Lefever v. . Lefever

Wright, J. The representations made by the • defendant, -which the referee -finds to be untrue, and on which the plaintiff relied, he being ignorant in fact of their truth or falsity (except as to certain protested paper), related wholly to the condition of the bank and the value of its stock. ‘One of the questions is whether the plaintiff, being a director of the bank, entrusted with the supervision and management of its affairs, is estopped, in a suit of this character, from setting up his actual ignorance of the condition "of*the bank. In any matter or-controversy connected with the business of the bank, or its management, it is clear that want of notice of its condition would not be available to him. . Upon well -settled principles of public policy, he *34 would not be allowed to hold himself out to the world as the director or manager of an institution, and then, when sought to be made liable by the people of creditors of the institution, avail himself of the plea of ignorance to repudiate the acts or omissions of himself or his agents. But this case has no relation to the business of the bank or its management. It was simply a sale of stock by one officer of the bank to another; and, although the vendee was a director, having the means of knowledge, he was not in the particular transaction chargeable with notice of the condition of the bank. If he was actually ignorant of its condition, the fraudulent vendor would be legally responsible to him for the deceit as to anv stranger to the institution. It was not a case in which the plaintiff was legally bound to lrnow the truth or falsity of the defendant’s affirmations. On the trial the solvency and prosperous condition of .the bank, and the value of its stock, were important inquiries. If the defendant’s representations were not false in these respects when made, then there was no ground for the action. The evidence showed very plainly that on the 29th August, 1857, the time of the alleged sale and transfer, the bank was, by the application of all the ordinary tests, sound, solvent and prosperous, and the stock worth all that the defendant had represented it to be. But the referee holds that the plaintiff might show, by indirection, and the merest hearsay testimony, that the facts, were otherwise; and having received the evidence, he gave effect to it in his report. Accordingly he allowed the introduction, under objection, of what purported to be a certified copy of the proceedings had in November, 1857, on the petitions of certain stockholders for the re-establishment of the bank. Among the papers thus admitted was the petition of the stockholders, stating, on information and belief, the amount of bills receivable; assuming to state the inadequacy of the available fund to pay the debt *35 of the bank to the state treasury, and avoiding it by alleging the responsibility of the sureties; representing many of the debtors of the bank as embarrassed and crippled by the commercial revulsions, and stating the petitioners’ apprehension of disaster from the judicial administration of the fund, under the receivership. Another of the papers was the deposition of the receiver of the bank, embodied1 in the report of the referee. In this was stated the facts of the protest of $11,150 of the bills by the Nassau Bank, and that the amount of bills receivable was $27,000. Appended to the referee’s report was his estimate that from one-eighth to one-quarter of the bills receivable would prove uncollectable; his estimate of the then amount and value of the bank assets; also the receiver’s accounts, showing the large expenses incident to the receivership, the sacrifice of the New York state stocks at panic prices, ranging from eighty-seven and one-half cents to ninety-five cents, and other losses of a kindred character. To these proceedings in the matter of the bank, the defendant was in no sense a party. It may be that by competent evidence the plaintiff would have been allowed to show the condition of the bank in November 1857, with the view of falsifying the defendant’s representations of its condition in August, 1857. But this would be allowing a wide range of examination ev.en where • the question involved was one of fraud. It was especially mischievous in this case; for between the date of the contract and November, 1857, the great commercial revulsion and panic of that year had occurred, and was at its height, unsettling commercial values, crippling and embarrassing all classes pecuniarily, occasioning a suspension of specie payment by all the banks, and prostrating temporarily even the state credit. If such a latitude of investigation, however, was permissible, it could only be pursued by the introduction of competent proof. The petition of the stockholders to re-establish the bank, the affidavit of the receiver, and the estimates *36 of the referee, as:to the amount and value of the then assets of the bank, were, clearly incompetent as against the.defend'.ant. So far as he was concerned, the statements in the petitions were.mere.hearsay, many of them upon the information and belief of the petitioners, who were themselves competent witnesses. This was also the character of the affidavit of the receiver before the referees (a witness not .sworn on the trial), and of the estimates of the referee as to the .amount and values of the assets of the banks in November, 1857. .Instead of swearing witnesses on the trial .as to the condition of the bank, and the value and .amount,of its assets, when-taken .out of the hands of the' Receiver, (regarding .such evidence as material and competent on the question of .the truth or falsity of -the defendant’s representations in respect thereto, made in August, 1857,) the referee allowed second hand proof of the facts; apd what is quite apparent, in.a degree, at least, based his report' upon such proof. It may not have been strictly objectionable to have allowed the affidavit of the defendant, emboclied.in the report of.the referee, to be introduced with the view of showing his declarations and admissions; but on no .principle was the testimony -of the receiver, the hearsay testimony of certain stockholders.of the bank, and the estimates of the referee as do the amount , and value of its assets, in a process between other parties, admissible. It is urged that the record .of the proceedings was proper evidence to show the time that .-the bank went into the hands of a receiver, and the declarations and admissions of the defendant, and that it was necessary .to introduce the whole record, or the paper would have been incomplete. Suppose, however, it was incomplete, it could certainly be no reason ¿for the introduction -of improper evidence. -If -it were a proper way to .prove the fact that the bank went into ..the hands of a receiver, on the application of some of its .stockholders, on .the 18th September, 1857, it could have been-shown by the ordér or decree of the judge; and *37 if the declarations or admissions of the defendant as to the condition of the bank, made in" a proceeding tó re-establish the ■ institution1, were competent evidence, his affidavit containing these declarations and admissions, could have been introduced. Indeed, it was introduced and admitted;' under objection, beforé the other papers were received. I am of the opinion, therefore, that the referee erred in • admitting as evidence what is called in the case a certified copy of the proceedings upon the" re-establishment of the bank, except perhaps the order of the court appointing a: receiver and the testimony of the" defendant- before the" referee, embraced therein. The referee' found - that the representation of the defendant that the bank was in a sound, solvent and prosperous condition iff August, 1857,, was false, and the defendant knew it; but the'statement of persons not sworn on the trial, and "in- fact the unsworn - statement of one as to the condition of the bank in November, 1857, were not competent evidence on which to base such "a finding of fact. The-judgment of the supreme-court should be reversed, and a new trial ordered, with costs to abide the event. Ingraham,' Davies,-Sélden, Mtjllin and Johnson, JJ., concurred.