Case Name: WILLIAM VAN HOOK v. THE SOMERVILLE MANUFACTURING COMPANY ET AL.
Court: New Jersey Court of Chancery
Jurisdiction: New Jersey
Decision Date: 1845-09
Citations: 5 N.J. Eq. 137
Docket Number: 
Parties: WILLIAM VAN HOOK v. THE SOMERVILLE MANUFACTURING COMPANY ET AL.
Judges: 
Reporter: New Jersey Equity Reports
Volume: 5
Pages: 137–185

Head Matter:
WILLIAM VAN HOOK v. THE SOMERVILLE MANUFACTURING COMPANY ET AL.
1. The act incorporating the Somerville Manufacturing Company provides that the stock, property and concerns of the company shall be managed and conducted by five directors, one of whom shall be president; and that the president and directors, or a majority of them, shall and may appoint such officers, superintendents and agents as they may think proper ; and that the president and directors, or a majority of them, shall have power to call in installments on the stock. Can two of three directors assembled make a mortgage of the lands of the company ?
2. Can two of three directors assembled make a mortgage to the third ?
3. The book of minutes of a corporation is only prima facie evidence of the correctness of the entries made in it. The appearance of the minutes may, of itsellj raise so strong a suspicion against the regularity of the proceedings, that no weight will be given to them.
4. The corporate seal may be affixed by a less number of directors than is necessary to constitute a hoard, if it be done by tbe direction of a legal board.
5. If, on a notice to all the directors, a meeting be held at which some of them do not attend, and an adjournment is made to a subsequent day, is the meeting on the subsequent day a meeting on due notice to all tbe directors ?
6. The consent of a director not sitting in a legal board is nugatory.
7. If a mortgage be given, even by a competent board of directors, to one of their number, who is the financial agent of the company, to enable him to raise money for the company, on his representation that the money needed by the company could not be raised on the bond and mortgage of the company given directly to any lender; or after failure so to raise money for the company, and on his representation that he could raise the money on a bond and mortgage of the company executed to him, by an assignment of it, allowing a greater rate of interest than the legal interest, it would be a fraud on the company to enforce the mortgage against them as a mortgage to him for his own use and benefit, and if he attempt to do so, he will be held to have procured it by fraud.
8. In general, fraud in the obligee in obtaining a bond is a good defence against an assignee of the bond, though he be a bona fide purchaser of it without notice of the fraud. But it was held, that a bona fide assignee, without notice, of a bond and mortgage given under the circumstances and for the object before stated, might enforce them against the company.
9. Certain certificates of the director who was president, one, signed by him as an individual, stating that the bond and mortgage was executed by him as president, by order of the board, “as said amount was due the obligee as agent of the company,” and the other, signed by him as president, stating that the board, having examined the account of the obligee against- the company, did pass the same and acknowledge a balance due the obligee of $9638.17 ; and a copy, signed by the secretary of the company, of what purported to be a resolution of the board, that the bond and mortgage was a legal and subsisting liability of the company, and that they had no defence to make to the same ; which writings were procured by the obligee to aid him, as he said, in negotiating the bond and mortgage ; were exhibited on tbe part of the complainant, to show good faith in taking the assignment. Before the complainant took the assignment, he was told by the president that he, the president, considered the property would be worth $20,000 when in operation ; that if he, the complainant, had the money to spare, he could not put it out more safely ; that they were anxious to get the money and have the works in operation, and that if they could obtain the money on the bond and mortgage, they would be able to put the works in operation. After this, the complainant took the assignment of the bond and mortgage, and in exchange, or alleged exchange, therefor, made a deed of leasehold property in New York to a son of the obligee; and the complainant produced in evidence' a certified copy of a mortgage made by the son to one-Morgan, dated August 23d, 1842. There was no evidence given to show when the assignment to the complainant was delivered, or the deed to the son — whether on the same day the mortgage was made by the son or not; but it appeared that an assignment of the bond and mortgage was left by the obligee in the office of the clerk of Somerset, on the 1st of August, 1842, and recorded after the 9th of August, 1842. Ho account was given of the mortgage made by the son, except that the witness of the complainant, who produced the certified copy of it, stated that he had seen it in Hew York the morning of the day of his examination, in the hands of one Edward P. Clark, and that “ he could not get the original out of the office — they refused to let him have it.” Held, that the complainant could not be considered a bona ñde purchaser of the bond and mortgage for consideration paid; and held, further, that the information he received from the president was sufficient notice to overcome the evidence he offered of bona fides, if that had been sufficient to show it.
On the 10th of January, 1842, a bond for $9600, and a mortgage on the real estate of the Somerville Manufacturing Company to secure the payment thereof on or before January 5th, 1845, were, or purported to have been, executed by the said company to Jared N. Stebbins, a director of the company. They are signed “ John I. Gaston, president of the Somerville Manufacturing Company,” with an ordinary seal annexed. The concluding clause of each runs thus — “In testimony whereof, John I. Gaston, president of said company, hath hereunto set his hand and affixed the seal of the said company, by order of The said company.” The certificate of the officer who took the acknowledgment of the mortgage, states that said Gaston, known to him as president of the said company, appeared before him, and, he being satisfied that the said company are the grantors mentioned in the deed, and having made known to the said Gaston the contents thereof, he did acknowledge that he signed, sealed and delivered the said instrument as his voluntary act and deed for the uses and purposes therein expressed, and that he sealed the same with the seal adopted by the said company, and by the order and direction of the board of directors of the said company. This instrument was recorded in the clerk’s office of - the county of Somerset, on the 26th March, 1842.
Stebbins, on the 25th of July, 1842, executed a separate instrument under seal, in the presence of a subscribing witness, and acknowledged before a judge of the Common Pleas of Somerset county on the 26th of that month, assigning the said bond and mortgage to William Van Hook, the complainant. This assignment was delivered in the clerk’s office of Somerset, by Stebbins, on the 1st of August, 1842, and recorded after the mortgages left in said office for record on the 8th and 9th of August, 1842; and was delivered to Mr. Blauvelt, the complainant’s solicitor, on the 10th of May, 1843.
Van Hook exhibited his bill for the foreclosure of the said mortgage, and made the Somerville Manufacturing Company, and Luther Loomis and Samuel P. Lyman, who claim the property under a deed from the company, and certain judgment creditors of the company, defendants. A decree pro eonfesso has been entered against the company and the judgment creditors. The defence arises under the answer of Loomis and Lyman and the proofs in the cause.
The nature of the defence will sufficiently appear in the opinion of the Chancellor.
The testimony in the cause is as follows:
George H. Brown, for complainant. — On being shown the bond, he says he is the subscribing witness, and saw it executed by John I. Gaston, president of the company, and who was then reputed president; the seal annexed was then adopted by the board of directors for the express purpose; he is als® subscribing witness to the mortgage; it was executed in his presence by said Gaston, president as aforesaid.
On cross-examination, he says Stebbins called on him and requested him to prepare according to law the said bond and mortgage; he suggested to Stebbins that the board must adopt a seal; on reflection, he cannot say he was .present when the seal was adopted, or whether he was afterwards told that the seal had been adopted; does not know that notice was given of the time and place of meeting when the bond and mortgage were executed, or seal adopted ; he has no personal knowledge of a resolution of the board to give this bond and mortgage; but at the time it was done, a resolution was produced, and the secretary, Joseph A. Gaston, was present, directing or authorizing said bond and mortgage to be given; witness supposes this was the original resolution which had passed the board for that purpose; the resolution was shown deponent, and the bond and mortgage were executed at the house of Joseph A. Gaston, secretary, in Somerville; the persons present were' John I. Gaston, president; Jared N. Stebbins, a director; Joseph A. Gaston, secretary, and he thinks, William Packer, another director; the meeting was for the purpose of executing the bond and mortgage, and the said resolution was produced to satisfy witness that it was correct; the secretary kept a book of minutes.
A paper writing, purporting to be a true copy of a resolution from the minutes of the said Somerville Manufacturing Com-, pany, signed “3. A. Gaston, secretary,” dated 28th June, 1842. is produced, and marked Exhibit C on the part of the complainant. The witness says it is in the handwritng of Joseph A. Gaston, secretary.
The assignment of the bond and mortgage by Stebbins to the complainant, and marked Exhibit D on the part of the complainant, is admitted by Thomson, solicitor for the defendants Loomis and Lyman.
William Packer, for the defendants.
— He was a manager {i. e., director) on the 10th of January, 1842, and for the year preceding; Ibbotson and Van Renselaer lived out of the state; the company were then engaged in putting up the screw factory, foundry and blacksmith shop, and getting other machinery; there was a log for the shaft which had laid there six months, partly dressed, and they could not get along any further, for the want of money; at this time he had received for work he had done between $3000 and $4000, on the notes of Wall and .Nevius, given to him by Stebbins ; he never got any money from Stebbins; Stebbins, who was agent of the company, at a meeting of the board, stated that there was a debt of about $2000 against the company, and that they could start the works if they could raise $5000 or $6000, besides paying the debt; through the six months prior to the 10th of January, Stebbins held out inducements to him to go on with the work, and said he could raise money by a loan on a bond and mortgage of the company; at the time he called us together, about the 1st of January, 1842, he said he could not raise the money in this way, and that he would have to give a higher interest, or pay a premium to raise the money, and then proposed a plan how he could raise the money to complete the works; this plan was to give him a valid mortgage for the amount they would want; witness objected to it, on the ground that the company owed him a great deal of money, and that he did not know that they owed Stebbins a cent; witness did not think it safe' to give Stebbins a mortgage; Stebbins assured them it was the only way they could ever get the works going; through Mr. Van Renselaer, witness was induced to agree to the plan ; Van Renselaer said he knew Stebbins could not raise the money the other way, i. e., by a mortgage from the company to the lender, because he would have to give a premium on it, and therefore proposed that the mortgage should be given to Stebbins, in his own name, and stated that in that way the money could be obtained ; this was Stebbins’ plan, and advocated by Van Renselaer; this was about the 1st of January; John I. Gaston, Stebbins, and he, were the only managers present when the mortgage was given, on the 10th of January ; either Stebbins or John I. Gaston called on him, and requested him to meet at Mr. Brown’s office or house, in the evening, at the time the mortgage was given; witness does not know that other members of the board were notified to meet; he never had a thought but that this mortgage was given to raise money to pay the debts of the company and start the works; Stebbins said the money was wanted to pay $2000 the company owed, and to start the works; and that it would take about $5000 or $6000 to complete the works; John I. Gaston suggested that it would take more than $2000 to pay the debts, and therefore the morlgage was made for more than $8000 ; i< was made for $9600; witness was contractor for building the works, and a great deal of money was due him ; Stebbins said he wanted to pay Theodore Young some money and some at New Hope for castings; also a debt due the State Bank at Elizabeth; witness never knew there was any money raised on the bond and mortgage to pay the debts of the company; he never got any of it; not one of the debts na'med by Stebbins has ever been paid ; they stand just as they were; through the inducements held out to witness by Stebbins, and letters he wrote to Gaston, he went on with the works and nearly completed them; the inducements named by Stebbins were, that he was negotiating the mortgage, and would get the money and pay witness for his work; he was finally compelled to suspend his work; the foundry was still unfinished; the millwright came with- four or five hands, and worked at the mill two mouths; they were induced to come by Stebbins; they then stopped and would not work another stroke; they told witness they were going to be deceived by Stebbins; they got nothing but about $80, in trade, from Mr. Steele’s store; this he understood from Mr. Young; the castings were left at Bound Brook, and Stebbins could not get them up, as he could get no one to Work for him; and there they lay till the next October; during the time he was negotiating in New York for the money, he said, frequently, there would be gentlemen up to see the works, and wanted us to show them as much as we could, and make things as favorable as possible; after this he told us there must be one more thing done; there must be some resolutions passed to suit Mr. Blauvelt; these resolutions were passed, ,but whether witness was present or not, he cannot say; he wrote to John I. Gaston that he wanted a certificate from the president of the company, to show that the company owed him the money; at the time the mortgage was executed, witness wanted Stebbins to give him a writing to show to the other persons interested why they had acted as they did, and that the mortgage was given only to raise money to pay the debts and start the works, and not to pay Stebbins, for witness never knew that the company owed him anything; witness insisted on this at both of the meetings; Stebbins assured him it was not necessary; that he was the agent of the company, and that what he did would be right; he said he did not want it known that he had taken the mortgage in his own name, and if he gave a writing, he was fearful it would get out; he said he was the agent of the company, and if it got out among the people that the money was not coming to him, he would be censured, and then he would not be able to get along, but thal he wished it kept still till he got the works started; witnesi told him that he, witness, had told Judge Nevius all they had done; Stebbins said he had done wrong, and that he was afraid witness would defeat him in getting the money; witness told General Wall, when he saw him, what they had done— that the mortgage was given to Stebbins to raise money to pay the debts and start the works; witness was present at a meeting of the water-power company, when Stebbins applied for a lease of water for the manufacturing company, and stated that he could not negotiate his loan till he got the lease; this was in June or July, 1842; at the time the mortgage was given, Stebbins had received from Wall and Nevius, $10,500, in notes; he got out of Steele’s store more than $500, so Steele told witness ; he received from Gaston between $600 and $700; ther« is still remaining, debts of the company contracted by Stebbins while he was agent, over $7000; witness received from Stebbins, as agent of the company, about $4100, in the notes of Wall and Nevius; Stebbins never pretended to witness, at the time the bond and mortgage were given, that there was anything due him from the company, and that there had been any settlement of any account between him and the company.
