Lawrence Lewis.

American and English corporation cases : a collection of all corporation cases, both private and municipal (excepting railway cases), decided in the courts of last resort in the United States, England, and Canada [1883-1894] online

. (page 59 of 73)
Online LibraryLawrence LewisAmerican and English corporation cases : a collection of all corporation cases, both private and municipal (excepting railway cases), decided in the courts of last resort in the United States, England, and Canada [1883-1894] → online text (page 59 of 73)
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Soc., 12 Mich. 138.

In Brinley v, Mann, 2 Cush. (Mass.) 337, the deed was as follows:
*' Know all men by these presents, that the New England Silk Company, a
corporation legally established by C. C, their treasurer, etc.



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$68 STRONG V. DISTRICT OF COLUMBIA.

"In witness whereof. I, the said C. C, in behalf of said company, and
as their treasurer, have hereunto set my hand and seal, this," etc. (Signed
and sealed.) ** C. C, treasurer of New England Silk Co."

It was held that this instrument was not the deed of the corporation,
because not sealed in the name of the corporation and with the corporate
seal.

In Tenney v. Lumber Company, 43 N. H. 343. the deed was as follows :
" Know all by these presents, that we, the E. W. Lumber Co., a firm doing
business under an act of incorporation, etc.

** In witness whereof we have hereunto set our hands and seals, etc
[Seal] " D. C. F., President of E. W. LumJ>er Co.

[Seal] " E. S. C, Treasurer of E. W. Lumber Co."

It was held that the concluding clause " in witness whereof," etc, must
be construed as the language of the company, " we. the company, set our
seals," in order to give effect to the intention of the parties, that the in-
strument in question was to be the deed of the corporation. See also Mill
Dam Foundry v, Hovey, supra.



Strong

V.

District of Columbia.

{Advance Case, District of Columbia, Oct, 5, 1885.)

When under a stipulation referees certify and return into court, with
their award, all findings of law and fact, and also all the evidence, the court
may set aside the award for patent mistakes of law or fact, but will not
set it aside for error in fact, unless the finding of fact is clearly contrary
to the weight of evidence.

Promises by individual members of a municipal board to pay existing
debts of the board, made at different times and places, and without that
joint official deliberation for which the law provides, are not binding upon
the municipality.

A contracted with a municipal board to do certain works. The terras
of the contract provided for monthly payments as the work prog^ressed,
but, the municipality being unable to make these payments, the contractor
was advised by certain members of the Board acting as individuals to raise
the necessary funds to proceed with the work on his own notes of hand,
secured by certificates issued to him by the Auditor of the Board. This
was accordingly done, and the certificates pledged were indorsed by A in
blank, and delivered to pledgees. A also sold a large number of the cer-
tificates outright. These certificates were all paid by the municipal cor-
poration. A sought to recover of the corporation the difference between
the face value of the pledged certificates and the amount for which they



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STRONG V. DISTRICT OF COLUMBIA. 569

were pledged. Held, that A, having by indorsement and delivery of pos-
session, invested pledgees with apparent authority to collect the certificates*
it was his duty to notify the makers of the certificates of any reasons why
the certificates should not be paid to the holders thereof, and that, in
absence of such notification, the makers were justified in paying the
amount of the certificates to said holders.

Where there were numerous items in an award, and the evidence in
relation to them was voluminous, it was held that, some of the items
being wrongly allowed, the court would not undertake to revise the whole
award and give judgment for the proper amount, but would vacate the
entire award.

Action at law to recover for work done during the years
1872-73, under a number of written contracts executed by the
Board of Public Works of the District of Columbia, and also
for work claimed to have been done outside of these contracts,
but arising therefrom, which work was performed under
written or verbal orders from niembers of the Board of.
Public Works or some of its officers. The declaration con-
tained substantially the common counts; the defendant
pleaded a general denial and several special pleas, among
which was one of payment After issue joined and several
ineffectual trials, the action was referred by a stipulation of
the parties to three referees. By virtue of this stipulation
the case was heard by the referees, and an award made and
filed in accordance therewith in favor of the plaintiff for the
sum of $234,798.48.

