Case Name: CHARLES H. DABNEY et al., Plaintiffs and Respondents, v. SIMON STEVENS et al., Defendants and Appellants
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1870-04-30
Citations: 2 Sweeny 415
Docket Number: 
Parties: CHARLES H. DABNEY et al., Plaintiffs and Respondents, v. SIMON STEVENS et al., Defendants and Appellants.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 32
Pages: 415–430

Head Matter:
CHARLES H. DABNEY et al., Plaintiffs and Respondents, v. SIMON STEVENS et al., Defendants and Appellants.
[Decided April 30, 1870.]
An exception taken at the trial by the respondent is improperly incorporated into the printed case, unless its insertion canbe justified by the existence of a special reason therefor.
A person dealing with an officer of a corporation, whose duties are regulated by the by-laws, is chargeable with notice of his authority, and of the limitations and restrictions upon it, contained in the act of incorporation and by-laws.
Where neither the president nor the secretary of a manufacturing company, nor both combined, possessed the power to issue drafts, or to negotiate drafts drawn by them in the name of the company, the latter cannot be held liable except upon proof—(1) that a general or particular authority for that purpose was conferred by the board of trustees upon the president and secretary, or either of them; or (2) that the conduct of the company was such as to create a well-founded belief that such general or particular authority had been delegated; or (3) that the acts of such agents, although unauthorized, were subsequently ratified by the board of trustees.
Such delegation of authority, or subsequent ratification, may be either express or implied.
But a subsequent ratification will not be inferred in the absence of proof showing that the board of trustees had notice or knowledge of the unauthorized acts of the company’s agents.
The liability imposed by statute upon trustees of manufacturing companies for neglecting to make and file an annual report, is in the nature of a penalty for misconduct in office. The penalty imposed is the debt of the corporation.
In an action of this description, the burden of proof is upon the plaintiff to establish that the debt was contracted by the corporation.
Before Monell, McCunn, and Freedman, JJ.
The action was brought against the defendants as trustees of the Simpson Water-proof Manufacturing Company, upon an alleged liability incurred by them, in consequence of their failure to make, file, and publish the annual report required by law.
The answers of the defendants, as amended on the trial, put in issue all the material allegations of the complaint.
The issues were referred to a referee to hear, try, and determine the same, who found as follows:
“ I find as a matter of fact that on the first day of February, 1864, the above-named defendants filed in the office of the clerk of the city and county of Hew York a certificate or acknowledgment, under chapter 40 of the Laws of the State of Hew York, passed February 17, 1848, and the laws amendatory thereof, and also filed a duplicate of said certificate in the office of the Secretary of State of Hew York, as required by said laws, whereby the said defendants became a corporation in fact and in name, by the name of “ The Simpson Water-proof Manufacturing Company,” the name stated in said certificate as the title thereof, with the usual powers, rights, and duties conferred in and by the acts aforesaid.
“ That in and by said certificate it was certified, among other things, that the principal part of the business of said company was to be carried on in said city and county of Hew York (where the chief office of the said company was to be established), and also the corporated name of said company, the objects of its formation, the terms of its existence, and the number of shares of which the stock should consist, and also" that the number of the trustees to manage the concerns of said company should be five, and that the names of those who should manage the concerns for the first year were, Edward L. Simpson, Simon Stevens, Edward Learned, Courtlandt P. Dixon, and William Palmer, the defendants above named, and the persons who signed and acknowledged said certificate. That no election of trustees ever was held, and the above-named defendants, never having resigned or retired from their said trusteeship, continued to be and were the trustees of said company from its formation until after the time that the indebtedness hereinafter mentioned was incurred.
“ That between the 13th day of March, 1865, and the 5th day of June in the same year, the plaintiffs in the action, at the request of the president and secretary of the said company, accepted certain drafts drawn by said company upon the plaintiffs, for the amounts and upon the terms and conditions specified and set forth in the complaint in this action, and especially upon the condition that the said company should place said plaintiffs in cash funds to meet said acceptances at maturity.’
