Wash. Libby v. Union Nat'l Bank Adelia R. Coolbaugh v. Union Nat'l Bank.

• Decision Date: 30 September 1881
• Citation: Wash. Libby v. Union Nat'l Bank Adelia R. Coolbaugh v. Union Nat'l Bank., 99 Ill. 622, 1881 WL 10588 (Ill. 1881)
• Parties: WASHINGTON LIBBYv.UNION NATIONAL BANK et al.ADELIA R. COOLBAUGH et al.v.UNION NATIONAL BANK.
• Court: Illinois Supreme Court

99 Ill. 622

1881 WL 10588 (Ill.)

WASHINGTON LIBBY

v.UNION NATIONAL BANK et al.ADELIA R. COOLBAUGH et al.

v.UNION NATIONAL BANK.

Supreme Court of Illinois.

Filed at Ottawa May 14, 1881.Rehearing denied September Term, 1881.

APPEAL from the Appellate Court for the First District;--heard in that court on appeal from the Superior Court of Cook county; the Hon. S. M. MOORE, Judge, presiding.

Prior to December 4, 1873, the Union National Bank was the holder of four promissory notes, one dated September 15, 1873, at 60 days, for $5000, made by W. F. Windate and Samuel Smith; one dated September 16, 1873, at 60 days, for $10,000, made by the Swansea Smelting and Refining Company; one dated October 4, 1873, at 60 days, for $10,000, made by the Swansea Smelting and Refining Company; and one dated October 4,1873, at 60 days, for $5000, made by the Richards Iron Works. The notes of the Swansea Smelting and Refining Company were signed by Adam Smith, as president; that of the Richards Iron Works by W. F. Windate, as its secretary, and the name of Samuel Smith was signed to the first note by Adam Smith, as his attorney. All these notes were indorsed by Adam Smith, and Adam Smith & Son. The first two, dated, one September 15 and one September 16, were also indorsed by S. M. Nickerson. The notes bearing date, one, September, and two, October 4, were also indorsed by S. F. Windate. The name of “Samuel Smith, by Adam Smith, attorney,” was also on the note of September 16, as an indorser.

These notes appear to have been discounted by the bank in the ordinary course of business. The notes of September 15, 1873, and September 16, 1873, were protested for non-payment on the 17th and 18th of November of that year.

Shortly before the 4th of December, 1873, an arrangement was made between Adam Smith, or Adam Smith & Son, of the one part, and the bank of the other part, to extend the time of payment of this indebtedness to the bank; and to that end four other notes were given to the bank, for like amounts respectively, dated respectively at the maturity of the original notes,--that is, one on December 17, one on December 18, and two on December 4, 1873,--each payable six months after date, and signed by Adam Smith, payable to Benjamin Merrill; and these notes were secured by a pledge of 300 shares of stock in the Swansea Smelting and Refining Company, issued to Adam Smith, and by him assigned, and these notes were at the same time secured by a trust deed made by Pierson D. Smith to Benjamin Merrill. The bank retained also the four original notes.

The deed of trust to Merrill was acknowledged December 3, 1873, and recorded December 4, and conveyed (as security for the second class of notes) the east half of the north-east quarter of the south-west quarter of section 35, town 39, range 13, containing 20 acres, more or less. Upon a subsequent survey this tract was found to contain about 22 acres.

At the time of this transaction Washington Libby held a deed of trust (which was recorded in December, 1871,) upon the east half of the south-west quarter of the same section, made to Freer, as trustee, to secure to Libby a debt of $40,000; and a second deed of trust to Freer, recorded in October, 1873, to secure Libby another debt of $30,000, both debts due from Adam Smith.

About the time when the bank accepted this deed of trust to Merrill the residue of the tract embraced in Libby's deeds of trust was incumbered, in parcels, by like deeds of trust, to secure debts to Miner T. Ames & Co., Bogle & Co., and to the Chicago and Rock Island Railroad Company, and also to E. F. Pulsifer & Co.

The deeds of trust held by Libby each contained powers of sale for foreclosure, without proceedings in court, and without redemption.

Some time in the winter of 1874-1875, Libby took steps to have the entire 80 acres embraced in his deeds of trust brought to sale under the powers therein contained. It seems some question was raised as to the bona fides of his claims, and in January, 1875, to test this question, the holders of these subsequent incumbrances united in causing a bill to be filed by Miner T. Ames & Co. Such a bill was filed, and a temporary injunction obtained forbidding Libby's sale; but soon after, on hearing of a motion for that purpose, that injunction was dissolved and the bill dismissed. In this proceeding the bank took part, and paid its proportion of the expenses and costs incident to the proceeding. Libby then proceeded to advertise and sell the property, and at the sale made by Freer, on March 15, 1875, Libby became the purchaser, and received a deed to him from Freer, the trustee, investing him with the title to the entire 80 acres. Before this time this entire tract of land had been laid out into blocks and lots, streets and alleys, under the name and description of “Adam Smith's subdivision of the east half of the south-west quarter of section thirty-five (35), in township thirty-nine (39) north, of range 13, east of the third principal meridian;” and blocks 1, 4, 5 and 8, and lots 1, 2, 3, 4, 5 and 6, of block 9 of that subdivision, consisted of that part of the tract embraced in the deed of trust to Merrill, which was held by the bank.

