Court Opinion

ID: 8861678
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:50:22.89027+00
Date Added: 2024-06-11T17:05:50.684095
License: Public Domain

THAYER, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
It was contended on the oral argument of the case, and the point is also made in the brief of counsel for the real-estate company, that the latter company is not liable on the note and deed of trust in suit, because they were not executed in pursuance of a resolution of the board of directors formally proposed and passed at a directors’ meeting. This question, however, is not open for consideration on this record, and the proposition is not tenable, for the following reason: The answer to the bill contains an express admission that both the note and the deed of trust were executed by the real-estate company at the date alleged in the complaint, which must be regarded as an admission that the officers who executed the note and the deed of trust, and affixed the corporate seal thereto, to wit, the president 'and secretary, were duly authorized to take such action by the board of directors or other governing body. Any other construction of the pleading would render the admission meaningless and of no effect. If it was the intention of the defendant company, when it filed its answer, to challenge the validity of the note and deed of trust on the ground that the officers who executed the same did so without the sanction or approval of the board of directors, it should have presented that defense either by plea or answer. Not having done so, the only question open for consideration is one which is raised- by the answer, namely, whether the note in controversy was executed without any consideration moving from the bank to the real-estate company, and solely for the accommodation of its president and vice president. The answer contains an averment to the 'effect that the note in suit was an accommodation note made for the benefit of “certain other persons,” meaning, we suppose, Leonard and Montgomery, and that the bank was well aware of that fact when it accepted it. This is the only substantial defense which we find stated in the answer. If these allegations were true, and were supported by the proof, we might well concede that the corporation exceeded its powers in attempting to become responsible for the individual debts of its officers, and that securities executed solely for that purpose are voidable, if not absolutely void. Central Transp. Co. v. Pullman’s Palace-Car Co., 139 U. S. 24, 11 Sup. Ct. 478; Bank v. Kennedy, 167 U. S. 362, 368, 17 Sup. Ct. 831.
We are not able to concede, however, that the evidence supports these allegations of the answer. The testimony discloses, as we think, without any substantial contradiction, that, when the note and deed of trust were executed, a large portion of the land which is embraced in the deed of trust was incumbered with an attachment lien that existed thereon when it was conveyed to the real-estate company. That company had acquired the land from its grantors subject to the lien, in exchange for its capital stock, and was interested in having the lien discharged, and would be benefited by its discharge, whether we regard an attachment lien when levied as a lien in the strict legal sense, or merely as a conditional charge, which may ripen into a lien upon the recovery of a judgment. By the execution of its note and deed of trust, the real-estate company did in fact procure a release of an attachment lien existing upon its land, which was undoubtedly *505valid and would probably have ripened into a judgment. All parties to the transaction understood that the note and deed were executed for that purpose. We are not able to understand, therefore, upon what ground it can be successfully maintained, on the evidence found in the present record, that the note in suit was executed without a valuable consideration moving from the bank to the real-estate company, and that Leonard and Montgomery were the only persons who were benefited by the transaction. This being the only substantial defense which was urged at the trial, and it being, in our judgment, wholly unsupported by the proof, the judgment below is hereby' affirmed.