source: Caselaw Access Project

author: By the Court. Sandford, J.

license: Public Domain

text:
    Lohman v. The New York and Erie Rail Road Company.
    Where the charter of a corporation, after providing for a subscription to the capital stock on a public notice, authorized the directors, if the whole were not then taken, from time to time to cause the books for the subscriptions of stock to be opened until a sufficient sum was subscribed; the further subscriptions so authorized, may be made without any public notice of opening the books; and the power to receive the same may be delegated to officers or agents of the corporation.
    The object of-a subscription in filling the stock of a corporation, is to furnish evidence of the subscriber’s liability to pay up his shares, and to identify the persons who have become shareholders.
    No particular form of subscription is necessary; and when the shares are paid up at the time of their being first taken, the stock certificate issued, and the party’s receipt for the shares, constitute a sufficient subscription.
    A corporation having power to issue further capital stock, may issue the same in exchange for an equal amount of its indebtedness.
    Where there was express authority from the directors to the principal officers of a corporation, to issue stock in exchange for three distinct classes of indebtedness, and those officers for a considerable period, had been in the habit of thus issuing stock, in exchange for those, and for a fourth class not embraced in the express authority ; and their acts had never been disclaimed or questioned by the directors, or the corporation ; it was held, that their issue of stock in exchange for such fourth class of indebtedness, was valid and binding upon the corporation, and equally binding upon the creditor who accepted such stock.
    One who exchanges his debt against a corporation, for capital stock issued tiy its principal officers, without inquiring as to their authority, is not at liberty to annul the contract, because their authority was not express, but was a full implied authority derived from the course of business, and from similar acts affirmed or acquiesced in.
    Where the stock of a company was usually transferred on two distinct books, to the stock transferred on one of which share brokers attached a greater value than to that on the other; and a creditor agreed to exchange his debt for stock, on the officers stating that such stock could be transferred on the former ; and after completing such exchange, the officers refused to allow a transfer of it to be entered on such book ; it was held, the creditor could not for that cause rescind the exchange, but that his remedy was in an action for damages.
    May 26, 27 ;
    July 8, 1848.
    Motion by the plaintiff for a new trial, on a case. The action was trover, brought to recover certain certificates of indebtedness issued by the defendants, commonly called bonds, which the plaintiff owned on the second day of January, 1846.
    Upon the trial of the cause, the following matters appeared in evidence. The defendants were incorporated by an act of the legislature, passed April 24, 1832, with a capital of ten millions of dollars, in shares of one hundred dollars each, (which were to be deemed personal property, and transferable as its by-laws should direct,) with power to construct and maintain a railway, with one, two, or three tracks, from the city of New York, or its vicinity, to Lake Erie, through the southern tier of counties in this state. By the fourth section of the act, a large number of persons were designated as commissioners, and it was made their duty to open books to receive subscriptions to the capital stock of the company, giving twenty days notice thereof, by advertisement in the newspapers, and to keep the books open three days. As soon as the stock was subscribed, directors were to be elected, under the inspection of the commissioners. By the fifth section, if there were an excess of subscription to the stock, the commissioners were to apportion the stock among the subscribers; “And if the full amount of capital be not subscribed within three days as aforesaid, then it shall be the duty of the commissioners to open the subscription books from time to time until the whole amount shall have been subscribed: the commissioners shall receive no subscriptions, unless five dollars on each share subscribed be paid at the time of subscription.” By the sixteenth section, the directors were authorized to require payment of the sums to be subscribed to the capital stock, at such times, in such proportions, and on such conditions, as they should deem fit; giving public notice of the calls respectively. (Laws of 1832, ch. 224, p. 402.)
    The charter was amended on the nineteenth day of April, 1833, by an act which directed the commissioners to open the books on the second Tuesday of July ensuing. If in three days the whole amount of the capital were not subscribed, the commissioners were to ascertain how much had been applied for. If one million should have been subscribed, or as soon thereafter as a million should be subscribed, the commissioners were to proceed and organize the company. The third section was as follows:

      “ If the directors shall be chosen, and the company organized by virtue of the preceding section, it shall be the duty of the directors so chosen, or their successors, from time to time, to cause the books' for the subscriptions of stock to be opened until a sum sufficient to complete the work from Hudson River to Lake Erie shall be subscribed, but the time for the completion of said road shall not be deemed to be extended by this act.” (Laws of 1833, ch. 182, p. 229.)
    Under this act, the requisite amount of stock was subscribed, and the company was organized by the choice of a board of directors, the usual officers were appointed, and the rail road was commenced. Various acts of the legislature were subsequently passed, in aid of the corporation, and. recognizing its proceedings in different forms.
    On the 10th of May, 1843, the board of directors adopted a series of resolutions, authorizing the executive committee to settle with creditors of the company, and' pay them in the general stock of the corporation; also, to issue certificates of indebtedness of the company to the amount of $300,000, at not less than five years, bearing interest at six per cent, per annum, and chargeable on the revenues of the eastern division of the rail road ; and to issue a further amount of certificates to the extent of $300,000, at not less than five years, and bearing interest at seven per cent., which should be receivable at par in payment of subscriptions to the capital stock.
    On the 8th of November, 1844, a statement-was made and a resolution adopted by the board of directors, in these words, viz. :•—•
    “ The president stated propositions had been made by holders of the certificates of the company which fall due on the 1st of January, 1849, to exchange the same, with the addition of interest to the time of maturity, for the stock of the’company.
    “ Mr. Griswold moved that all such propositions' be accepted, and that the treasurer and secretary be authorized to carry the same into effect, which motion was adopted.”
    On the 7th day of October, 1845, the directors adopted a resolution, referring the subject of receiving the seven per cent, certificates of the company in payment of its full stock, to the president and treasurer with power.
    The minutes of the board of directors, exhibit the following proceeding as having occurred on the 1st day of December, 1845, viz.:—•
    “ On motion of Mr. Brown, the following resolution was adopted:
    “ Resolved, that the resolution passed the 8th day of November, 1844, authorizing the secretary and treasurer to receive the certificates of the company in payment for stock, with the addition of five years interest to the same, be, and is hereby, repealed.”
    Mr. Brown, who offered this resolution, was also the treasurer of the corporation, and he testified as a witness on the trial, that its object was to repeal no part of the resolution of November 8th, 1844, except that which allowed stock to be issued for the unearned interest on the certificates of indebtedness. He also testified, that for two years and a half prior to January, 1846, the officers of the company had been in the practice of issuing stock for the corporation, both the president and treasurer, and also the treasurer and secretary. They had thus issued from five hundred to seven hundred shares. . The treasurer had the principal management of the issues of stock, and made the agreements with the creditors in New York to issue stock for ■ debts, and the agent made like agreements with the creditors on the line of the road. In eight instances, the issue of stock had been arranged by agents of the executive committee, and by the officers of the company. The president and secretary signed all the certificates of capital stock, and all were regularly entered on the books of the company. Between the first of December, 1845, and the second day of January, 1846, there' were several instances of stock issued for indebtedness.
    It further appeared on the trial, that by an act in relation to The New York and Erie Rail Road Company, passed May 14th, 1845, a fresh subscription of stock, to the amount of three millions of dollars, one-fourth payable on subscribing, was directed to be made, on which being done, the state of New York, by the terms of the act, would relinquish to the like extent its lien on the road, for a loan made to the corporation in 1838; but the old stockholders were not to participate in the benefits of the provisions made by this act, unless they would surrender to the company their stock certificates, and receive therefor for every two shares of stock theretofore issued, one share of stock to be thereupon issued. (Laws of 1845, ch. 325, p. 352.)
    Under this act, $3,400,000 of new stock was subscribed in October and November, 1845. The stock issued pursuant to the act of 1845, for the outstanding shares surrendered, was denominated in the company’s office, and was known among share-brokers and dealers, as “ consolidated" stock.
    The company kept a transfer book in which were entered the transfers of the consolidated stock; and another old transfer book, on which werey entered fractional shares. In issuing stock for indebtedness after the passage of the act of 1845, the transfer clerk usually wrote across the face of the scrip the words, “ equal to consolidated,” and the transfers of such stock were made on the transfer book of consolidated stock, although the certificates issued to the transferee were marked f< equal to consolidated,” like those surrendered. The object of this, was to distinguish the stock so issued for debt, from the old consolidated stock.
    The plaintiff was the holder of twenty-three certificates of indebtedness of the defendants, issued November 1st, 1843, and January 1st, 1844, bearing interest at six per cent.; payable half-yearly, and the principal payable January 1,1849 ; amounting in the aggregate, to $6000. Six of these bonds of the earlier date, and amounting to three thousand dollars, were signed by the president and treasurer. Nine of the same date, signed by the treasurer and an agent, amounted to about $2575. The residue were signed by the officers last named, and were dated January 1st, 1844.

