Mutual Life Insurance v. Yates County National Bank

Follett, J.: All the defendants except the Yates County National Bank made default, and a judgment was entered foreclosing the mortgages and [221] for any deficiency that might arise on the sale of the premises against the defaulting defendants, who had covenanted to pay the mortgage debt. The Yates County Hational Bank defended the demand for a judgment against it for any deficiency that might arise on the sale of the mortgaged premises on three grounds: (1) That there was no consideration for its bond. (2) That its president, who executed the bond, had no authority to execute it. (3) That it was without power to incur the obligation represented by the bond, and that the execution of it was ultra vires. Does the evidence contained in the record authorize the conclusion that there was no consideration for the bond ? The bond is not a mere obligation to pay the debt of .Michael L. and Ellen E. Tierney, a contract of guaranty or of suretyship, but it is an original undertaking on the part of the bank to pay a debt which was a specific lien on its realty. (Winfield v. Potter, 10 Bosw. 226; S. C., 24 How. Pr. 446; Prime v. Koehler, 7 Daly, 345; affd., 77 N. Y. 91; Mutual Life Ins. Co. v. Hall, 31 App. Div. 574.) The bond is under the corporate seal of the bank, which is “ presumptive evidence of a sufficient consideration.” (Code Civ. Proc. § 840.) The seal of a corporation like the seal of an individual when affixed to a contract is presumptive evidence of a sufficient consideration for the contract. (Sturtevants v. The City of Alton, 3 McLean, 393, 395; Royal Bank of Liverpool v. Grand Junction R. R. & Depot Co., 100 Mass. 444; Thomp. Corp. § 5105; Jones R. R. Securities, § 189 ; 1 Wat. Corp. 318, § 99.) The bond being under seal and importing a consideration, the defendant was bound to allege in its answer, which it did, a want of consideration, and by affirmative evidence rebut the presumption arising from the presence of the seal. This burden was on the defendant, which, I think, it failed to sustain. Ho witness testified that there was no consideration for the bond, nor was any evidence given of the circumstances under which it was executed from which the presumption of a consideration was overthrown. The defendant called but a single witness, who was, at the date of the bond, a director of the bank, and also clerk of its board of directors. His examination was for the purpose of showing that the execution of [222] the bond was not authorized by a resolution of the board of directors. He testified that he knew that the bank had an interest in this property, though there was nothing in the book of minutes to show it, and that he knew of the conveyance of the mortgaged property to the bank and by the bank. He testified that it was not conveyed to the bank in payment of a debt which then existed in its favor, which is the only fact remotely relating to the question of consideration, which is altogether insufficient to rebut the presumption arising from the corporate seal that there was a sufficient consideration for the bond. Was the execution of the bond authorized by the board of directors of the bank % The bond was executed by the chief executive officer of the bank, under its corporate seal, who made an affidavit wherein he stated “that he is the president of the Yates County National Bank of Penn Yan; that the seal affixed to the foregoing instrument is the corporate seal of said bank; that the same was affixed thereto by virtue of an order of the board of directors of said bank, and that he subscribed the same by virtue of a like order of said board.” The seal and the affidavit werq pri/ma facie evidence of the authority of the president to execute the bond. (Lovett v. The Steam Saw Mill Association, 6 Paige, 54; Hoyt v. Thompson, 5 N. Y. 320, 335; Trustees Canandaigua Academy v. McKechnie, 90 id. 618; New England Iron Co.,v. Gilbert Elevated R. R. Co., 91 id. 153; Thomp. Corp. § 5029.) To overcome this presumption, a director of the bank, who acted as clerk of the board of directors and kept a record of the minutes of the board, testified that the board did not, to his knowledge, pass any resolution or take any action in regard to the execution of the bond. He produced the records of the board, and testified that he found no resolution therein authorizing the execution. He testified that he knew the bank had an interest in this real estate, and that there was nothing in the book of minutes of the board showing that the property was purchased or conveyed by the bank. He testified that he knew of the conveyance of this property to the bank and by the bank; knew that the bond was sent to the bank for execution, but he did not know that it was executed at the time it was executed. No other directors were sworn, and I think this negative evidence of a want of knowl [223] edge on the part of the witness was not sufficient to overcome the presumption arising from the seal and the affidavit of the president, coupled with the fact that the bank afterwards, on July 1,1892, conveyed its interest in the property. Showing that there was no recorded vote does not overcome the presumption. (Hart v. Stone, 30 Conn. 94; Northern Central Ry. Co. v. Bastian, 15 Md. 494; Fidelity Co. v. Railroad Co., 32 W. Va. 244; Thomp. Corp. §§ 5106, 5107.) Was the execution of the bond ultra vires f The presumption is that all contracts made hy corporations are within their power, unless the contrary appears on the face of the contract, or unless it is shown affirmatively, by way of defense, that the corporation had no power to make the contract. (Morse Banks & Banking, § 56, and cases cited.) The bond was but a covenant to pay a sum specified, evidently given because the bank was the owner of an interest in the mortgaged premises. A national bank having acquired the title to realty incumbered by a mortgage has power to pay it and discharge the lien. It would not be contended that such an act is beyond the power of a bank, and I am unable to see why the covenant of a bank to pay a lien on its land at a future day, or on demand, is beyond its power. The plaintiff abstained from foreclosing these mortgages for more than four year’s after the bond was given, and in the meantime the bank conveyed the mortgaged premises, and technical defenses not clearly established will not prevail. The judgment should be reversed and a new trial granted, with costs to the appellant to abide the event. All concurred. Judgment reversed and a new trial ordered, with costs to t;he appellant to abide the event.