On cross-examination, he says — In January, 1842, and before, John I. Gaston was president of the company; the board r>f managers, at their meeting, about the 1st of January, 1842, directed that the president should give the bond and mortgage; the amount of it, he thinks, was fixed at that meeting, but he cannot say positively; the board of managers, on the day the bond and mortgage were given, adopted a seal for the com pany; he thinks Joseph A. Gaston was present at the meeting when the bond and mortgage were given; he thinks it was about April Court, or at a time that Stebbins stated to him that Mr. Blauvelt was at Somerville to examine the records, that Stebbins wished to get the resolutins passed by the board ; he does not know that Blauvelt was ever up to examine the records, but only what Stebbins told him; the resolutions required by Stebbins were passed by the board; Joseph A. Gaston was secretary of the board; thinks it was within twc weeks after the bond and mortgage were executed, that he told Judge Nevius it was done, and stated to him why it was done; thinks it was in the June following, that he told General Wall the bond and mortgage had been given; General Wall said very little about it; Judge Nevius was a good deal dissatisfied; General Wall said they had got enough, already, in the hands of Stebbins; Wall and Nevius were then large stockholders, and had paid in, between them, between $10,000 and $11,000 on their stock; no effort was made, to his knowledge, by any one of the company, to recover back the bond and mortgage from Stebbins; we never had an official meeting of the board after the bond and mortgage were given, till after we found he had used them ; he had used them a long time before any of us knew about it; I only knew the debts of the company from acknowledgments and statements made at the meetings of the board, and by the statements of the managers and the president.
On re-examination. — After they had found out that Stebbins had assigned the bond and mortgage to Van Hook, he, Stebbins, denied to witness and John I. Gaston that he had ever made use of the bond and mortgage, and said he could make no use of them till he could get a lease from the water-power company; witness does not know that Wall or Nevius was ever informed that Stebbins intended to use, or had used the bond and mortgage-for any other purpose than what it was intended for; witness was present at a meeting when Stebbins applied for a lease of water, when Stebbins blamed General Wall for his not getting the lease; Stebbins said he could not raise the money on the bond and mortgage without the lease; General Wall then said he could not have the lease, and that he must return the bond and mortgage; the company frequently told Stebbins that he was largely indebted to them, and if he had any claims he must present them; and he would say he was ready for a settlement ; that his books were in New York; and when in New York, he would say they were in Somerville; and we never could nor did get a settlement while Stebbins was in the board.
John I. Gaston, for the defendants.
— He was president of the company; what Packer has testified as to the situation of the buildings and the property generally, is correct; the first he knew of the bond and mortgage, was on the evening the company resolved to give them ; there had been some talk about giving them some time before, for the purpose of raising money for the company; then he found they had all agreed on giving the bond and mortgage; he was opposed to it himself; he did not wish to encumber the property without giving the stockholders notice; Stebbins then said that all we had done would be lost unless we raised money on bond and mortgage; and that there were many debts that were pressing and must be paid ; he then produced a memorandum showing that the company owed him about $10,000 for services, house rent, &c., and considerable interest on it; and, therefore, there would be no danger in giving him the bond and mortgage; the reason lie gave why a bond and mortgage should be given to him was, that he could not negotiate a bond and mortgage to the lender; he said he would be compelled to give a premium on it; but if it was given to him, he could assign it to some one and give some further security and make it an individual transaction of his own ; he said it would enable him to pay the pressing debts of the company and complete the works; that was the purpose, entirely, for which the bond and mortgage were given; and not to pay any debt the company owed him ; I did not, in giving the bond and mortgage, recognize that the company owed Stebbins anything; yet at the same time, if he had not made some show that the company owed him, witness would not have consented to give the bond and mortgage; as it ultimately turned out, I believe, the company did not owe h.im one dollar; in the statement exhibited by Stebbins, he thinks there was no credit given ; the account was nearly all for salary; he knows there was no credit given for the notes received from General Wall or Judge Nevius; there never was a settlement with Stebbins and the company; and we could never get a statement of what he had received; he thinks Stebbins had received, in notes of Wall and Nevius, $10,000; the indebtedness of the company at the time the bond and mortgage were given was about $6000; he does not know what Stebbins had paid out; the whole of the expenditures at that time ought not to have exceeded $6000; at the time the bond and mortgage were given, Stebbins said the object of the mortgage was to raise money to pay the pressing debts and complete the works; there never was one dollar raised on the bond and mortgage that came into the hands of the company; and I did not, until within a year past, know that it had been assigned away by Stebbins; the letters shown him, and marked Exhibits A and B, are in the handwriting of Stebbins, and were received by witness from Stebbins, during the time he pretended he was negotiating the loan ; the $1500 mentioned in the letter of January 17th, 1842, is a prior debt against the company, as security for liabilities incurred for the company; Mr. Packer, whose name is mentioned in the letter marked B, is the William Packer who was contractor on the works; Stebbins said he must raise the money to complete the works, for that he had $30,000, all he had in the world, in the company ; and he would be ruined unless he got the works completed; the property mortgaged, being in an unfinished state, and without the use of the water, and if subject to the mortgage of $9600, was not worth anything to the stockholders; neither would it pay the mortgage; Stebbins brought Van Hook out to look at the property some time during the spring or summer of 1842; Van Hook stopped at witness’ door, and told witness he had come out to see about loaning Stebbins the money on the bond and mortgage; I told him we wanted about $10,000 to set the property going and pay the debts, and that Stebbins said that sum would do it; that I considered the property would be worth $20,000 when in operation; I told him the amount of expenses we had been at, about $180,000; that if he had the money to spare, he could not put it out more safely; that we were anxious to get the money and have the works in operation; VaD Hook said he could furnish the money if he was satisfied with the security, but that he did not wish to run any risk, as he had already lost some money on loans made for other persons; he made several inquiries respecting the value of the property; that is all that passed between us that I know ; I never made the least intimation to Van Hook, or any other person, that the money was to be raised for the benefit of Stebbins, but always supposed it was for the benefit of the company ; Van Hook did not inquire as to the means of the company for completing the works, but I told him that if we could obtain the money on the bond and mortgage, we would be able to put the works in operation, and that then the property would be valuable; my impression is, that the resolutions offered in evidence were passed before the conversation took place with Van Hook, but am not positive; by the information witness received from Stebbins, there was no negotiation of the bond and mortgage at the time the resolutions were passed ; I gave Stebbins such a certificate as he asked for to enable him to effect a loan ; it was given him for the same purpose the bond and mortgage were given for — to enable Stebbins to make the loan; I gave the certificate to aid him in making the loan, and that the bond and mortgage were valid ; I never gave Stebbins a certificate that the company had given him the bond and mortgage for any debt due him from the company.
Cross-examined. — He does not recollect whether he was present at the meeting of the board when the resolutions were passed, but he recollects something about the resolutions, and probably he was present at the time they were passed; he presumes the original minutes are in the hands of the company in Hew York; Ibbotson got them of his son, and took them to Hew York ; he did not convey the idea to Van Hook, or any other person, that the bond and mortgage were given to Stebbins for a debt due from the company to Stebbins ; Van Hook made no inquiry about its being for a debt due Stebbins ; there was no conversation on that subject.
In chief. — The resolutions were to aid Stebbins in the negotiation in raising the money on the bond and mortgage for the use of the company ; he applied to witness for the resolutions, and said he wanted them to assist him in get tii^j the money on the bond and mortgage, and they were passed for that purpose, and if any certificate was given by me as president of the company, it was given for the same purpose ; he does not know that Stebbins ever paid any money out of his own funds for the use of the company; the company have never expended anything at Somerville, except for building and some castings; the expenditure he before alluded to is $180,000 in stock ; the scrip to be delivered for the Poughkeepsie machinery and patents, depending on them to fulfill.
Cross examined. — Witness is not a stockholder, and has no interest in this suit; Stebbins was employed by the Somerville Manufacturing Company as their agent, at $3000 a year salary and a house; thinks it was three years from the time he was engaged as agent till he was dismissed; but he does not know that he was engaged in the business of the company more .than a third of the time; the first year he does not think there was much done; there never was any agreement between the compauy and Stebbins varying the first bargain made; there never was a settlement by the company with Stebbins; they never could get him to a settlement, or to make a statement;- there never was a formal account rendered by him to the company as agent; at the time the bond and mortgage were given, Stebbins presented a statement on a small piece of paper, showing that the company was indebted to him between $9000 and $10,000 for services; there was a minute made in the books of the company of the bargain of the company with Stebbins; Van Renselaer was present when the statement was produced by Stebbins, and it was talked about, but he does not recollect that Van Renselaer said anything about it; witness did not take the statement as a settlement, but merely to show that the company were in no danger in giving him the bond and mortgage; he does not know that Van Renselaer recognized the statement as a just claim of Stebbins against the company.
