Manufacturing Company v. Bradley

• Decision Date: 01 October 1881
• Parties: MANUFACTURING COMPANY v. BRADLEY
• Court: U.S. Supreme Court

105 U.S. 175

105 U.S. 175

26 L.Ed. 1034

MANUFACTURING COMPANY v. BRADLEY.

October Term, 1881

APPEAL from the Circuit Court of the United States for the District of South Carolina.

The facts are stated in the opinion of the court.

Mr. A. G. Magrath and Mr. Samuel Lord, Jr., for the appellants.

Mr. William E. Earle and Mr. James B. Campbell for the appellee.

MR. JUSTICE MATTHEWS delivered the opinion of the court.

The Marine and River Phosphate Mining and Manufacturing Company, one of the appellants, is a corporation organized under the General Statutes of South Carolina, on March 15, 1870, with a subscribed capital of $500,000, the amount limited by the articles of association, of which but one-half had actually been paid in. On Dec. 28, 1872, it borrowed from William J. Gayer, receiver, appointed by the Court of Common Pleas for the County of Charleston, in a cause pending therein, of Debney, Morgan, & Co. against The Bank of the State of South Carolina, $20,000 of the funds in his hands, which he was authorized so to invest. As evidence of, and security for the loan it executed and delivered its bond, of which the following is a copy:——

'STATE OF SOUTH CAROLINA, CHARLESTON COUNTY.}

'Know all men by these presents, that we, the Marine and River Phosphate Mining and Manufacturing Company of South Carolina, are held and firmly bound unto William J. Gayer, receiver, in the sum of twenty thousand dollars, with interest thereon at the rate of ten per cent annually, payable semi-annually, to be paid on the first day of July next ensuing the date hereof, for which payment well and truly to be made we, the said company, do hereby bind ourselves and our successors firmly by these presents.

'In witness whereof the said company have caused their seal to be hereunto affixed, the twenty-eighth day of December, A. D. 1872.

'We the said company, do further covenant and agree that the above bond constitutes a lien upon the property of the said company, and that the same is issued under and pursuant to the provisions of section thirty-nine of chapter sixty-four of the General Statutes.'

It is signed by 'D. T. Corbin, president Marine and River Phosphate Mining and Manufacturing Company of South Carolina,' countersigned by 'Reuben Tomlinson, treasurer,' and sealed with the corporate seal.

Subsequently to the maturity of this bond, C. C. Puffer, who had become successor in the receivership to Gayer, on April 2, 1874, transferred and delivered it to D. T. Corbin, in exchange for three hundred shares of the capital stock in the Phosphate Company, owned by him. This transaction was reported by the receiver to the court as a payment of the note, and the shares of stock were carried as part of the fund in his hands, and were afterwards sold by order of the court. No express order of the court is produced authorizing the transaction, but his accounts disclosing it were passed and confirmed and he was bischarged. Corbin at this time was still president of the company. The bond, while held by the original receiver, had been duly recorded in the office of the register for mesne conveyances, as a lien upon the company's property.

On May 13, 1874, an indorsement was made upon the bond, as follows:——

'In consideration of further forbearance on the part of the holder of this bond till the first day of January, A. D. 1875, the Marine and River Phosphate Mining and Manufacturing Company of South Carolina hereby promises, waiving all set-off or other defence, to pay this bond to bearer on the first day of January, A. D. 1875, with interest at the rate of twelve per cent per annum, from the first day of April, 1874, payable quarterly; and should said bond not be paid on the first day of January next, then thereafter interest shall be paid in the same manner and at the same rate as herein mentioned, till paid.'

This indorsement was signed 'The Marine and River Phosphate Mining and Manufacturing Company of South Carolina, by D. T. Corbin, president,' and countersigned by 'Reuben Tomlinson, treasurer.' The corporate seal was thereto affixed.

The evidence on the point does not permit any doubt that this arrangement between Corbin and the company was made with the full knowledge and express sanction of the directors. The treasurer testifies that he objected to taking action upon the proposal of Corbin for an extension of payment as contained in the indorsement, without first submitting the question to them. The form of the renewal was the one agreed to by them, and by them ordered to be indorsed on the bond. This was done with knowledge that Corbin then held it. The interest to be paid appears to be lawful and customary, being then the rate charged by banks. It was regularly paid by the treasurer to Corbin, and in December, 1876, a payment of $10,000 was made to him by the treasurer on account of the principal. That payment was reported to the board of directors, some of whom had been consulted in regard to it by the treasurer before it was made; because, as he states, 'the funds on hand at the time having been provided for other purposes, I did not feel at liberty to use them for that purpose without first consulting with such directors as were conveniently at hand.' He adds: 'Mr. Corbin frequently, during the months of January and February, 1877, requested me to arrange for the payment of the balance of $100,000 principal, and the interest due on said bond. The matter was brought to the attention of the directors by me, and no objection was made by them to the payment of said money, if it could be raised without serious embarrassment to the company. Arrangements to pay said bond were finally made and the money actually raised and deposited in bank for that purpose, subject, however, to conditions, the fulfilment of which was prevented by the change in the organization of the company which took place in March, 1877.'

In June, 1877, Corbin transferred and delivered the bond to Bradley, the appellee, in consideration of ten dollars paid, and his agreement to pay the amount still due on the face of it, less the ten dollars paid, as stated in a letter from Corbin to Bradley, making the offer which was accepted, 'only when you shall have collected the amount from the company, and what you shall collect from the company, less the cost and expenses of collection.'

In answer to a question, on cross-examination, as to his motive and purpose in parting with the bonds in this way, Mr. Corbin said, 'that the company had refused to pay the bond, and I believed if I held the bond I would be compelled to litigate the same with the company, and I believed if it passed into the hands of a third person, in good faith, that the company would pay it to him without a long and tedious litigation, having no prejudices against him, as I believed; and further, I did not wish to be a party plaintiff in an important suit against the company that I had been so long connected with as president.'

On July 5, 1877, Bradley, being a citizen of Massachusetts, filed his bill in equity in the court below against The Marine and River Phosphate Mining and Manufacturing Company, and several others, alleged to be citizens of South Carolina, and stockholders in that corporation. It alleges that the bond is a lien upon all the property of the corporation, embracing certain described personal property, and the franchise granted to it by the State to dig, mine, and remove from the bed of the navigable streams and waters within the jurisdiction of the State the phosphate...