The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1855-06-25
THE SCHUYLER FRAUDS.

THE SCHUYLER FRAUDS
--~~-~~~~~-~-~-~~~~~~~
Superior Court--General Term.
Before Chief Justice Oakley and Hon. Judges Oanpbsn
Bosworth, Hoffman and slosson.
IMPORTANT DECISION OF THE o0UHr AS TO THE
LIABILITY OF THE COMPANY.
JUNE 23-The AecAanScs' Bank us The Ne0 York and
Ne,o Havem Railroad Oompany-rhe Court rendered
elaborate DECISIONS affirming the Judgment Of the court
beloW-Judge Campbell alone dissenting.
OPINION OF JUDGE sLossoN.
The plaintiffs claim to recover, a. the holders Of tn.
the sto.f rsprsssntsd purpofas to be represented
by the cerhcsts with interest from the date OF the
permit transfer Of it their books, where .y asthsy
allsse the certificate ID rendered unavalaoie and
,snSsssst genuine stocn but that the sto.k limited Oy
the charter full and tn the hands Of bona re hold
er conceded and 1T s also conceded that II was is
sued for an unlawful purpose and that the act OF ssu
ing WAS fraud ON the part Of Schuyler, aud that it
was 80 issued for his own private bensat The plain
ts do not claim that competent for the defend
ants BY their asst or by the set Of their transfer
agent TO increase the number Of ther original capital
OF the number Of shares into which it was divided
nor do thew ascribe to this certificate any effect
nor claim that the defendants we're bound to- or had
right to sue genuine certificate in exchange for this
coed legal hits ana they therefore concsde that
the defendants had right to refuse to do this and
the statute provision to capital tae value OF
shares and in the view which have taken Of this
one but they that for this refusal the defendants
have become liable to make 70 them pscunary compen
saton their loes precisely tasy woald have 6eeo
Baiiaio, vs.. Kor'nishs u wend s4s The theory q
the action H. that the defendants bound by the act
Of Schuyler, psuiDg this certificate Though It was an
abuse Of his powers and pure fraud on his part and
that the plaintiffs are entitled holders thereof and
by virtue Of its terms be admitted shareholders,
that DO impraccable creating excess Of cap
M that they are entitled to gss1ns5y moe unity 5G%
the certificate its face confers Upon them is not
In form action to recover damages against the COM
pany on the alleged ground that their agent in the
course OF biz business such, had committed fraud
by which the plaintiffs have been injured and for the
spond but It rests on the assumption that the eomps
ny under the circumstances bound in Law BY the act
though y n Sss 81 tS 81 bs sSsn and
which the company itself could not rghtfaly have
DONE and the question presented by the action is, whe
ther the defendants be bound in favor Of party
dealing bona de with their transfer agent (Which the
plaintiffs confessediy were BY an act Of his which they
rightfuy have deputsd to HIM the to perform,
but which he has fact performed while acting in the
discharge Of his office as transfer agent fOf the psstSs
apparent hmits Of his duties. To make out right Of
recovery in this action, on the cause as made by the
plaintiffs IL Is incumbent on the plaintiffs to estsb ish
the affirmative Of this proposition It is question the
solution Of which depends, after all the correct ap.
pcation OF few simple and familiar principles, and
were for the advsntious importance attached to
from the stupendous magnitude Of the general fraud
which the case a. pss Gnt an 70 ss
cd by the dec ion, it would not In my apprehension
be considered by the profession as question Of
very. extraordinary difficulty, That the company
Legislature. have under the circumstances right
representative Of stock; that is, could not have
sued it without abuse of their lawful powers under
b. to s
coming within range Of their cooperative powers,
though in the particular instance be unswful
itself contravening the intent Of the charter is
M capacity in fact to do the act under the powers con:
rrsd upon it by the charter which, in relation to third
the obligation Of the corporation Let II be supposed
that this company had never employed transfer agent
direct action Of the board ITSELF and that one iu
question had been issued under aresouon OF the board
and with the corporate seal affixed though the act IN
the purchaser the rights Of shareholder, might DO
clear abuse Of the corporate powers of the and
void can it be doubted that in favor Of bona AIDE hold
the scrip, who has parted with the value credit
sf it, the act would be binding the corporation.
hands3 The act, though not fraud on the charter,
would not be nullity, dor necessarily void 1t wcue
st be corporate act which the defendants would be
Who had dsss on tie faith Of It. II Is true that il csi
an at mpsS
was unautt and Illegal, but the rule has app
cation TO case like the present. ramage rs. Peel.
done an act in clear excess in violation Of its charter
or legal powers and that transaction in which the
of tie ieeaty Of the act. If this DO true, do not
perceive in what pect the act differs BY being done
i ss that
and that the act done while ostens BY within the
limits and in the Performance q his Legitimate. duties
stock Certificates il city Of New York. those
S.volv.d upon him, and every act done By him
| within the scope Of that duty was, In judg-
does this conflict with the rule that where the
agent exceeds abuses his powers the principal hee
the right to repudiae his acts and hold him responsb
for the consequences conduct since that is right
which exists between himself and his servant only an
which in way affects the rights Of strangers against
Of general agent that is Of agent entrustsd with
the entire busnees of that department under the rules
Sss Sa oa e @
world and in the business Of transfer Of the stock Of
the company the public dealt with him and him only
right TO regard all acts done BY him rishtuy done,
long sy had to suspect to the contrary
While acting within these limits and in his character Of
transfer agent and in the performance Of that very bu
sness, his acts were binding on the company without
'ass Story E ss
There would be NO safety otherwise in dealing With
corporations, or private Individuals acting By the
sgency Of others This rule applies we'll 70 acts done
in fraud Of the rights Of the principal to those right
fully done, otherwise there would be benefit In tbs
rule ITSELF II is rule founded In the common OF
right IN mankind, and adopted fundamental because
In itself right and necessary for the profession OF the
noeent s lrue, the party who claims the dement, OF
1t mus. himself be not only in fact but in contempa
ton Of law free from any participation in the fraud Of
the agent that is he must neither be party directly
participant in the fraud lave actual noce of e,
nor be put upon inquiry by the Suspicious character
of the transaction, bat these conditions being found
his security is perfect There pretepce that the
plaintiffs here had actual knowledge Of the fraudu-
lent conduct of Schuyler nor was there anything ia
the Transaction to put them inquiry. 1t was the
ordinary transaction of q loan upon stock security
with the usual assignment and power to effect trans
fer and In NO respect different either in the character
of the papers the transaction itself from probably
hundred similar transacted IN the street In
the same stock and that very day. But IL Ia said
tho plaintiffs should have investigated the title to
| the stock before they advanced their mouey-that
they should have ascertsined resort to the books
or BY inquiry at the Office whether the statsnent
the certificate true and whether this certificate
had been issued upon surrender of former ceri6c
actual stock In com piance with the regu