In chief. — At a meeting of the company in New York, the company told Stebbins they were unwilling to pay him $3000 a year, because he had not been engaged in the business of the company the^whole time; Stebbins said he had been engaged a considerable part of the time for the water company, and he was willing that whatever that company paid him, might come out of his wages; the company never admitted that they owed Stebbins anything; but we did not know whether we owed him, or he owed us ; at the time the bond and mortgage were given, it was proposed by Stebbins, and agreed to by the company, that it should be given to him to raise money to pay the debts of the company, and to enable them to complete the works, and for no other purpose, and not for any debt due him from the company, or pretended to be due.
James Taylor, for defendants.
— The assignment of the bond and mortgage was acknowledged before him ; he does not know who brought it to him ; he has never seen Van Hook, to his knowledge; Stebbins appeared before him and made the acknowledgment ; thinks he heard Stebbins say that the object of giving the bond and mortgage was to raise money for the company to complete the works; that is his impression, but he is not certain of it.
Edward F. Loomis, for the defendants.
— He served a subpoena on Henry L. Stebbins to appear at this place this day; served it last evening, about half-past four o’clock, and paid him one dollar ; when witness handed him the subpoena he said, what is this ? he read it, and said he did not know what it was; he said he did not know anything about it — that he did not know Mr. Van Hook; Henry L. Stebbins is the reputed son of Jared H. Stebbins.
Allan Clark, for the defendants.
— I now reside in Somerville; in 1842 I resided in Hew York; the paper marked Exhibit C on the part of the defendants, is in my handwriting; I saw it executed by all the parties except Mr. Gaston ; it was executed by Stebbins on the 11th of September, 1842, and was finally executed by all the parties on the 1st of October, 1842; it was to take effect as soon as a majority had signed it; the paper marked Exhibit D is in my handwriting, and was executed on the 2d of September, 1842; it was modified in part on the 11th of September, 1842, and referred to in the agreement signed that day; the paper marked Exhibit E is in my handwriting, and was executed in part on the 11th of September, 1842 j it was signed by Van Renselaer, Loomis, and Lyman, and Jared U. Stebbins on that day; it was
afterwards signed by General Wall, not in my presence, but I know his signature; and also by Lyman for Judge Nevius; I saw the authority in the handwriting of Judge Nevius to Mr. Lyman for him to sign his name to that writing; the date of this writing was altered from September 11th to October 3d, at the request of Stebbins; he stated that it was for the purpose of securing a small debt of the manufacturing company to Mr. Steele, of about $500; that he had promised Steele there should be no prior lien to his; he said the property was clear of all encumbrances; I have heard him represent this more than once; the first I heard of the negotiations which resulted in the above agreement, was a conversation between Stebbins and Lyman; Stebbins represented all the debts of the company not to exceed $3000; he never claimed any debt that the company owed him ; I have seen him make a list of the debts; he always represented that the company were unable to go on any further, for the want of money, and that was the reason he applied to Mr. Lyman to make the negotiation ; I was present when the agreement was signed by some of the parties; I knew the property which Stebbins said he had bought of Van Hook ; I had a conversation with Stebbins in April last, about this property; I have known the property for ten or fifteen years; it is leasehold property, and the term has about ten years to run j at the time Stebbins got this property it was worth about $4000; Stebbins has always claimed this property as his own.
Cross-examined. — There are buildings on this property, of brick, about twelve and a half feet front, and three stories high j I think there are five separate entrances to the building in front; I do not know what is the rent of the property; I lived in the neighborhood of the property sixteen or eighteen years; I now own property in the same neighborhood; I am now in the employ of Lyman & Loomis, who are partners in business.
William Thomson, for the defendants.
— I saw the paper marked Exhibit E, executed by John I. Gaston.
A deed from the Somerville Manufacturing Company to Loomis & Lyman, dated October 18th, 1842, was exhibited on the part of the defendants.
The master states that it was admitted by the parties that the assignment of the bond and mortgage by Jared if. Stebbins to the complainant, was delivered in the clerk’s office of Somerset county, on the 1st of August, 1842, by said Stebbins, and recorded after the mortgages left in the office for record, on the 8th and 9th of August, 1842, and delivered to Mr. Blauvelt, the complainant’s solicitor, on the 18th of May, 1843 ; and that it was agreed by the parties that the paper marked Exhibit 0 on the part of the complainant, is a true copy of the resolutions passed by the board of managers of the Somerville Manufacturing Company, duly certified by the secretary.
John M. Mann, for the complainant.
— He is acquainted with Loomis and Lyman, two of the defendants ; is acquainted with the property of the Somerville Manufacturing Company contained in the mortgage in controversy; some time prior to June 25th, 1842 — the precise time he cannot say — he was employed, on behalf of Mr. Van Hook, to examine into the title of the property belonging to the Somerville Manufacturing Company, at Somerville, included in said mortgage, with the understanding that there was a negotiation going on between Van Hook and Jared if. Stebbins; he made the examination, and gave a certificate to that effect; he examined the book of minutes of the company, as it was represented lo him; he did not know it to be the book of minutes of the company, any more than that it contained the proceedings of the company; he does not know where he found it; he found on this book a resolution of the board of directors of the company, of an indebtedness of the company to Jared If. Stebbins of $9638; there was also in said book a resolution authorizing the president of the company to execute a bond and mortgage to Jared N. Stebbins for $9600, on the real estate of the company ; all the information he gathered in relation to this property he gave either to Van Hook, or to his counsel, Mr. Blauvelt; he had no knowledge of the bond and mortgage given to Stebbins, or anything in relation to it, except what he got from the resolution on the book of minutes of the company; he knows the handwriting of John I. Gaston. [Being shown a paper writing marked Exhibit A on the part of the complainant, he says] — ■ The name John I. Gaston, subscribed to said paper, is said Gas» ton’s handwriting.
Cross-examined. — He thinks the property of the Somerville Manufacturing Company would be worth very little without the water-power.
Abner Jones, for the complainant.
— He resides in New York, and has resided there thirteen or fourteen years ; he has been a real estate broker for the last five years, and is now. [Being shown the bond and mortgage in controversy, he says] — He has seen them before; the first time he saw them was in the spring of 1842; the occasion on which he first saw them was about the time of the completion of the arrangements between Stebbins and Van Hook ; he had been applied to prior to that time, by Stebbins, to negotiate the bond and mortgage for him ; about the last of March or first of April, 1842, he was applied to, by Stebbins to negotiate the bond and mortgage; witness offered it for dry goods, and offered it to other persons before he offered it to Van Hook; about the time last mentioned, he offered the said bond and mortgage to Van Hook for some houses he had in the Third avenue, New York; while it was under consideration, he obtained from Van Hook another offer, which Van Hook preferred, being some cash and New York securities; in the fore part of May witness went and showed Jared N. Stebbins the property contained in Exhibit I, J. M. Mann, master, which resulted in the purchase of the bond and mortgage by Van Hook; Stebbins was to make up the mortgage to $10,000, and make it equal to a ten per cent, mortgage; Van Hook was to give him for it, the five houses and lots contained in said Exhibit I, and the leases, and give him also the benefit of the decree, if the property should not bring as much as the mortgage Van Hook held on the property ; the rent which had been kept back for six or nine months in the hands of a receiver, was to go to Stebbins ; Van Hook at this time held a bond and mortgage on the said property, witness thinks, of $10,000, which was in an advanced state of foreclosure, or had been foreclosed, he does not know which ; the sale of the property had not then been made; it was to be sold, and after the sale Stebbins was to get his title through Van Hook; this trade had been agreed upon some weeks before the sale by the master; the sale was partly given up once by Van Hook ; Stebbins desired the property to be purchased in as low as if
could be; witness took a message from Stebbins to Van Hook, for bina, Van Hook, to buy in the property at a small price; the reason why Stebbins wished the property bought in at a small sum was, that the smaller the sum for which it sold, the larger would be the amount left due on the deoree, which he, Stebbins, would be enabled to enforce against Bowen, the defendant in said decree; which balance belonged to Stebbins by the terms of the bargain; this whole transaction took place in the city of New York; witness was first applied to by Stebbins ; Van Hook never applied to witness ; Van Hook paid one-half of the commissions, in consequence of some misunderstanding between Stebbins and Van Hook as to the terms of the bargain; this was done by way of settling the difficulty ; witness looked to Stebbins for his commissions ; did not think of charging Van Hook, until Stebbins and he agreed that he, Van Hook, should pay one-half; Van Hook refused to part with the five houses and lots for less than the amount of his mortgage, as they were worth that to him; witness and Stebbins went together to see the property, and went through two or three of the houses; this was before the bargain was made; at this time Stebbins was willing, and proposed to witness to give his bond and mortgage for the said property and decree; previous to the bargain being closed, Stebbins went to see the property once or twice, as he informed witness, and showed him a memorandum of the income; after paying ground rent and all expenses, the property rented for enough to make it a seven per cent, matter on $10,000, as it strikes witness; he does not speak positively; Stebbins examined about the rents particularly, to know what would be in the bands of cite receiver; Van Hook repeatedly said, in the course of the negotiation, that he would not take less than the amount due on his mortgage; witness says if he had owned the property when the bargain was made in May, 1842, he would not have taken less than $10,000 for it; since this property has been sold by Van Hook, it has been mortgaged for $8000; witness has seen the mortgage; saw it this morning in the hands of Edward P. Clark; never saw the mortgage in any other place than in the city of New York. [Being shown a paper marked Exhibit B on the part of the complainant, be says] — It is a true copy from the original, which he could not get out of the office; they refused to let him have it; witness has sold and negotiated for the sale of a large amount of real estate in all parts of the city of New York; during the last five or six years he has been a real estate broker in the city of New York; he has some knowledge of the value of real estate in the city; during the time of this negotiation, and about the close of it, he learned from Van Hook and Stebbins that they had been over to Jersey, at Somerville, to look at the property on which the mortgage in controversy is; they said they had seen Gaston, the president of the company; Van Hook did not see the property; had not time ; from the time the first trade of the Third avenue property was talked about, Van Hook and Stebbins talked of going over to Somerville, and whether they did go before the last trade was introduced or shortly after, witness is not able to say with certainty, but feels confident it was before the 20th of May, 1842.
Cross-examined. — The property in the deed contained in Exhibit I, was sold at public sale; Henry L. Stebbins had nothing to do with the negotiation with Van Hook; about the close of the negotiation, Stebbins said the property was to be made to his son, Henry L. Stebbins.
John S. Blauvelt, for the complainant.
