103 Mich. 565 | Mich. | 1895
In the early part of April, 1892, Charles T. Sawyer and Don F. Cargill obtained from one Charles Mears, of Chicago, an option for the purchase of about 2,000 acres of land lying immediately north of the city limits of Ludington, Mich., for the sum of $15,000. They then held a conference at the office of the defendant bank with the defendant Fuller, who was the cashier of the said bank, and the complainant, Charles G. Wing, at which it was agreed that the four parties named should organize themselves into a body corporate, purchase said lands, and engage in a scheme for developing the city of Ludington, popularly known as “booming.” They were to grant bonuses to manufacturing establishments to induce them to locate their plants in Ludington, expecting, as it is fair to assume, that the resulting appreciation in real estate values would eventually, if not at once, bring them a fair return, at least, for their investment and enterprise. It was agreed by Fuller that the defendant bank would furnish, upon the notes of .the individual corporators, all money necessary to buy the said lands.
A corporation was accordingly formed, with the four individuals aforesaid as its stockholders. The corporation was known as the “ Development Company of Ludington,” and each of the four corporators held . an equal share of
The note first above mentioned is the one more particularly in issue in this case. It reads as follows:
“ $5,000. Ludington, Mich., April 11, 1892.
“ Four months after date, I promise to pay to the Commercial and Savings Bank, or order, five thousand dollars, at the Commercial and Savings Bank, Ludington, Mich., for value received, with interest at 8 per cent, per annum, until paid.
“ O. G-. Wing..
[Indorsed] “H. S. Fuller.
“D. F. Cargill.
“ Chas. T. Sawyer.”
The deed of the land from Charles Hears- was taken*directly to the defendant bank. Within a short time afterwards the development company purchased 80 acres-of land in the same locality, known as the “Danaher & Helendy Addition,” for the sum of $2,000, and' still another 40.acres, known as the “McDole 40,” for $600. The defendant bank also furnished the money for these purchases upon the notes of the company, indorsed by the individuals aforesaid.
The development company proceeded, largely under the direction of Fuller, to carry on the booming business*.
[Seal of Bank.] “H. S. Fuller, Cashier.’;
Immediately below this, and on the same sheet of paper, was the following:
“ In addition to the above release, I do personally guarantee that I will secure other indorsements for the development company paper in place of the name of O. G-. Wing, when the same shall mature.
“Dated, August 1, 1892. H. S. Fuller.”
The notes matured on August 15, 1892; and about that time complainant asked Fuller for the notes, and was assured by him that they were paid, and would be delivered up. He said that some of the notes had been deposited .as collateral, and had not been gotten in yet, but would be in a few days, and would be canceled and delivered up. In the meantime the stock of Sawyer and Cargill had been purchased by Fuller, who was now the sole proprietor of the assets of the development company, and its sole stockholder, except the 600 shares held by the bank. Sawyer and Cargill were to be released also, and about the same time they made inquiry for the notes. Mr. Sawyer especially inquired several times, and was answered over and ■over again, almost impatiently, that the notes had been paid, and would be delivered up in a few days. It was not claimed that Sawyer and Cargill had bargained for their release from the bank, but Fuller had acquired their .stock, and was to release them himself.
It is not claimed that any of the other directors or
At the time these negotiations were going on, it was talked in Ludington that there was a necessity for the organization of a new development company to carry forward the work begun by the old company, but which it had proved inadequate to carry out. To this end a meeting was held in the office of E. P. Bishop, at which a large number of the leading citizens of the city were present, and among them the cashier, the president, the vice-president, and several of the directors of the defendant bank. At that meeting a full statement was made of the affairs of the old development company, showing the amount of its indebtedness to the defendant bank and to others. It was considered to be of prime importance that no default should be made in carrying out the promises made by the development company; and the projectors of the new company proposed to be formed felt that they must pay such a price for the assets of the old company as would discharge all its just debts. It was a matter of common notoriety in the city that the defendant bank was carrying a large amount of the development company's paper, and was in peril on account thereof. It was a part of the plan of the public-spirited citizens engaged in the movement that they should and must relieve the bank from its embarrassment. For the purpose of ascertaining the amount necessary to accomplish the purposes in view, a committee was appointed to examine into the affairs of the old company, and report. To this committee, Fuller exhibited his vouchers for expenditures of the old company, and all the matters were allowed, except what Fuller had paid for the stock of Sawyer and Cargill, and some item of expense for an excursion steamer, which the committee found was unauthorized; and they found that, if they paid
The new company was organized on September 8, 1892, and incorporated under the name of the “ Citizens’ Development Company.” The new company, when organized, ratified the action of the committee, and purchased the assets of the old company at the price of #33,000. All except two of the directors of the bank, residing in Ludington, became stockholders in the new company. Fuller .subscribed for #7,500 in the stock, and Cartier, the president of the bank, for a like amount; others took smaller amounts. On September 20, 1892, at the request of Fuller, complainant, who still remained nominally the president •of the old company, executed a deed of all the lands of the old company to the new, and delivered it to Fuller, without compensation or question, relying, as he says, and as seems altogether probable, upon the release he held from all liabilities on account of the old company. On September 24, 1892, the defendant Fuller delivered the deed just mentioned to Stray, the treasurer of the new company, and Stray paid to him #32,628.75, being the purchase price aforesaid, less 6 per cent, for 90 days on a part of the stock subscidptions, for cash. About #11,000 of this amount was deposited by Fuller in the First National Bank, to the credit of the defendant bank, and
In December, 1892, it became evident that Fuller’s management of the defendant bank was too liberal for its means, and, as he was largely indebted to it, he assigned a large amount of stock and securities to the bank to secure it. On January 1, 1893, Fuller was removed from his position as cashier, and W. L. Hammond was appointed to succeed him. On January 13, 1893, Fuller paid the interest on the note in question to the new cashier, and the payment was indorsed on the note by the latter. No mention was made of the existence of this note or any claim made upon it until June 28, 1893, when Hammond, the cashier, wrote a letter to the complainant, asking him to call and pay the note. The complainant refused to do so, and on July 10, 1893, a suit was commenced by the bank against Wing on the note. On July 14, 1893, complainant served upon the attorneys for the bank in the suit at law two interrogatories, asking that they answer whether the bank had any other or further claim against
Complainant, in his bill, asks relief as follows:
1. That the defendant bank may answer the two interrogatories hereinbefore mentioned.
2. That the defendant bank may answer how much money was paid to it on September 10, 1892, by the Citizens’ Development Company, and to what extent such money was used in the liquidation of the three notes given on April 11, 1892, for the purchase price of the Mears .land, and in the payment of the notes subsequently given for the purchase of other lands by the development company.
3. That the defendants Fuller and Cartier may answer the same question, and also state how much they each paid on their subscriptions of $7,500 each to the capital stock of the Citizens’ Development Company.
4. That the defendant bank may be decreed to be a trustee for the use and benefit of the complainant for all money it has received by reason of its holding of 600 shares of the capital stock of the old development company assigned to it by complainant, or by reason of the •deed to the new company of the lands, of the old comqoany; and that said moneys may be set off against any claim the bank may have upon any of said notes; and that said notes may be surrendered and canceled by order of ■the court; and that said bank be declared to be equitably ■estopped from asserting any claim upon any of said notes.
5. That defendants Fuller and Cartier may be declared trustees for the use and benefit of the complainant for all moneys or other valuable property received by them by •reason of the deed aforesaid, and that they be decreed to q)ay the same into court for the use of the complainant, and for such distribution as the court may find to be equitable.
6. That the defendant bank may be temporarily and perpetually restrained from further prosecuting its suit at law.
In answer to the interrogatories the bank answers that it has no other or further claim against complainant except the note for $5,000, sued upon.
“ That it has no knowledge of the note dated April 11, 1892, for $5,000, signed by H. S. Fuller, as maker, and .indorsed by complainant, C. T. Sawyer, and D. F. Car-:gill, nor of the other notes mentioned in said first interrogatory, except a note for $5,000, dated May 24, 1892, •made by the development company, and indorsed by said parties. Defendant has in its possession said last mentioned note, and also a note of $200, dated May 26, 1892, and one of $500, dated April 11, 1892, each made by said development company and indorsed by said parties, which .said notes are stamped “paid,” and defendant stands ready to deliver the same to the proper representatives of the maker thereof at any time.
“That there was no money paid to said bank on Sep'tember 20, 1892, by said Citizens' Development Company, but, as hereinbefore stated, the money paid by said company, in so far as this defendant has knowledge, on the purchase of the old development company property, was paid to the then treasurer thereof, and by him used in the payment of obligations of complainant and his said • associates; nor has this defendant received any money or other thing belonging to said complainant which it could or should in law or equity apply upon said complainant's ■ said indebtedness to this defendant.”
It is first insisted on behalf of defendants that complainant's remedy in the suit at law is adequate, and that ■this bill does not lie. Complainant was the maker of the •note upon which the suit at law was brought, but he was •also the indorser upon other notes of the development
This brings us to a consideration of the merits of the case. This is not a case where a cashier with limited authority has, in consideration of a transfer of stock, undertaken to release a party from liability upon paper held by the bank without the knowledge of the directorate or ratification by that body. The rule undoubtedly is that usually the authority of a cashier of a bank is a limited authority, and that a party seeking to show a release by the cashier from liability upon commercial paper held by the bank, except in the ordinary course, must show that the cashier had authority from the directorate, or that the act had been ratified or acquiesced in by the bank. That authority, however, may be shown expressly or by necessary implication, or it may be established by the particular usage, practice, or mode of doing business of the bank. If a cashier be allowed to exercise general authority in respect to the business of the bank for a considerable time, — in other words, if he is held out to the public as having authority in the premises, — the bank is bound by his acts, as in case of an agent of any other corporation,
This transaction originally involved a loan of $15,000 from the bank, which sum was afterwards increased. The title to the land purchased was vested in the bank, and afterwards conveyed by the bank to the company. The directors profess to have had no knowledge of these transactions; indeed, the president of the bank testifies that he did not know, at the time of the formation of the new company, that the bank held this paper, aggregating the sum of $15,000. The president and several of the directors say that they did not learn of the transfer of the stock to the bank until the hearing in the present case, in January, 1894. Yet it is in evidence, and not disputed,, that in July, 1893, the new cashier of the bank, upon request, produced from the archives of the bank the stock, with the transfer thereof. The reason given by each of the directors for the change of cashiers on January 1, 1893, is that Fuller’s management of the affairs of the bank was unsatisfactory. It remained for the bank examiner to inform the directors as to the condition of the affairs of the bank, and to disclose to the directors that
The record clearly shows that Fuller was permitted by the directorate to exercise unlimited authority; that he took this transfer of stock, and gave this release, to prevent an assignment by the development company and consequent injury to the bank; that he controlled the affairs
The decree of the court below is affirmed, with costs to ■complainant.