Court Opinion

ID: 6560537
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:15:03.284937+00
Date Added: 2024-06-11T15:56:31.160223
License: Public Domain

Hallett, C. J.
Appellant is a mining corporation organized in Few York, which owns and operates mines in this territory. T. H.'Becker, at first a trustee, and more recently president of the corporation, was in the territory during a portion of the time mentioned in this record, but the evidence does not show that any other officer or shareholder was ever in the territory. In 1865, George K. Sabin was appointed superintendent of the company’s mine in Gilpin county, and conducted its affairs until October of that year, when work was discontinued. At the trial, appellant contended, and introduced testimony to prove, that Sabin resigned his agency in the spring of 1866, and that, in the fall of that year, he entered into an agreement with the company by which he was to work the mine on his own account and render to the company the first-class ore. Appellee’s testimony on this point tended to prove that Sabin’s agency continued until December, 1868, and so the jury found the fact to be. In the years 1867-68, Sabin kept a deposit account in the bank in appellant’s name, which, by frequent overdrafts, he increased to the large amount for which, with interest, judgment was rendered against appellant.
In four special pleas appellant alleged that the bank was not able to contract an indebtedness exceeding in amount ten per cent of its capital stock, setting forth the amount of *542the stock and other facts to show the alleged incapacity, and, in another plea, the organization and capital stock of the bank is set out, apparently with a view to claim, a forfeiture of the charter of the bank, pursuant to section fifty-three of the act under which it was organized. 13 Stat. 99. As to the forfeiture of the charter, it is well settled that a corporation cannot be dissolved in a collateral proceeding, and I do not think that appellant can question the existence of the bank in this way. Angell & Ames on Corporations, § 777; Robinson v. London Hospital, 11 Hare (44 Eng. Ch.) 24. Section fifty-three provides that the violation of the provisions of the act, which shall work a forfeiture of the rights and franchises of the association, shall be determined and adjudged by a proper circuit, district or territorial court of the United States, in a suit brought by the comptroller of the currency, in his own name, before the association can be declared dissolved, and the bank must stand until dissolved in this way.
The special pleas; in which incapacity of the bank to contract the indebtedness is asserted, go to the whole declaration, and at best answer only the count for money loaned, and therefore the demurrer was properly sustained. In another trial the question may possibly arise on the evidence, and for this reason it may be necessary to make some suggestions as to the true meaning and effect of section 29 of the National Bank Law. That section was obviously intended to protect the shareholders and creditors of a bank organized under the act against an unwise use of its funds, and to this end it was necessary that the duties of the officers of the bank should be defined. I do not perceive that it was equally necessary that the power of the corporation, in relation to loans, should be circumscribed, for the mischief would arise out of the conduct of the officers, rather than the power of the bank. In section 8 the powers of the bank are enumerated, that of loaning money among others. If section 29 is to be regarded as limiting this power, the bank would be unable to recover that which rightfully belonged to it, and this section would tend to accomplish *543the ruin which it was designed to prevent. In the well-considered case of Harris v. Runnels, 12 How. 75, it was said that a contract to do a thing prohibited by statute, is not necessarily void if the statute visit the unlawful- act with a penalty. If the thing prohibited is malum in se, the contract cannot be enforced, but as to things not immoral or against public policy it may be sufficient to enforce the statutory penalty only. Accordingly it was recently decided in Maryland that a provision in the charter of a bank prohibiting any director or other officer under penalty of fine or imprisonment from borrowing money from the bank, does not exempt a director from liability for money loaned to him in violation of the prohibition. Lester v. Howard Bank, 33 Md. 558.
If it was not the intention of congress to make the contract void, it will be enforced, and for the violation of law the penalty which the statute gives may be applied. That penalty attends every violation of the act, and is found in section 53. Another and additional penalty is attached to some of the acts prohibited by the statute, as for instance in section 30, it is provided that taking illegal interest shall work a forfeiture of the entire interest, and failure to comply with the provisions of sections 31 and 32 may result in the appointment of a receiver to wind up the business of the bank. This may show that, whatever consequences were to follow the violation of the act are expressed in the act itself, and where one penalty is given I do not think we are at liberty to attach another. We are not to give to section 29 a construction which will defeat the purpose for which it was enacted, and such will be the effect if we deny the right of the bank to recover money which it has paid out. I am persuaded that this section is to be regarded as a direction respecting the management of the bank, and not as a limitation of its powers, and that the rule pari delicto is not applicable to this case.
It will not be necessary to consider whether Sabin was agent of the company at the time of the transactions with the bank. The evidence was conflicting, and for the pur*544poses of this discussion I accept the finding of the jury on that point. As to the nature and extent of his agency, it has not been contended that his dealings with the bank were within the scope of his authority. It would be difficult to maintain that a superintendent of a mine, with authority to take ore therefrom and crush it, for the purpose of obtaining gold, can, upon such authority, borrow money in the name of his principal, even if the money be used in carrying on the mine. Undoubtedly, the transactions with the bank were beyond Sabin’s authority as agent, and we are now to consider whether there is evidence to show a ratification of his acts by the company.
