Van Hook v. Somerville Manufacturing Co.

The opinion of the court was delivered b,y Whitehead, J.

The first question for the consideration of the court is, whether the mortgage set forth in the bill of complaint is the deed of ,the Company. So far as regards these parties, and under the pleadings in the cause, this cannot be an open question. The answer of the defendants distinctly admits that the Company .executed the bond ;and mortgage in the manner set forth in the bill of complaint. This admission precludes all inquiry into the fact or the manner of the execution. It was not a matter in issue in the cause, and the defendants we,re not at liberty to controvert it. If this be the law of the case, .then it is entirely .unnecessary and irrelevant to inquire whether the several meetings of the managers were regular- and in pursuance of their charter, or whether any .of the managers who .took part in the proceedings of the meetings were competent to act.

Assuming then that the bond ,gnd mortgage were regularly .executed, the next question raised by the counsel is, whether they were given for a valuable consideration. But upon this question it is not necessary for the court to express an opinion. Admitting that there was no consideration, and that they were given for the purposes alleged by these defendants, how d.q.es She case then stand upon the evidence ? Stebbins the mortgagee was and had been for two years or more previous to the 5th day -of January, 1842, when it was resolved by the hoard' to give the mortgage, the acknowledged financial agent of the Company at a salary of $3000. Under these .circumstances, .it is fai/r to presume that .he had the entire confidence of the managers and stockholders. The Company were at this time in need of money to discharge claims pressing for payment, and to put the works in operation. He was authorized by the board, as its agent, to negotiate the mortgage. It was placed in his hands for the purpose. The board of managers held him out to the world as the bona fide holder of it, with all the presumptions *637 the law would raise, from the possession of it by him, that it was given for a valuable consideration. If under these circumstances, and clothed with this authority, he negotiated the mortgage as his own property, given for a valuable consideration, ■he did no more than he was authorized to do by the managers. He was simply carrying out their intentions, as expressed in their recorded resolutions, copies of which were furnished him for the purpose. In this view of the case, even if he did commit a fraud upon the Company, as is insisted by the defendants, ■the Company is nevertheless bound for the payment of it, unless the complainant took the assignment with notice of the fraud. The Company must abide the consequences of the fraudulent conduct of its own agent.

It is said, however, that Mr. Yan Hook had notice of the fraud by Stebbins, and that therefore the mortgage is void in his hands. No satisfactory evidence is to be found in the case .of a combination between Stebbins and Yan Hook, or that the latter regarded the mortgage otherwise than ¡as a fair and bona fide transaction between the Company and Stebbins. The conduct of the complainant «relied upon as evidence of fraud, or as .evidence of his knowledge of the fraudulent intentions of Stebbins, is his employment of counsel to look into the circumstances under which the mortgage was given; and the conduct of the counsel in asking an additional resolution to be passed by the board, that the bond and mortgage were a legal and subsisting liability of the Company;; and the further certificate of the president, Mr. Gaston, that the same were given by the order o,f the hoard of managers, .and that the amount thereof was due Mr. Stebbins, Nothing is seen in all this furnishing the slightest evidence of fraud. It is but the prudent action of a careful man. Considering the amount of the mortgage, and the fact that the complainant resided out of the state, there was an apparent necessity that he should employ counsel in this state to examine the Company’s title to the mortgaged premises, and to ascertain whether the board had complied with all the requisitions of the law to constitute the mortgage a valid security. The charge of fraud might much more properly have been made against the complainant, had he purchased the mortgage for this large amount without any examination by counsel. Nor *638 can fraud be inferred from the action of the complainant’s counsel in the premises. They did no more than any prudent faithful counsel would have done, under like circumstances.

The testimony of Mr. Gaston, detailing what took place in his interview with the complainant at Somerville, is relied upon as evidence of notice on the part of the complainant of the object for which the mortgage was given. In relation to this testimony it should be remarked, that the object of Mr. Van Hook’s visit to Somerville, was not to examine the title to the mortgaged premises, nor the circumstances under which the mortgage was given, but simply to satisfy himself of the value of the premises. This is' proved by the other testimony in the cause, and Mr. Gaston himself says, that he (Mr. Van Hook) came out to look at the property. Be says further,- that Mr. Van Hook made several inquiries respecting the value of the premises. This was the whole object of his visit, and was necessarily the principal subject of conversation. Ail the other matters connected with the affairs of the Company, about which Mr. Gas-ton says they conversed, were matters in which Mr. Van Hook had but little interest. It would be dangerous to fix a party with notice of fraud by a casual conversation upon matters in which the party sought to be charged had but little or-no interest.

Again: It is sa;id (in the. defendants'’ own language) that no decree favorable to the complainant can be made until all the persons interested are made parties to the suit. The persons referred to are the parties of the second part to the memorandum of an agreement dated in' October, 1842. The allegation is, that they are interested under and in pursuance of that agreement, and should have been made parties with these defendants. The question presented is, does the simple execution of the agreement by these parties, without any other or further act done by them, give them such an interest as to make it necessary to bring them into court as defendants ? By the terms of the agreement it was contemplated that something further was to be done by the parties, in the event of a purchase by Loomis and Lyman, before they could be interested in the purchase. They might or they might not become interested. They had the option ¡to protect their respective equitable interest by *639 making fro rata advanees. If they refused or neglected to make these advances they certainly had no interest in the purchase afterwards made. The agreement in that case, as to thorn, was a dead letter. Bat if they did avail themselves of the option7 made them by the defendants: (Loomis and Lyman,) so as to entitle themselves to-share in the benefits contemplated by the purchase, then the fact that they did contribute and thereby became interested, ought to appear either in the answer or in the proofs. Now this fact nowhere appears in t-he cause. In the absence of any allegation or proof of the kind-, they cannot be regarded' as parties in interest. The simple fact that they signed the agreement referred to, does not of itself invest them with such an interest- as required the complainant to bring them before the court as parties defendants.

Again-: The deed from the Company to these defendants is absolute upon its face. Títere is-nothing showing a trust.

We are of opinion that the mortgage is not fraudulent, but a valid lien and incumbrance upon the premises therein mentioned and described ; and that the complainant is entitled to the relief sought and prayed for- by him in- his bill of complaint.