After the sale by Freer to Libby, and some time in April, 1875, Libby conveyed these lots and blocks to William F. Coolbaugh (who was the president of the bank), and Coolbaugh gave to Libby a promissory note, signed with his name as maker, payable to Libby three years after date, for the sum of $22,000, with interest at 10 per cent per annum, payable semi-annually, and bearing date April 10, 1875, and to secure the payment thereof executed a deed of trust upon the property so conveyed to him by Libby, conveying the same to George C. Christian, as trustee. This deed of trust was acknowledged by Coolbaugh April 24, 1875, and was duly recorded. The consideration stated in Libby's deed to Coolbaugh was $55,000.

Coolbaugh died in November, 1877. In June, 1878, Libby filed the bill in this case to subject this property to sale, and to apply the proceeds to the payment of the note given him by Coolbaugh. The heirs and legal representatives of Coolbaugh and the Union National Bank were made parties defendant. The bill charges that the purchase of the property from him was in fact made by the bank, although the deed was made to Coolbaugh, and that the bank, as well as Coolbaugh, became his debtor for the purchase money, and asks a decree against the bank and against the estate of Coolbaugh for the amount of his note and unpaid interest. Answers were filed and issues formed, and the legal representatives of Coolbaugh also filed a cross-bill, claiming that the debt to Libby, evidenced by this note given by Coolbaugh to Libby, is the debt of the bank, for which in equity Coolbaugh was really merely security, and asking that such be declared by the decree of the court, and that the bank be required to pay whatever balance, if any, shall be unsatisfied after the sale of the property in the deed of trust to Christian. The bank answered the cross-bill, and in that answer, as well as in its answer to Libby's bill, denies all interest in the transaction and all liability on account thereof.

The case was heard on the pleadings and proofs, and by the decree of the Superior Court of Cook county the cross-bill was dismissed for want of equity, and it was held that complainant in the original bill had no equity as against the bank, and that the amount due upon the note should be paid out of the assets of Coolbaugh's estate, and in default of payment the property in the trust deed to Christian be sold. This decree, upon appeal to the Appellate Court by Libby and also by the legal representatives of Coolbaugh, was affirmed. From that judgment of the Appellate Court Libby appeals to this court, and so do the legal representatives of Coolbaugh. These two appeals are brought here upon one transcript of the records of the lower courts, and are here considered as one case.

Mr. WM. C. GOUDY, for the appellant Libby, after stating the facts of the case and commenting upon the evidence, made the following among other points:

Taking all the facts and circumstances together, they establish that the bank purchased the land from Libby through its duly authorized agent, Coolbaugh, and thereby became liable for the purchase money. Coolbaugh was not only president, but director of the bank. He was acting for the bank, and not for himself, and his knowledge was the bank's knowledge. U. S. Bank v. Davis, 2 Hill, 455; Bank v. Town of New Milford, 36 Conn. 93; Smith v. Livingston, 111 Mass. 342; National Sec. Bank v. Cushman, 121 Id. 490; The Distilled Spirits, 11 Wall. 350. National banks have power to purchase real estate to secure debts due to them. U. S. Rev. Stat. sec. 5, 137; Mapes v. Scott, 88 Ill. 352.

Evidence of powers habitually exercised by the president or cashier of a bank, with its knowledge and acquiescence, defines and establishes as to the public those powers, provided they be such as the directors of a bank might, without violation of its charter, confer on such officer. Merchants' Bank v. State Bank, 10 Wall. 604.

To hold that the public may not safely confide in the existence of powers which by charter can be lawfully delegated, and which are openly exercised, but must investigate and find if those powers have been the subject of by-laws or vote, and act accordingly, would not only suspend the business of commerce, but tend to make transactions with corporations a snare and a cheat. Bank of the United States v. Dandridge, 12 Wheat. 64; Minor v. Bank of Alexandria, 1 Pet. 46; Nicoll v. Am. Ins. Co. 3 Wood & M. 530; Smith v. Hull Glass Co. 8 C. B. 868; 11 Id. 897.

So far as the public are concerned, it is immaterial whether the powers thus exercised are in disregard of the by-laws of the corporation or not, provided they are within the corporate powers conferred by the charter. Agar v. Ath. Ins. Co. 3 C....