“ That the said drafts so accepted by the said plaintiffs were duly paid by them as they became due.
“ That the said company put the said plaintiffs in funds to meet the said four drafts as they became due, except the draft dated June 5, 1865, drawn by said company for $4,000, which became due on the 7th day of August, 1865, which last-mentioned draft the said company failed to pay, or to put the plaintiffs in funds to pay according to said agreement, except the sum of $985, and the said draft being paid by the said plaintiffs as aforesaid, a balance of $3,115 became and was due to them from defendants on the 1st day of September, 1865, no part of which has ever been, paid to the plaintiffs.
“ That the said company failed to make a report within twenty days of the 1st day of January, 1865, or within twenty days of the 1st day of January, 1866, and publish the same in a newspaper published in the said city of Hew York, stating the amount of its capital, and the proportion actually paid in, and the amount of its existing debts, and signed-by the president and a majority of its trustees, and verified by the oath of the president and secretary, and file the same in the office of the clerk of the city and county of Hew York, as required by the acts aforesaid.
“ And I find as matters of law that on the 1st day of September, 1865, the said company were justly indebted to the plaintiffs for the said sum of $3,115.
“ That in consequence of the failure of said company to make and publish and file the reports aforesaid required by section 12 of said act, within twenty days from' the 1st day of January, 1865, and from the 1st day of January, 1866, the said defendants as such ti’ustees became and are jointly and severally liable for all debts of said company existing at the time said reports should have been made, published, and filed respectively, or which have been contracted since that time, including the said indebtedness-so due to the plaintiffs as aforesaid, and that the plaintiffs are entitled to judgment against said defendants for said sum of $3,115, with interest thereon from the 1st day of September, 1865, amounting to the sum of $933.97, making in all the sum of $4,048.97, and the costs of this action.”
The defendants duly excepted to the referee’s findings of fact and conclusions of law.
Judgment was entered in conformity with the findings of law of the referee, and the defendants, Learned, Dixon, Palmer, and Stevens, appealed.
Mr. Albert Stickney for appellants Learned, Dixon, and Palmer.
The liability of the trustees sought to be enforced in this action is a penal liability, and consequently the plaintiffs should be held to the strictest proof of their case (Merchants’ Bank v. Bliss, 35 N. Y., 412).
The statute creating these manufacturing corporations places the management of their property and concerns in the board of trustees.
The corporation acts then by its trustees, and in no other way.
The words of the statute aré: “ There shall be not less than three nor more than thirteen trustees in each company, who shall manage the stock, property, and concerns thereof.”
How, we of course make no question that the trustees, acting as a board of trustees, could draw these drafts and bind the company, even if the company never had a penny of the money, or ¡any advantage from it.
And the trustees could bind the company by their drafts, ■either—
(1) . By previously authorizing them; or,
(2) . By subsequently ratifying them.
And, moreover, such previous authority, or subsequent ratification, might be either express or implied.
But in one way or other there must, in order, to bind the company, be action of the trustees, either prior or subsequent, express or implied.
“ When a charter invests a hoard with the power to manage the concerns of a corporation, the power is exclusive in its character. * * * It is one of the fundamental conditions into which the corporators have entered by becoming members of the corporation, that its concerns shall be managed in the manner prescribed by the act of incorporation, and from this no essential departure can be made ” (McCullough v. Moss, 5 Denio, 575).
And this principle is one of the fundamental points of the law of corporations, and needs no authorities to sustain it.
Undoubtedly, subsequent ratification by the trustees would be just as conclusive on the company as prior authorization, and either would be just as binding when implied as when express.
But, in some shape or other, the trustees must act. And the plaintiffs have made out neither of these points,'neither prior authority nor subsequent ratification, either express or implied.
Stevens was merely president. McEwen, at this time, was merely secretary.
The acts of an officer out of his duty are no more binding than those of a stranger (National Bank v. Norton, 1 Hill, 572).
In the present case no one of the trustees besides Stevens ever had any knowledge of the drafts, either before or after they - were made.