From such of the findings of fact by the referees as are
material to the case, it appears that the contracts sued on were
ten in number and were all substantially the same in character,
being printed forms containing blank spaces filled in with the
specific terms agreed upon between the parties. A material
provision of all these contracts was that partial payments in
monthly instalments should be made as the work progressed.
The Board of Public Works, however, in many cases failed
to make these monthly payments ; whereupon Strong notified
them that he would be compelled to suspend the work unless
this part of the contract was complied with. Certain members
of the Board, with the knowledge of all the others and with-
out objection on the part of any, promised the plaintiff that if
he would continue the prosecution of the work with money
borrowed on his own notes, secured by pledges of certificates,
issued to him by the Auditor of the Board of Public Works,



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570 STRONG V. DISTRICT OF COLUMBIA.

the Board would seasonably provide money for the payment
of his notes. The plaintiff thereupon borrowed on his own
notes, so secured, large sums of money. When these notes
matured, the Board failed to provide the money to meet them,
and in consequence the pledgees sold the hypothecated certifi-
cates for about fifty cents on the dollar. These certificates,
whenever the plaintiff found it necessary to hypothecate them,
were indorsed by him or by his constituted attorneys in blank.
In some instances they were sold outright by the plaintiff so
indorsed. On the 20th of June, 1874, ^ong after these certifi-
cates had passed, in the manner indicated, out of Strong's
possession. Congress passed an Act, 18 Stat, at L., 126, ch.
337, creating what was called a Board of Audit, which was
directed to examine and audit certain suspended and floating
debts of the District of Columbia and the Board of Public
Works specified in the Act, among which was " the debt pur-
porting to be evidenced and ascertained by certificates of the
Auditor of the Board of Public Works," to which class be-
longed the certificates which had been issued to Strong. The
7th section of the act then authorizes the issuing of what are
known as 3.65 bonds of the Dfstrict, and gives authority to the
sinking fund commissioners " to exchange said bonds at par
for like sums of any class of indebtedness in the preceding
section of this act named."

A great many of the certificates which had been hypothe-
cated or sold by Strong or by persons assuming to act as his
attorneys, were thereupon presented by the holders to the
Board of Audit ; and the Board without notice, it was claimed,
to the plaintiff, issued to such holders certificates, called cer-
tificates of the Board of Audit, for like amounts with interest,
which latter certificates were subsequently taken up by the
District with the 3.65 bonds, as provided for by the Act of
Congress. It also appears that on the i8th day of December,
1873, the plaintiff published the following advertisement in
the Evening Star, a daily newspaper circulated in the District
of Columbia :

Special Notice.

All persons are cautioned and notified that I have forbidden
the Auditor and Treasurer of the Board of Public Works
from paying certificates issued to me for work done, as cer-



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STRONG V. DISTRICT OF COLUMBIA. $7 1

tain parties holding my scrip have illegal possession of
them. Samuel Strong.

And again on the 9th of January, 1874, he published in the
same newspaper the following :

Special Notice.

All persons holding my notes, bonds, or evidence of debt of
any description whatsover, with collateral security for the
same, in water bonds of the District of Columbia, bonds or
certificates of the Board of Public Works, or any other securi-
ties as collateral for the payment thereof, are hereby notified
and required to present the same without unnecessary delay
to the Hon. Peter Campbell, Stock Broker, No. 1423 Penna.
Ave., Washington, D. C., who will pay these claims on pres-
entation and take up the securities. Samuel Strong.

The referees here found, as matter of law, that, wherever
Strong had made an absolute sale or assignment of these
certificates, a payment to or settlement by the District
authorities with the assignees was, in the absence of proof of
other facts, binding upon Strong ; but if, on the other hand,
the proof showed a pledge of the certificates by Strong, the
payment in whole or in part by the District to the pledgee,
accompanied by a transfer of the certificate to the District,
would not defeat a recovery by Strong from the District of
the amount called for by the certificate less the amount real-
ized by him when he pledged it. To the latter part of this
finding, as well as to numerous other findings, the defendant
excepted ; and the case, coming on upon a motion to affirm
the award, was certified by the Circuit Court to the General
Term, to be there heard in the first instance.

Benjamin F. Butler, William A, Cooky Frank 71 Browning and
(?. D. Barrett for plaintiff.

Francis Miller and Henry E. Davis for the District of
Columbia.

