Bank of Rome v. Village of Rome

By the Court, Bacon, J.

I shall spend no time in discussing or considering the various topics which are dwelt upon in the first 20 pages of the appellant’s brief, submitted in this case. Those propositions have, for the present, all been disposed of in this court, and their final adjudication abides the judgment of the court of appeals, to which, it is understood, a case involving these points has been, or is to be taken.

The only real question in this case arises on the ruling of the court, that the making and filing of the certificate of the commissioners of the rail road fund of Rome, that $500,000 had been subscribed to the stock of the Ogdensburgh, Clayton and Rome Rail Road Company, in good faith, and by persons of sufficient ability to pay their several subscriptions, was conclusive on the parties to this suit, as to that fact, and that the defendants could not go behind that certificate, and show that, in point of fact, valid subscriptions to the amount stated had not been made. This certificate was made in pursuance of the 11th section of the act, which prescribed the duties of these commissioners, and provided that before negotiating the bonds of the Village of Rome, they should make and subscribe a certificate of the import above mentioned, and file the same with the clerk of the village of Rome.

My opinion at the circuit was, and still is, that the act intended that this certificate should furnish the evidence, and be held declarative of the fact, that such subscriptions had been made—that these commissioners, who acted as the representatives in effect, and on behalf of the defendants, were *70 expressly constituted by the act the parties to examine and become satisfied that the amount required by law had been subscribed to the stock of the company; and it never could have been the intent of the lawmakers that every dealer in the bonds of the village should take them at the risk of having them declared invalid, if it should turn out that for some reason, utterly unknown to him and incapable of ascertainment by any means within his control, a portion of the subscriptions, (it might be to the amount of a hundred dollars,) was invalid, or incapable of being collected. It cannot be that every holder of these bonds may be called on to litigate not only the amount, but the bona fides of every subscription, up to the $500,000 which the rail road company were required to have before the .commissioners could be called on to make their certificate and negotiate the bonds. If such a contingency had been supposed to be attached to the possession of these bonds, it may be safely affirmed that not a dollar of them would ever -have passed from the hands of the commissioners. I do not say that this might not ultimately have been highly to the advantage of the citizens of Eome; but we must remember that at the time of the passage of the act in question, it was deemed to be greatly for the benefit of the inhabitants óf that village, that the rail road should be pushed rapidly forward, and they probably felicitated themselves on the great gains and profits which were likely to accrue to the corporation from holding stock in a road which would not only always be sure to pay the interest on their bonds, but ultimately contribute to the treasury of the village a handsome annual surplus above the interest, by way of dividends on the stock subscribed to the road by the village authorities. Time has of course served to dispel these visions; but they were not the baseless fabric they have since become, at the time these bonds were issued and the subscription made, to meet which they were executed. The strong desire of the defendant was -to raise money on its negotiable bonds, and the object of the law *71 was, not to create obstacles in the way of the attainment of that desire, but to facilitate its accomplishment. But no man would have been insane enough to take these bonds, if he supposed that upon him was to be cast the burden of sustaining, by proof, not only the good faith with which the subscriptions were made, but the actual ability of every person whose name appeared upon the roll, to pay his subscription. In my judgment, the act intended to provide a simple process, as well as a decisive test, by which not only the defendant should be saved from imposition, but every holder of, or dealer in, the bonds should be warranted, on ascertaining that the certificate had been made and filed pursuant to the act, in dealing freely in them, without incurring the extraordinary risk of having them defeated by showing either that the commissioners were imposed upon, or were themselves participants in a gross fraud upon the public. These commissioners were the agents of the defendant, and their act was substantially the affirmation of the defendant that the conditions of the act had been complied with, and as between them and the innocent holders of the bonds it creates a moral, if not a legal, estoppel of the most emphatic and decisive character.

In the case of Jones v. Dana, ( 24 Barb. 395 ,) one question was whether the certificate of the commissioners who were designated to receive the premium notes, &c. of a mutual insurance company, was not conclusive as to the authority of the company to commence business, and whether the court could, at the instance of a third party, go behind that certificate and impeach the proof upon which it was professedly founded. Judge Allen held it to be conclusive, until impeached and overthrown by a direct proceeding instituted by the people or their representatives for that purpose. “ It was not intended,” he says, “ to leave the fact of the possession by the company, of the requisite amount of premium notes, at the time of its organization, to be proved as a matter in pais, or to leave it an open question, liable to contestation by eveiy in *72 dividual having dealings with the corporation. The legislature provided a tribunal for the adjudication of this question, and its determination is final.” These remarks, it seems to me, are strikingly applicable to the case before us, and vindicate the reason and policy of the law we have been considering. If right in this conclusion, then no error was committed in refusing to nonsuit the plaintiffs, or in excluding the evidence offered by the defendant.

[Onondaga General Term, April 6, 1858.

Bacon, W. F. Allen and Mullin, Justices.]

It was assumed, upon the trial, that no further proof was required on the part of the plaintiffs, to show that they were bona fide holders of the bonds, than its production, and proof of its execution. It is an evidence of debt, which the bank clearly had the power to deal in by its charter, and it was negotiable on its face, and passed by delivery. Ho circumstances were shown casting suspicion upon the title of the plaintiff, and until some such proof was made, by the defendant, the plaintiff was not called upon to fortify his title. Such is clearly the rule in regard to commercial paper; and I am not aware that any different rule has been established in regard to negotiable bonds, or other evidences of debt. In the case of Caryl v. McElrath, ( 3 Sandf. 176 ,) the question arose, whether a party who had purchased a negotiable security of an insurance company who were prohibited from transferring certain securities without a previous resolution of the board of directors, was a bona fide holder, and the court decided that he was to be presumed to be such holder without notice, and that his title could only be impeached by the other party showing that he did not purchase in good faith.

I am of opinion that the judgment in this case should be affirmed. (a)

Affirmed by the court of appeals, October, 1868.