      On the 2d day of January, 1846, the plaintiff applied to the treasurer of the company to exchange them for stock. While at the office negotiating, he asked the transfer clerk, if the stock he should take, could be transferred on the transfer book of consolidated stock, and was informed it could be so transferred. He told the clerk he wanted to sell it, and transfer it on that book. Thereupon the exchange was made, the certificates of indebtedness surrendered to the company, and the plaintiff received a certificate for sixty shares of the capital stock of the company, in the usual form, signed by the president and secretary. Across its face was written “ equal to consolidated stock,” with the secretary’s signature. The plaintiff signed a receipt for the stock, in the margin of the scrip book. The negotiation and arrangement were made by the treasurer and secretary of the company. The bargain was for stock, “ equal to consolidated.” The plaintiff stipulated for the privilege of rescinding his contract, at or before two o’clock of the succeeding day. The treasurer assented to this, and the stipulation was reduced to writing, and signed by the transfer clerk, in these words:—
    11N. Y. and Erie R. R. Office,
    “ New Yor/c, January 2, 1846.

      “ Mr. Chas. Lohman having this day exchanged with the N. Y. and Erie R. R. Co. six per cent, certificates to the amount of six thousand dollars, for the same amount of stock of the company 1 equal to consolidatedit is hereby understood and agreed, that in case he should wish to re-exchange the same, he. has the privilege of doing so any time previous to 2 o’clock Saturday, 3d January, 1846.”
    At this time, there was a great excitement among the dealers in stocks,' growing out of what they technically termed, “a corner” in the stock of this company ; large contracts to deliver the,stock on time, maturing on the 3d day of January, and the quantity deliverable not being procurable in the market. A large amount of the company’s certificates of indebtedness was offered to the company in exchange for stock on the 2d of January, after the issue to the plaintiff; so large, that the officers at first hesitated to issue the stock, but finally they issued it the next day. Mean time, and early in the morning of the 3d day of January, the president instructed the transfer cleric, to permit no more stock “ equal to consolidated,” to be transferred on the book of consolidated stock, but to enter the transfers in the old stock book, used for fractions, &c.; still marking it, “ equal to consolidated.” The stock brokers refused to receive the stock so transferred, on contracts for stock of the company, and on the afternoon of January 2d, they designated it as “ converted stock.” During that afternoon, the “ converted stock” sold at the board of brokers at 55 per cent., and the “ consolidated” at 85 per cent. In the morning, sales of the latter were made at par. The prices on the 3d day of January, were about the same as in the afternoon of the second. After the 2d of January, the stock previously issued for debt, and marked “ equal to consolidated,” was all called by the brokers “ converted stock.”
    The plaintiff might have sold his stock at par on the 2d of January, if it had been of the scrip transferable on the consolidated book. He did not, however, make any contract for its sale, nor apply to transfer it. On the 3d day of January, but not till after 3 o’clock, P. M., the plaintiff called at the office of the company, and demanded a return of his certificates of indebtedness, and offered to deliver up his certificate of stock. The officers declined to re-exchange, because it was after the time stipulated in the agreement for that purpose. The plaintiff thereupon brought this suit.
    At the trial, he contended, and requested the judge to charge, that the directors of the company had no authority to issue the capital stock, and take pay therefor in the certificates delivered to them by the plaintiff. That the treasurer and secretary had not, on the 2d day of January, 1846, authority to issue the stock to the plaintiff in exchange for the six per cent, certificates ; and when the plaintiff demanded them back, and offered to give up the stock, the agreement for the exchange was not binding on the corporation, and the latter had the right to dissent from it; and as it was not binding on the corporation, no valid contract existed. That on the 3d of January, the directors had the right to disavow and repudiate the agreement made by those officers with the plaintiff, and therefore the latter could tender back the stock and demand the bonds at any time before the corporation had adopted the contract. That if the contract was made under a belief by those officers, that they had the authority to issue the stock and make it transferable on the consolidated book, when in fact they had no such authority, then the agreement being founded on mutual mistake, was voidable, and the plaintiff had the right to demand a return of his bonds. If he acted under such mistake, and the officers knew it, and knew they had no authority to bind the corporation without the assent of the directors, then it was a fraud on the plaintiff, and he could rescind the contract.
    That if the agreement for the exchange was that the stock was to be transferable on the regular consolidated transfer book, and the plaintiff would not have entered into it except on that understanding ; and if on the morning of January 3d, the transfer clerk was ordered not to allow the stock issued to the plaintiff to be transferred on that book; 'then the corporation had not ratified the agreement made by the treasurer and secretary, and the plaintiff on discovering that fact, had the right to demand back his bonds and return the stock. The not recognizing and the repudiation of that part of the agreement, authorized the plaintiff to treat the whole contract as at an end. That if the plaintiff, on learning of the orders not to permit a transfer on the consolidated book, would have returned the stock and taken his bonds before 2 o’clock, P. M., of January 3d, then it was the defendants duty to have notified him of those orders; and he had a right, whenever he ascertained them, though after that hour, to rescind the contract. And that he had the same right, if it were a material inducement without which he would not have contracted, that the stock to be issued to him should be transferable on that book; and if on the morning of January 3d, the company determined not to permit the stock to be transferred on that book. Also, that under the circumstances last supposed, and those given in evidence, the plaintiff had the right to rescind, whenever he discovered that the corporation had determined not to allow his stock to be transferred on the regular transfer book of consolidated stock. And that if the jury found that the agreement between the plaintiff and the treasurer and secretary, was made by the former on the faith of representations made by those two officers, which were untrue ; he had the right to demand back his bonds, whether they made such representations fraudulently or ignorantly.
    The defendants asked the court to instruct the jury, that the defendants had authority on the 2d January, 1846, to take new subscriptions to their stock, and in such form and' manner as their board of directors should think proper. That their officers, viz.: their president, secretary and treasurer, being their general agents, and charged with the taking of additional subscriptions to the stock, were authorized on that day to take the plaintiff’s subscription for sixty shares, and take pay for them in the bonds of the defendants. That there has been no conversion of the bonds of the plaintiffs. Time being the essence of the contract, and no offer to re-exchange until after the time specified in the contract, the cancelling and retaining of the bonds by the defendants were legal and right. If the plaintiff had any claim against the defendants, having given him a certificate unauthorized by law, and on that account of no value, his remedy is not in trover, as he voluntarily parted with his title, and without any fraud or fault on the part of the defendants. That the conversation and engagement, if any, respecting transferring the plaintiff’s stock in the book for transferring consolidated stock, was anterior to the completion of the arrangement to exchange the bonds for stock, and that agreement being reduced to writing, the writing is the sole and only evidence of' the agreement between the parties. That the transfer clerk had no authority to negotiate for or agree upon terms for the exchange of the bonds for stock, and the defendants are not bound for any thing he said on that subject, or relating to it. That the book on which the transfer of the stock was to be made, was not one of the conditions or terms of the purchase ; all those are embraced in the written agreement. If any thing, the arrangement on that subject is collateral to the exchange, and a breach of it only furnishes ground for an action for damages.
    The judge charged the jury, that under the circumstances proved, and the acts relative to the defendants, the stock issued to the plaintiff was valid as against the company. That if it were a part of the agreement between the plaintiff and the company, that the stock was to be transferable on the consolidated transfer book, (and such appears to be the evidence,) and the company next day directed that a transfer on that book should not be permitted ; then the refusal of the company to allow such a transfer, was a violation of the agreement, and entitled the plaintiff to sue for damages. He has not, however, brought a suit for a breach of contract, but has brought one founded upon the position that the contract was rescinded. Instead of claiming damages, he repudiates the whole agreement, and demands a return of the bonds.
    To sustain this suit, a violation of the agreement by the company, is not sufficient. The plaintiff must prove that the contract was not fair on their part, and that there was a deceptive and fraudulent intent in making it. It is not enough that there may have been mistake or misapprehension on his part. A deception must have been practised upon him.
    Though by determining not to permit a transfer of this stock on the consolidated transfer book, and omitting to notify the plaintiff thereof before two o’clock on the 3d of January; the defendants may have exposed themselves to an action for damages; yet as matter of law, they did not thereby rescind the whole agreement, so as to entitle the plaintiff to maintain this suit. The whole, therefore, results in this, that unless the jury find that an intention to defraud him existed at the time the conti'act was made, the plaintiff cannot recover.
    The plaintiff excepted to the judge’s charge, and to his omission to charge as requested. The jury found a verdict for the defendants.

      F. B. Cutting, for the plaintiff.

      S. A. Foot, for the defendants.
   By the Court. Sandford, J.

The plaintiff contends, that the contract made with him for exchanging his bonds for the stock of the company, never was binding upon the latter, and. therefore his title to the bonds was unaffected by the exchange. His first point in support of this position, is that the directors of the company had no authority to issue capital stock, and receive in payment the bonds or indebtedness of the company. On this subject, we entertain no doubt of the authority of the directors, to issue the unsubscribed stock, whenever and as often as opportunities were presented. The act of 1833, contains an express grant of power to this effect, without restriction as to time, place, previous notice, or the form of the subscription. The directors were entrusted with the duty of forwarding the construction of this rail road, which, as the course of legislation respecting it shows, has been deemed by the state government, a highly important public enterprise. And to enable them to accomplish it, the statutes relative to this corporation, instead of the usual pre-requisite in stock corporations, of a full subscription of the capital, authorized it to proceed when one-tenth part of its intended capital was taken, and to obtain further subscriptions from time to time, until a sufficient sum should be procured to complete the work. Indeed, it seems the commissioners appointed to open the books, by the original charter, were unrestricted as to the time and manner of obtaining subscriptions, after offering the stock to the public for three days, under an advertisement.