Merrick, J. — These cases come before this court, in the
first instance, certified from the Circuit Court upon excep-
tions taken to the award of referees.

The reference stipulated that the referees should make



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572 STRONG V. DISTRICT OF COLUMBIA.

separate findings of law and of fact, and should, together with
their award, and as part of it, certify and return all the evi-
dence, and all their findings of law and of fact, into the Cir-
cuit Court.

The evidence and the findings of law and of fact are, there-
fore, all brought into court for revision. Now the power of
pow raoFooTO T a court, when all the facts and the law are brought
w^^^RETOtwDio i^gf^j.^ j|. Qj^ ^^ £^^^ q{ ^j^g award, plainly is to

review and set aside the award if it can be successfully chal-
lenged for nny patent mistake of law or fact apparent upon
the face of I'he proceedings. The court will, of course, observe
the same hesitation to disturb the findings of fact upon evi-
dence which it would observe were there a motion for new
trial after the verdict of a jury, and will not disturb such find-
ings unless they be unsupported by evidence, or be so far op-
posed to the great preponderance of evidence as to leave the
court free from doubt that the referees have erred in their
conclusions of fact. The rules governing courts in such pre-
dicament are nowhere more clearly and concisely stated than
in that admirable book, Adams's Equity, marginal pages 192
and 193.

Turning now to the exceptions in this case, the most im-
portant in principle and in the amount involved are taken to
the dertermination of the referees, that the defendant is
responsible to the plaintiflf for the face value, less what is shown
to have been realized by him, of all the certificates of the
Auditor of the Board of Public Works which were issued to
him for work done, and which he hypothecated with third
parties by indorsement in blank of himself or his constituted
attorneys, and which were, by the holders thereof, presented
to and redeemed by the Board of Audit with 3.65 bonds,
issued in virtue of the Act of June 20, 1874. So far as we can
understand the somewhat confused findings, the referees
base their conclusions in great part upon the tenth general
finding of facts (p. 126 printed award), to the eflfect that the
Board of Public Works having failed to make monthly pay-
ments according to contract, Strong notified the defendant
that he would be compelled to suspend work if the monthly
payments were not made; whereupon certain members
of the Board of Public Works, with the knowledge of all
the others and without objection on the part of any, promised



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DEBTS ABB KOT
BIXDnfOOKMUNI-
CIPALITT.



STRONG V. DISTRICT OF COLUMBIA. 573

that if he would continue his work by borrowing money on
his own notes, secured by pledges of auditor's certificates, the
Board would seasonably provide money for the payment of
his notes ; but they did not promise to make good all or any
losses incurred from the sales of certificates at a sacrifice, in
satisfaction of such pledges.

Now, assuming for the moment this finding to be accurate
in point of fact, it is diflficult to understand how

\ , . - Promisk by

such a promise to provide money to meet notes at JJJ™*"^ pj;
maturity, or, in other words, to pay their already
past due and dishonored debt at some newly
designated period, could render the promisor liable in dam-
ages for not maintaining their own credit. The promise is, in
substance and effect, an iteration of this existing or continuing
obligation to pay an overdue debt, and nothing more nor
less. But it is to be noted that the referees do not find any
act or resolution of the board in their official character ; and
we are not aware of any authority or principle of justice for
holding that unofficial statements by any or all the members
of a public body, at different times and places, made without
that joint official deliberation for which the law provides, can
be binding upon the municipality. There is no record of any
such action or conclusion of the members of the Board of
Public Works. The testimony of Magruder, the treasurer,
contradicts the conclusion of the referees ; and the testimony
of Shephard, the president, was not even taken upon the sub-
ject. It would be of most dangerous, not to say fatal, ten-
dency to sanction the notion that parol testimony of wit-
nesses, were it clear and unqualified, could be admitted at the
end of ten or twelve years to establish a contract of any kind
by a municipal agency required by law to act within a very
narrow range of power, and to keep a record of its public
transactions. But to so loose an undertaking as the one now
asserted (and which, moreover, was not within the scope of
the delegated powers of the Board, however formally it might
have been entered into), a court could attach no efficacy. But
how stands the matter in other aspects of the referees* find-
ings, so far as the rights and obligations of the District are
involved ? Samuel Strong was in need of money to prosecute
large contracts which he deemed valuable to himself, and
which, if you please, he was much urged to consummate. He



