Darst v. Gale

• Decision Date: 30 September 1876
• Citation: 83 Ill. 136,1876 WL 10303
• Parties: JACOB DARSTv.JACOB GALE et al.
• Court: Illinois Supreme Court

83 Ill. 136

1876 WL 10303 (Ill.)

JACOB DARST

v.JACOB GALE et al.

Supreme Court of Illinois.

September Term, 1876.

OPINION TEXT STARTS HERE

WRIT OF ERROR to the Circuit Court of Peoria county; the Hon. J. W. COCHRAN, Judge, presiding.

Mr. JULIUS S. STARR, and Messrs. PUTERBAUGH, LEE & QUINN, for the plaintiff in error.

Messrs. HOPKINS & MORROW, and Mr. D. MCCULLOCH, for the defendants in error.

Mr. JUSTICE SCHOLFIELD delivered the opinion of the Court:

Bill was filed in the court below by Jacob Darst, against Jacob Gale, Sidney Pulsifer and Erastus D. Hardin, to enjoin them from selling certain real estate in Peoria by virtue of a deed of trust executed by the Peoria Marine and Fire Insurance Company, on the 1st of October, 1859, to Jacob Gale, Sidney Pulsifer and Henry Grove, as trustees, to secure the payment of ten bonds for the sum of $1000 each, with coupons for interest at the rate of ten per cent per annum attached, and to declare said deed void and vacate the same as a cloud upon the title of Darst.

Answers were filed by Pulsifer and Hardin, and they also filed their cross-bill against Darst, and William M. Dodge, receiver of the Peoria Marine and Fire Insurance Company, to enjoin Darst from taking possession of the premises, to correct mistake of description of the property in the deed of trust, and to appoint a receiver. Answer was filed to the cross-bill, and replications were also filed to the answers to the original bill and cross-bill; and the cause was heard on bill, answers, cross-bill and answer and proofs, and the court thereupon decreed that the bill be dismissed, and that the relief prayed by the cross-bill be granted. The record is brought here by the appeal of Darst.

The first point made, in argument for the reversal of the decree below, is, that the deed of trust was void, because its execution was beyond the power vested, either expressly or by necessary implication, in the insurance company.

The bonds were issued by virtue of a resolution of the board of directors, adopted on the 3d of October, 1859, made payable to Charles Holland, secretary of the company, and placed in his hands to negotiate “in the East,” for the purpose of raising money to meet indebtedness of the company maturing in the then following December. The deed of trust was executed and placed on record when the bonds were issued. Holland failed to negotiate the bonds “in the East,” but, sometime afterwards, pledged eight of them to John Johnson as collateral security for indebtedness by the company to him, in place of other collateral security which it was desired to take up. In 1861, Holland negotiated with S. Pulsifer & Co. to pay the company's indebtedness to Johnson, then amounting to $6250, and deposited the eight bonds, that had been pledged with Johnson, as collateral security for that and any other indebtedness the company then or thereafter might owe them. In September, 1863, Holland negotiated another loan from S. Pulsifer & Co. of $7000 for the insurance company, and deposited with them, as collateral security, the other two bonds, together with other collaterals. From that time forth, the ten bonds were held by S. Pulsifer & Co. as collateral security for any and all indebtedness contracted or thereafter to be contracted by the insurance company to them. The insurance company made deposits with S. Pulsifer & Co., drew drafts on them, and had them discount notes for it, from time to time, as its regular bankers. At one time (in 1865) the company had liquidated its entire indebtedness to them, but it suffered the bonds to remain there as before, and continued to make deposits with them, draw drafts on them and have them make discounts for it, until in 1869, when it was put into liquidation. At that time, the company was indebted to S. Pulsifer & Co., on over-drafts, $13,911.10, and for notes discounted, etc., $17,500, for which they held as security the ten bonds and the deed of trust, thirteen bonds, of $1000 each, on Lacon City, and seven Marshall county bonds, of $1000 each.

It is clear to our minds, from the evidence, that the ten bonds were in the hands of S. Pulsifer & Co. as security for advances made for the insurance company, from time to time, with the knowledge and acquiescence of the board of directors of the company, although it does not appear that they ever, by a formal resolution entered upon their records, authorized them to be thus pledged. The company had the benefit of the security, obtained the money upon its faith, and it is not shown that there was any fraud on the part of S. Pulsifer & Co. in their transactions with the insurance company.

The insurance company, as a corporate body, was empowered, by its charter, to insure property, etc. It was authorized to invest its capital in certain securities, and to purchase and hold, for its business, real estate, the purchase money for which should not exceed, in the whole, $20,000; and it was also authorized to take and hold any real estate mortgaged or pledged to it to secure the payment of any debt; to purchase on sales made by virtue of any judgment at law, or any decree of a court of equity, or otherwise to take and receive any real estate in payment or toward satisfaction of any debt previously contracted, and further, to lease and convey said real estate, or any part thereof.

Whether it was, in fact, necessary for the insurance company to mortgage its real estate acquired and used (as the property here in question was) for the transaction of its business, in order to meet its liabilities to its creditors, we think unimportant. That, in certain cases, it might have lawfully done so, even against the remonstrance of those who had the right to directly interfere in its management, we think can admit of but little controversy. Such a case, it may be conceded, is not shown by the evidence in this record; and it may be, had the application been made by a creditor or stockholder in apt time to have enjoined the disposition that has been made of these bonds, it would, on the evidence before us, have been required to grant the injunction. The question here, however, is entirely different. Appellant has no interest whatever in the assets of the insurance company. He claims neither as stockholder nor as creditor of it. He is, at most, simply the purchaser of a purchaser of property that belonged to it, at a judicial sale, with full, actual knowledge, both in himself and his vendor, of the prior claim of the trust deed, and of the amount claimed by Pulsifer & Co. to be due thereon by virtue of it. He can, therefore, have only what the company had, at the time, the right to sell, and, as to the trust deed, can interpose no other defenses than might have been interposed by the company, had the property not been sold. The general rule is, that the plea of ultra vires shall not prevail when, instead of advancing justice, it would accomplish a wrong; and it makes no difference, in this respect, whether it is interposed for or against a corporation. The corporation here had the money of Pulsifer & Co. upon the faith of this security. The amount went to swell its assets, and it would be against natural justice that it should now be sufficient to say: true, the company had the benefit of the money--it went to enlarge its capital, and thereby the amount with which its debts were to be paid, and, if it should prove...