As to the form of the subscription, no particular form is necessary. The object of a subscription being, to furnish evidence of the liability of the subscriber to pay up his shares, and also to show who have become the shareholders of a corporation ; it becomes a mere ceremony, where the new stockholder on receiving his shares, pays them up in full, and takes his certificate, which has been-previously entered in the stock ledger. This may not, perhaps, dispense with the observance of the ceremony, although it be useless; but in this case, there was a subscription, sufficiently formal, in the plaintiff’s receipt for the shares, written in the margin of the scrip book.

The mode of payment for the stock in question, is also made an objection to the authority of the directors ; but as we think, without any good cause. We doubt the propriety of the plaintiff’s finding fault with his shares, because he paid for them in the debt of the company, instead of paying cash. Nor do we assent to the argument, that the company, under a new direction, could have repudiated the shares, whatever might have been its remedy against the plaintiff for the amount payable to make them full shares, assuming that payment in bonds was unauthorized.

But to return to the transaction before us, we think it entirely free from objection. The plaintiff was the holder of the company’s bonds, and entitled to receive payment of their full amount, in cash, when they matured. If the company had procured some other person to subscribe for sixty shares of stock, and to pay them up in full; the six thousand dollars thus obtained, could do no more than pay the plaintiff’s bonds. Thus, it made no possible difference to the company, or to the prior stockholders, whether the plaintiff took the shares and cancelled the bonds, or whether another party took the same shares, paid the amount, and the company with that sum, discharged the bonds. On the assumption that the stock had some value, and the debts would be paid, it was all one to the company; and if the stock were worth nothing, no one but the plaintiff could be injured by the exchange. It is to be observed, that the bonds in question were not issued to the plaintiff, on an agreement to receive them for stock, or for an amount or consideration enhanced by the circumstance that they would be paid in stock, and not in money.

We are satisfied that the exchange of the stock for the bonds, was valid, so far as it is to be deemed the act of the directors of the company.

But the plaintiff next insists, that the directors could not delegate the power to receive subscriptions to the capital stock; that they never authorized the exchange in question; and that the treasurer and secretary had no authority from them to make the exchange; which therefore, was an invalid contract, not binding on either party, when the plaintiff demanded back his bonds.

First, as to the delegation of authority. The directors could not always be in session, either as a board or by committees. They necessarily acted by agents,, and we perceive no good reason why the power to receive subscriptions to the capital stock, could not be conferred on one or more agents, with as much propriety as the far more important power of contracting for labor, materials, and the like, in the construction of the road.

Then, as to the authority conferred on the treasurer and secretary. We have no doubt that the resolution of November 8th, 1844, authorized those officers to issue stock for such bonds as the plaintiff held. The spirit of the resolution, and the object in view, are sufficient to show that the resolution was not limited in its effect to propositions which had already been made. But there is a difficulty in sustaining this exchange under the resolution of November, 1844, in consequence of the repealing resolution of December 1st, 1845. We are unable to read the latter, so as to restrict its operation to the mere allowance of interest not yet earned on the certificates of the company. It is in its plain terms, a repeal of the entire resolution of November 8th, 1844. At the same time, there is no room on the facts, to doubt that the intention of the directors was simply to prohibit the issue of stock for the unearned interest on the bonds. In addition to the positive testimony of the treasurer who brought in the repealing resolution, and the practice of the company in accordance with his statement; there is the circumstance that the conversion of the company’s actual debt into stock, remained as important and desirable as it ever had been; andlhe recent cash subscription of over three millions under the act of 1845, would account for the change intended to be accomplished by the resolution of December 1st, 1845, as it would not be just to those new stockholders to issue stock for debts with the addition of three years of unearned interest. Nevertheless, we feel great difficulty in construing the repealing resolution by clear proof its object and intention, when its language is as clearly the other way; and we will waive the point.

The testimony shows, that for at least three distinct classes of indebtedness, stock had been issued for periods of from one year to two years and a half, by several officers of tb company, under express authority from the directors. Such authority existed in the treasurer and secretary, as to the class to which the bonds in question belonged, from November 8th, 1844, to December 1st, 1845, if no longer. Those two officers had for two years and a half, been in the practice of issuing stock, in the manner that was pursued in this instance, without any express power, so far as it appeared, except the resolution of November 8th, 1844; and the treasurer had in like manner from time to time, made agreements with the-New York creditors to issue stock for their debts. In this respect, the treasurer seems to have exercised the authority which was conferred on the executive committee by the directors in May, 1843.

These issues of stock for indebtedness, by the treasurer and secretary, had extended to about six hundred shares. The president and treasurer were also expressly authorized in respect of a class of seven per cent, certificates, by a resolution of October 7th, 1845. The president, treasurer, and secretary, were the principal officers, and in their respective spheres, the agents of the company. The acts of these several officers in thus issuing stock for indebtedness, had never been disclaimed, or questioned, by the directors or the company. They had proceeded so long, and to so great an extent, that ignorance on the part of the company could not be asserted, and silence and acquiescence had ripened into indisputable authority.

Under such circumstances, the exchange in question was negotiated and' agreed upon, between the plaintiff on the one hand, and the treasurer and secretary, acting in behalf of the company, on the other, and was approved by the president; the contract was executed, and the plaintiff received scrip for his shares, with the regular signatures and authentication of the president and secretary, and the proper entries in the company’s books.

We are convinced, that the company could never have set aside this transaction, on any pretence of want of authority in these their three principal officers. The facts we have stated, would be perfectly conclusive against any such attempt on the part of the company. The implied authority, from the course of business, and from similar acts done without challenge or disaffirmance, is as potent as an express resolution of the board of directors. The contract was, therefore, valid and binding upon the company. Was it any less valid against the plaintiff? It is contended, that he was not bound, because there was no express authority given to those officers, and the plaintiff cannot be held, upon one implied from previous acts, which were not authorized at the time, and which could at any time have been repudiated. That the company cannot bind him upon an apparent authority in its officers to contract, when in fact there was no real authority.

We think there is no difficulty on this subject. The practical good sense of the matter is this. The plaintiff dealt with the three principal officers of the company, without inquiring into their powers; willing to act, and acting, on their apparent authority to issue stock for debts. If he had inquired into their authority, and found it to be implied from usage and acquiescence merply, and had chosen to proceed with the exchange, he could have held the company bound. He cannot now, because he omitted to inquire, withdraw from the contract, on finding that they had such implied authority, and no other. In any contested point of authority on the part of the company, it would be incumbent on him to prove its existence; and proving a power implied from acts, would be as effective as the most positive authority in writing. The same proof must be valid against him; with no difference, save that more ■ full proof would be required from the company than from him, to establish the implied power. The contract for the exchange of the bonds for the stock, was therefore valid, and bound both parties.

The next questions arise upon the transfer book of consolidated stock, and the plaintiff claims that the contract was rescinded by the company’s direction on the morning of January 3d, not to permit transfers of this species of stock on the consolidated transfer book.

This was claimed at the trial, upon the ground, among others, that the defendants had been guilty of a constructive fraud in the .transaction. The question of fraud was submitted to the jury, and they have negatived it by their verdict. As to the misrepresentations said to have been made by the officers of the company, in ignorance, and not with any fraudulent intent 5 they relate first, to their authority to issue the stock, and second, to their assurance that it might be transferred on the book of consolidated stock. As to the first, we have stated our conclusion that they had authority. The assurance as to the transfer book, was not made by either of the officers having any authority, real or apparent, or with any one who contracted with the plaintiff. But if it had been made by the latter, there was no misrepresentation. When the statement was made, such stock was permitted to be transferred on the consolidated book. If the plaintiff had any right to rely upon their promise that it should continue to be so transferable, it at most, formed part of the contract between the parties, for a breach of which the defendants would be liable in damages. Their omission to apprise him of their determination to use another transfer book for this species of stock, may also have been the ground of an action; if it prevented him from re-exchanging his stock for the bonds, within the time stipulated for that purpose. We do not undertake to decide whether the change in the transfer book made any difference in the value of the stock.

In every aspect of the case, we are bound to say, that the contract for the exchange, was a valid, executed contract, on the second day of January; unaffected by any fraud, actual or constructive. When the defendants issued and delivered to the plaintiff scrip for sixty shares of stock, they performed it, so far as it was then capable of execution. If the defendants failed to fulfil such of its obligations as were to be subsequently performed, the plaintiff should have sued them for the breach. If they so conducted, that they prevented him from availing himself of the provision for a re-exchange, and he was thereby injured, he had his appropriate remedy, in an action on the case for damages. But neither of these events avoided the original contract, or warranted the plaintiff in treating it as rescinded.

We have discussed these points, as if the understanding relative to the transfer book, were to be deemed a valid and subsisting portion of the agreement. The defendants insist, that as the agreement was reduced to writing in the issue of the shares and the stipulation for re-exchange, no evidence of the alleged understanding is admissible. We do not intend by our decision, to sanction the introduction of the testimony, or to pass upon the question.

Upon.the whole, we are satisfied that the ruling of the judge at the trial, was correct, and that the action cannot be maintained.