It does not appear that the company was informed of the indebtedness' to the bank prior to December 16, 1868, at which time Becker, the president, communicated such information by mail. There is some testimony to the effect that Becker had earlier information of the indebtedness, but he denies it, and as we cannot know how a jury may determine the fact, we must assume that his statement is correct. At this time the officers of the bank were pressing Becker for payment of the indebtedness, and, although he denied Sabin’s authority to contract the indebtedness, he did not repudiate the demand, but expressed a willingness to pay it. On the 1st of January following, he executed to the president of the bank a paper, in which he speaks of the indebtedness as “the over-draft of our company on your bank,” and says, “I hope you will not feel uneasy about the payment; we have an abundance of ore already broken in the mine to pay all indebtedness of the company. In fact, this is the only indebtedness I have any knowledge of the company’s owing, and if it is not paid off out of the mine, I propose to call a meeting of our directors and submit your claim, and make an assessment at our February meeting (in New York city) to pay off your claim and any others that the company may owe.”
Becker states that he wrote this letter under an impression that the company had made some different arrangement with Sabin, and that he refused to sign it as president, *545not wishing to bind the company—but this will not affect the character of the letter. The president of a corporation is presumed to know something of its affairs, and the evidence in this case shows that Becker was better acquainted with the business of the company than any other of its officers. He does not state the nature of the arrangement which he supposed the company had made with Sabin, or from what source he derived his impression that such arrangement existed. He had been in communication with his company in regard to Sabin’s dealings with the bank, and was at that time its only representative in the territory. If he was acting upon false information he ought to have stated by whom and how he was misled. Nor can the president of a corporation put off his official character at will and deny to those who have business with the corporation, access through him. If an officer of a corporation may, at pleasure, assume the status personal and deny his relations with his principal, it will be impossible to deal with a corporation except at the will of the officers. He was acting upon the business of the company, and all his acts within the scope of his authority as president must be regarded as official. In the evidence it is shown that the president exercised a very general authority in the management of the affairs of the company. When Sabin was appointed superintendent in April, 1865, Creswell, then president, gave him instructions as to the manner of working the mine, and in the fall of that year the work was discontinued by order of the president. Sabin’s reports of affairs at the mine were always made to the president, and in December, 1868, Becker, then president, stopped the work and took charge of the mine, and proceeded to adjust the unsettled accounts of the company. Becker states that he used his own funds in paying the debts incurred by Sabin for labor and supplies, but it may be fairly inferred that he was acting for the company in taking possession of the mine. If we regard the payment of the bills as the exuberance of a generous heart, there are other acts of his presidency and of his predecessors in office, done appar*546ently with the knowledge and approval of the directors of the company, which go far to establish the general authority of the president to manage and control the affairs of the company. But this evidence of the authority of the president was not directly to the point, that he was authorized to settle and adjust the debts of the company, and appellant was not allowed to interrogate Becker as to his authority in this matter.
Under our statute Becker was competent to testify, and his authority to bind the company was in issue before the jury, and therefore the evidence should have been received. If, however, Becker had no authority to pledge the company to the payment of any indebtedness, he certainly had authority to convene the board of directors and lay before them the claim of the bank, and this he agreed to do. In the usual course of business a corporation is addressed through its president, and it is an important duty of the executive officer to bring to the knowledge of the board of directors any matter affecting the interest of the corporation.
In Fulton Bank v. New York and Sharon Canal Co., 4 Paige, 137, the court said: “It is well settled that notice to an agent of a party whose duty it is, as such agent, to act upon the notice or to communicate the information to his principal in the proper discharge of his trust as such agent is legal notice to the principal; and this rule applies to the agents of corporations as well as others.” So, also, in National Bank v. Norton, 1 Hill, 578, it was said that notice given to the directors of a bank, for the purpose of being communicated to the board of directors, would be sufficient to charge the corporation with'knowledge of the fact stated in the notice. This is upon the rule that the principal shall be responsible for the acts and omissions of his agent within the line of the agent’s duty. Upon this rule it appears to me that Becker’s undertaking to bring the claim of the bank before the board of directors of his company at the February meeting, bound the company to consider the claim at that time. The undertaking was an *547«exercise of the executive function, and we are at liberty to presume that it was performed. Upon the evidence it ■seems that notice of the indebtedness was given to the company December 16, 1868. Fifteen days later Becker undertook to present the claim to the board of directors at the February meeting in New York. If the matter was acted on by the company, it does not appear that any notice of the result was given to the bank. Becker states that he told appellee’s attorney, in the spring of 186.9, that the company refused to pay, but the exact time is not fixed. Upon these facts the jury would have been warranted' in finding that the company had ratified Sabin’s dealings with the bank, for, where an agency exists, and the agent exceeds his authority, the silence of the principal may give rise to a presumption of an intentional ratification of the unauthorized act. Story’s Agency, 256, et seq. The circumstances must have been fully understood by the party before .any inference can be drawn from his silence, and they must have been such as not only afforded an opportunity to act or speak, but such also as would properly and naturally call for some action or reply from men similarly situated. 1 Gfreenl. Ev., § 197.
