Union Gold Mining Co. v. Rocky Mountain National Bank

• Decision Date: 01 February 1873
• Parties: UNION GOLD MINING COMPANY v. ROCKY MOUNTAIN NATIONAL BANK.
• Court: Colorado Supreme Court

2 Colo. 248

UNION GOLD MINING COMPANY v. ROCKY MOUNTAIN NATIONAL BANK.

Supreme Court of Colorado

February, 1873

[Copyrighted Material Omitted]

Appeal from District Court, Jefferson County.

THIS cause was determined in this court at the term of 1872, upon appeal from a former judgment of the district court, and is reported in 1 Col. 533, where the pleadings are set forth. The judgment being there reversed, the cause was remanded and tried again at the November term, 1872, of the district court; judgment being given for the plaintiff, the defendant prosecuted this appeal.

Evidence was given tending to show that the defendant was incorporated under the law of the State of New York; its principal office and place of meeting was in the city of New York; all its officers and members except the president, one Becker resided there during the accruing of plaintiff's demand the mines were located in Gilpin county. The defendant commenced mining in 1864, and continued until the fall of 1865, when its operations were suspended and the mine closed. One Sabin was the superintendent of the mine from the spring of 1865 until the close of operations in the fall of that year; after that he remained in charge of the company's property until the spring of 1866.

In March, 1866, Sabin went east, and at his suggestion, another person was appointed as keeper of the property, and was paid by the company until November, 1866, when Sabin returned and resumed mining operations. There was testimony tending to show that, in the spring of 1866, Sabin resigned his position as superintendent, and that, in resuming work, he was acting under an agreement with the defendant to work the mine upon his own account, and with his own means, retaining the ores of lower grade to his own use, and rendering the first-class ore to the company as rent or compensation for the use of the mine. There was, also, testimony tending to show that at the time of re-opening the mine in the fall of 1866, he professed to be operating upon his own account; that he borrowed money and employed men upon his individual credit for this purpose, and none of the officers of the company, save the president, Mr. Becker, were informed, until December, 1868, that Sabin was assuming to act for the corporation.

During all the time, however, Sabin occupied the office which had been previously occupied by the corporation; the sign of the company was upon the building, and Sabin always represented to the plaintiff, that he was the superintendent of the defendant. In 1867 he opened an account in the name of the defendant at the plaintiff's bank, and from that time until the fall of 1868, was accustomed to sell at the bank the gold, which was the product of his mining, placing the proceeds to the credit of defendant, and from time to time drew checks against it. The labor of the men at the mine, and other liabilities incurred in his operations, were discharged by these checks. Previous to April, 1868, there was sometimes money to the credit of this account; after that, the account was always overdrawn until the fall of 1868, when his operations were suspended, and the company resumed possession of the mine. The money obtained by this overdraft was used in operating and improving the mine and in milling the ore.

Plaintiff was permitted to show, against defendant's objection, that Sabin had accumulated, and had on hand about 400 tons of the selected ore, at the time when he ceased operations in the fall of 1868. During the time of his operations, subsequent to 1866, Sabin corresponded solely with Mr. Becker. The latter visited Gilpin county in the spring or summer of 1867, and remained at and in vicinity of the mine for several weeks; he returned again in January and again in October of the same year. Whether Mr. Becker was informed, prior to December, 1868, that Sabin had assumed to contract an indebtedness at the bank in the name of the company, was in dispute; but during 1867 and 1868, Mr. Becker had repeatedly addressed letters to him as superintendent of the company, giving directions for the defense of an action brought against the company, and advising as to the manner of conducting the mine. After the operations ceased he paid other debts contracted by Sabin for the mine, and in the spring of 1869 he made a settlement with Sabin, and paid him for his services, computing his salary at the same rate as during 1865, 1866.

In the fall of 1868 Sabin became the owner of mining premises adjoining these of the defendant, on the west, and there was evidence tending to show that some part of the money obtained from the plaintiff was expended in mining upon this claim. Mr. Becker swore that he was first informed of this in December, 1868.

