 Barb. S. C. E. 9, and 3 Comst. 19.
See Cary 1 v. McElrath, S. P. in the other branch of the court; the second case post.