Motion for a new trial denied.


author: By the Court. Vanderpoel, J.

text:
    Sherwood and Bowerman v. Ruggles.
    The question of sea-worthiness, is a matter of fact to be decided by the jury on the evidence.
    There is no legal presumption that a vessel is unseaworthy, from the fact of her leaking within a few hours after her sailing, there being no unusual stress of weather.
    The owners of a vessel have a lien upon the cargo, for the proper proportion of the general average, on an injury to the vessel by the perils of the sea.
    The owners remedy against the consignee, is not lost by the latter’s receiving the cargo at the port of necessity and forwarding it himself to its destination.
    If after a vessel is disabled, the master can in a reasonable time, communicate with his owners, it is his duty to do so, before making repairs ; and such delay does not relieve the owner of the cargo from contribution.
    It is for the jury to say, upon all the circumstances, whether the delay in order to communicate be reasonable.
    July 7, 8 ;
    July 15, 1848.
    Assumpsit for average on a cargo of turpentine, tried before the Chief Justice, in October, 1847. ■
    The plaintiffs proved the shipment of 1150 barrels, on board of their schooner, the Cornelia, at Swansborough, North Carolina, on the 16th September, 1845, consigned to the defendant at New York. The vessel sailed, September 22d. The next day, about three hours after they crossed the bar, in a gale of wind, she sprung a leak,, and it became necessary to put back. She did not succeed in getting into S., and finally, on the 25th, went into the port of Beaufort, There the cargo was discharged, and the vessel hauled up : a survey was had, and repairs made to the amount of $368. She was then taken to the wharf, and reloaded. While lying there in October, a gale of wind and heavy sea drove her upon an old wharf under water, where she pouiided, and again leaked, so that the tide ebbed and flowed in her. Another survey was called, and the master wrote to his owners in New York for advice. They advised him to go on with repairs, and while so doing, an agent of the underwriters came on, took charge of the vessel, and completed her repairs.
    The cargo was again taken on board, and the Cornelia sailed for New York in December, 1845. Had bad weather, and in a heavy gale on the 12th of December, off Cape Hatteras, the vessel was so far disabled, that she had to go back to Beaufort. She lost some of her deck load, her small boats, and one anchor in crossing the bar ; and some of the load was thrown overboard to ease the vessel. Another survey was called, when extensive repairs were advised. The master wrote to his owners for advice, and came himself to New York directly afterwards.
    While the Cornelia was lying at Beaufort in October and November, there was no suitable vessel to be had there to bring on the cargo. She was ultimately repaired, and came on to New York in the spring of 1846. Mean time, the defendant, by agreement with the owners, sent a vessel to Beaufort in January, 1846, which there received 999 barrels of the turpentine originally shipped on the Cornelia, and brought it to him at New York.
    The freight payable by the bill of lading, signed by the master of the Cornelia, was thirty-five cents per barrel, with primage and average accustomed. On the adjustment of the average, made by a broker, the amount of the special charges against the cargo, was $87 90, and of the general average, $643 71. The defendant furnished the broker with the valuation of the cargo, and examined the statement. He refused to pay the general average charged to the cargo. The statement was sent to the underwriters. The plaintiffs then proved, (the evidence being objected to,) to show defendant’s acquiescence in the ¡results of the adjustment of average, that he received from the underwriters, the amount of his loss and general average on the cargo of the Cornelia, in August, 1846.
    The defendant claimed that the vessel was unseaworthy, and that there was unreasonable delay in the port of Beaufort, to his great loss in the value of the cargo.
    The judge, in charging the jury, said, the first ground of defence is, that the 1150 barrels of turpentine composing the cargo, were not delivered to the defendant according to his contract with the plaintiffs. But there is abundant evidence to show that this property did come into defendant’s possession. It is shown that he sent a vessel for it, and it appears from his statement to Mr. Johnson, that he sold it at two dollars and seventy-five cents per barrel. The second ground of defence is, that there was unreasonable and unnecessary delay on the part of the captain in the port of Beaufort; that this delay was unauthorized, and such as the captain had no right to make. But it is not the rule of law, that the captain is bound to proceed immediately to repair the effects of a storm, without waiting to communicate with his owners. If he can do so in a reasonable time, it is his right and his duty to communicate with them, and to wait for advice. If the jury find in this ease, a fair exercise of that right, this ground of defence fails.
    But the main ground of defence is, that the vessel was unseaworthy. This is a matter of fact to be decided by the jury, on the evidence. The defendant’s counsel has relied upon the log-book, protests, and surveys made at the time. These, though not evidence, have been admitted, because not objected to by the other side. If she was not fit for this voyage, and therefore loss occurred, the defendant is not responsible in this action.
    Defendant’s counsel excepted to the charge of the Chief Justice respecting the right of the captain to wait and communicate with his owners; and requested him to charge the jury, that from the vessel leaking two hours after she sailed, she must be presumed unseaworthy, unless an adequate cause for that leak is shown by the plaintiffs; and that no such cause has been shown, and that the fact of such leak has been proved by legal and competent evidence. The judge assented to the general principle of law laid down by defendant’s counsel; but stated that the question whether an adequate cause had been shown, was one for the decision of the jury.
    The jury rendered a verdict for the plaintiffs; and the defendant moved for a new trial.

      H. Ketchum, for the defendant.

      F. B. Cutting, for the plaintiffs.
   By the Court. Vanderpoel, J.

The question whether the vessel was seaworthy, was purely one of fact. It was fairly submitted to the jury, and they have found that she was seaworthy. Barnum testified, that in 1844 he repaired the schooner for the plaintiffs ; that he cut her down to the water’s edge, put in new timbers, new ceiling, new outside from the bottom to the rail; that he took out all the ceiling, and left only the keel, stern, stern-post, and a few floor timbers. He says, he substantially rebuilt her.

The witness Newman also testified, that he was a shipwright; that he examined the schooner Cornelia about eighteen months ago, at the request of Mr. Johnson. They put her on the dock, and the witness examined her to ascertain the cost of repairs. She was then in good condition, except that her stern-post had been started.

To this is opposed the fact, that the vessel sprang a leak so soon after the commencement of the voyage. We cannot, on the strength of this fact, assume the responsibility of overruling the finding of the jury. Whether the vessel was seaworthy, was peculiarly a question of fact. We cannot say that there is no evidence to sustain the conclusion to which the jury came; and cannot, without interfering with their province, and violating a too well established principle, overrule their finding.

2. Another point taken by the defendant is, that the testimony of Thomas Callendar was improperly admitted. He testified, that he was an oflicer of the Sun Mutual Insurance Company, and sometimes acted as assistant secretary; that, on the 22d day of August, 1846, he, for the company, paid the defendant $1237 55, in full for loss and general average on the cargo of the schooner Cornelia, as appóared from a receipt introduced, and signed by the defendant Ruggles. The ground on which the judge at the trial admitted this evidence, is correct. It was admissible to show, not that the defendant was liable, because he had received his insurance, but to show that he had acquiesced in and admitted the principles and results of the adjustment made by Johnson, the witness who made the adjustment.

3. Another ground taken by the defendant is, that the turpentine whicli is sought to be made contributory to the plaintiffs indemnity, was never delivered to the defendant, and therefore is not subject to general average. In Strong v. The New York Firemens' Insurance Company, (11 John. 323,) it is declared to be the duty of the master, in cases proper for general average, to cause an adjustment to be made upon his arrival at the port of destination; and it was hold, that he has a lien upon the cargo to enforce payment of the contribution. Here, the schooner was necessarily detained at the port of necessity, for more than two months. The defendant becomes impatient, sends on a vessel, and brings away his property. Now, he contends, that the turpentine was not delivered to him according to his contract with the plaintiffs, and that it is not, therefore, subject to general average. The plaintiffs, surely, cannot by this agency of the defendant, lose his claim. The jury have found that there was no unreasonable or unnecessary delay in the port of Beaufort; and the defendant could not, by taking his property from there, when the schooner was being repaired, destroy the plaintiffs right to have contribution from it.

No error was committed on the trial, and the motion for a new trial is denied.


text:
    Keutgen v. Parks.
    Where an agent, entrusted with a negotiable note for the purpose of procuring, it to be discounted, pledged it with a stranger for money loaned to him for his own use, at usurious interest; Held, that the transaction being illegal, for usury, the lender could not retain the note against the true owner, on the ground that he had received the same in good faith, in the usual course of trade.