And the court say in McCullough v. Moss, that “ the presence, or, indeed, the actual interference of individual directors would be ineffectual to make a ratification.” “ The concurrence of a majority of the board when duly assembled is requisite to constitute a valid act.” “ The ratification of an unauthorized transaction can never be inferred from the acts of the very officers or agents by whom it was made.”
If there were in the present case any pretence of a ratification, it is at most a ratification by Stevens alone.
It is decided again and again that neither the president nor the secretary has authority, as such, to make notes to bind the company (7 Wendell, 31; 3 Bosworth, 600).
The calling McEwen “ manager ” has no bearing on the points of the case. This was so in McCullough v. Moss, and the court held it of no effect.
McEwen says it was done by direction of Stevens himself.
Stevens was directed by resolution of the trustees “ to employ McEwen in such capacity as he shall deem desirable for the interest of the company, and at a salary at the rate of $1,500 per annum.”
It would be a novelty to maintain that this resolution could authorize Stevens to make McEwen take on himself duties larger than those of Stevens himself—the duties of the whole board of trustees, and of the treasurer.
Moreover, McEwen was at the time of these drafts secretary, which revoked any previous employment by Stevens, even if it had been binding on the company. Mow, the by-laws of the company provide the regular duties of the secretary. They also provide the regular duties of the treasurer; and there was a regular treasurer.
It was the business of the treasurer, if it was the business of any single officer, to sign those drafts. The by-laws expressly gave him the financial duties, and' took them away from the president and secretary.
A by-law of a corporation, enacted under the express authority of an act of the legislature, and in conformity with the power conferred, has the same force as if it were enacted by the legislature” (Brick Church v. Mayor, N. Y., 5 Cowen, 538; McDermott v. Board of Police, 5 Abb. Pr., 422).
In the present case there had been three transactions in all, the present suit being brought on account of the last one.
Mow, even if there had been a long series of these drafts and payments by Stevens and McEwen, the effect would be nothing at all, as far as concerned the company, or the other trustees.
If the trustees could have been shown so to have sanctioned the making of drafts by the secretary for a long period, there would be implied authority. But nothing of the kind appears.
The appellants here cannot be met by the point that the referee has found, as a matter of fact, that the company made this draft.
Even if it were a finding of fact, it would be reversible by the General Term, in case of clear error.
But in this case there is not the slightest conflict of evidence. Both sides admit every particle of evidence in the case. Ho single circumstance contradicts any other single circumstance.
There is not a particle of evidence that the corporation made this draft, or paid any of the prior ones, or that it made the agreement.
The whole finding of the referee is utterly unsupported, and is a general finding, which is a mistake in law.
If this case had been tried before a jury, the court would have been bound to dvrect a verdict, one way or the other. There is no dispute of a single fact.
Mr. Dudley Field for appellant Stevens.
The corporation was never liable upon any of these drafts. They never authorized the agreement nor the borrowing of the money, nor did they ratify the same, nor is there any proof that the money ever came to their possession (Hoyt v. Thompson, 5 N. Y., 334; 19 N. Y., 213; Lawrence v. Gebhard, 41 Barb., 575; Jackson v. Campbell, 5 Wend., 574; Partridge v. Badger, 25 Barb., 147; Olcott v. Tioga R. R. Co., 27 N. Y., 546; Beers v. Phenix Glass Co., 14 Barb., 358).
The draft in suit, the balance of which is sought to be recovered, was not an original draft, but was a renewal. It differs in its terms from the other drafts in evidence. The first and second were made payable to the order of “ ourselves,” the third to the order of “ R. M. McEwen, Secretary and Manager,” while this is made payable to the order of myself. It is indorsed by McEwen, and the words “Simpson Water-proof Manufacturing Co.” on the back must be rejected.
The plaintiff having accepted the renewal, waived any liability of the corporation (if any existed), except such as is imposed by the terms of the renewal.
If the corporation was liable at all upon the renewal draft, it could- be liable only as indorser, and there is no pretence that the draft was protested.
