Stark Bank v. U. S. Pottery Co.

34 Vt. 144 | Vt. | 1861

Peck, J.

This action is against the defendant as maker of three promissory notes, dated at Bennington, February 15th, 1858. The defendant makes no defence to two of the notes, but denies its liability on the other, being the note for two thousand two. hundred and forty dollars and thirty-eight cents.

The first objection on the part of the defence, is that the treasurer who executed the note in behalf of the company, was not authorized thus to bind the defendant.

There can be no doubt of the authority of Gager, the treasurer, to execute notes in behalf of the company in the ordinary course of business, if he had previously acted as the financial agent of the company, and been in the habit of borrowing money, executing notes, drawing drafts and accepting bills, etc., in behalf of the company, with the knowledge and sanction of the directors of the company, as the evidence tends to show, but it still remains to be seen, whether the note in question, under the circumstances of the case, came within the scope of his powers. We think not. It was not in the ordinary course of business, and, to give validity to the note in question, some special authority must be shown or some ratification of the act by the company or its directors, especially as the note was given for the debt of Fenton, on which Gager was holden as surety, and with which the company 'had no connection, and as Fenton, who was an agent of the company, acted in concert with Gager in substituting the note of the company for their liability.

The evidence, as appears from the minutes of the testimony referred to, tends to show that the bank on or about the 14th of November, 1857, held several notes against the Pottery Company, amounting to about five thousand six hundred dollars, which had accrued under an arrangement with the defendant by which they discounted its notes from time to time, and also held a note against Fenton of about two thousand two hundred dollars, on which Johnson, one of the directors of the company, and said Gager were holden as indorsers, but with which the company had no connection. Johnson was also the selling agent of the company in New York, and Gager the agent in Boston, and Fenton at Bennington, where the business of the company was carried on. In order to procure an extension or continuance of the loan of the company at the bank, Gager agreed with the bank to give the note of the company for the amount of the Fenton debt, and in pursuance of that agreement, Fenton, who it appears had been in the habit to some extent of executing notes on behalf of the company, executed a note to the bank for the Fenton debt, and the loan to the company was thereupon extended or continued. The note in question is a renewal note, substituted for the one thus executed by Fenton in behalf of the defendant.

All this, it appears, was known to the bank at the time of the transaction. There was no evidence that either Fenton or Gager had in any other instance used the name of the company as surety or in assuming liabilities of others ; and in relation to Gager, the evidence tends to show that this is the only instance of. such use of the company name.

Under these circumstances and the other facts appearing in the case, we think the agency of Fenton and Gager did not authorize them, or either of them, tq pledge the credit of their principal upon this note, without the assent of the company or a majority of its directors to the transaction. This, it was incum,bent on the plaintiff to show. Here two questions arise; — first, whether the directors had the power to authorize the giving of the note, for if they had not, then their assent or ratification would be inoperative; secondly,whether a majority of the directors did assent to or ratify the act.

It is true the company received an extension of their loans at the bank in consideration of the assumption by them of the Fenton debt. This is a sufficient consideration, technically, to sustain the note if the act was within the scope of the powers of the directors, but it does not follow that, because there was a consideration for the note, the directors had power to execute it. It must also appear that it was a transaction within the scope of the powers of the directors who are but agents of the corporation. The directors had no such power unless under the circumstances there was an urgent necessity of doing it in order to save the credit of the company and enable them to go along with their business. If there was such necessity, making it for the interest of the company to enter into such arrangement, it was within the scope of their powers as directors, otherwise not. But as some of the directors were individually liable on the Fenton debt, for which the note in question was given, and their assent is relied on to make a majority, the note is not binding unless the transaction was in good faith towards the company, since some of the directors had an interest in casting their personal liability on the company and this was known to the bank at the time of the transaction. The question whether there was such an urgent necessity as to authorize the directors to make or sanction the arrangement, and whether they acted in good faith, are questions which should have been left to the jury under appropriate instructions. The court therefore erred in directing a verdict for the plaintiff. The question whether a majority of the directors did assent to, adopt or ratify the transaction, should also have been left to the jury under proper instructions. The evidence relied on by the plaintiffs counsel on this point is not of such an unequivocal character as to amount necessarily in law to a ratification or adoption of the act by a majority of the directors, even if the cqurt could assume it all to be true, as it consists to some considerable extent in inferences and presumptions to be drawn front the fapts testified to by the witnesses.

It is claimed among other things by the plaintiff’s counsel, that the transfer of the stock by Fenton to the company and its acceptance by them is in law a purchase of the stock in consideration of the assumption of this debt. If it clearly appeared that such was the contract it might give validity to the note, but the evidence fails to show this. The note executed for the Fenton debt and for which the note in question is a renewal, was executed on the 14th of November 1857, and the stock was not transferred till November 23d, 1857, and then without any communication with the directors of the company, and, for aught that appears, without the knowledge of any of them except Rhodes, the clerk, who it seems was a director, and without any special reference to this debt, but to secure Fenton’s general indebtedness to the company, he then owing them six or seven thousand dollars independent of this debt, and this debt, it appears, was never charged by the company to Fenton — at least the evidence tends to show this. It is therefore quite clear that this cannot be as matter of law a ratification of this transaction; —it is at most but evidence to be submitted to the jury with the other evidence in the case on this point.

It is claimed by the defendant’s counsel that the county court erred in not instructing the jury that the note was void for usury under the laws of New York where the note is made payable. The only evidence before the county court as to the laws of New York, was that of Mr. Harmon on cross-examination, who said : he supposed that by the laws of New York the security for debt is avoided for usury. There was no proof of the provisions of the statute of New York, or what constitutes usury by the laws of that state. We are referred in argument to the statute of New York, but the question for this court to decide is whether the county court erred, which must be determined by reference to the evidence on which that court was called upon to act. We see no error in the refusal of the county court to charge as requested on this point. What the ruling should be with the statute of New York properly before the court upon the evidence, must be left for a future trial if the counsel choose to raise the question.

Judgment reversed and new trial granted.