      Held also, that the disposal of the note by the agent, was tortious.
    The agent in such a case, is a competent witness for his principal in an action brought against the stranger for the recovery of the note.
    The record of the principal’s recovery, will not be evidence for the agent in a subsequent suit; nor will he be liable to the principal for the costs, if the suit be unsuccessful. His interest is balanced, and the usury in the loan to him, doe» not alter the case.
    Where a party who received a note, on a tortious misappropriation by an agent, but without notice of the owner’s rights, sold it, and received the proceeds ; and the owner subsequently demanded the note of him without effect; it was held to be sufficient evidence of a conversion.
    An agent on receiving sundry notes to procure them to be discounted, furnished his post dated checks to his principal, intending to meet them with the proceeds of the notes when discounted. Before the date of the checks arrived, he pledged the notes for his own use; and the checks were not paid. He subsequently paid the principal, a small sum, on account. In an action by the principal against the pledgee, for one of the notes; held, that the agent, on tortiously disposing of the notes, extinguished any lien he may have had for his checks, and that no lien therefore passed to the pledgee ; and that the pledgee had no lien upon the note for the payment made by the agent.
    A party calling a witness, may satisfy the jury from facts and circumstances stated by the witness himself, that he is mistaken in some of his statements and conclusions, while in others he is correct.
    July 5, 6 ;
    July 15, 1848.
    This was an action of trover for a promissory note for $1593 94, made by Wood, Folger & Messer, to the plaintiff, dated April 13,1845, and payable at six months.
    Upon the trial, the following facts appeared:
    For two years prior to April, 1845, one Ray, a note broker, had been in the habit of taking business paper from the plaintiff for the purpose of procuring it to be discounted. In some instances the arrangement was, for Ray to procure it to be discounted at a bank, and account for the proceeds, less his brokerage ; in others, he discounted the paper himself, taking it on his own account, and charging such commission as was agreed upon. In both modes, it was the practice for Ray, on receiving the paper, to hand his checks to the plaintiff for about the net amount, dated forward so as to conform to the time when the latter needed the avails, and to the time when Ray would probably be enabled to have the paper cashed, or otherwise to meet the checks.
    On the 30th of April, 1845, the plaintiff delivered to Ray, to be discounted for the plaintiff’s benefit, six notes indorsed by him in blank, and amounting in the whole to 04826 17, including the note in question. The plaintiff desiring to use the proceeds on the 10th and 12th of May ensuing, Ray on receiving the notes, delivered to the plaintiff his three checks, two dated May 10th, for 02000 and 01800 respectively, and the other dated May 12th, for 0850.
    It was a severely contested question of fact on the trial, whether the note in suit, and some of the others, were delivered to Ray as the plaintiff’s broker, that he might procure them to be discounted; or were discounted by Ray himself, being taken on his own account, and the checks given in payment for the same. This question was submitted to the jury, who found that the note in question was delivered to Ray as agent for the plaintiff, and not absolutely and as Ray’s own property on a sale to him. It is therefore deemed unnecessary to state the testimony on this point at large.
    The checks given by Ray, were never paid. The two largest were in the plaintiff’s hands at the time of the trial; the custody of the other was not shown.
    Within three or four days after the 30th of April, Ray deposited the notes he had then received, with the defendant, who was the first teller in one of the city banks ; and on those notes as collateral security, received from the defendant 02000, at the time he left them, and 01500 the next day. By a long subsisting arrangement between the defendant and Ray, the former-made short loans to Ray from time to time, bearing interest at the rate of one per cent, a month, on the deposit of securities; and if the loans were not paid at matuirty, the defendant had the right to sell the collaterals and reimburse himself. The note in question was deposited with the others, and the advances made upon them, on the terms of this arrangement.
    On the 23d of May, 1845, the defendant delivered the note in suit to a broker, with instructions to sell it for the best terms he could. The broker sold it on the 29th of May, and paid the proceeds to the defendant. On the 6th of June, the plaintiff demanded the note of the defendant, who replied that he did not hold it, and declined otherwise to answer the demand. Thereupon this suit was commenced.
    It further appeared, that on the 12th of May, Ray paid to the plaintiff $200, on account of the notes delivered to him on the 30th of April, and in a settlement made after this suit was commenced, between Ray and the plaintiff of matters prior to April 30th, and embracing three of the six notes then delivered, it was agreed that Ray should be refunded this $200, whenever he settled for the- other three notes, including the one in question.
    On the trial, Ray was called as a witness on the part of the plaintiff, and was objected to on the ground of his interest in the event of the suit. The objection was overruled. After he had testified and stated the agreement between himself and the defendant, under which the notes were lodged with the latter, the objection to his competency was renewed, and was again overruled.
    This witness testified, that when he left the notes in suit with the defendant, nothing was said as to the terms. That an agreement had been made as to terms, on his first dealing with the defendant, and that such course of business had continued as long as he dealt with the defendant. The plaintiff inquired what that agreement was. This inquiry was objected to on the ground, that proof of previous usurious loans, was not admissible to prove the loan upon this note usurious. The objection was overruled.
    The defendant moved for a nonsuit, which motion was denied. The judge presiding at the trial, reserved the points of law arising in the case, and submitted to the jury on the evidence, the single question, whether the note in controversy was delivered by the plaintiff to Ray, as the absolute owner thereof on a sale to him by the plaintiff, or was delivered to him as the agent of the plaintiff for the purpose of being discounted for him. The jury by their verdict found that the note was delivered to Ray as the plaintiff’s agent for discount, and not as owner, or on a sale.
    The cause now came on for argument on a case.

      F. B. Cutting, for the plaintiff.

      A. P. Man, for the defendant.
   By the Court. Sandford, J.

The objection to Ray’s competency as a witness for the plaintiff, was pressed with great earnestness on the argument, and if well founded, is fatal to the plaintiff' ’s case ; for he is the only witness to some facts without which the action cannot be maintained. It is said, first, that Ray, on the assumption that he was an agent and not the purchaser of the note, is liable to the plaintiff for the costs of the suit, in the event of the latter’s failure. But this view of the matter is clearly erroneous. Whatever may have been the misconduct of an agent, it does not subject him to the costs of an unfounded suit, brought by his principal against a stranger, for the redress of the injury. (1 Greenl. Ev. § 396.) Next, it is urged that Ray is identified in interest with the plaintiff; a recovery by the latter will pay his debt incurred by the perversion of the note; that his interest is not balanced, because he has an absolute legal defence on the ground of usury, to any suit which the defendant may bring against him; and that the record in this suit, will be evidence in his favor.

As to these propositions, we say, first, that the record will not be evidence either for or against him. Such a consequence does not follow from his relation to either of the parties. Towards the plaintiff, he stands as a wrongdoer, in the disposal of the note. Towards the defendant, he becomes a debtor for the money advanced, on the plaintiff’s recovering the amount of the note. If the plaintiff succeed in this action, and collect his judgment, and should then sue Ray for his conversion of this and the other notes, it is true Ray could show in mitigation of damages, that the plaintiff had received the amount of this note of the defendant; but he would prove it precisely as he could prove the same fact, if the latter on the demand of the note, had been satisfied that it belonged to the plaintiff, and had ■ then paid him its proceeds.

It is an instance of balanced interest in the witness. (Marshall v. Davis, 1 Wend. 109.) Nor is this affected by the circumstance, that according to his testimony, the transactions between himself and the defendant were usurious. This was expressly decided by the late supreme court, in Jackson ex dem. Skinner v. Packard, (6 Wend. 415.)

The authorities cited by the defendant show, that where the whole credit on a sale is given to one person, acting ostensibly for himself, he is not a competent witness in behalf of the seller, to fix the whole or a part of the debt upon another, as a purchaser. They do not apply to a case where the witness is liable for the whole claim at all events, whether the one party or the other succeeds in the suit in which he is called. We have no doubt that Ray was a competent witness for the plaintiff.

The. defendant also objected to testimony of the agreement between Ray and himself, as tending to show former usurious transactions between them. This testimony was admitted, not to prove other usurious transactions, but to show on what terms the note in suit was deposited; and as there was no express agreement made at the time, this could-only be shown by proof of the original arrangement under which this affair took place.

On the merits of the case, the defendant claims protection as a purchaser of the note in good faith, for value. It is not alleged on the other side, that he had any notice of the fact that Ray was an agent and not the owner of the note ; but it is insisted that the defendant received the note as security for an usurious loan, and that having taken it on a contract made in violation of the law, it was not received by him in good faith. This is a point of some moment, in the law of commercial paper. It will be observed that there was no sale of this note to the defendant. If there had been a sale, there would have been no difficulty. It is undoubtedly true, that the defence of usury is in general, personal to the party paying, or contracting to pay it. But the principle is not precisely applicable to this case. Here the defendant sets up against the true owner of a note, the great doctrine of the law merchant, that the holder of a negotiable bill or note, who has received it in good faith for value, before its maturity, may retain it against the whole world. Now the good faith, is a vital element of this doctrine. And can that be said to have been done in good faith, or in the usual course of trade, which is done contrary to the positive prohibition of a statute, and which the statute declares to be void? We are satisfied that it cannot. The principle is settled in Ramsdell v. Morgan, (10 Wend. 574;) and it is therefore unnecessary for us to argue the question at large. There an auctioneer made advances, on usurious interest, upon goods which had been fraudulently obtained from the owners. As he was ignorant of the fraud, he could have retained the goods against the owner, for his advances, provided they were made in good faith. But it Avas decided that the usury was fatal to his claim to be considered a bona fide purchaser.

The next ground of defence is, that the plaintiff did not show he Avas entitled to the immediate possession of the note, at the time he brought his suit; because Ray, by means of his checks and the subsequent payment of $200, acquired an interest in the note, or a lien upon it.