— In the spring of 1842, he was in the complainant’s office in the city of New York; he cannot specify the exact time, but thinks it was the last of April or early in May; Van Hook stated to witness that Stebbins had offered him a mortgage upon the property of either the Water Power Company or the Somerville Manufacturing Company, and wanted witness to examine the title and ascertain the value of the property ; witness told him he had better get John M. Mann to do it, as he lived some distance from Somerville; that Maun had been clerk of the county, knew the property, and probably knew the title, and he could get more satisfactory information from him than he, witness, could give him; Van Hook thought that would be the best way; as the conversation closed, he remarked to Van Hook that the bond and mortgage being made by a corporation, he had best ascertain, before he took it, if it had been properly executed, and he had better also get a recognition of the bond and mortgage by the company as a good and valid bond and mortgage, and that the company had no defence to make against the bond and mortgage, either in law or equity, or something to that effect; witness does not recollect that he held any communication with Van Hook on the subject, afterwards, until after the bond and mortgage had been assigned to him, nor had witness anything to do with the examination of the title or value, or with the negotiation, having referred him to Mr. Mann, as his counsel, to get the information ; witness was at Somerset Court — which is held on the third Tuesday in June in each year — at the term of June, 1842, on the first day; saw Stebbins there; he inquired of witness what kind of a resolution of the company Van Hook wanted in relation to the bond and mortgage, so that he, Van Hook, would take it; witness referred him to Mr. Mann; Stebbins applied again, and maybe more than once, and fiuallv witness told him what kind of a resolution he supposed Van Hook wished; witness may have drawn or dictated a resolution on th6 subject, but his memory does not entirely serve him; he had some conversation, he thinks, but is not certain, with Mr. Mann on the subject of the bond and mortgage; witness did not then know anything about the bond and mortgage, or the circumstances under which it was given, nor did he hear anything of any difficulty about the said bond and mortgage until several months afterwards- — thinks about the middle of the following winter; when witness was at Somerville, in June Term, 1842, as above stated, he knew the fact that Van Hook had been to Somerville to see and inquire about the mortgaged property; that he had seen Gaston, the president of the company, and that he had not seen the property, for he told witness so; when or where, witness does not recollect; it is possible witness may have seen him at Perth Amboy, in the latter part of May, in that year; he does not recollect to have had any communication with Van Hook about the bond and mortgage, after that above stated as having taken place in his office, for some months after-wards.
Dudley Selden, for the complainant.-
— He resides in the city of New York, and has resided there more than twenty years, and is a lawyer; he says he is acquainted with the New York property described in Exhibit I, and has known it since 1886 or 1837, particularly; there were three adjoining lots, of which the premises in said exhibit is five-sixths, each lot being 25 feet front, by a little over 100 feet deep; they were vacant, and held under leases from Mr. Rogers; the agent ■of the owner of the leases applied to witness to purchase them; witness purchased his interest in the three lots under said leases, at the rate of $1000 per lot; the fee simple of the lots, at that time, was worth from $3000 to $3500 each, free from all encumbrance; after having purchased these three lots, witness determined to build upon them six houses, of twelve and a half feet front, and made an arrangement with the builder, whereby he, in connection with Mr. J. Rogers, should build two of the houses on his own account, substantially corresponding, externally, with the four witness was to build on his own account, witness advancing some portion of the money, which was to be secured by a mortgage on their respective buildings; under the arrangements, six buildings were put up, occupying the entire front of the three lots; the cost of the four buildings put up on the two lots retained by him, was over $8(j)00; he thinks the contract price was either $2000 apiece, together with certain additions not covered by the contract, or it was $2200 apiece, with certain additions; he took a mortgage from Colburn and from Rogers, for advances he made to them in building their houses; the amount of the mortgages he does not recollect; they were probably about two-thirds of the cost of the lot and buildings, perhaps a little more; the titles to Colburn and Rogers’ lots were made to them, either by his surrendering the lease to them and they taking out new leases, or by his assigning to them the lease for one of the lots which he held; the said Rogers who became interested in the one-half of this one lot, is wholly unconnected with the Rogers who is the original lessor of the three lots; the one who claimed under witness was Rogers the architect; about a year after witness got the building completed, property began to depreciate in New York, and gradually declined for about three years; the buildings, he thinks, were completed in 1837 or 1838 ; thinks real estate in New York continued depreciated until the beginning of 1842 ; he thinks he rented his houses for from $350 to $375, each' house; thinks he got, the first year for some of these houses $400; shortly after the buildings were completed he made an arrangement with a Mr. Bowen, then in Europe, and who at that time had certain funds in the hands of witness, whereby the purchasing the lots, the building, the arraugement made with Colburn and Rodgers, the letting of the houses, &e., were all deemed to have been made by the said Bowen j his impression is, he originally intended the said property for Bowen, and wrote to him on the subject; witness foreclosed the Colburn mortgage for non-payment, and became the purchaser under the foreclosure, for the benefit of Bowen ; Colburn had become embarrassed, and left the city ; this was about a year or eighteen months after the buildings were completed; the Colburn house and the four houses built by witness are included in Exhibit I; before witness transferred the leases under direction of Bowen, witness, at his request, executed a mortgage upon the premises, collateral to Mr. Bowen’s bond, which witness believes was to Mr. Van Hook ; witness thinks it was conditioned for $10,000. [Being asked what was the value of the premises in 1840, he says] — Tie should think that, in May, 1840, such buildings as were put up on these premises could have been constructed for . $1750 apiece; and had the leases for the vacant lots been offered to witness at that time, he would not have, been willing to haw* given more than $500 for the leasehold interest in each lot of twenty-five feet front; he thinks the entire property would have sold for more in 1842 than in 1840 ; he received the rents for several years after the buildings were put up, and up to about the time of the sale under the foreclosure of the mortgage that was given to Van Hook, acting therein as the agent of Bowen; the rents of I he buildings fell off considerably, and varied from $225 to $275 or $300 for each of the five houses; there were more houses in Hew York during the depression of business than there were tenants who usually occupied such houses, to occupy them ; some of these houses were occupied by two tenants ; the rents, during the depression, were not always collected in full; perhaps, if witness pressed hard, he might have got them.
William Packer, for the defendants.
— I was present at the time a certain resolution of the board of directors of the company was passed, dismissing Stebbins from their employ, and speaking of the mortgage in this suit, which resolution was passed in the middle of October, 1842 • which resolution I saw last Monday night, and to which I will put my name when requested ; the resolution is in the handwriting of John I. Gas-ton, who was president of the board, and was certified by him ; Ib'ootson, Gaston and myself, and, I think, Van Renselaer, were present at the meeting when the resolution was passed; Stebbins was not present, but had notice.
Cross-examined. — I am well acquainted with the handwriting of John I. Gaston ; the paper marked Exhibit No. 1 on the part of the complainant, now shown to me, is in his handwriting.
It was agreed by the solicitors of the parties, that the book of minutes of the board of directors be used as evidence on the hearing of the cause; and that if it be furnished for that purpose, it is to be used for that purpose and no other, and is to be returned to the person furnishing it, after being used for the purposes of this cause.
Robert Van Renselaer, for the complainant.
— He was a director of the company in 1841 and 1842'; Jared N. Stebbins was also a director, and managing agent of the company, at a salary of $8000 a year; deponent was present at a meeting of the board when the account marked A on the part of the complainant, was presented and passed upon by the board; the signature to said account is that of John I. Gaston, president of the board; at a meeting of said board he has no recollection that an order was made directing a mortgage to be given to Stebbins, but knows that a mortgage was given, sanctioned by the board, but whether at that meeting or not deponent does not know; he remembers being present at a meeting of the directors when a discussion took place as to the time when the mortgage should become payable, Stebbins wishing it to be at a short date, and the directors at a longer one; the time was fixed upon, but deponent does not remember what that time was.
Cross-examined. — At the time said mortgage was proposed tc be given, the company was struggling with pecuniary difficulties which seemed to be insurmountable; the works of the company were suspended at that time for the want of funds; the manufacturing company had just commenced its operations; deponent is not aware of any settlement having been made between Stebbins and the company, excepting so far as refers to the account marked A ; Stebbins received a large amount of notes and obligations and moneys for account of the company; he knows that Stebbins received $4000 from the water-power company, to be applied to the use of the manufacturing company, as appears by the settlement of the water-power company at Bunker’s; the question was often discussed by the company as to the mode of raising money, and as to whether any money could be raised by a loan on the company ; Gaston was of opinion that any amount could be raised ; deponent was of opinion it could not; the company was indebted, at the time, to several persons, who were pressing for their debts; when the mortgage was given to Stebbins, he gave the assurance that he could raise a sufficient sum to relieve the company from its embarrassments, and go on with the works and complete the manufacturing establishment; deponent consented to the mortgage, to secure the indebtedness of the company to Stebbins, but would not have consented, had it not been for the assurance of Stebbins that the proceeds would have been applied for the payment of the debts and prosecution of the works of the company; he was present when the negotiation was going on between the company and Loomis and Lyman, for the property covered by the mortgage, but cannot remember the month; Stebbins always represented to deponent that the mortgage was under his control; deponent never knew that Stebbins’ property in the mortgage had been absolutely transferred, until the present summer; deponent derived that impression from the assurances of Stebbins, that he had the control of the mortgage; deponent knows nothing of the resolutions of the board or certificates of the president, in relation to the mortgage, at the time of the transfer to Van Hook, or of the machinery by which said resolutions and certificates were obtained, which resulted in the negotiation of the mortgage; deponent not having been present at any of the meetings of the board when the resolutions were passed and the certificates given.
In chief. — -A prior mortgage was given to the State Batin at Elizabeth, to secure to them the indebtedness of the individual directors; and deponent only consented to the Stebbins mortgage on condition that said mortgage should be given '<> said bank to claim priority to the Stebbins mortgage.
The following is the writing before referred to,, marked Exhibit C on the part of the complainant:
At a meeting held June 28th, 1842, the following preamble and resolution were passed;
“ Whereas a certain bond and mortgage given by the Somerville Manufacturing Company to Jared N. Stebbins, for the sum of $9600, bearing date the tenth day of January, 1842Í, has been this day submitted to the inspection of this board, and the same having been considered and examined, it is
“ Resolved, That the said bond and mortgage is a legal and subsisting liability of the said company, and that they have no defence to make to the same, either in law or equity.
“ June 28th, 1842.”
I certify the above resolution to be a true copy from the minutes of said company. J. A. Gaston, Secretary.
Exhibit A, L. D. Harden burgh, master, on the part of the complainant, is as follows;
Somerville Manufacturing Company,
To J. N. Stebbins, Dr.
