Merchants' Bank of Baltimore v. Goddin

• Decision Date: 13 July 1882
• Citation: 76 Va. 503
• Court: Virginia Supreme Court
• Parties: MERCHANTS BANK OF BALTIMORE AND ALS. v. GODDIN & HOWISON, TRUSTEES, AND ALS.

76 Va. 503

MERCHANTS BANK OF BALTIMORE AND ALS. v. GODDIN & HOWISON, TRUSTEES, AND ALS.

Supreme Court of Appeals of Virginia.

July 13, 1882

Appeal from decrees of the chancery court of Richmond city, rendered 5th July and 4th December, 1879, in the suit of Wellington Goddin and R. R. Howison, trustees, against Samuel Freedley The Union Manufacturing Company of Richmond, Va.; The City Savings Bank of Richmond; John W. Wright, receiver of said bank; The Savings Bank of Tolland, Tolland county Connecticut, and Alvan P. Hyde, of Hartford, Connecticut.

The said U. M. Co., in January, 1867, under a special act of assembly, executed its deed of trust conveying real estate and machinery to Goddin and Howison, in trust, to secure the payment of sixty coupon bonds, each for $500, payable 1st January, 1872, with semi-annual interest at eight per cent per annum. Thirty-one of these bonds were issued and sold to the Savings Bank of Tolland, and nine more to Alvin P. Hyde. The remaining twenty were never issued, in fact, were never sealed. In 1869 the company desired to sell the machinery and get a release thereof from the holders of the thirty-one and the nine bonds. Without the knowledge of the holders, James L. Kent, then the president of said company, who had assured them that the said twenty bonds had not been and would never be negotiated, also executed the release, signing it as the " holder of the said twenty bonds as collateral for the payment of the floating debt of the said company."

In 1879 the trustees sold the remaining trust property to Samuel Freedley. He afterwards making objections to the title, the trustees brought suit to remove the difficulties. The Savings Bank of Tolland, the U. M. Company and A. P. Hyde filed their answers, all concurring in the positions of the trustees that the trust deed was valid, and was only to secure the forty bonds that were actually issued, and that the sale money belonged entirely to the holders thereof. But John W. Wright, receiver of the City Savings Bank, and the Merchants Bank of Baltimore, having been made parties on their own petitions, claimed that the said twenty bonds " held as collateral for the payment of the floating debt of the company," were entitled to ratable satisfaction out of that sale money, and that they were holders of large portions of that floating debt.

The facts and the proceedings are fully indicated in the syllabus and stated in the opinion of the court, and need not be reiterated.

The decision of the said chancery court being adverse to the said Wright and Merchants Bank of Baltimore, from its decrees they obtained an appeal to this court. This cause was heard at Richmond, but was decided at Wytheville.

Bryan, Donnan & Hamilton and Ould & Carrington, for the appellants.

W. W. Henry, for appellees.

OPINION

ANDERSON, J.

The deed of trust was executed by James L. Kent, president, under the corporate seal of the Union Manufacturing Company, Richmond, Va., and by W. Goddin and R. R. Howison, trustees, under their hands and seals. A deed of a corporation, executed by the president under the seal of the corporation, is a valid mode of executing it. Angel and Ames on Corporations, § 226; Haven v. Adams, 4 Allen 80; Burr v. McDonald, 3 Gratt. 234.

The corporation, at a meeting of the stockholders, authorized the officers of the company to execute the deed, under the direction of the executive committee. That was sufficient authority to the president to execute the deed under the direction of said committee, it being an act which in its performance properly belonged to the function of the president, and evidently was all that was contemplated by the resolution of the company. The deed was evidently executed under the direction of the executive committee, and with its sanction and approval, and was ever afterward recognized by the company as its deed, and the appellants claim under it.

The deed was made " to secure the payment of the money borrowed by the said Union Manufacturing Company, according to the act of assembly (under which authority the company was acting), not exceeding the sum of $30,000, and all interest that may accrue and be payable thereon." The deed goes on to recite that the company had executed bonds of $500 each, bearing date February 28th, 1867, payable on the 1st of January, 1872, with interest from date, at the rate of eight per centum per annum, payable semi-annually, on the 1st of July and 1st of January of each year, for which coupons are attached. If the deed had recited that such bonds had been executed to the amount of $30,000, principal (though I do not find it stated to what amount they had been executed), unless they had been afterwards issued and delivered by the company, the deed could not be construed as a security for any that had not been issued. For the deed expressly provides for sale of the property only in case of default made in the payment of bonds and interest which had been " executed and issued " by the company. The mortgage was not made to secure thirty thousand dollars of bonds whether they were negotiated or not. All were not equally secured, but only such as were, or should be, negotiated and issued by the company for the money borrowed. The deed expressly declares that the property was conveyed to the trustees, " in trust to secure the payment of the money borrowed, and to be borrowed," " not exceeding thirty thousand dollars." And it only provides that the coupons shall be payable on presentation and delivery at the office of the said company. Bonds that had not been issued and delivered created no liability in the company, and to say that the coupons should be presentable and payable at the office of the company in such case, would be absurd.

Twenty thousand dollars of the bonds were properly executed, issued and delivered to the Savings Bank of Tolland and Alvin P. Hyde, and they were undoubtedly the bona fide holders and owners of those bonds. And they say, that the execution of the remaining twenty bonds, amounting to ten thousand dollars, was never completed, and consequently that no part of the property conveyed by the deed of trust is applicable to the payment of those bonds. They say, that about the last of October, 1869, James L. Kent, who was then president of the said Union Manufacturing Company, applied to them to consent to the release of the machinery and fixtures embraced in the deed of trust, and represented to them that the said company had determined to cease their business of manufacturing, and were about to lease their premises, embraced in said trust deed; that the company could sell the machinery to the lessees at a good price; that none of said coupons had been sold or otherwise disposed of except the $20,000 held by them; and if they would consent to the release of said machinery and fixtures, said company would agree not to issue, or in any way dispose of, the remaining $10,000 of bonds, and that the said trust deed should thereafter remain as security for the payment of the $20,000 of bonds so held by them, and for those only. That in view of the wear and tear, and rapid depreciation in value of the machinery, the real estate would be a safer security for the $20,000 of bonds, then outstanding, than the real estate and machinery would be for the whole $30,000 of bonds, and unless this arrangement was made the company would issue and dispose of the remaining $10,000 of said bonds. And they finally consented to said release, relying on the said promise and representations of said Kent.

The release was made by the trustees with their consent, and in support of the foregoing affirmative statements in their answers to the plaintiff's bill, they offered in evidence the depositions of C. A. Hawkins, who was treasurer of said savings bank, and Alvin P. Hyde, who was one of the defendants, whose testimony was excepted to by the appellants upon the ground of incompetency, James L. Kent being dead.

We are of opinion that C. A. Hawkins not being a party to the transaction, nor a party to this suit, but only an agent of the savings bank, and not appearing to have any interest in the result of the suit, would have been a competent witness at...