As to this point, the $200 may be laid out of víoav at once, because it was paid after Ray had parted with the note to the defendant. The giving of the checks does not affect the ease, They were loaned by Ray, with the intention no doubt of paying them at maturity out of the proceeds of the plaintiff’s notes, after he had procured them to be discounted. Being post dated, no one could take them prior to their maturity, as valid commercial paper. If they had been paid, it would have so far discharged the plaintiff’s claim for the tortious disposal of his notes. But as they were not paid, they ceased to be of any importance. They availed nothing to the plaintiff, and if there ever were a lien in Ray’s favor in respect of the checks, it ceased Avhen he transferred the notes Avithout' providing for the payment of the checks. In short, the only pretence for asserting a lien by reason of the checks, is by connecting them with the notes as the mode by which the proceeds of the latter were to be paid to the plaintiff. And when that connection was severed by the wrongful disposal of the notes, so that their proceeds could no longer be used to pay the checks, there was no ground left for maintaining a lien.

But it is further insisted that the plaintiff, before bringing suit, should have tendered the cheeks and the $200 to the defendant.

We will say nothing of the obstacles to this claim, arising from the facts that the three checks were given in respect of six notes, and the $200 was paid on account of. three notes; while this suit relates to one, which does not correspond in amount with that sum or with either of the checks ; and the difficulty is not the fault of the plaintiff. But we go further, and say that we perceive no reason whatever for requiring the plaintiff to tender the checks to the defendant. As to the $200, it was paid to the plaintiff on the 12th of May. Whatever rights or interests the defendant acquired in the note, were acquired at least a week before that time. He therefore had no interest in the $200 ; which can be regarded only as a payment made by Ray on account of the plaintiff’s claim against him for the amount of the notes.

If any further answer to the lien claimed were necessary, it might be added, that the defendant having parted with the note, no tender was necessary; and the lien, if one existed, would only avail him in mitigation of damages. (Saltus v. Everett, 20 Wend. 267.)

We have spoken of Ray’s disposal of the notes as having been tortious. This is shown by Murray v. Burling, 10 Johns. 172. The exception mentioned by the court in that case, (on page 175,) does not apply, because, although here was a general authority to procure the note to be discounted, there was none to pledge it on usury for the agent’s benefit. (And see Reynolds v. Shuler, 5 Cow. 323.)

This brings us to the point, that no conversion of the note by the defendant was proved. The facts proved were, that on the !oth of June, the plaintiff demanded the note of the defendant, without obtaining it or its proceeds. The defendant’s answer to the demand was, that he did not hold the note. This was true, for he had sold it, and received the proceeds a week before. The case of Everett v. Coffin, (6 Wend. 603,) is an authority that this was sufficint evidence of a conversion. Much of the defendant’s argument, and most of his authorities on this point, are inapplicable, because his possession of the note was tortious from the outset, as against the plaintiff.

The only subject remaining to be examined, is the verdict of the jury on the fact submitted to them. It is said the testimony shows a clear and perfect sale of the note to Ray; that there was no conflict of evidence, and nothing to go to the jury ; and at all events, the verdict is clearly against the weight of evidence. All the testimony on the subject was given by Ray, and is found in his statements and the papers which he produced. And it is very true that his direct statements were distinct and positive, that he purchased the note in question. There was, however, much developed in his occupation, in the nature and course of his business with the plaintiff, his cotemporary and subsequent acts, and the written memoranda; which indicated an agency, and rebutted the idea of a sale. The testimony was conflicting, and the judge would not have been warranted in withholding its consideration from the jury. He submitted it to them, with the instruction that a party calling a witness, was not bound by his testimony in all its parts; but might satisfy the jury from facts and circumstances stated by the witness himself, that the witness was mistaken in some of his statements and conclusions, while he was correct in others.

This instruction was perfectly correct in point of law, and was proper in this instance to prevent the jury from being misled by the familiar proposition, that a party cannot impeach his own witness.

We have considered the testimony, and find no sufficient cause for interfering with the conclusion of the jury. We are not prepared to say that we, as jurors, would have come to a different conclusionj much less can we say that there is any such preponderance of evidence as to authorize us to set their verdict aside.

The plaintiff is entitled to judgment on the case.


author: By the Court. Oakley, Ch. J.

text:
    Zachrisson v. Ahman.
    Replevin in the detinet, may be brought when the taking was tortious ; and that form of action does not admit the original possession of the defendant to have been lawful.
    Where one claiming the right to bales of cotton on board a ship, for which bills of lading have been signed, demands the bills of lading, it is a sufficient demand of the cotton which they represent.
    The charterer of a vessel cannot withhold goods for which the master has signed bills of lading to third parties, against bona fide assignees of gutih bills for value, on the ground that the property was his own, and the bills should have been signed to him.
    A general clerk of a merchant, who transacts the out-door business of the latter, negotiates purchases and charter parties in the name of and ratified by his principal, and prepares and presents bills of lading for signature on shipping property of the principal; has no authority as such clerk, or as commercial agent, to pledge such bills of lading, or to receive advances on the faith thereof.
    Such a chief clerk is in no sense a factor, nor is he entrusted with the possession of bills of lading, within the factor’s act of 1830. That statute was intended to protect advances and dealings made on the faith of the ownership of the property, and not on the faith of the possession of the paper title, or the evidences of title.
    July 17;
    July 27, 1848.
    Replevin in the detinet, for two hundred and twenty-one bales of cotton, and for the bills of lading issued for the same cotton ; one set being for 136, and the other for 85 bales ; tried before Sandford, J., June 8th, 1848.
    On the trial, it appeared that the plaintiff, a Swedish merchant in New York, in December, 1846, departed for South America, leaving his affairs generally in charge of F. Wissman, a German merchant, in whose counting room the plaintiff kept his office. On his departure, he gave to his clerk, M. A. Súber, also a Swede, certain written instructions, among other things authorizing Súber to open all his letters, to forward family and private letters to him; and regarding his business letters as to European affairs, to “ do the needful, and communicate their contents to Mr. Wissman, whom you are aware holds my procuration for transacting them.” As to business letters connected with the house in South America, Súber was to take copies and leave with Mr. Moring, who was to attend to those matters. As to letters from two merchants in Venezuela, Súber was to leave them unanswered, unless some business matter required prompt action, when he was advised to consult Mr. Moring; though if any signature were requisite, Mr. Wissman would have to attend to it. Súber was to correspond with the plaintiff constantly respecting business. Mr. Wissman would furnish Súber the trifling means for office expenses. There were instructions as to keeping the books. “ In shipping goods on my own account, you will select such as are cheapest, most suitable, and which promise best according to former shipments and advices, making out accounts to guide Mr. W. in his opinion.” Then followed specifications, as to various articles of commerce, among which,—11 Cotton. For the purchase of this, Mr. B., &c., is the most reliable person to intrust with the purchase of a given description, if you are not judge enough yourself. Yet Mr. L., cotton broker, &c., would also do you justice, if left to him.” Further on, “ Samples of suitable cottons are also at the store for your government.” Speaking of tobacco, the instructions say,—“Before ordering from Baltimore and Richmond, it will be necessary previously to obtain the prices, so as to enable you to calculate if the price here would be within limits.” Towards the conclusion,—“Of course, in all these matters of purchases, charters of vessels, and every thing connected with the Swedish and European trade, you will always consult Mr. W., who will advise you, as he is responsible to me for a good and faithful execution of the trust I have placed in his hands by means of my procuration.” The power to open letters, was to devolve on Wissman’s clerk, Schenckberg, if any thing should happen to Súber. These instructions were voluminous and minute, and generally of such a character as would be addressed to a a merchant’s chief clerk.
    The authority from the plaintiff to Wissman, was a full letter of attorney under seal; accompanied with a letter of instructions, as minute and nearly as long as those given to Súber. The letter of attorney authorized Wissman to superintend, manage and conduct, all the plaintiff’s business transactions and correspondence, to and with all persons and places in Europe; to receive and execute orders and commissions; to draw and accept bills of exchange ; to make entries and give bonds at the custom house ; to effect insurances and charter parties ; and to make contracts for .the purchase and shipment of goods on the plaintiff’s private account. The instructions requested Wissman to consult with Súber as to shipments for private account and upon orders; and stated Súber might purchase, guided by W.’s experience and advice. They requested W. to place at Suber’s disposal, sums not above $>10 to $15 at a time, for counting house expenses.
    In March, 1847, Wissman, acting for and in the name of the plaintiff, chartered from the house of Grinnell, Minturn & Co., in New York, a Swedish barque, of which they were the agents, to take a cargo of cotton for the plaintiff from New York to Gothenburg in Sweden. The defendant was the clerk in the house of G., M. & Co., intrusted with the business of chartering vessels, and as such, called on Wissman, and proposed to him the charter of the vessel, and stated the terms. After two or more conferences, and considering the terms, W. instructed Súber, (who attended to the plaintiff’s out-door business as clerk,) to take the barque for the plaintiff. Thereupon G., M. & Co., prepared a charter party, dated March 27, 1847, between them as agents of the first part, and the plaintiff of the second part, chartering the barque on the terms stipulated, and sent it, under cover to Súber, to Wissman’s office. Súber examined it, and in plaintiff’s name returned it as correct, upon which G., M. & Co., executed it, and sent it again to W.’s office, who signed it in the plaintiff’s name as his attorney, and Súber attested his signature as subscribing witness. Before the formal charter party was prepared, Súber, in the name of the plaintiff, signed at G., M. & Co.’s office, a brief memorandum of the terms which had been agreed upon, drawn up by the defendant. The plaintiff and his agents were, by the charter, to have the entire freighting of the barque.
    Wissman, with Suber’s aid as clerk, in the month of April, 1847, bought, paid for, and shipped for the plaintiff, on board the barque, 1189 bales of cotton. There were among others, one lot of 136 bales, and one of 85 bales. Súber filled up the bills of lading for all the cotton so shipped, and left them with the defendant at the office of G., M. & Co., to have them signed by the master. Bills of lading for the 85 bales were signed and delivered to Súber, who kept them in his desk for a few days, and then pledged them to the defendant for money borrowed of him in the name of the plaintiff. These bills of lading were made out to the order of Mr. C. F. Carlborn of Gothenburg. Súber afterwards made out new bills of lading for the 85 bales, in the name of the defendant, and left them with him to be signed by the master, for his security for the loan of $3000, about half of which had then been advanced. The master signed these, on the former being given up. When Súber left the bills of lading for the lot of 136 bales with the defendant for signature, (which was after the delivery of the bills for the 85 bales as security,) he borrowed of the defendant further sums of money, and pledged those bills of lading as security for the loan. He received in all, $6000 in different sums, from the defendant, on the security of the two lots of 85 and 136 bales. For the 136 bales, Súber never had in his possession the bills of lading after they were signed.
    In purchasing the cargo for the barque, Wissman bought some lots personally, but nearly all were purchased by S. upon consultation with W. Purchases in a few other instances, for shipment by other vessels, were contracted by Súber without consulting W., but were afterwards approved by him.
    When Súber obtained the money of the defendant, he represented to the latter that he wanted to use it for the plaintiff, to pay for cotton already bought to go by the barque. He told the defendant it was not best to mention the loan to any one, as it would be disagreeable to Wissman to have it known. That W. was not willing to advance money for the purchases before he could draw against the shipments, and so refund himself.
    In fact, no part of the money received by Súber from the defendant, was applied to or for the use of the plaintiff; but it was spent by Súber. When he left the bills of lading for the 85 bales with the defendant to be signed, he left the barque’s receipts for that lot; and when he left the bills for the 136 bales with the defendant as security, he left the receipts for that quantity. The bills of lading left for the 136 bales, were in blank as to the consignee, and so made for the defendant’s security. Wissman knew nothing of these transactions with the defendant till the last day of April, and he never received bills of lading for those two lots of cotton. On calling for them from Súber, he was at first put off; and the next day Súber confessed that he had pledged them with the defendant for advances, and lost the money in gambling. W. then demanded the bills of lading of the defendant, who admitted they were in his possession, but refused to deliver them up. W. proposed to give him security that his rights, if any, should not be affected by delivering the bills to him, but he still declined.
    There was some testimony in defence, tending to show that after the plaintiff’s return from South America, in July, 1847, he disclaimed the purchase of the 136 bales ; but W. testified they were bought for the plaintiff’s account.
    It was proved, that Súber appeared to have the supérintendence of the cotton for the barque while it was being pressed and loaded.
    For all the residue of the cotton shipped by the barque, the bills of lading "were delivered to Wissman. After the discovery of Suber’s misconduct, the master was called upon by W. to sign bills of lading for the 85 and 136 bales, which he refused to do, because he had already signed bills for the same.
    The checks in which the defendant advanced the $6000 to Súber, were ten in number, dated from the 14th to the 27th of April, in amounts from $300 to $1500.
    The value of the two lots of 85 and 136 bales, at the time of the demand, was $10,551 10.
    The defendant, on the evidence being closed, requested the judge to instruct the jury, that under the documentary evidence adduced on the trial, Súber was authorized to act as the factor or commercial agent of the plaintiff; and that, as such factor or commercial agent, he was authorized to pledge bills of lading in his hands, for money advanced or negotiable instruments given to him thereon by the defendant in the course of business. The judge refused to give the instructions requested, and the jury rendered a verdict for the plaintiff.

