Case Name: St. James Company, Respondent, v. The Security Trust and Life Insurance Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1903
Citations: 82 A.D. 242
Docket Number: 
Parties: St. James Company, Respondent, v. The Security Trust and Life Insurance Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 82
Pages: 242–254

Head Matter:
St. James Company, Respondent, v. The Security Trust and Life Insurance Company, Appellant.
Loan by one corporation to another —proof that the money loaned had been advanced by two stocJcholders of each, corporation and as to their relations is incompetent — rule as to who is the real party in interest ■—proof as to express authority to borrow money where the power is claimed to rest upon implication from official relations to a corporation, '
In an action brought by the St. James Company against the Security Trust and Life Insurance Company to recover moneys alleged to have been loaned by the former company to the latter company, it appeared that, at a time when the defendant company did not have funds with Which to pay the taxes assessed upon a building owned by it, it was notified that unless such taxes were paid a mortgage covering the building would be foreclosed; that one James N. Stout, who was the treasurer of the plaintiff corporation and vice-president of the defendant• corporation, drew, as treasurer of the plaintiff corporation, checks upon its bank account to the order of the receiver of taxes . and the department of water supply for the amount of the taxes.
Meld, that evidence that the moneys deposited in the bank account of the plaintiff corporation, with which the taxes were paid, had been advanced by Stout and one Price, who were stockholders of both companies, and as to. the relations existing" between Stout and Price, was incompetent, irrelevant and immaterial;
That the only effect of such evidence would be to show that the plaintiff was not the real party in interest, and that this fact would not constitute a defense to the action, because payment of the judgment to the plaintiff corporation would protect the defendant against all claims by a third party;
That, as Stout did not claim any express authority to borrow money to pay the taxes upon the defendant company’s building, but claimed an implied authority to do so "by virtue of his position as vice-president of the company and by virtue of a resolution passed by the directors of the defendant company giving him the charge and management of the building in question, it was not error to exclude evidence as to whether or not he had specific authority to borrow the money.
Ingraham and Hatch, JJ., dissented.
Appeal by the defendant, The Security Trust and Life Insurance Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 22d day of August, 1902, upon the report of a referee.
The action was brought to recover $42,749.10, alleged to have been loaned by the plaintiff to the defendant on or about July 11, 1900, and by consent a reference was ordered.
Proof was given upon the trial to show that this sum was paid out by the plaintiff’s treasurer and used in the payment of taxes upon the St. James Building, which was owned by the defendant. At the time of the transaction, Mr. James N. Stout was the vice-president of the defendant company, and was also treasurer of the plaintiff, the St. James Company, and by checks of the St. James Company, which he signed as treasurer to the order of the receiver of taxes and the department of water supply, he paid the taxes upon the building. Such payment was made by Mr. Stout after written notice was received by him as vice-president of the defendant on July 7, 1900, from the Bond and Mortgage Guarantee Company which had guaranteed the first mortgage on the building to the Mutual Life Insurance Company, that said insurance company insisted that the taxes due should be paid or the mortgage would be foreclosed, and that if the taxes were not at once paid and receipted bills shown, the Bond and Mortgage Guarantee Company would be compelled to place the matter in the hands of its attorney to commence foreclosure proceedings. When this notice was received, the defendant was without funds, and in order to meet the demand and pay the taxes, it was necessary for it to obtain money, which was done in the manner stated.
One of the defenses was that the money so obtained and paid was not the money of the plaintiff, but belonged in fact to Mr. Stout and Mr. Bruce Price, who were stockholders of both companies. Evidence was given to show that the moneys which finally paid the taxes were advanced by Mr. Stout and Mr. Price, and deposited in the treasury of the plaintiff company, and were for the most part obtained by them from Mrs. Price. The defendant attempted to go further into the relations between Mr. Price and Mr. Stout, and when prevented from so doing took exception to the rulings of the referee. It appears, however, that prior to the commencement of this action, Mr. Stout and Mr. Price had adjusted their affairs with each other and exchanged releases.
Another separate defense was that Mr. Stout, as vice-president of the defendant, had no power or authority to borrow money for its account and thereby charge it with liability. It. was not denied that he was at the time the defendant’s vice-president as well as the treasurer of the plaintiff company; and it was shown that the defendant had given him charge of the St. James Building. Evidence as to specific. authority to borrow the money with which the taxés were paid was excluded and exception taken.
The referee found in favor of the plaintiff for the amount demanded in the complaint; and from the judgment so entered upon his report the defendant appeals.
Jacob Halstead, for the appellant.