1840. Feb. 1. To am’t balance due, per voucher......$4517 93
1841. “ 1. “ interest.one year................. 271 75
Rent from 1st Feb. to 1st May, 1840.. # 87 50
Half month rent to 15th June........... 43 74
Rent to 1st April, from 15th June..... 200 00
1841. Feb. 1. One year’s salary........................... 3000 00
Interest one year......................... 487 25
$8608 17
1840, By note of Gen. Wall and Judge Nevius, $1000 Three notes, $500, $278, $222......... 1000
Interest one year......................... 120 2120 00
$6488 17
Dr. To one year’s salary............................. 3000 OC
$9488 17
1841. Jan. 1. Rent.......................................... 150 00
$9638 17
The board of directors having examined the above account do pass the same, and acknowledge a balance due J. N. Stebbins of $9628.17.
Signed by order of the board,
J. I. Gaston, President.
A paper marked B., L. B. Harden bergh, master, on the part of the complainant, is exhibited as a copy of a mortgage mentioned in the testimony of Abner Jones, as given by Henry L„ Stebbins to John B. Morgan, dated August 23d, 1842, for $8000, on the leasehold property in New York.
Exhibit I, G. A. Vroom, master, on the part of complainant, is as follows i
I do hereby certify, that a bond and mortgage for $9600, was given and executed by me to Jared N. Stebbins, as president of the Somerville Manufacturing Company, by order of the board of directors, as said amount was due said Stebbins, as agent of the company, and 1 know of nothing that could be brought against said claim in abatement or in any way destroy its validity. Jno. I. Gaston, President.
June 28th, 1842.
Exhibit A on the part of the defendants, is a letter from J. N. Stebbins to J. I. Gaston, dated January 17th, 1842, as follows s
Dear Sir s I returned from New Sfork Saturday evening, expecting to have gone back in the nine o’clock train this morning j but an attack of a violent pain in my head, with sickness at the stomach, has prevented. Should I be able, I intend to go in the morning. I fear I shall not be able to negotiate my mortgage until after the next meeting of the water company board, which will probably be on the 1st of February. I have found a person who has $10,000 to loan, at seven per cent., and will let me have it on the mortgage, provided the property on which it is a lien is worth $20,000; but he objects until I get some certainty for water without*any question; he does not like any chance for a law-suit. It must be a first mortgage. This can be got along with, either by paying up the $1500, oí keeping it hack, as we shall iiereafter agree upon.
Now it is not possible for me to get along without money, and I am trying to negotiate some of my stock to raise the wind. I have sent up to your son one of my certificates of fifty-six shares, and he has sent me the three scrips here inclosed, for your signature; this makes thirty-eight shares, including the fifteen I had before, and there is now eighteen more due me upon the fifty-six, when I come to settle. I would thank you to add your signature to the three scrips, and send them to me. I should like to see you before I go to New York, if you are coming down town.
Respectfully and truly yours,
Monday, January 17th, 1842. J. N„ Stebbins.
P. S. I cannot pay the five dollars till I return. I heard of your being in town, and sent for you this morning, but could not find you.
Exhibit B on the part of the defendants, is a letter from J. N. Stebbins to John I. Gaston, dated New York, March 29th, 1842, as follows:
Dear Sir : I find obstacles in the way of negotiations. I want a certificate from you as president, that the bond and mortgage is a valid one, given me for the amount due me. The best way is, to copy the resolution on the books, provided there is nothing else in said resolution. I also want a certificate from the clerk that the title is good and free from encumbrance. Now you know perfectly what I need j will you get it for me and forward it to the care of C. Wykoff, Merchants’ Hotel?
I want the wall put up and the shingles put on the foundry, and I have written Mr. Packer to do it now. I wish you would try to aid him in getting it done, and I will pay for the shingles, &c., just as soon as I get the money upon the mortgage, which I can do as soon as I can satisfy that all is right, and the property worth double the money ; and I think they will send some person over to look, and I want it all right when they get there.
Yours, truly, J. N. Stebbins.
New York, March 29th, 1845.
Exhibit C on the part of the defendants, is an article of agreement between J. N. Stebbins, Robert Van Renselaer, Wil liam Packer and John I. Gaston, managers and directors of the company, and Luther Loomis and Samuel P. Lyman, witnessing, that the parties of the first part, in consideration of $3000, the receipt whereof is acknowledged in behalf of the said company, have sold, assigned, transferred and delivered, and do thereby sell, &e., all and singular the letters patent, &c.,- more particularly described in a deed to the Somerville Manufacturing Company, a copy whereof is hereunto annexed. And do, for the like consideration, sell, assign, transfer and deliver to the said parties of the second part, all the right, title and interest of the said company, and of the parties of the first part, of the property and effects of the said company, described in said deed, consisting of machinery for the manufacture of screws, stock of materials, tools, chattels and effects, of whatever name or nature, belonging to the said company, free and clear from aSi encumbrance. This article is signed and sealed by Van Renseiaer, Stebbins, Packer and J. I. Gaston.
Exhibit E on the part of the defendants is a memorandum of an agreement, dated October 3d, 1842, signed by Loomis and Lyman, Van Renselacr, J. N. Stebbins, Wall and Hievius, reciting that the affairs of the company had long been so embarrassed that the property of the company could not be made productive, and must be sold to meet the liabilities of the company, and that the parties to the memorandum are holders of a large amount of the stock of the company, and liad already expended large sums to make the property productive, and that it had become necessary that further sums be expended to save what had been laid out from total loss, and that it was the intention of the parties to the memorandum, to afford an opportunity to other parties who claim to have an equitable interest in the property, to make advances, pro rata, which shall be equal to the expenditures made by the parties named in the memorandum, aud share with them in the benefits or disadvantages to accrue from what has been undertaken by the said parties •, and providing, 1st, That at any sale of the property and effects of the company which may take place under any execution or decree, or at private sale by the managers of the company, the property shall be bought by Loomis and Lyman, for the parties who shall subscribe the memorandum, at the lowest price at which it is possible to purchase the same j provided the price of the whole shall not exceed the sum which Loomis and Lyman may be willing to pay for the same; which property, when purchased, shall be held by them for the benefit of the said Loomis and Lyman, G. D. Wall, J. S. Nevius, Henry Ibbotson, Jared N. Stebbins and Robert Van Renselaer, in case they become parties to the memorandum, in the following proportions: Loomis and Lyman shall have six-twelfths, and Wall, Nevius, Ibbotson, Stebbins and Van Renselaer six-twelfths ; and each.one shall pay, pro ratd, for the purchase of the said property, according to his interest in the same, to be thereafter declared.
,2d. Immediately after the execution of the memorandum, an accurate inventory and valuation of all the effects of the company shall be made.
3d. As soon as the property and effects of the company can be obtained, and title thereto perfected, for the benefit of the parties named therein, a lease for all the water-power required for the use of the said purchasers, is to be obtained from the Somerville Water Power Company, upon the usual terms, at the rate of $4 per annum for each square inch.
4th. The title to the said property under the sale herein contemplated, shall be acquired as soon as the same can be done, consistent with the interests of the said parties, and without doing violence to the rights of others.
5th. Simultaneously with the steps herein agreed to be taken, it is understood that steps shall be taken to clean up and put in order all the machinery and effects of the company, and to prepare the same for use as soon as the circumstances will permit.
6th. It is the understanding of the parties, that as soon as the said purchases are made and the value of the same ascertained, articles of agreement more full and defining the rights of the parties more particularly, are to be made and entered into between the parties ; but until then this memorandum is to be binding. (Signed,)
Loomis & Lyman, J. N. Stebbins,
Robt. Van Renselaer, Garret D. Wall.
James S. Nevius, by S. P. Lyman for him.
Exhibit K on the part of the defendants, is a deed, dated October 18th, 1842, from the company to Luther Loomis and Samuel P. Lyman, therein stated to have been made by virtue of a resolution of the board, conveying, for $3000, therein acknowledged to have been received, the real estate of the (>■" pany, (being the same property described in the mortgage assigned to the complainant,) “subject to two certain liens by judgments and executions against the company, to wit, one in favor of Joshua Doughty, and one in favor of the president, directors and company of the State Bank at Elizabeth.” This deed contains covenants by the company, that the property is not encumbered by any encumbrance whatever, except as before mentioned, and that the company will warrant and defend the premises to the said Loomis and Lyman, freed and discharged from all encumbrances. This deed is signed by the president, and sealed, and is acknowledged by him before George EL Brown, master in chancery, to have been signed, sealed and delivered by him, in the name of, and as the voluntary act and deed of, the company.
By an exemplification of the proceedings in the Court of Chancery of New York, exhibited on the part of the complainant, it appears that the bond and mortgage from Bowen to Van Hook, on the property in New York, spoken óf by the witness Selden, were dated May 20th, 1840, and conditioned for the payment of $10,000, in one year, witli interest at seven per cent. This mortgage recited that George P. Rogers had, by a lease dated October 14th, 1837, demised to Dudley Selden all that lot of land, &c., to hold from May 1st, 1837, for the term of seventeen years, at the yearly rent of $31.50; that Selden,, with the consent of George P. Rogers, had assigned the lease to Colburn ; that to secure part of the consideration of the assignment, Colburn had executed a mortgage to Selden ; that afterwards, on the 27th of November, 1839, the interest of Col-burn in the lease had been sold by a master in chancery to the said Bowen, by deed dated April 6th, 1840; that Bowen mortgaged to Van Hook the said unexpired term, and the lease and all the advantages of renewals and buildings and improvements. The said recited mortgage was only of Colburn’s interest in one
of the lots. There was another mortgage of the leasehold interest in two of the lots, reciting a lease dated April 26th, 1833, for twenty-one years, yielding for each of the lots the yearly sum of $63. Dudley Selden mortgaged the leasehold interest in said two lots to Van Hook. The property is in Thirteenth street, Fifteenth avenue. The bond and the said two mortgages were to secure $10,000. The bill filed in that case states that Jacob Acker has or claims some interest in or lien upon the said premises prior to the said mortgage of Van Hook, the complainant in that cause, and prays, among other things, that after satisfying the prior liens on said premises, if any, the complainant may be paid out of the residue of the proceeds.
The answer in that case sets up usury, and states, among other things, an assignment by Bowen in trust for the benefit of his creditors, dated June 1st, 1841.
On the 14th of December, 1841, an order for proofs was made in that case. The testimony was closed February 21st, 1842. On the 8th of April, 1842, that cause was brought to hearing on the pleadings and proofs, and it was referred to a master to compute the amount due Van Hook, the complainant in that cause. A final decree was made on the 9th May, 1842. On the 8th of September, 1842, the master’s report of sale was confirmed, unless cause to the contrary should be shown in eight days.
A paper writing, purporting to be a copy of a mortgage given by Henry L. Stebbins to John B. Morgan, dated August 23d, 1842, was exhibited and marked Exhibit B on the part of the complainant.
Copies of three several deeds from the complainant to Henry. L. Stebbins, for the New York property, were exhibited and marked Exhibits F, G and H on the part of the complainant.
A copy of a deed from William Mitchell, master in chancery of New York, to the complainant, was exhibited and marked Exhibit I.
The cause came on to be heard on the pleadings and proofs, the term of June, A. D. 1845.
Blauvelt and P. D. Vroom, for the complainant.