There was also evidence that in 1867 Sabin had obtained from Becker permission to use a mill which was the individual property of Becker, agreeing to develop a claim of Becker's adjoining the premises of the company, in compensation therefor, and that a considerable part of the moneys were expended in this work.

There was also evidence tending to show that in October, 1868, Sabin had executed two promissory notes, in the name of the company, for the amount of the overdraft at that time, $10,000, and that this was without the knowledge of any officer of the company, until, during the trial, these notes were produced and canceled in open court.

There was evidence tending to show that in November and December, 1868, Mr. Becker was repeatedly informed by the officers of the bank of the fact of the overdraft and its amount, and promised to pay it.

In January, 1869, he addressed to the president of the bank a letter, in which he spoke of 'the overdraft of our company,' protested that he had no knowledge of it until about the middle of December previous; stated that it was the only indebtedness of the company of which he had any knowledge, and that if not paid off from the mine, he proposed to call a meeting of the directors, and make an assessment at the February meeting, to pay off this and any other claim that the company might owe. The full text of this letter may be found in 1 Colorado, 535.

Mr. Becker, however, testified that this letter was written at the urgent solicitation of Kountze, one of the officers of the bank; that he refused to sign it in his official capacity, or to speak for the corporation, and that he, at the time, expressly disclaimed all authority for the company in the premises.

There was also evidence, tending to show that, immediately upon being informed of the overdraft, Becker had addressed the vice-president of the company in New York, stating the facts, and inquiring whether any new arrangement had been made with Sabin, authorizing such an assumption of authoriy; that the vice-president had replied in the negative; that this was transmitted to Becker, who communicated it to the officers of the bank-upon the point of such communication the evidence was conflicting; that in April, 1869, the stockholders met and repudiated the claim of the bank, and that this action was communicated to the officers of the bank, at some time afterward. The officers of the bank denied that such communication was made until shortly prior to the former trial.

The statute of the State of New York, under which defendant was organized by certificate of association, was put in evidence, and contained no authority to the corporations formed thereunder to borrow money; nor was there any express prohibition upon the exercise of such a power. The act, however, contained a provision for the increase of the capital stock of the corporation, by consent of those holding two-thirds of the shares, upon notice. The by laws of the company were also given in evidence, and the letter of instructions and authority under which Sabin was originally appointed superintendent, in which there was no express authority to borrow money on the credit of the company.

The court instructed the jury that if Sabin was the agent of the defendant, and while so acting, borrowed the money sued for in the name of the defendant and Sabin's dealings with the bank were fully explained to Becker, and Becker informed the company thereof, these circumstances called for an answer from the company, and if through its board of directors it failed to disavow the acts of Sabin within a reasonable time, they should find for the plaintiff.

Mr. HUGH BUTLER and Mr. G. B. REED, for the appellant.

Mr. W. R. GORSLINE, Mr. H. M. TELLER and Mr. JNO. Q CHARLES, for the appellee.

HALLETT C. J.

This cause was before this court at the last term, and several questions, now again presented, were then considered and definitely determined, so far as this court may do so. Of this number is the sufficiency of appellant's pleas, by which the competency of appellee to maintain an action for a sum exceeding ten per cent of its capital, was denied, and that question is not now open to examination in this court. The legality of appellee's demand is now however further challenged, upon the additional ground that an overdraft upon a bank, of which the account in suit is an example, is fraudulent per se and cannot be made the basis of an action of assumpsit. For this we are cited to the case of an agent who, by collusion with the book-keeper of a bank, obtained money in the name of his principal, for which it was said the latter was not liable for several reasons; although the agent had authority to draw upon the funds of his principal in the bank, his authority did not extend beyond that point to enable him to borrow money; credit was not given to the principal, the bank being misled by fraudulent entries of its own book-keeper. Union Bank v. Mott, 39 Barb. 180. That this has no application to a case in...