Sutter St. R.R. v. Baum

McKinstry, J. 1. The court below found: “ Prior to the 21st day of November, 1878, and at all times herein mentioned, the defendant Shrier was, and is, the partner of the defendant Baum; that although the said notes and mortgage were made to the said Shrier by name, yet he never had any real or beneficial interest therein, and never advanced any part of the said $125,000 (the full amount received by plaintiff); that the defendant Baum [51] was the person who advanced all of said money, and that he was the real and substantial owner of all of said notes and mortgage ; and that he negotiated the said loan, and arranged the terms thereof with his co-directors of said corporation; that the said Shrier merely lent his name to the transaction ; * * * that about the 18th of August, 1879, the said notes and mortgage were formally assigned, transferred and delivered to the said Baum; and that ever since said last mentioned day, said Baum has been the (legal) owner and holder thereof, and still is such owner and holder.” There was sufficient evidence to uphold the finding. 2. It is not necessary to say whether the notes and mortgage were or were not void. For the purposes of this decision, it may be conceded, as is claimed by appellant, that the doctrine laid down by Mr. Taylor (in his Treatise on the Law of Private Corporations, § 634), is just, and sustained by authority. That writer says: “ The following rules regarding loans to a corporation from its officers seem deducible from the preceding and other cases. Directors and other officers may, when they honestly deem it for the interest of the corporation to borrow, advance it money on terms as favorable as any on which they could have procured the money for it from other sources; and they may take from the corporation security for their loan,” etc. 3. The court below found “ from the 10th day of July, 1879, (the date of the resolution which purported to authorize the execution of the notes and mortgage), ten per cent, was an excessive and unjust rate of interest; and from and after said day, according to current market rates, nine per cent, per annum upon said -1125,000 was a fair, just and reasonable rate of interest, the mortgagee paying the tax upon said debt and mortgage. ” The most that can be conceded to the defendant Baum is, that he believed it to be for the interest of the corporation to borrow one hundred and twenty-five thousand dollars, the money which it actually received. The finding, of course, is to be applied to the transaction before the court, and is to the effect that nine per cent.—the mortgagee paying the taxes—was a just, fair, and reasonable rate to be paid for the use of the one hundred and twenty-five thousand dollars, reference being had to the security in fact given, and to the usual rates paid in similar [52] cases. Accepting the doctrine laid down by Taylor, and it being conceded that defendant Baum was authorized to advance the money at nine per cent., secured by mortgage on the property of plaintiff, he to pay all taxes on the mortgage, he was not justified in contracting with his co-directors that, in consideration of one hundred and twenty-five thousand dollars, advanced by him, he should receive notes in the aggregate amounting to one hundred and thirty-seven thousand five hundred dollars, bearing interest at the rate of ten per centum per annum, even though by oral contemporaneous agreement it was provided that of the excess beyond one hundred and twenty-five thousand dollars and interest, the plaintiff should be required to pay only the sum which the defendant might pay for taxes upon the property, with interest thereon. The court was, therefore, justified in holding that the notes and mortgage should be satisfied, upon payment by plaintiff of $125,000, with interest thereon from July 10, 1879, at the rate of nine per cent, per annum, less the interest paid since that date. 4. The court also found, “ that in negotiating, arranging and bringing about the transaction, the defendant Baum used his position as director to obtain for himself an undue advantage,” etc. The evidence sustained the finding, and it follows that from the amount to be paid by plaintiff there should also be deducted one hundred and fifty-eight dollars, expenses of making and acknowledging the mortgage. 5. In its complaint plaintiff offers to comply with all the terms imposed by the court as conditions to a decree in its behalf, and offers to refund to the defendants any and all sums of money received from them or either of them, together with such amount of interest thereon as may be just and equitable. Where a plaintiff comes into a court of equity asking for the rescission in whole or in part of a contract, or to be relieved of a portion of a contract, and the taking of an account is necessary for the ascertainment of the sum to be repaid, or the sum is to be liquidated by an adjudication based on evidence of facts independent of the terms of the contract itself, an offer to refund such sum as shall be decreed is a sufficient offer to do equity. In such case the plaintiff cannot determine, in advance of the suit, the [53] amount by him to be repaid, and is not required to make ah actual tender of such amount before commencing his action. Judgment and orders affirmed. McKee, J., and Ross, J., concurred.