They cited 2 Ball & Beatty 319; 1 lb. 151, 340; Ambler 436; 5 Wheat. 420; Angell & Ames on Corp. 73, 74, 158, 159, 160, 378; 2 Kent’s Com. 293.
S. P. Lyman and G. L. Wall, for the defendants.
They cited. Angell & Ames on Corp. 151, 190, 242, 247, 390, 406; 2 Kent’s Com. 298, 463, 468; 4 Peters 152; 4 Wheat. 636; 7 Serg. & Rawle 530; 2 Wendell 308; 7 lb. 31; 6 Hal. 116, 119.

Opinion:
The Chancellor.
The first question I shall consider is, whether the bond and mortgage are the acts of the company. Were they so executed as to bind the company?
The third section of the act of incorporation provides that the stock, property, and concerns of the company shall be managed and conducted by five directors, being stockholders, one of whom shall be president, and that the president and directors may make and ordain such by-laws and regulations for the government of the corporation, and for the management of the stock, property, effects, and concerns of the company, as may by them be deemed necessary and convenient, and that the president and directors, or a majority of them, shall and may appoint such officers, superintendents, and agents as they may think proper, and may remove the same at their pleasure.
The fourth section provides that the said president and directors, or a majority of them, shall have power to call in stock, •from time to time, in such installments as they shall see fit to prescribe; and, by the last clause of the eighth section, it is provided that, on the death or resignation of any director, the remaining directors shall choose, from among the stockholders, some fit person to fill the vacancy, who shall hold his office till the next annual meeting.
Under this act, what is the mode of expressing the binding will of the corporation ? If, on due notice to all the directors, three only meet, can a majority of them bind the corporation ? It is said, in 2 Kent's Com. 293, that there is a distinction taken between a corporate act to be done by a select and definite body, and on» ' ~ be performed by the constituent members. In the latter case, a majority of those who appear, may act, but, in the former, a majority of the definite body must be present, and then a majority of the quorum may decide. This, the author says, is the general rule on the subject; and if any corporation has a different mode of expressing its binding will, it arises from the specific provisions of the act of incorporation.
The act incorporating this company does not give, specially, any definite mode of expressing the will of the corporation. It does not say, in words, that the concurrence of three of the five directors shall be necessary to bind the corporation, nor that three shall be a quorum. The provisions, in this respect, differ, in words, in different parts of the act. In two clauses, the words, "or a majority of them," occur. These clauses authorize the president and directors, or a majority of them, to appoint officers, and to call in installments. Is it intended that, when three are duly met, two of them may make the appointments, and call in installments, or is the concurrence of three of the five necessary? I have great difficulty in supposing that the legislature, when they say that a majority of the five may appoint officers and call in installments, intended that two of the five might do it, if a third should be present, though he should vote against it. If, in these clauses, this was not intended, was it intended to give a different rule in the other clauses ? The act of a majority of those who, by the charter, have a voice in the corporate deliberations, will bind. The question is, what shall be considered the act of that majority? Mr. Kyd says that in different corporations, the manner in which the majority shall be reckoned, varies according to the provisions of the charter. Sometimes, the act that is to bind must be sanctioned by the assent of an absolute majority of the body empowered to act; sometimes, it is sufficient if a majority of the body be assembled, and the majority of those assembled agree to the act. Kyd 309.
Which of these rules does this act give — or does it give different rules for different purposes ? Does it require the concurrence of three voices to appoint an agent, and of only two to make a deed ? Lawrence, J ustice, in Witherall v. Gartham, 6 T. R. 592, says: "In general, it would be the understanding of a plain man, that when a body of persons is to do an act, a majority of that body would bind the rest." I think a plain man would quite as readily understand, that a minority of the body could not, under any circumstances.
Without deciding what is the construction of the act in this respect, (for I have disposed of the cause on other grounds,) I am willing to say that the experience of "New Jersey in reference to the proceedings of corporations, furnishes strong arguments to her judicial tribunals, to induce them to look narrowly into the powers given by acts of incorporation. But, under both these clauses, not less than three can constitute a board to do a corporate act. Gould Stebbins, with two other directors, constitute a board to vote a mortgage from the company to him? I think not. A member of a corporation contracting with it, is regarded, as to that contract, as a stranger. Ang. and Ames 168, 169; 1 Kyd on Corporations 180.
This brings us to an inquiry of fact in the case. Were there three directors other than Stebbins present, duly assembled, at the meeting or meetings at which the acts necessary to bind the company by this bond and mortgage to him, were done ? it is shown by the testimony of Brown and Packer, that at the meeting of the 10th of January, 1842, but three of the directors were present, and Stebbins was one of them. This fact is unconiradicted, unless the minutes are sufficient to overcome this direct testimony, and to show that four of the directors were then present. " The books and minutes of a corporation, if there is nothing to raise a suspicion that the corporate proceedings have been irregular, will be treated and referred to as evidence of the legality of the proceedings." Angell and Ames 407. However regular and free from suspicion on the face of them, they would be but prima fade evidence. I have examined the minutos carefully. The appearance of them is too suspicious to allow them to overcome the testimony of Brown and Packer. It is plain that at the meeting of the 10tt »f January, there were but two directors present besides Stebbins. As to the word " board," as used by the witnesses, it is evident they use it without regard to the question whether a meeting of three directors, including Stebbins, would be a competent board to give a mortgage to him.
The meeting of Gaston, Packer and Stebbins, on the 10th, of January, the minutes of which say that a resolution was then passed, ordering the president to sign the bond and mortgage and affix thereto his own seal, which was thereby acknowledged and adopted as the seal of the company for that purpose, was not a legal board for the purpose of giving a mortgage to Stebbins. But the affixing the seal of a corporation is a ministerial act, and may be done by a less number than is necessary to constitute a board, if it be done by the direction of a legal board. Angell and Ames 155, 158, 406. Was there any previous meeting of a legal board for giving a mortgage to Stebbins, at which the affixing the seal to the bond and mortgage was directed to be done? The minutes, as they now appear, show, under a heading of a meeting on the 5th of January, 1842, which states that Gaston, Stebbins, Van Renselaer and Packer were present, and prior to the heading of the meeting of the 10th, two entries, one directing the president to execute the bond and mortgage and affix thereto a common seal, and the other, stating that that meeting was then adjourned to the office of George H. Brown, esquire, January 10th, at 5 p. M., 1842. When these two entries were made was not shown. The secretary of the company was not examined, nor did the book of minutes appear at any of the examinations of witnesses; nor does the witness Brown, say that he saw the book of minutes and these entries in it, at or before the execution of the bond and mortgage. It is obvious that it may have been supposed by some person, at some period before the bond and mortgage were assigned, that such a state of the minutes as would appear to show an adjournment from a former meeting at which three directors besides Stebbins were present, might put the question of the validity of the bond and mortgage on a better footing than if it stood simply on the resolution appearing in the minutes of the meeting of the 10th, the heading of which does not state how many or who were present. A careful. examination of the minutes, compared with testimony, has satisfied me that the entry stating an adjournment from the 5th to the 10th, is not a correct entry; and that it was made, not on the 5th of January, but at some subsequent time. [The reasons for this conclusion are here stated.]
There may have been another reason for introducing this antry of adjournment from the 5th to the 10th. The heading of the minutes of the meeting of the 5th is, " At a meeting of the board of directors of the company, at the house of John Torbert, innkeeper, pursuant to notice duly given to said directors respectively, the following persons were present j" naming Gaston, Van Renselaer, Stebbins and Packer. It may have been supposed that the entry of an adjournment from the 5th to the 10th, would have the effect of making the meeting of the 10th appear to be a meeting on due notice. Whether this would be so, if all. the directors were not present at the first meeting, is at least doubtful, in reference to business of an extraordinary character. The entry of an adjournment was made for some purpose, and was thought necessary or proper by some person, for some purpose j but, from the appearance of the minutes, in connection with the testimony, I think it was not made in accordance with, the fact.
As to the resolution appearing on the minifies as of January 5th, 1842, directing the president to execute the bond and mortgage and affix thereto a common seal, the book of minutes furnishes no evidence to be relied upon, that it was passed at a meeting on due notice, at which three directors, besides Stebbins, were present — no evidence that it was passed by a legal board. And Van Renselaer, who from the minutes would appear to have been present, says he has no recollection that at a meeting of the board an order was made directing a mortgage to be given to Stebbins. He says he knows a mortgage was given, sanctioned by the board, and that he consented to it. This does not prove that, he was present at the meeting which, he says, sanctioned it; and the consent of an individual director, not sitting in a legal board, is nugatory. If Van Renselaer was not present, then it could only have been sanctioned at a meeting of three, of whom Stebbins was one, for it is shown that Ibbotson was absent, out of the state.
If I am right in the conclusion to which I have come from an examination of the book of minutes and of the testimony, then the resolution appearing on the minutes as of January 5th, 1842, directing a bond and mortgage to be given to Stebbins, depends for its efficacy on a simple entry of a resolution, on minutes of very suspicious appearance, without any statement of a meeting of the board, without stating who were present, or the presence of any one, without any proof of notice of the meeting, and without proof aliunde that a board was present, and against the testimony of one of the director* that be has no recollection of such a resolution being passed at any meeting of the board, and against the presumption of the absence of another of the five directors, Ibbotson, arising from his non-residence. It appears to me that it would be going too far to say .that such an entry as that of this resolution of January 5th, is binding on the corporation.
Again, this was a business of an extraordinary character, the mortgaging the real estate of the corporation. Is an entry in the minutes, even if free from suspicion, that the meeting was held on due notice, sufficient evidence of it, if it appears, as it does here, that all the directors did not attend ? Indeed, the true reading of the heading under which this was introduced is, that it was on due notice to the directors who attended.
On the question, then, whether this bond and mortgage were legally given, so as to bind the corporation, there are several matters about which I am not satisfied. I am not satisfied that under this charter, the concurrence of less than three affirmative voices out of the five directors will bind ; nor that the meetings which passed the resolutions of January 5th and January 10th, 1842, were duly assembled ; nor that three of the directors besides Stebbins voted for either of them ; nor that Stebbins, with two other directors, could constitute a board to direct a mortgage to be given to him. But as to these matters, I do not give m decided opinion. My view of the case on another ground of defence, has led me to a conclusion satisfactory to my mind, and I shall decide the cause on that ground.
The ground of defence now to be examined is, that the mortgage was given to Stebbins as the agent of the company, to enable him to raise money for the company, on his representation to the directors that the money needed by the company could not be raised on the bond and mortgage of the company direct to any lender; or after failure so to raise money, and on his representation that he could raise it on a bond and mortgage of the company executed to him, by an assignment of it to some person, allowing the lender a premium or greater rate of inter est than the legal interest, and that this was the only way in which the money could be raised; and that the mortgage was given under such circumstances (which it is contended are shown in evidence) that to enforce it against the company would l)a a fraud on the directors and the company ; in short, that as a mortgage of the company to be used by Stebbins against them, it was procured by fraud.
