Nelson v. Drake

Hardin, J.: The Rochester Towing Company was a joint-stock association organized in pursuance of articles of association, entered into by sundry persons in January, 1869. The fifth article provided that “ the trustees shall have control and management of all business and affairs of the company, appoint all officers and agents who may be deemed necessary, and may prescribe the duties and fix the compensation of such officers and agents; to sell and dispose of all such property belonging to the company as they shall think best.” * * * Article four provided: “ There shall be seven trustees to take the care and charge of the business affairs of the -said company, with powers to any four of them to transact business.” Article eight provided for the duties of a treasurer. Roswell B. Smith, as a witness, testified that he became connected with the company in 1869, and continued with it up to the fall of 1874, and that he attended the meetings of the company, and identified the book of record of its proceedings, and it was produced and read in evidence. He was appointed one of the trustees in and by the articles of association. He testified that he executed a chattel mortgage 23d of April, 1874, as president and treasurer, to L. M, and M. G. Thompson and N. C. Wilcox, in the name and under the seal of the company; that it was executed pursuant to a resolution of the trustees, five being present, passed 22d April, 1874, covering all the mules, among other things, then owned by the company. After that the company purchased other mules and property. There was another mortgage executed by the company per Smith, “president and treasurer,” August 18, 1874, covering mules, to the same mortgagees to secure $6,874.58, and indorsements to be made for the company by the mortgagees. There was a resolution of the stockholders passed 9th December, 1873, giving to the trustees “full power to manage and control, sell, and dispose of” the property of the company to the best advantage for the interest of the company. Smith applied to the mortgagees for a loan and for indorsements, and they arranged with him to [470] take the mortgages, became liable, and were obliged to pay and did pay. They made advances which were used for the benefit of the company upon the mortgage of August 18, 1874. This mortgage covered the pair of mules for which this action was brought.' The mortgages were recorded and were taken in good faith. They contained a danger clause, and on the 5th of October, 1874, the mortgagees gave the company notice of their intention to take the property from the possession of the company. The fifth article gave the trustees power to appoint all officers and agents who may be deemed necessary, and to prescribe the duties. This authorized them to appoint Smith president, as the proceedings show they called him and treated him. It also authorized them to prescribe his duties. There was power in the trustee Smith, who was also president and treasurer, to pledge and mortgage the property of the company, in payment of its indebtedness, and to secure the mortgagees for loan of money and credit. (Mabbett v. White, 12 N. Y., 454; Graser v. Stellwagen, 25 id., 315.) The defendant did not set up in his answer that he was a judgment creditor, nor that he was a purchaser in good faith of the property; nor did he make any such proof upon the trial; all that he proved was that an agent of the company turned out the property October 15, 1874, in payment of an antecedent debt of the defendant against the towing company for feed. He did not put himself in a position to challenge the transfer to the mortgagees by the company, on the ground of fraud against the creditors of the-company, or that the transfer and mortgage were fraudulent as against the other trustees or stockholders. (25 N. Y., 317; Beaty v. Swarthout, 32 Barb., 293.) The company received the benefit of the indorsements derived, under the chattel mortgage of August 18, 1874, and could not repudiate the act of its president and treasurer without returning the money and benefit derived. The execution of the mortgage-was not against good moral and public policy, and the company would not be allowed to repudiate it without returning the benefits derived, under it. It was good between the parties, and could be. enforced by the mortgagees against the company. In other [471] words, the company holding the moneys and benefits derived under the mortgages, would be estopped from questioning the transfer. (Steam Co. v. Weed, 17 Barb., 378; Whitney Arms Co. v. Barlow, 63 N. Y., 62.) After the mortgages of August 18, 1874, the mortgagees indorsed and paid for the benefit of the company $12,000, which was not repaid to them. They were entitled to hold and enforce the mortgages, and as the defendant took the property and converted it, and refused to deliver it upon their demand, he became liable for its value. They assigned their cause of action to the plaintiff, who has recovered the value of the mules converted by the defendant. The learned referee properly held, as a conclusion, that, “at the time of such conversion by the said defendant, the said two mules were the property of the said mortgagees as against the said defendant; that the taking .possession thereof by the said defendant, on the said 15th day of October, 1874, was wrongful as against the said mortgagees.” The complaint sufficiently alleged, first. That the mules were the property of the mortgagees, and that they were entitled to the possession thereof. Second, That the mortgagees sold their demand and claim for the conversion to the plaintiff; and third. The value of the mules at the time of the conversion. The mortgages were therefore properly allowed in evidence, and the assignment to the plaintiff of the cause of action, of the mortgagees. The exceptions by the defendant to the admission of them in evidence were not well taken. The judgment should be affirmed. Talcott, P. J. and Smith, J., concurred. Judgment affirmed.