      J. L. Wendell, for the defendant.

      F. B. Cutting, for the plaintiff.
   By the Court. Oakley, Ch. J.

The defendant contends, that he has a right to hold the bills of lading and the cotton in question, for the advances which he made to Súber; and the principal question in the cause, is whether he has that right.

The plaintiff was indisputably, the owner of the whole of this cotton. The question of fact as to his ownership of the parcel of one hundred and thirty-six bales, was submitted to us on the evidence contained in the case. We have examined the evidence, and have no doubt on the subject.

The first objection made to the plaintiff’s recovery, is that there is no proof of any demand of the property from the defendant before the commencement of the suit; and that a demand was necessary, because it came lawfully into his possession. That the bringing of replevin for the unlawful detention of property, is of itself an admission that its original possession by the defendant, was lawful and not tortious.

There are two answers to this objection. 1. The cases to which we were referred by the plaintiff’s counsel, viz.; Cummings v. Vorce, (3 Hill, 282;) Pierce v. Van Dyke, (6 ibid. 613;) and Stillman v. Squire, (1 Denio, 327;) establish the position that replevin in the detinet, lies where the taking of the property was tortious, as well as in cases where the wrong consists in its detention only.

2. Another answer is, that a demand was proved. The plaintiff’s agent, Mr. Wissman, demanded the bills of lading of these two parcels of cotton, from the defendant. The bills of lading were the representatives of the cotton, the evidences of the title to the property; and a demand of those evidences, was a demand of the cotton represented by them, and must have been so understood by, the defendant. The demand is therefore held to have been sufficient.

Next, ■ it is insisted by the defendant, that the plaintiff as charterer of the vessel, was pro hac vice the owner, and could hold the cotton laden on board of her, and need not deliver it upon the bills of lading, -to the defendant or the assignees of those bills ; and that he could remove the captain of the ship, if he were obstinate and refused to withhold the cotton on the plaintiff’s order to retain it.

This, we must say, is no ground at all. The captain had issued bills of lading for these two lots of cotton, to the defendant and his assignees; which enabled the defendant to dispose of the property to others in good faith for value, by a mere in- * dorsement of the two bills, who could demand the cotton from the master of the ship, whoever he might be, and could hold it by virtue of the bills of lading against any direction or control of the plaintiff; and it is very likely the defendant had so parted with the bills, before any knowledge of the difficulty came to the plaintiff’s agent.

The main question in the cause, is whether the defendant can hold the cotton for his advances, as against the true owner. And in considering the question, we are to regard the advances as having been made in good faith.

It is said, that Súber was the general commercial agent of the plaintiff, and thereby authorized to pledge or dispose of this property for the advances made by the defendant. Arid further, that he was, as agent, entrusted with the possession of the bills of lading ; and his contract, pledging the bills to the defendant, for the payment of the money advanced to him by the defendant, was valid, and barred the plaintiff from'a recovery.

On this subject, it is clear that the plaintiff’s letter of instructions to Súber, affords no pretence for the authority ascribed to him as the plaintiff’s general-or commercial agent. Those instructions are very limited in their character.: They doubtless grew out of the fact that Súber, as well as the plaintiff, was a Swede, and Wissman, the plaintiff’s agent, was a German, unacquainted with the language in which much of the plaintiff’s foreign correspondence was conducted; and it thus became necessary to have it interpreted to Wissman; and Súber was therefore,deputed to receive and examine the plaintiff’s letters, keep those which were of a private nature, and furnish to Wissman the contents of the business letters.

The case furnishes no evidence of a general authority in Súber to act for the plaintiff, or of any acts of Súber which were known to the defendant, from which he could infer that Súber had such authority.

The other ground upon which the defence is attempted to be sustained is, that Súber was in possession of the bills of lading of the cotton, having been entrusted with the same ; and that he could dispose of them under the act of 1830, relative to factors, &c., to the defendant acting in good faith, on the strength of such possession.

This ground, in our opinion, entirely fails. A clerk is not within the statute at all. Súber was not a factor in any sense of the word, or an agent for the sale of this property. He had no control at all of the cotton, nor was he entrusted with the possession of the bills of lading, in any other manner than any clerk or porter is entrusted to whom bills of lading are handed to be carried from a shipper’s office to the master, or vice versa. Indeed, if Súber had been a factor, the defendant could not hold the cotton for his advances, because he knew from the bills of lading, that Súber was not the owner of the property. The act of 1830 was made for the protection of those who dealt with a factor in ignorance of his not being the true owner. This is well settled by the case of Stevens v. Wilson, (6 Hill, 512, and in error, 3 Denio, 472,) cited by the plaintiff’s counsel. The statute was iniended, (as this case decided,) to protect advances and dealings made on the faith of the ownership of the property, and not on the faith of the possession of the paper title, or the evidences of title.

In this case, if Súber were to be deemed a factor of the plaintiff, yet the defendant knew, or ought to have known, that he was not the owner of the cotton. On this point also, there is no room for doubt; and we must give judgment for the plaintiff for the value of both parcels of cotton.