The plaintiffs have mistaken their remedy. They dealt with Stevens and relied upon his guarantee.
He may be liable upon that, bat the corporation was never liable upon this claim, and the defendants, who are sued jointly, as trustees of the company, are not liable.
Mr. W. D. White for respondents.
All the questions raised by the separate answer of the defendant Stevens have been overruled by the decisions of this court in prior actions of a similar character (McHarg v. Eastman, 35 How., 205; Bank New Haven v. Bliss, 1 Rob., 391).
All the questions of limitation of actions or objections to right of action raised by the separate answer of the defendants, Learned, Dixon, and Palmer, have no application or have been overruled by the above cited cases.
All the questions raised by the defendants on the trial were obviated by their own evidence, and shown by themselves to be unfounded and irrelevant.
The alleged want of authority of the secretary and manager to sign the name of the company to the drafts was not raised by their answer, nor taken when the drafts were given in evidence (Garrison v. Howe, 17 N. Y. R., 461).
The objection of want of authority either in Stevens as president to negotiate with the plaintiffs, or in McEwen as secretary and manager to draw the drafts under the direction of the president, both going together to obtain the acceptances, and McEwen also indorsing the name for the use of the company, is not set up in the original answer of either of the defendants, and is manifestly an after thought, taken after the plaintiffs rested, and probably suggested by finding in the book of minutes one resolution authorizing the treasurer to borrow $5,000 on the notes of the company; but whether he did so or not was not proved, nor do the by-laws regui/re any resolution to borrow money; on the contrary, the defendant Stevens advanced to the company $30,000 without previous resolution, and part of which was paid out of part of the proceeds of these drafts upon the plaintiffs, nor does the amendment allowed by the referee, without being verified, add anything to its force; besides, the reported cases show that the secretary is the usual officer of such corporations, to sign its name to checks, notes, etc.; but as the defendants have themselves proved that the money was raised and used for the business and in payment of the debts of the corporation, they have, therefore, adopted and ratified the transaction; the objection not only has no foundation, but is fraudulent (Beers v. Phœnix Glass Company, 14 Barb., 358; Bissell v. Michigan S. R.R., 22 N. Y. R., 264, 279; Bank of Genesee v. Patchin Bank, 13 N. Y. R., 316; Hoyt v. Thompson, Exr., 19 N. Y. R., 208, 216; Aiken v. Blanchard, 32 Barb., 527).
The evidence of the parties defendant was contradictory, and mostly disproved by each other, and the report of the referee on questions of fact will not be reviewed.

Opinion:
By the Court:
Freedman, J.
The appeal papers submitted in this case have been prepared in a very objectionable form. They contain not only all the exceptions taken by the four appellants, which are very numerous, fiut also the exceptions of the respondents, which are equally numerous. Such practice, being calculated to mislead, imposes upon the court at General Term much additional and superfluous labor. This should not be done. An exception taken during the progress of a trial by a party who finally succeeded, is improperly incorporated into the printed case, unless its insertion can be justified by the existence of a special reason therefor. I have, however, carefully examined the whole case as submitted, and the examination thus made has led me to the conclusion that the evidence was insufficient to authorize the referee to find as matters of fact that the drafts in question were drawn by the company, upon the condition, among others, that the company should place the plaintiffs in cash funds to meet their acceptances at maturity, and that the company put the plaintiffs in funds to meet the four drafts as they became due, except the draft dated June 5, 1865, for $4,000, which became due on the 7th day of August, 1865, which last-mentioned draft the said company failed to pay, or to put the plaintiffs in funds to pay, .except the sum of $985, etc. If these findings of fact can-mot be sustained, it follows as a necessary consequence that the referee's conclusions of law based upon these facts must also fail.
It has been repeatedly held that the liability imposed by the statute upon trustees of manufacturing companies for neglecting to make and file an annual report, is in the nature of a penalty for misconduct in office. The penalty imposed is the debt of the corporation (Bird v. Hayden, 2 Abb. Pr. R., N. S., 61; McHarg v. Eastman, 35 How., 205; Merchants' Bank v. Bliss, 35 N. Y., 412, affirming 1 Robertson, 391).