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574 STRONG V. DISTRICT OF COLUMBIA.

did what many other persons were doing to the extent of per-
haps millions of dollars ; he took the certificates of the auditor
for debts due by the District, and hypothecated them with
third parties, in some cases in proper person, in others through
attorneys and agents by him authorized, and delivered the
hypothecated certificates to his pledgees, indorsed, sometimes
in blank or with a printed power of attorney or assignment
over the signature, and threw them thus upon the public mar-
ket. Floating side by side with such certificates, #and with
precisely similar forms of indorsement, were other like certifi-
cates which he had sold out and out. He made no distinc-
tion in the forms of his indorsements, as a prudent man would
and ought to have done, between hypothecated certificates
and those he had sold absolutely. In this state of things, the
Act of June 20, 1874, was passed (18 Stat, at L., p. 126, ch.
337), reorganizing the whole structure of the District govern-
ment. By the 6th section of that law, all and every of the
claims of Samuel Strong against the District derive their
efficacy, if they have any force at all. Without the vitalizing
influence of that statute, as this court has already adjudged
in I Mackey, 265, he would have no standing in court for any
purpose upon the claims advanced in this controversy. All
the world had constructive notice of the functions conferred
upon the Board of Audit by that law ; and the Board was
required by it to give, and did give, notice to all persons hav-
ing claims against the District to present them for liquidation,
and the Board was authorized to give to the claimants certifi-
cates of indebtmentfor their claims, which might be presented
and allowed after full investigation, which certificates were to
be exchanged at par for 3.65 bonds, by a sinking-fund com-
missioner. Now, Strong knew that his auditor's certificates
had been indorsed as above described, and were outstanding,
and might be presented to the Board of Audit for redemption,
as in fact they all were presented and redeemed in 3.63 bonds.
It became, then, his duty to see to it that the Board of
Audit should be in possession of any facts on which he might
rely as an objection to the redemption of the certificates in
Notice of favor of the posscssors who, he knew, held through
^^^TO^OTE- himself or his attorneys prima facie title to them.
BioNBD. He did not do so ; and not having done so, he was

ruilty of laches, and must be held to have allowed their pay-



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STRONG V. DISTRICT OF COLUMBIA. 575

ment in that manner without objection. See Adams' Case, 17
Ct. Claims, 351.

But it is said that Strong gave notices by virtue of which
the District is chargeable with knowledge of the infirmity of
the title of his assignees, viz.: by his advertisements in the
Evening Star of the i8th December, 1883, and January 9,
1874 (see 1 2th finding). And the 13th finding con-
veys the idea that the Board of Audit was not noSoT bt ad-

^ VBBTI8SMK11T.

authorized to pay those who held Strong's hypothe-
cated certificates without giving him notice in fact of their
presentation.

In Adams* Case, 17 Ct. Claims, 351, it was shown that the
plaintiff had filed a protest with the Treasurer of the Board
of Public Works, specifically claiming certain enumerated
certificates which had been fraudulently disposed of by his
pledgee ; that notice was not filed with the Board, and what
became of it did not appear. Yet it was held that in the
absence of the fact of this specific notice being brought home
to the knowledge of the Board of Audit, he was concluded
from claiming those certificates, they having been redeemed
and paid to the holders in 3.65 bonds by the Board of Audit.
In that case it having been held, first, that it was the duty of
the original owners to appear before the Board of Audit and
there give notice of their claims ; and, secondly, that a specific
notice which had been given to the treasurer of the Board of
Public Works, who was a member of that body, not brought
home to the knowledge of the Board, was of no avail to pre-
serve the equities of the original holder, it is vain to assert
that the general notices of Strong, published in an evening
paper, can signify anything. The decision in Adams' Case is
adopted by the Supreme Court in Looney's Case, 113 U. S.
260. They there say that the nature and history of auditors*
certificates, the so-called sewer certificates and other securities
of the District, as well as the legislation of Congress relating
to them, have been fully stated in opinions delivered by the
Court of Claims, and need not be recapitulated, and then refer
by name to Fendall's Case, Adams' Case, and Morgan's Case.
The Court of Claims then having stated the nature of these
certificates, and the effect, um^er the legislation of Congress, of
their redemption, and the Supreme Court having unqualifiedly
approved those cases, which contain explicit statements thati