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    Child and others v. The Sun Mutual Insurance Company.
    An abandonment of a cargo insured, in order to be effectual, must be warranted by the state of things actually existing when it is made. And if made on information warranting an abandonment, and was not accepted when made ; it will not be valid, if it afterwards appear that such information was erroneous, and there was in fact no technical total loss.
    So, where a whaling vessel was stranded and lost, and on receiving information of the disaster, the owner of the vessel and cargo gave notice of abandonment to the underwriters ; and, after subsequent advice of the safety of part of the cargo, gave a further notice of abandonment; but prior to the first notice, nearly the whole cargo had been saved, and had arrived at ah intermediate port; and there had been no notice or act on the part of the underwriters accepting the abandonment ; it was held, that it was not a valid abandonment of the cargo, and that the profit arising from a sale of the saved portion of the cargo, and the investment of the proceeds in coffee, at the intermediate port, belonged to the assured, who were entitled to claim for a partial loss.
    July 14;
    July 27, 1848.
    Assumpsit, on a policy of insurance on the cargo of the whaling ship Galen. The ship sailed from Warren, Rhode Island, in December, 1842. On her return home, in February, 1846, she was stranded at Fox Bay, in the Falkland Islands, and was totally lost. At that time she had on board 327 barrels of sperm oil, 1400 barrels of whale oil, and 8 barrels of black fish oil. The cargo was almost all saved, subject to various expenses, and was shipped to Rio Janeiro, where it arrived previous to September 17th, 1846.
    On the 19th of September, 1846, the plaintiffs having received a report of the stranding of the Galen, addressed from Warren, R. I., to the defendants and the other underwriters on the vessel and cargo, a letter stating the report, that there was no probability of her being got off, and thereby abandoning the vessel and cargo to the insurers, claimed for a total loss as insured.

      Prior to November 16th, 1846, the plaintiffs received from their agents at Rio Janeiro, Maxwell, Wright &. Co., a letter, stating the arrival there of the captain of the Galen, that he had shipped to Rio some 350 casks of whale and sperm oil, which had arrived to the consignment of a grocer there, and were sold conformably to the U. S. Consul’s instructions, at the fair rate of 1250 reals per gallon. That the captain would have the proceeds paid over to M., W. & Co., but as the oil was subject to very heavy charges, they could not as yet make any correct estimate of its probable amount. That the captain had to consign to the grocer, in order to procure the vessel in which it came. And that M., W. & Co. would have made the necessary documents for the underwriters, and keep the plaintiffs advised of the business.
    On receiving this communication, the plaintiff’s at Warren, wrote another letter to all the insurers of the Galen and cargo, dated November. 16th, 1846, in these words:
    “ Since our letter of the 19th Sept., advising of the abandonment of the ship Galen and her cargo to the insurers, we have received intelligence confirming the rumor of the loss of said ship, upon the strength of which said abandonment was made.
    “ We have now to advise the entire loss of the Galen, at Fox Bay, Falkland Islands, in February last, and the shipment of the portion of the cargo which was saved, to Rio Janeiro, where it had arrived previous to Sept, last, and 300 barrels sperm oil has been re-shipped to N. York, and the balance, whale oil, having been sold at Rio, (at a very fair rate,) the proceeds (amount unknown,) will be remitted in coffee to N. Y., consigned to us.
    “We desire to know what disposition you will have madé of this property, and unless advised to the contrary, we shall immediately, upon its arrival in this country, dispose of it for the benefit of all concerned.
    “ The sperm oil comes forward in the brig Camilla, and the coffee in the brig Louisa Beaton, both which vessels Would probably sail about the first October, from Rio, as we are advised by Messrs. Maxwell,Wright & Co., of that city, and presuming you will prefer risking your interest in the property, we shall not effect insurance upon it, unless requested so to do.
    “ N. B.—The protest has not yet come to hand.”
    All the oil, except the sperm, was sold at Rio, and the proceeds paid by the master, to Maxwell, Wright & Co., who invested the same in 12521- hags of coffee, and shipped the coffee to New York and Boston, on the 5th and 20th of October, 1846, consigned to the plaintiffs. They forwarded to the latter, their account current with the captain for the ship’s owners, and an invoice of the coffee. The plaintiffs received the coffee, sold it, and retained the proceeds. There was a profit on the sale of the coffee. The sperm oil saved, being about 300 barrels, was shipped to New York, and also came to the hands of the plaintiffs.
    On the 2d of January, 1847, the plaintiffs delivered to the defendants, the preliminary proofs of interest and loss. On the 20th of July, 1847, at New York, they addressed a letter to the - defendants, as follows :

      “ To avoid misunderstanding on the subject of the prelimi- ■ nary proofs in the case of the Galen cargo policy, we beg leave to draw your attention to the proofs of interest and of loss' delivered to you, namely, a copy of the register lately delivered, a protest and survey delivered in January last, copies from the captain’s journal of the cargo on board, bills of lading from the Fox Islands, by the Dispatch, July 23, 1846, of 173 casks oil; by the Manney, July 31, 1846, of 265 casks oil, to Rio de Janeiro ; and the bills of lading of coffee, proceeds of said oil, by the Louisa Beaton, October 6, 1846, for 474 bags ; by the Pil-' grim, for 778J bags, October 20, 1846; together with all the bills, accounts, sales and invoices, with the statement of loss, by Welbaskie & Graham, of our claim.
    “ These were all delivered in February last, at your office, and to them we shall refer as preliminary proofs of interest and of loss, as far as they may be material, of which please to take notice. The papers are left with our attorney, D. Lord, where they may be consulted, if need be.”
    The various documents relating to the adventure being laid before despecheurs by the plaintiffs, they made a statement of the plaintiff’s claim, by which it. appeared, on the fifth February, 1847, to be $2,135 87.
    If the insurers were entitled to the benefit of the profit on the sale of the coffee, in which the proceeds of the oil sold at Rio, were invested, it was agreed that this statement of the loss was incorrect. Otherwise, it was admitted, for the purposes of the trial, that the statement was correct, subject, however, to adjustment.
    There was no proof of any express assent of the defendants to the abandonment, nor of any act indicating their acceptance of the same.
    The defendants insisted that the plaintiffs having abandoned the cargo to them, they, from that time, became substituted in the plaintiff’s right to the property, or its proceeds, or reinvestments, according to the proportion covered by their policy.
    The plaintiffs insisted that the letters of 19th September, and 16th November, 1846, respectively, did not show a valid right to abandon, and also, that at each of those dates, the property insured had been relieved from the peril on which the attempt to abandon was predicated, so that the letters of abandonment were not effectual, and therefore the underwriters were not entitled to the substitution by them claimed.
    A verdict was taken subject to the opinion of the court.

      D. Lord, for the plaintiffs.

      H. Ketchum, for the defendants.
   By the Court. Vanderpoel, J.

This case is somewhat peculiar. The defendants seek to hold the plaintiffs to their abandonment of the cargo, which forms the subject of the action, and insist that the plaintiffs having abandoned the property to them, they, from that time, became substituted to it or its proceeds in the plaintiff’s right, according to the proportions covered by their policy.

The plaintiffs, on the other hand, insist, that the letters of the 19th September, and November 16, 1846, respectively, did not show a valid right to abandon, and also, that at each of those dates, the property insured had been relieved from the peril on which the attempt to abandon was founded, so that the abandonment was not effectual, and, therefore, the underwriters were not entitled to the substitution claimed by them.

The whole case depends upon the legal effect of the attempted abandonment.

When the assured makes an abandonment, and the underwriter accepts it, it is binding on the parties. So far as it respects the rights of the assured, an acceptance of the abandonment is not necessary. If made in due form, and for sufficient cause, it transfers the subject, and perfects the right of the assured to recover for a total loss, although it is not accepted by the insurers. (2 Phillips on Ins. 400.) The underwriter is not construed by his silence merely, to accept the abandonment. He is not bound, says Justice Story, in Peele v. Merchants Insurance Co., to signify his acceptance. If he says nothing and does nothing, the proper conclusion is, that he does not mean to accept. (2 Phill. 401.)

The two letters of abandonment were written in Rhode Island, when the plaintiffs could not have known the real facts, as they were afterwards shown to have existed. It is a well established rule, that the right to abandon, is to be tested by the actual facts at the time of the abandonment, and not upon the state of the information received. (3 Kent’s Comm. 325; Church v. Bedient, 1 Caines’ Cases in Error, 21; Depau v. Ocean Insurance Co., 5 Cow. 63; Dutilh v. Gatliff, 4 Dallas, 446; 2 Wash. C. C. Rep. 54.) The assured may act upon the best information they can get, as to the state of the vessel or the cargo, but as Chancellor Lansing said in Hallett v. Peyton, (1 Caines’ Cases in Error, 40,) “ if the information is either totally unfounded or materially variant from the truth, it would be a strange position to maintain, that its resemblance should be preferred to the truth itself.” There must be an actual total loss, or one in the highest degree probable, to justify an abandonment of the cargo. (Anderson v. Wallis, 2 Maule & Sel. 240; Hunt v. Royal Exchange Assurance Co., 5 ibid, 47; 2 Camp. N. P. 624.)

We are of opinion, that as the defendants did not accept the abandonments made by the plaintiffs; and the facts subsequently discovered, showed there was no ground for it; they did not acquire the plaintiff’s right to the oil, or its proceeds or re-investments. The judgment must be, as for a partial loss; as there was no binding abandonment of the property to the defendants.