I. Laflm Kellogg, for the respondent.

Opinion:
O'Brien, J.:
The' plaintiff company having shown that the defendant through its vice-president had received at his instance from the plaintiff moneys from its treasury which were actually used for the payment of the taxes due on defendant's, building, had sustained the burden resting upon it and the referee was justified in his conclusion in its favor, The contention is made, however, that the judgment should be reversed for errors committed to the prejudice of the defendant in rulings upon évidencé.
The defendant sought to prove that Mr. Price and Mr. Stout, the latter being principal owner of the plaintiff company, and both being large stockholders in the defendant' company, were desirous of preventing the foreclosure of the mortgage held by the Mutual Life Insurance. Company upon the St. James Hotel property which was the largest and principal asset of the defendant company, and that on their own account and for their own benefit and gratuitously and without any reference to whether they were or were not to receive repayment, they undertook to. discharge the obligation which rested upon the defendant company of paying the taxes which were due on the St. .James Hotel property. To that end it was sought to examine into the transactions between Mr. Stout and Mr. Price as to the accounts between them, and as to what they said and did at or about the time that the $42,000 was borrowed from Mrs. Price by Mr. Stout, and- by him placed in the treasury of the plaintiff company.
With respect to all this class of evidence it seems to us that it was entirely incompetent, immaterial and irrelevant, because this action was not for an accounting between Mr. Stout and Mr. Price, but was an action at law between the plaintiff corporation and the defendant corporation to recover moneys lent. If an accounting between Mr. Stout and Mr. Price could have any material bearing on the issues presented, it was herein made to appear by uncontradicted evidence that all their differences with respect to stock and borrowed money were adjusted and settled prior to the trial before the referee, and upon that basis Mr. Stout was released from any and all claims which Mi'- Price might have had against him growing out of their relations as officers, stockholders or persons otherwise interested in either of the two corporations. In any aspect, therefore, whether the taxes were as the result of an agreement paid out of the moneys which belonged to Mr. Price and Mr. Stout jointly before they were placed in the defendant's treasury, had no relevancy to the issue as to whether or not the plaintiff loaned to the defendant. It could make no difference nor was it any concern of the defendant whose moneys were deposited in the bank account of the plaintiff. It was conceded that the payment of the taxes was an obligation which rested on the defendant. It was also shown that it was the plaintiff's cheek which paid the taxes and, so far as it was necessary to show that the money had actually gone into the plaintiff's treasury and from what source it was received, this clearly appeared from the cross-examination of Stout.
The most that could be claimed of such evidence is that it might have had a tendency to prove as matter of defense that the plaintiff was not the real party in interest. If it had been proved, however, that originally the money borrowed from Mrs. Price had been so borrowed by both Mr. Price and Mr. Stout, it was conclusively shown that it went into the plaintiff's treasury, which thus got' the legal title to the money, and that thereafter the taxes were paid with the plaintiff's check. When we recall that there is no suggestion that the money was. stolen by Mr. Stout or came wrongfully into his possession, and that neither Mr. Stout nor Mr. Price nor anybody is here asserting any claim to the money as against the plaintiff, and the further fact proved without dispute that the transaction was one between the plaintiff and the defendant by which moneys to which concededly the plaintiff had legal title were borrowed to pay the debt of the defendant, it becomes evident that the defense sought to be proved would not, if established, be available, because payment of the judgment to the plaintiff will fully protect the defendant against claims by third parties. This, under the authorities, is the test as to whether or not the plaintiff is the real party in interest. (Sheridan v. Mayor, 68 N. Y. 30; City Bank of New Haven v. Perkins, 29 id. 554; Gage v. Kendall, 15 Wend. 640.)
It was further contended that it was erroneous to exclude evidence upon the question of whether or not Mr. Stout, as vice-president of the defendant, had power or authority to borrow the money. If the claim had been made that he -had special authority and that was a crucial point in the case, such evidence would be. relevant. Mr. Stout, however, did not claim, express authority, but insisted that as an officer of the company and pursuant to the resolution which gave him charge and management of the St. James property, he had implied authority to do all things necessary, including the borrowing of money to pay taxes so as to avoid foreclosure and save and protect the property for the benefit of the defendant. Whether he had such power did not depend upon any specific authority to negotiate the loan, but turned upon whether, by virtue of his position as vice-president of the company and manager of this particular property under the resolution which gave him general powers in connection therewith, he was, authorized and justified for the benefit of the defendant in making the payment so as to bind it. The exclusion of the evidence, therefore, bearing upon the question of specific authority, we think, was proper.
The other points of the appellant we have examined, but find no reason therein presented calling for a reversal. •
Our conclusion, therefore, is that the judgment should be affirmed, with' costs.
Van Brunt, P. J., and McLaughlin, J., concurred; Ingraham and Hatch, JJ., dissented.