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5/6 STRONG V. DISTRICT OF COLUMBIA.

by the indorsement in blank of the origfinal holders, the pos-
sessors became clothed with an apparent ownership, which,
in the absence of explicit notice of the equities of the original
party, justified the Board of Audit in causing them to be
extinguished by an issue of 3.65 bonds to the possessor and
ostensible proprietor ; and that unless the true owner did give
notice in fact to the Board of Audit he was guilty of laches,
and must be held to have consented to and allowed their pay-
ment in that manner, — the position taken by the referees that
Samuel Strong is not chargeable with the full face value of
all the auditor's certificates which he ever held, and which
have been liquidated with 3.65 bonds, is manifestly erroneous.
But long before those cases the Supreme Court had decided
in Cowdrey v. Vandenburgh, loi U. S. 576, the principle
applicable to all choses in action, whether negotiable or non-
negotiable in the commercial sense, to wit : that when a party
makes a blank assignment he contemplates that the blanks
may be filled up, if necessary, by the holder, and that the
rights of innocent parties do not depend upon the actual
title or authority of the party with whom they deal directly,
but are derived from the act of the real owner, which pre-
cludes him from disputing, as against them, the existence of
the title or power which, through negligence or mistaken con
fidence, he caused or allowed to appear to be vested in the
party making the conveyance thereof. It is further to be
considered that this case is not a dispute between the first
owner and any assignee, but it is a dispute between the
creditor and his debtor, which debtor by and through a means
and apparent authority furnished to him by the creditor him-
self, and after a public notice warning him and all others to
produce their claims, if any, before a lawful agency for
liquidation, has been induced to pay the demand in full

To allow him, under such circumstances, to be paid over
again would be gross injustice to an innocent public.

The errors into which the referees fell upon this question,
being patent on the face of their award, permeating nearly all
of the claims, and the consequence of them being an allowance
of largely more than double of what the plaintiff could recover
upon all his claims together, were there no mistake of law or
fact in any other matter, the court would be compelled to set
aside the award.



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N

STRONG V. DISTRICT OF COLUMBIA. 577

Besides this fatal defect, and making every allowance for
liberty of judgment in doubtful matters to the referees, there
is aa eminent probability that, with respect to some large
allowances to which exception was taken, the referees have
fallen into error.

Multitudinous as are the items in dispute between the
pajrties, and voluminous as is the evidence, this court cannot
UTtdertake to discharge the duties of an accountant, compar-
ing all the items of complicated transactions, and then striking
the exact balance. Without so doing we could suggest no
exact basis of settlement, even were the right of a court to cut
down an award and adjust the final balance clear, a question
on which we express no opinion. Being therefore unable to
indicate an exact and definite result, we are satisfied, after
mature consideration, that it would not be appropriate to des-
ignate those eminently probable miscarriages to which allusion
is made ; possible prejudices might arise to one or other of
the parties from such expression, and we are not satisfied that
an identification of those questionable allowances would result
in promoting any settlement of the controversy. We are the
more induced to this course from the fact that, after all the
investigations which have taken place, the skilled professional
advisers of the parties have before them all the elements to
enable them, upon a careful review of the case, to approximate
at least a result which will accomplish substantial justice, and
terminate by private convention between themselves a pro-
tracted and vexatious litigation. The court will give an order
vacating and annulling the whole award.



Members of a Municipal Board Cannot Bind the Corporation
BY THEIR Individual Acts, even thouxjh a Majority Join in or
Ratify" the Acts. — Members of a municipal board have as individuals
no authority to act for the municipal corporation. This is true though
the majority of the individuals composing the board join in or ratify the
act. The board must act as a body or unit. It can only act at meetings
regularly called. Thus in the case of McCortle v. Bates, 29 Ohio St. 419,



Online LibraryLawrence LewisAmerican and English corporation cases : a collection of all corporation cases, both private and municipal (excepting railway cases), decided in the courts of last resort in the United States, England, and Canada [1883-1894] → online text (page 59 of 73)