Platt v. Birmingham Axle Co.

41 Conn. 255 | Conn. | 1874

Pardee, J.

On the 28th day of October, 1869, the petitioner loaned $625 to Charles E. Colt, one of the respondents, who gave his note therefor. As security for the payment thereof Lucie P. Colt, his wife, delivered to the petitioner a certificate for fifty shares of the stock of the respondent corporation, the Birmingham Axle Company, belonging to her and standing in her name, together with a writing of which the following is a copy:—

“ I hereby pledge fifty shares of the stock of the Birmingham Axle Company, with certificate No. 11 attached hereto, as security for the payment of a certain note drawn by Charles E. Colt in favor of Zenas M. Platt, dated this day, at six months, for six hundred and twenty-five dollars. I pledge all my possessions, real or personal, now or hereafter, for the payment of said note. Birmingham, Oct. 28th, 1869. Lucie P. Colt, Charles E. Colt.”

Of this transaction the respondent corporation had no notice until on or about the 15th day of April, 1873, when the petitioner for the first time notified it thereof and requested it to transfer the fifty shares of stock to himself.

We say no notice, notwithstanding the fact that Mr. Colt held the office of secretary of the corporation from July, 1869, to March, 1872; for under the circumstances of this case his knowledge of the transaction is not to be imputed to the corporation.

In Farmers’ & Citizens’ Bank v. Payne, 25 Conn., 449, Storrs, C. J., says: The general rule on this subject is, that notice of a fact to an agent is notice to the principal, if the agent has knowledge of it while he is acting for the principal in the course of the transaction which is in question. ® * * * * In all of the cases where the question was whether the principal was to be affected by the knowledge of his agent, the latter possessed such knowledge while he was acting for the former. There is none in which it has been held, or indeed claimed, that such knowledge would have that effect while he was not so engaged, nor can we conceive any good reason for the adoption of such a principle.”

In The Bank of U. States v. Davis, 2 Hill, 451, Nelson, C. J., said : “ I agree that notice to a director or knowledge derived from him while not engaged officially in the business of the bank can not and should not operate to the prejudice of the latter. This is clear from the ground and reason upon which the doctrine of notice to the principal through the agent rests. The principal is chargeable with this knowledge for the reason that the agent is substituted in his place and represents him in the particular transaction; and as this relation, strictly speaking, exists only while the agent is acting in the business thus delegated to him, it is proper to limit it to such occasions.”

In Winchester v. Baltimore & Susquehanna Railroad Co., 4 Maryland R., 231, the court held that where the president of a corporation executed to some of its directors, in trust for it, a mortgage of land to which his wife had an equitable title by unrecorded deed, the same having beén paid for out of her separate estate, the mortgagor’s knowledge of his wife’s equities will not on account of his official position be considered as knowledge of the corporation and cannot affect its rights unless communicated to its managing agents. Neither the acts nor the knowledge of the officer of a corporation will bind it in a matter in which he acts for himself and deals with the corporation as if he had no official relations with it.

Judge Stort, speaking of certain judicial opinions upon this subject, says : “ Perhaps it will be found that if either of these distinctions is to prevail it will sap the foundations on which the security of all banking and other moneyed corporations, if not of all corporations, have been hitherto supposed to rest; to wit, that no act, or representation, or knowledge, of any agent thereof, unless officially done, made or acquired, is to be deemed the act, representation or knowledge of the corporation itself.” Story on Agency (6th ed.), § 140 b.

Colt borrowed the money from the petitioner for his individual use. As the husband of Lucie P. Colt he knew of the delivery of the stock certificate to him and joined her in signing the paper referred to. This knowledge came to him in no manner and in no sense as the secretary of the Birmingham Axle Company; his secretaryship in no degree operated to make him a party to the act or to bring him and the petitioner together. The corporation had no interest'in the matter ; it was not in legal identity with him, either as to the act or his knowledge respecting it; he was not an agent for it in the transaction which made him a witness to the delivery of the certificate ; and he ceased to be its secretary and had left its service prior to the time when the loans were made which gave rise to the statute lien hereinafter mentioned.

After the 28th day of October, 1869, and prior to the 9th day of April, 1872, all of the stock-holders of the respondent corporation, the Birmingham Axle Company, by a mutual parol agreement and understanding’ among themselves, agreed to pay Into the treasury, for the use and benefit of the corporation, a certain sum of money upon each share of the capital stock thereof; Mr. and Mrs. Colt entered into this agreement in relation to the stock standing in her name, including the fifty shares represented by the certificate held by the petitioner. All of the stockholders, except Mrs. Colt, executed their agreement, by paying the money due thereon from them respectively td the treasúrer of the company.

On the 9th day of April, 1872, upon the joint request of Mrs. . Colt and her husband, the corporation credited her with the payment of the sum due from her by reason of her agreement with the other stockholders, thus executed on their part, both then representing that she held the certificate for the stock and that they would transfer the same to the corporation to hold until she should repay the loan thus made to her.

Practically, the transaction was a loan of money by the corporation to her at her request to enable her to perform an agreement which she had made with her co-stockholders, presumably beneficial to her and to them, which she desired to execute, to which the corporation was not a- party, for which it was not responsible and which was not illegal.

Therefore we see no occasion for discussing any question as to the power of the corporation to compel her to make this contribution to its treasury, if she had refused to do so.

Also, upon the 9th day of April,’1872, upon the joint request of Mrs. Colt and her husband, the corporation loaned to her for her private use an additional sum of more than $800, upon their like joint representation and agreement concerning the certificate of stock.

It is true, the Birmingham Axle Company was organized as a manufacturing corporation, and so far as the case shows, carried on that kind of business. The solitary instance of earning interest by a temporary loan of' its funds to one of its stockholders upon the security of its own stock, which is brought to our notice, does not, in our view, so violate the law of its being, and is not so clearly against public policy, as to justify a court of equity in placing the transaction outside of its protection and in refusing to aid the corporation in obtaining repayment oí the money, especially when the representatives of the debtor do not ask for any such action on the part of the court.

The statute provides that every joint stock corporation shall at all times have a lien upon all the stock or property of its members invested therein, for all debts due from them to such corporation.

When the respondent corporation made these loans to Mrs. Colt, the fifty shares of stock in question stood in her name upon its books, and it had received no notice that any other person had or claimed to have any interest therein. By operation of the statute a lien in its favor came into existence simultaneously with her indebtedness to it; and we do not regard its failure to insist upon her presentation of the certificate at that time such neglect as would prevent the inception of that lien.

In contemplation of law, the statute was known to the petitioner when he accepted the certificate; it was, to him, as if it had been embodied therein ; it was in the nature of a qualification or restriction of his eqfiitable interest; it was notice to him that if, after a reasonable time had elapsed, he refrained from giving any notice of his interest in the stock to the corporation, a statute lien might come into existence at any moment.

Under these circumstances the petitioner was called to the exercise of some diligence, to the performance of some act to perfect and protect his rights. His silence, two and a half years in duration, is neglect of such kind and degree as must place his interest in the stock in question second to the statute lien of the respondent corporation.

We advise the Court of Common Pleas that the Birmingham Axle. Company has the first lien upon said stock for the repayment of $1,275, principal, with interest from the 9th day of April, 1872.

In this opinion the other judges concurred.