Plaintiffs should be held, therefore, to strict proof of their case, and the burden of proof was upon them to establish that the debt was contracted by the corporation.
A corporation aggregate, being an artificial body—an imaginary person of the law, so to speak—is, from its nature, incapable of doing any act, except through agents, to whom is given by its fundamental law, or in pursuance of it, every power of action it is capable of possessing or exercising. The acts of such agents, in order to be binding upon the corporation, must, as a general rule, be done in the line of such agency, and within the limits of the authority conferred on them (Hartford Bank v. Hart, 3 Day, 493; Wyman v. Hallowell and Augusta Bank, 14 Mass., 62; Bellows v. Same, 2 Mass., 31; Salem v. Gloucester Bank, 17 Mass., 1).
Thus an agreement of the president of a private corporation was held not to be evidence against the corporation without something from which it could be inferred to have been within the scope of his authority (Pa. Supreme Court, Farmers' Bank of Bucks Co. v. McKee, 2 Pa. St. R., 318).
The statute under which manufacturing corporations may be organized places the management of their property and concerns in a board of trustees to be chosen for that purpose. This power is exclusive in its character. It is one of the fundamental conditions into which the corporators enter by becoming members of the corporation, that its concerns shall be managed in the manner prescribed by the act of incorporation. From this no essential departure can be made (McCullough v. Moss, 5 Denio, 575). The corporation, therefore, can only act by and through its trustees. The duties and powers of the president, who must be one of the trustees, and of such subordinate officers as the corporation may, by its by-laws, recognize, are generally regulated by the by-laws, and persons dealing with such president or any such officer are chargeable with notice of his authority, and of the limitations and restrictions upon it contained in the act of incorporation and by-laws. There is no grant of general powers in the name by which an officer may be designated, whether he be called superintendent or president or general manager (Adriance v. Roome, 52 Barb., 399).
In the case at bar, the by-laws of the Simpson Water-proof Manufacturing Company were adopted at the first meeting of the board of trustees. They provided that the officers of the company shall consist of a president, a secretary, and a treasurer. The respective duties of these officers were also clearly defined. It was made the duty of the president to preside at all meetings of the stockholders and trustees, and to oversee, under the direetion of the trustees, the manufacturing, selling, and all other operations of the company and its subordinate officers. It was made the duty of the treasurer to keep the moneys of the company, to deposit them in a bank designated by the trustees, and to disburse them under the direction of the trustees / but it was expressly provided that no money should be paid unless in pursuance of a vote of the trustees, and upon checks signed by the treasurer and countersigned by the president. The duty of the secretary was defined to be, to keep all the books and papers of the company, and to record the doings of the trustees. Eeither the president, therefore, nor the secretary, nor both combined, possessed the power to bind the company by making the drafts in question or negotiating with the plaintiffs for their acceptance, except upon proof that the board of trustees had conferred either a general authority to borrow on the company's credit upon them or either of them, or a particular authority in respect to the drafts in question, or that the conduct of the company was such as to create a well-founded belief in the plaintiffs that such genera] or special power had been delegated, or that the acts of said agents, although unauthorized, were subsequently ratified by the board of trustees. Such delegation of prior, general or special, authority, or such subsequent ratification, might be either express or implied, but, in order to bind the company, action of some kind, in some shape or other, on the part of the trustees was indispensably necessary.
Thus it has been held that, whenever a corporation have a board of directors, under whose general supervision and control the business of the corporation is transacted, an agent, who attends to the daily routine of business and its management under all ordinary circumstances, has no authority, by virtue merely of his agency, to make a contract creating a general hen upon the personal property of the company, to secure money borrowed, but such contract must receive the approval of the board of directors. A general agent might be deemed vested with power to make such contracts, when necessary, in the intervals of corporate meetings, if the corporation had no other board of control but the agent; but if they have such a board, under whose control the agent was acting, such a contract by the agent without their sanction is not binding (Vermont Supreme Court, 1848; Whitwell v. Warner, 20 Vt., 425).