The matter of Sabin’s dealings with the bank appears to have been fully explained to Becker, and by his statement the company was equally well informed. The circumstances called for an answer from the company. Money had been obtained by its agent and upon its credit, and the bank was demanding payment. The president of the company acknowledged the justice of the demand, and if the company had any objection to it, it was reasonable to believe that such objection would be made known. Where the delay on the part of the principal to disavow the agency will result in loss, and where the transaction may turn out a profit or loss according to circumstances, the principal must disavow the act of the agent within a reasonable time after notice. Culver v. Ashley, 1 Am. L. C. 719, note; Hortons v. Townes, 6 Leigh. 47.
In Corser v. Paul, 41 N. H. 24, it is said: “There is a *548class of admissions which maybe either express, or implied, from silence or acquiescence. Such are admissions which have been acted upon, or those which have been made to influence the conduct of others or to derive some advantage to the party, and which, therefore, cannot be denied without a breach of good faith.”
Upon this it would seem that if the appellant, with knowledge that Sabin was obtaining money from the bank, had stood by and allowed him to go on without objection, it would have been estopped to deny his authority. There is, however, nothing of this kind in the evidence, nor does it appear that the position of the parties would have been different if the company had promptly disavowed the acts of its agent. The question is as to the intention of the company respecting Sabin’s dealings with the bank, to be determined upon evidence of its conduct and the declarations of its authorized agents, within the scope of their authority. If at any time the company assented to the acts of its agent, it is as much bound by those acts as it would have been if the agent had been clothed with authority to perform them. The negotiations with Becker, the notice to the company of the indebtedness, the agreement to consider the matter at the February meeting of the board of directors, and the delay of the company to disavow Sabin’s acts are facts to be considered by the jury, whose province it is to determine the question of ratification. Hortons v. Townes, 6 Leigh. 47; Corser v. Paul, 41 N. H. 24.
Further discussion of the principal points in the case is unnecessary, and it remains to consider some questions which may arise upon another trial.
The circumstance that the company retained the ore taken from the mine is not material to the question of ratification. It is not like the purchase of a chattel by an agent without authority, which, if retained by the principal, affords evidence of his intention to ratify the purchase. In such case the principal acquires, by the act of the agent, property which he had not otherwise; and if he disaffirms the contract he ought to restore the property to its rightful owner. *549But here the ore belonged to the company, both before and after it was taken from the mine, and the bank never had any right to it whatever. If any inference is to be drawn from the fact that the ore was retained by the company, it arises out of an obligation to deliver it to some other party, and I do not perceive that any such obligation existed. Nor is it material that the money was expended in the mine, or that the expenditure was advantageous to the company, unless it is shown that the company had knowledge ■of the loan and of the expenditure. Whether the money was expended in the mine, and whether it resulted in gain or loss to the company, are matters in no way connected with the authority of the agent or the ratification of his acts by the company. If Sabin had authority to obtain money from the bank on behalf of the company, the liability of the latter is not affected by the use to which he appropriated it. A ratification has a retrospective, effect, and takes effect as a prior command according to the maxim omnis ratihabitio retrotrahitur, et mandato priori aogvAparatur. Therefore, if the act of the agent is ratified by the principal, the use of the money is equally foreign to the issue.
A witness may be interrogated as to his relations with the parties to the suit for the purpose of affecting his credibility. Obviously the testimony which it is proposed to draw out must have a tendency to prove the state and disposition of the mind of the witness toward one of the parties to the suit, and I do not see that proof of indebtedness to one of the parties has any such tendency.. Upon our experience of human nature we cannot say that, as a rule, debtors are friendly or hostile to their creditors. Doubtless, in many cases, the circumstances of the debtor may lead him to seek the favor of his creditor, but it is impossible to lay down any general rule upon the subject. A matter of this kind may be safely left to the discretion of the judge sitting at the trial. Appellant also proposed to show that Sabin refused to testify until the bank had made an arrangement with him respecting his indebtedness to the latter, but we are not told what the arrangement was. If Sabin asked *550favorable terms of payment, or that all or a portion of the indebtedness should be remitted to him, as a condition upon which alone he would testify, evidence of the fact would go> to his credibility. A witness who demands compensation other than that which is given by law, for his testimony, is certainly to be regarded with suspicion. The offer, as made,, however, did not disclose a corrupt bargain, or any circumstance which could influence Sabin’s testimony, and hence-it was rightly rejected.
Yarious questions are presented in the record, which it is deemed unnecessary to discuss. The issues were not presented to the jury upon the views here expressed, and. therefore the judgment must be reversed, and the causaremanded with a venire facias.

Reversed.