If these papers were obtained for the purpose of raising money for the company, and are fraudently attempted to be used by the party obtaining them, as securities given to him for his own benefit, it will be considered that when he obtained diem, and in using the means of obtaining them, he entertained the design of using them for his own benefit, and that therefore he obtained them fraudulently.
I am of opinion that the bond and mortgage were not good in the hands of Stebbins against the company. He acted as she general and financial agent of the company. (It is not material to the present purpose, to inquire whether such an agent can be legally appointed, and a director can be such an agent.) On the 1st of January, 1841, a resolution appears on the min Hies of a meeting at which Gaston, Van Renselaer, Stebbins, and Packer are stated to have been present, authorizing Stebbins to negotiate a loan of any sum not exceeding $5000, and to give a bond of the company and a mortgage on their factory and the lot on which it stands, to secure the payment thereof. On the 23d of August, 1841, a resolution appears, without any heading of a meeting or statement who were present, that J. V. Stebbins, agent of the Somerville Manufacturing Company, is authorized to loan money from the State Bank ;)i Elizabethtown, from lime to time, by notes or drafts, provided the liability of said company shall not at any time exceed $1500. On the 5th of January, 1842, two resolutions appear, one, a resolution that a bond and mortgage be executed to the State Bank at Elizabeth, to secure the personal liability of the president and directors of the Somerville Manufacturing Company to said bank, lor money loaned or to be loaned, the sum not to exceed $1500 ; the other, a resolution " that the president is hereby authorized and directed to execute a bond and mortgage to Jared N. Stebbins, for $9600 ; payable in three years from date, the interest, to be paid annually and every year."
Each of these resolutions, except the last, shows on its face the object for which the securities mentioned in it are to be given. The last simply authorizes and directs the president to execute a bond and mortgage to Jared N. Stebbins for $9600, without stating 'the reason or the object or purpose why or for which it was to be given.
The first resolution is, that Stebbins negotiate a loan of $5000, on the bond and mortgage of the company to the lender. This mode of borrowing money failed. Through the course of the year other means were used for borrowing money, with some success, but not to the amount required ; and on the 5th of January , 1842, the last of the said resolutions was adopted, (supposing for this part of the case that it was legally adopted,) directing a boneband mortgage to be given to Stebbins, without saying for what reason or consideration ; and Stebbins now claims that this mortgage is a valid security in his hands, and seeks to enforce it against the company. This would be the state of the matter as between Stebbins and the company.
Three of the persons who were directors at the time of the transaction, have been sworn in the cause — two of them called on the part of the defendants, and the other on the part of the complainant — in reference to the object of giving thr mortgage, and the manner and means in and by which those of the directors who voted for it, were induced to do so. [The testimony on this part of the case is here examined.]
The closing counsel for the complainant contended that the amount of the testimony was this: that Stebbins was to raise the money on the mortgage given to him for his débt, and to appropriate some $2000 or $3000 of it to pay the debts of the company, and to make advances as one interested in itae company. This explanation is hardly satisfactory. The conclusion I have reached is, that as a bond and mortgage tc be used by Stebbins against the company, they were procured by fraud.
(The "next,question is, will the bond and mortgage be gcH in the hands of Van Hook, if he be a bona fide holder ? .The case of Barrew v. Bispham, in the Supreme Court of this state, 6 Halst. 119, decides that the assignee of a bond takes it subject to ail the equities which existed against it in the hands of the obligee, and that fraud in the obligee in obtaining it is a good defence against the assignee, though he purchased it for a valuable consideration, and without notice of the fraud.
This principle may not be fully applicable to this case. These securities (assuming now that they were legally executed) were executed to Stebbins, the agent, to enable him to raise money for the company by an assignment of them. If the agent had used them in the maimer contemplated, and obtained the money, the company would be liable on them, though the agent failed to apply the money to the use of the company. Can securities made to an agent, to be by him assigned to raise money for the company, be resisted, in the hands of a bona fide assignee, on the ground that he assigned them for real estate, for purposes of his own ? I am inclined to think that the rule in 6 Halst, should not be applied in this court, in a case like this, against a purchaser in good faith and without notice. Is the complainant such an assignee?
First, as to good faith, irrespective of notice. In this inquiry it must be borne in mind that Stebbins, in the measures taken during the progress of what he called the negotiation, was acting with the knowledge that the mortgage was executed to him to raise money for the company, and yet with the design, as proved by the result, of making it available for his own benefit. I think it cannot be doubted that he was acting under the conviction that it would be resisted, if attempted to be used by him, against the company as a mortgage for his own benefit. His object, then, would be to get it into the hands of one who should claim as assignee, and to get as much as he could from the officers of the company to strengthen the claim of the assignee. I think it will be manifest that the whole course of proceeding connected with the assignment, is consistent only with this design on the part of Stebbins, and is inconsistent with the idea that the complainant was a real purchaser in good faith. So man, acting with sincerity and good faith, would have been satisfied to buy this mortgage, and pay for it on the credit of the papers which Stebbins procured from the president and secretary of the company. And I am clearly of opinion that he never did buy and pay for this mortgage — a mortgage on a manufacturing site without water-power, and to which a lease of water had been refused. The certificates and suppletory resolutions, •or copies of what purported to be resolutions, were procured by Stebbins, and at his instance, with a view to aid the mortgage in the hands of an assignee for his own benefit.
A certificate of John I. Gaston, and another writing signed by him, which it is difficult to characterize, and a copy of what purports to be a resolution of June 28th, 1842, are exhibited on the part of the complainant. The certificate is dated June 28th, 1842, and is signed John I. Gaston, without addition, and purports to certify that a bond and mortgage for $9600 was given and executed by him to J. N. Stebbins, as president of the Somerville Manufacturing Company, by order of the board of directors, as said amount was due him as agent of the company, and that he knew of nothing that could be brought against said claim in abatement, or in any way destroy its validity.
The resolution of June 28th, 1842, of which a copy is exhibited, signed J. A. Gaston, secretary, is as follows:
"At a meeting held June 28th, 1842, the following preamble and resolution were adopted : Whereas a certain bond and mortgage, given by the Somerville Manufacturing Company to Jared N. Stebbins, for the sum of $9600, bearing date the 10th day of January, 1842, has been this day submitted to the inspection of this board; and the same having been considered and examined, it is resolved, that the said bond and mortgage is a legal and subsisting liability of the said company, and that they have no defence to make to the same, either in law or equity,
"June 28th, 1842. J. A. Gaston, Secretary."
A letter had been written by Stebbins to Gaston, from New York, dated March 29th, 1842, in which he says he finds obstacles in the way of negotiation ; that he wants a certificate from Gaston, as president, that the bond and mortgage is a valid cine, given him for the amount due him. On the 28th of June, 1842, he receives the foregoing paper, signed by John I. Gaston, not as president, and stating, not " that the bond and mortgage were valid, given him for the amount due him," as requested by the letter, but, that they were given and executed to Stebbins, " as said amount was due said Stebbins, as agent of the company."
If the mortgage had been given to Stebbins for an amount due him, why was it that Gaston not only omits to sign, as president, but falls short of saying what the letter asks ? The '¿rath of Gaston's deposition, that lie gave the certificate for the name purpose the bond and mortgage were given for- — to enable Mm (Stebbins) to make the loan- — to aid him in making the loan- — and that he never gave Stebbins a certificate that the company had given him the bond and mortgage for any debt due him from the company, is confirmed by the language of "hif? so-called certificate. Gaston was willing to say as much as he could in aid of that object, but the restraint of the language of the certificate is manifest. The design of Stebbins, before spoken of, is obvious from the language of the letter. In view of the fact, as it appears by the result, that Stebbins was about patting these papers in the hands of an assignee, for a deed to his son of property in Mew York, it is plain that he was availing himself of the pressure on the company for money, to procure from the president what he supposed might give effect to the mortgage in the hands of an assignee. But Gas-ton, even under the pressing necessities of the company, would not give the certificate asked, though acting under the belief that Stebbins was honestly endeavoring to negotiate the mortgage for money for the company. This certificate is exhibited by the complainant to show good faith in him in taking the assignment. (It will be recollected that the negotiation, as Stebbins called it, which ended in the alleged trade for (he Mew York property, commenced some months before the 28th of Jane. (Did the complainant require the certificate Stebbins wrote for? If he did not, then its procurement by Stebbins, and its production now, by the complainant, are consistent only with the design of Stebbins, before stated, and with a want of good faith in the complainant. If it was at his suggestion that Stebbins wrote on the 29th of March, asking the certificate mentioned in that letter, would what Stebbius, after the lapse of three months, procured, have been satisfactory, to one proposing in good faith, to buy the mortgage ? Its language was short of what the letter asked, and it was not signed by Gaston, as president; and, if what was requested to be certified, was true, Gaston could have had no hesitation in giving the certificate in the language of the letter, and signing it as president; and, besides, the certificate, if given as required, would be no evidence whatever of the fact it purported to certify. The only object that could have been had.in procuring it was, that it might furnish some evidence of good faith in the complainant in taking the assignment. The resort to such means, in view of the inquiries he put, and of others he failed to put to Gaston, when Stebbins took him out to Somerville, are little calculated to show his good faith, or to satisfy us that a man of the business capacity of the complainant would, or did part with his property, and put it out of his control, on the faith of such a paper.
But this letter of Stebbins went further, and said: "The best way is, to copy the resolution on the books, provided there is nothing else in the said resolution." An entry of a resolution appears on the minutes, of the same date with the said certificate — June 28th, 1842. It is the entry, •a copy of which, signed J, A. Gaston, secretary, is before given. This entry, and the copy of it, signed by the secretary, and the above certificate of Gaston, were made for the purpose of removing the obstacles which Stebbins said he found in the way of negotiation. Stebbins wanted a resolution "that the bond and mortgage is a valid one, given him for the amount due him," " provided there is nothing else in said resolution;" and he wanted the certificate of the president to the same effect.
To show Stebbins' idea of the way in which things might be done, and the boldness with which he availed himself of the pressure on the company for money, in order to get from Gas-ton something which he hoped might make the mortgage good in the hands of an assignee, we have only to ask how, according to his notions, such a resolution and certificate were to be made. Ibbotson was absent; Van Renselaer lived out of the state, and he testifies that " he knew nothing of the resolutions of the board or the certificates of the president, in relation to the mortgage, at the time of the transfer to Van Hook, or of the machinery by which said resolutions and certificates were obtained which resulted in the negotiation of the mortgage, he not having been present at any of the meetings of the board when the resolutions were passed and the certificates were given;" and Stebbins was in New York when he wrote the letter. This left but two of'the directors, Gaston and Packer, to comply with the requirements of his letter.
