Magee v. Badger & Potter

By the Court, Johnson, J. The objection of the defendants to the validity of the first note is two fold: 1. That the company had no power to take a note at all, upon a subscription for preferred stock; and, 2. That if they could take [262] a note, they had no right to take one payable in one year from the time of such subscription. The act of April 1, 1854, (Bess. Laws of 1854, ch. 146,) authorizes the company to receive subscriptions for preferred stock, and to issue such stock to subscribers for the same. The subscribers were required to pay the par value of such shares as they were authorized to take, “ in such manner as the board of directors of such company should direct, at the time of subscribing.” The defendant Badger subscribed for the number of shares he was entitled to as a stockholder, and gave the note on such subscription, at the time. Mo note was necessary. The subscription was binding, and would have enabled the company to collect the amount subscribed, without any note. But the board of directors were to direct the manner in which the amount should be paid at the time of the subscription, and the promise was reduced to the form of a note. I see no error in this, or any want of power on the part of "the company. They were authorized to take the subscriber’s promise, and the form in which it was made cannot be material; nor do I see any difficulty in their giving the subscriber a year’s credit, if they saw proper to do so, at the time the subscription was made. The act cleatiy contemplates giving credit to the subscribers. It did not require subscriptions to be paid in cash at the time they were made. There is nothing in the terms or spirit of the act which limited the board of directors to any specific number of days, or months, in the term of credit they might give. I think, therefore, the judge was clearly right in holding 'that the first note was a valid note, in the hands of the company, it having been given upon an authorized and valid subscription to the preferred stock. Being valid in the hands of the company, it was equally so in the hands of Davis, to whom it was regularly transferred, in part payment of a demand due,him from the company. The defendants make no point, that the first note was not regularly transferred to Davis, so as to make him the lawful owner and holder. That note having been a valid note, it is [263] difficult to see why the note in question, which was given in settlement of the action brought to recover the amount due upon it, is not also a valid note. It certainly had a good consideration, to the amount due upon that note. There was, as we have seen, no valid defense to that note. And even if there had been such defense, it was competent for the defendant to waive it, and settle the controversy by giving a new note, which would be valid, as given in settlement of a disputed claim, and for the purpose of avoiding litigation. A ]3arty giving a note under such circumstances, would not be permitted to set up as a defense to it the invalidity of the prior note, unless he could show that he was in some way deceived and defrauded in the settlement. This is alleged here. But from the evidence upon the trial it seems to me very doubtful, to say the least, whether Badger was deceived or defrauded in the least, by the issue to him, by Davis, as secretary of the company, of a greater amount of preferred stock than he was entitled to, or could claim upon his subscription. If he knew he had no right to it, and that Davis had no authority to issue it, and that it would be entirely worthless even if Davis had such power, how can he now claim that he has been deceived or defrauded in the transaction ? But if defrauded, and he should seek to repudiate the note in question on that ground, he must restore the old note given up on the settlement, and place the other party in the same situation in which he stood at the time of the settlement. Many other considerations might be suggested, pertinent to the defense here insisted upon, but it is unnecessary to pursue the subject, as the judge charged the jury that this note was void in the hands of Davis, as against both maker and indorser. Of course the defendants cannot complain of this, and the plaintiff is not here with any exceptions. Assuming, therefore, for the purposes of this motion, that the note in question was voidable in the hands of Davis, on the ground of the fraud in the issue of the preferred stock, had the plaintiff" a good title, and could the defendants interpose their defense, [264] to the note in his hands ? He was certainly a holder for a valuable consideration, and took the note before maturity. The judge so charged, and the exception to this part of the charge is not well taken. The question whether the plaintiff had notice of the facts constituting the defense at the time he took the note, was a question of fact, to be submitted to the jury as it was. And certainly the defendants have no reason to complain of the manner in which this question was submitted. The charge was far more favorable to them than they had a right to require. The judge not only charged, that if the plaintiff took the note with notice of the facts, it would be void in his hands) but he went farther and charged, in substance, that if he had knowledge of facts or circumstances which should have prompted further inquiry that might have led to a knowledge of the facts, the note would for that cause also be void. This latter branch of the charge went beyond the settled rule of law, in regard to the validity of negotiable paper in the hands of a holder for a valuable consideration. (Hall v. Wilson, 16 Barb. 548, and cases there cited.) Hone of the exceptions to the charge are well taken. There is but a single exception to the refusal to charge as requested) and in order to sustain that, the defendants’ counsel must show that every proposition submitted is tenable. They were all, as appears by the case—nine in number-—submitted at the same time, with a single request to charge in favor of all. The court refused, and the defendants’ counsel excepted. If either proposition was erroneous the exception falls, although a portion of them were sound in point of law. (Haggart v. Morgan, 1 Seld. 422. Jones v. Osgood, 2 id. 233.) It has been shown above, that several of these propositions were unsound; and indeed I.doubt whether either of them can be upheld, upon the facts appearing on the trial. A new trial must therefore be denied. [Monroe General Term, December 5, 1859. T. R. Strong, Welles and Johnson, Justices.]