The evidence given on both sides in the case at bar presents no conflict of any consequence. It shows that the drafts were drawn by the secretary, simply because the president ordered him so to do, and that thereupon they were negotiated by the president for his private benefit; that neither of the defendants, Learned, Dixon, or Palmer, had any knowledge of any of the transactions which took place between plaintiffs and the president and secretary, or either of them, prior to the commencement of this action, and that the entries regarding the said drafts and the account with the plaintiffs were not made on the books of the company until after the expiration of a year or more after the last transaction. It also appeared that plaintiffs, who had had previous private dealings with Simon Stevens, the president, but none with the company, accepted the drafts on the faith of the personal guarantee of said Stevens, executed at the time and without inquiry as to his authority to bind the company, and that the funds received by plaintiffs to be applied in payment of the said drafts were furnished by Stevens for that purpose without any knowledge on the part of his co-trustees. Stevens himself testified that he had no authority from the company to borrow money, or to give the drafts, or to make the contract with the plaintiffs which he did make; that he never informed his co-trustees of his transactions with the plaintiffs until some months after the maturity of the last draft; that he originally advanced about $30,000 to the company, a great portion of which he repaid to himself out of the proceeds of these drafts. Upon this uncontroverted state of facts it seems clear that, within the principles decided in the case of Claflin v. The Farmers' and Citizens' Bank (25 N. Y., 293), the acts of President Stevens were wholly unauthorized, and therefore void as against the company. In the case last cited it was held that the power conferred upon the president of a bank by the by-laws to certify checks did not authorize him to certify his own checks; that such act on his part was characterized as a palpable excess of authority, and it was said that any person taking the paper was bound to inquire as to the power of the agent so to contract. The same rule was asserted in the case of Gould v. The Town of Sterling, and Harin v. The Town of Genoa (23 N. Y., 452, 464). In Beers v. Phœnix Glass Co. (14 Barb., 358), the facts proved warranted the inference that the transactions of the secretary, who also acted as treasurer, were directly authorized. The same remark applies to the case of the Bank of Genesee v. Patchin Bank (13 N. Y., 316); and Aiken v. Blanchard (32 Barb., 527) was decided purely upon a question of evidence. The three last-named cases, therefore, do not aid the plaintiffs.
The evidence, in my judgment, is also insufficient to show a subsequent ratification, either express or implied. The president and secretary certainly were not competent to ratify their own unauthorized acts (Mich. Supreme Ct., Hotchin v. Kent, 8 Mich., 526). The company, it is true, might have done so. No express vote seems to be necessary to a ratification by a corporation of the unauthorized acts of an agent. A ratification may be inferred from corporate acts, inconsistent with any other supposition than that the corporation intended to adopt and own the acts done in their name (Conn. Supreme Ct., Howe v. Keeler, 27 Conn., 538).
Thus, a ratification may be inferred from the acquiescence of the directors or other governing body of the corporation; from the fact that after the facts have been brought to their knowledge they have taken no measures to show dissent; from the fact that they did not question the accounts submitted; from the fact that they kept the proceeds or retained the benefits of the unauthorized acts of the agent (Houghton v. Dodge, 5 Bosw., 326; Woodbridge v. Proprietors of Addison, 6 Vt., 528; Hoyt v. Thompson's Exrs., 19 N. Y., 208; Olcott v. Tioga R.R. Co., 27 N. Y., 546; Walworth Co. Bank v. Farmers' Loan and Trust Co., 16 Wis., 629; Farmers' and Citizens' Bank v. Sherman, 6 Bosw., 181).