How it is that this certificate and entry of a resolution and copy of it were not made till June 28th, does not appear. Three months elapsed before the certificate, such as it was, was given. I suppose the truth to be, that Stebbins' immediate presence and aid were necessary to procure them ; and inasmuch as Van Hook could not make a deed for the New York property till after he should get a deed for it under his foreclosure suit, and Stebbins could make no arrangement with any one else to take an assignment of the mortgage, the delay worked no injury to either of them. What would be the effect of the delay on the mind of a person intending, in good faith, to buy the mortgage, is another matter. But the entry of this resolution was at length made, and the copy of it and the certificate of Gaston, as above given, were procured. The resolution was either caused to be entered by Gaston alone, or by Stebbins and Gaston, or at best, at a meeting composed of Gaston, Stebbins and Packer. Packer says he cannot say whether he was present or not. And if he was, it would not be a competent board for the purpose, for the reason that if it was, then a mortgage to one of five directors might be-declared to be a legal and subsisting liability of the company by a vote of that director and one other. But this entry is, in its terms, still less a compliance with the request than the certificate of Gaston ; and as to the form of it, it is headed thus: "At a meeting held June 28th, 1842, the following preamble and resolution were passed." Who were present at the meeting ? where was it held ? by whom was the resolution passed ? It cannot be that the complainant, in good faith, bought the mortgage on the credit of the papers exhibited by him in the cause.
Another paper is exhibited on the part of the complainant. It is the one which I have before said it is difficult to characterize ; a writing at the foot of a statement of Stebbins' account against the company. It is in the handwriting of John I. Gas- ton, and reads thus: "The board of directors having examined the above account, do pass the same, and acknowledge a balance due J. N. Stebbins of $9638.17. Signed by order of the board.
" Jno, I. Gaston, President.
"January 5th, 1842."
What is the character of this writing? It does not purport to be a certified copy of a resolution, but would rather seem to purport to be an original resolution, or perhaps more like a certificate of Gaston that such a thing was done. When was it furnished, or sent,-or given to Stebbins? There can be no doubt it was one of the papers sent or given to Stebbins in compliance with his request in his letter of March 29th, 1842, or on a similar request further urged by him afterwards; and hence the singularity of its form. The date put to it is not the date at which this writing, or certificate, or whatever it may be called, was made, but purports to be the date at which what is said in the writing to have been done was done. The form of this writing adds another proof'that all the exhibits on the part of the complainant were got up Jong subsequently to the execution of the mortgage, at the instance of Stebbins, to serve his design; and that the nature of the transaction between Stebbins and the complainant, as it finally resulted, was different from that of a bona fide purchase of this bond and mortgage. Does Gaston, by this writing, say that the board passed such a resolution on the 5th of January, 1842? Certainly not. If such a resolution had been passed at .that date, and then placed on the minutes, it cannot be imagined that such a nondescript writing as this would have been resorted to; a copy of such resolution, if it had been so passed, made in such a way as to satisfy a man proposing in good faith to buy the bond and mortgage, would . have been required and made. The production of such a paper amounts to less than nothing on the question of the good faith of the complainant. " The board of directors, having examined," &c. Is this the form of a resolution as it would appear on the minutes ? The very form of this writing, instead of giving satisfaction, carries plain and strong marks of suspicion. Who were present when any such resolution was passed ? who constituted, or pretended to constitute, a board to pass it? and how were they assem bled ? was Stebbins himself one of them ? As to these matters the writing is silent. And, what is quite as singular, Gaston, though produced as a witness in the cause on the part of the defendants, was not shown this writing by the complainant, nor asked when or where any such resolution was passed. Why Stebbins should not have the question asked is sufficiently plain, but why the complainant, if he was a bona fide assignee, having produced this paper to show his good faith, should omit to do so, I am at a loss to understand. The production of these papers, exhibited on the part of the complainant, furnishes no evidence of his good faith in this transaction : in my judgment they disprove it. If he was acting in good faith he would not have relied on writings of such a character, and produced to him by Stebbins, the man from whom he was to take the assignment.
But it was thought best that Van Hook should seem to have made inquiries for himself, and accordingly he rides out to Somerville with Stebbins. He stops at John I. Gaston's; does not go to see the property. Gaston testifies that Van Hook made no inquiry about the mortgage being given to Stebbins for a debt due to Stebbins; nor any inquiry as to the means of the company for completing the works; nor any inquiry as to the water-power, or whether a lease for water could be procured 5 nor, though on the spot, does he make any inquiry for the minutes, or as to the action of the board in reference to the giving of the mortgage. Gaston's testimony on this part of the ease is as follows : " Mr, Van Hook stopped at my door and told me he had come out to see about loaning Stebbins the money on the bond and mortgage j I told him we wanted about §10,000 to set the property a-going and pay the debts, and that Stebbens said that sum would do it; that I considered the property would be worth $20,000 when in operation." "I told him that if he had the money to spare, he could not put it out more safely; that we were anxious to get the money and have the works in operation ; Mr. Van Hook said he could furnish the money if he was satisfied with the security, but that he did not wish to run any risk, as he had already lost some money before on loans made for other persons." " Van Hook made several inquiries as to the value of the property." " I never made the least intimation to him, or any other person, that the money was to be raised for the benefit of Stebbins." " Mr. Van Hook did not inquire as to the means of the company for completing the works, but I told him that if we could obtain the money on the bond and mortgage, we would be able to put the works in operation, and that then the property would be valuable." Let it be recollected here that Van Hook claims to recover on this mortgage on the allegation that he gave a deed for real estate for it.
Again, at a meeting of the water-power company, said to have been in June or July, 1842, Stebbins said he could not negotiate the mortgage without a lease of water for the use of the Somerville Manufacturing Company. He had before written to Gaston, saying, " I have found a person who has $10,000 to loan at seven per cent, and will let me have it on the mortgage, provided the property on which it is a lien is worth $20,000; but he objects until I get some certainty for water without any question ; he does not like any chance of a law-suit; it must be a first mortgage; this can be got along with, either by paying up the $1500, or keeping it back, as we shall hereafter agree upon." This letter was produced on the part of the defendants. It shows the design of Stebbins. The mortgage would be of no value without a lease of water. Then in June or July he still presses the water-power company for a lease of water, saying he could not negotiate the mortgage without it, and it is refused ; and it is quite clear from the testimony, that without water the property as it then stood was of little value, compared with the sum named in the mortgage. But the effort to get the lease fails; yet this failure to procure water makes no difference to the complainant, the alleged exchange proceeds, notwithstanding, and Van Hook takes an assignment of the mortgage, not paying money, which Gaston told him they wanted, to put the works in operation and make the property valuable and good security for the money, but making a deed of real estate to Stebbins' son, and telling us by his witness, the land, broker, that Stebbins' son made a mortgage on that real estate to a Mr. Morgan.
Again, the conversation between "Van Hook and Gaston, in which Van Hook, while this alleged trade for real property, was going on, told Gaston that he had come out to see about loaning the money, and that he could furnish the money if he was satisfied with the security, and in which Gaston told him what is before stated to have been told him by Gaston in that conversation, of what the money was wanted for, and how it was to be applied, shows, in my judgment, to the conscience of a court of equity, both suggedio falsi and suppressio veri, on the part of Van Hook.
Gan it be believed that a man acting in good faith, and really intending to give real estate for this mortgage, would have made such a representation to Gaston, or, on receiving the information Gaston gave- him, would have omitted to inform Gaston that Stebbins proposed to trade the mortgage for real estate in New York? Gan there be a doubt that if he had done so, as he most assuredly was required in honesty to do, the company would have taken immediate means to protect themselves against the faithlessness and designs of'Stebbins ? . 1
This part of the case is consistent with all the features of the transaction, as well those before examined as the subsequent parts of it; and, instead of showing good faith in Van Hook, it makes him a party to the fraud -of Stebbins. I cannot understand how a man acting in good faith could proceed with the trade after this; but I think I can understand how two men, determining to proceed after this, should proceed as they did — that is, have the deed from Van Hook for the New York property made to Stebbins' son, (who, it will be recollected it is testified, when a subpoena to appear as a witness was handed to him, read it, and said he did not know what it was ; that he did not know anything about it; that he did not know Van Hook;) and have Stebbins' son make a mortgage to one John B. Morgan. Again I ask, could a man in good faith, on the production of such papers, and after the information he got from Gaston, have bought and paid for this mortgage ? It requires stronger faith in the complainant's simplicity than I have, to believe it.
The closing scene of the transaction is just such as was to be looked for. No evidence was given to show when the assignment to the complainant, or the deed to the son, or the mortgage made by the son, was delivered; but it appears that an assignment of the bond and mortgage was left by Stebbins in the office of the clerk of Somerset, and recorded after the 9th of August, 1842; that, on the 8th of September, 1842, the report of the master in chancery in Néw York, of the sale of the New York property to Van Hook, was confirmed, unless cause to the contrary should be shown in eight days; and that the deed for that property, from the master in chancery in New York to Van Hook, was recorded on the 19th of September, 1842; and the mortgage from Stebbins' son to Morgan is dated August 23d, 1842.
The complainant's witness, Jones, would seem to ask us to suppose that young Mr. Stebbins, under these circumstances, borrowed $8000 on the mortgage executed by him of this New York property, dated August 23d. It would have been a relief if Mr. Morgan, or somebody acquainted with this part of the transaction, had been examined, to tell us something about this mortgage, when it was delivered, and to whom, and what given for. If it was given for the benefit of Jared N. Stebbins, and had no connection with the transactions between Van Hook and him, and Van Hook actually parted with the New York property, and has no coutrol over it by means of this mortgage to Morgan, it would have been very easy for J. N. Stebbins oi Van Hook to produce evidence to satisfy us of this; and Stebbins, as well as Van Hook, was interested to do so. Instead of this, and though Van Hook, under the pressure of the case in another view of it, puts forward this mortgage from Stebbins' son, no account of it is given, except that Jones, a witness produced by the complainant, and who produced a certified copy of the mortgage, says that he had seen it in New York the morning of the day of his examination, in the hands of one Edward P. Clark, and that " he could not get the original out of the office j they refused to let him have it."
More light might be thrown upon the subject by examining Jones' testimony in connection with a fact of which he did not speak, and which was not alluded to by the counsel on either side, for the reason, I presume, that the voluminous record of the proceedings in the chancery suit in New York was not read by either of them; and that is, the fact that, some time before the sale of the New York property by the sheriff to Van Hook, Bowen, against whom the decree in that case was made, had become insolvent and made an assignment for the benefit of his creditors. But I forbear to say more of this matter, than that we hear nothing of any assignment of that decree either to J. N. Stebbins, or to his son. In view of this fact, this part of the case is to be added to the pretences.
It appears to me, that under the proofs in the cause, Irrespective of notice, the complainant is not entitled to be considered a bona fide purchaser, and, therefore, is not entitled to the application of equitable considerations to relieve him from the rule in Barrow v. Bispham.
I am of opinion, further, that the information he received from the president of the company, was sufficient notice to take from him the character of a bona fide purchaser without notice, if without that information he could have been considered such.
The bill will be dismissed.
Order accordingly.
REVERSED, 1 Hal. Ch. 633.
Cited in Stevens v, Post, 1 Beas. 417.