But in all these cases the board of directors or trustees had full knowledge of the facts, and I have been unable to find a single case in which a subsequent ratification has been inferred without proof that the board of directors or trustees had such knowledge. On the contrary, it has been held in several cases that it must be shoujn by the party asserting such ratification that the resolution or acts of the corporation, or of their directors or trustees, relied on as constituting the ratification, were performed with a full knowledge of all the material facts necessary to an understanding of their rights (Cal. Supreme Ct., Blen v. Bear River, etc., Co., 20 Cal., 602; Md. Ct. of Appeals, Cumberland Coal, etc., Co. v. Sherman, 20 Md., 117).
And where the ratification by a corporation of-the unauthorized contract of their agent consisted in their having received the consideration of the contract, it was held that it must be shown that the corporation, through its proper officer or officers, knew the terms of the contract, and on what account the consideration was by them received (Md. Ct. of Appeals, Pennsylv., etc., Steam Nav. Co. v. Dandridge, 8 Gill. & J., 248; Corn Exch. Bank v. Cumberland Coal Co., 1 Bosw., 437).
As the evidence in this case unmistakably shows that, with the exception of the president, none of the trustees ever had any knowledge or notice of the unauthorized transactions which took place between said president and the plaintiffs until about the commencement of this action, and that the said unauthorized acts have not in any manner been ratified by an affirmative corporate act, the mere fact that the president, probably in extenuation of his otherwise inexcusable conduct, testified that he originally advanced about $30,000 to the company, a great portion of which he repaid to himself out of the proceeds of the drafts issued by him, cannot, in the absence of proof that the company had recognized this indebtedness, that the loan had become due, that the said president had actually given credit to the company for the proceeds received, and that the company had notice thereof, be construed into a ratification on the part of the company on the ground of acquiescence.
Finally, it seems to me equally clear that the defendants cannot be held liable upon the ground that the conduct of the corporation was such as. to create a well-founded belief in the plaintiffs that the president had either a general or special power to issue and negotiate the drafts. There was no proof that the president had been in the habit of borrowing of the plaintiffs in the name of the company, and that such loans had been ratified by the company, or that it was his custom of borrowing of other persons; that his act, in this respect, had been ratified by the company, and that these facts were known to the plaintiffs at the time they made the loan (Martin v. Great Falls Manufacturing Co., 9 N. H., 51). The evidence did not disclose any corporate acts from which plaintiffs could have inferred such authority; but it showed that plaintiffs, because they had neither prior dealings nor any acquaintance with the company, accepted the drafts, almost exclusively, upon the faith of the individual guarantee of the president. Hor can the plaintiffs invoke the application of the rule laid down in the North River Bank v. Aymar (3 Hill, 262), Griswold v. Haven (25 N. Y., 601), and N. Y. & N. H. R. R. Co. v. Schuyler et al. (34 N. Y., 73), namely, that where the principal has clothed his agent with power to do an act, upon the existence of some extrinsic fact, necessarily and peculiarly within the knowledge of the agent, and of the existence of which the act of executing the power is itself a representation, a third person dealing with such agent in entire good faith, pursuant to the apparent power, may rely upon the representation, and the principal is estopped from denying its truth to his prejudice. There is no evidence showing, or tending to show, that the plaintiffs have been misled by the exercise of any such apparent power. The referee erred, therefore, in finding, as matters of fact, that the drafts were drawn by the company, and that the company failed to provide plaintiffs with the necessary funds to the extent claimed by them. For this reason the judgment cannot be sustained against the defendants. I have looked at the question whether the judgment cannot be sustained against the defendant Simon Stevens, but have become satisfied that, as to him, it must also be reversed. He is sued as trustee, sought to be charged as a trustee, 'and the whole case was tried on the assumption of his liability as a trustee for misconduct in office. Ho attempt was made to charge him upon his guarantee. It was no part of plaintiff's cause of action, and he cannot be charged' upon his guarantee, except by a change of the entire complaint. Plaintiffs should have moved for leave to amend their complaint in this respect, and given an opportunity to the defendant Stevens to litigate that question.
The judgment appealed from should be reversed as to all the defendants, and the order of reference vacated, and a new trial ordered, with costs to appellants, to abide the event.