Church v. Sterling

Church, J. The plaintiffs are commissioners, appointed under the provisions of an act passed in 1839, entitled “An Act to aid in the construction of the Housatonuc Rail-Road.” By virtue of this statute, the whole stock, franchise and income of the Rail-Road Company, and all real estate, which — 398 — then was, or thereafter might be, owned by said company, was declared to be pledged and mortgaged to the commissioners, as security for the redemption and payment of notes issued by virtue of that act. And the commissioners are empowered to sell and dispose of so much of the stock, or real or personal estate, of the company, as may be necessary to pay or redeem said notes. And directions are given when and how the commissioners are to proceed in carrying out the provisions of the law. The bill alleges the non-payment and protest of several notes, and also other facts preliminary to the right and duty of the commissioners to sell the property for the benefit of the holders, not only of the protested notes, but of all the notes approved by them. It rests with the commissioners to determine what part of the property shall be sold, whether it shall be real, or personal—the property now in controversy, or other estate. We know not what other facts, to show the propriety or necessity of a sale, could exist, than such as are averred in the plaintiffs’ bill. Indeed, if no necessity oi immediate sale existed, still it would be the duty of the commissioners, as trustees and mortgagees, to protect and preserve the estate, and the company’s title to it, so that it could be made available to meet the emergencies of the case, by sale or otherwise, as they should arise. The commissioners, under this law, have more than a naked power to sell: by the significant terms of the statute, they are constituted mortgagees, and therefore, have a legal interest; a legal interest in trust for the benefit of certain creditors of the Rail-Road Company. Superadded to this interest is the power to sell, without any other process of foreclosure. But the essential claim of Sterling, one of the defendants, is, that neither the plaintiffs, nor the Rail-Road Company, have an interest in the contract made by these defendants, with Sturges, for the sale of the land in question, but that the beneficial interest is in themselves entirely. An examination of this claim, we think, will show it to be unfounded; and that the defendants have never stood in any other relation to this transaction than as agents of the corporation. The defendants, both of them, were officers of the company, arid as such, to a certain extent, its agents. And although they could not, without something more than an ex officio authori — 399 — ty, bind the corporation, for the purchase of lands; yet professing to act only as agents, and for the sole benefit of the company, their acts would become obligatory, by recognition and a subsequent ratification, express or implied. Ang. & Ames, 157. There are so many unforeseen contingencies in the management of the affairs of a corporation, that it is impossible it should anticipate all cases in which it may be necessary to provide for the future performance of an act, or the appointment of an agent. There is a propriety, therefore, in many cases, that the most active officers, such as president, superintendent, cashier, &c. should exercise a prudential authority in providing for the interests of the corporation, subject, in all instances, to its assent and approval. But in the present case, there was more than this. Mr. Burrall, the president of the Rail-Road Company, had been appointed its general agent, with a general power of supervision and direction, and with authority to do all necessary and proper acts for conducting the business of the company, subject to such regulations as from time to time should be adopted by the board of directors. This gave him power to negotiate for the purchase of this land on behalf of the corporation, as its agent. He has never claimed to act in a different capacity; and does now, as he has ever done, recognize, in this negotiation, the Rail-Road Company as the principal. And Mr. Sterling, having, in this entire transaction, acted with him for a common purpose, cannot now claim a separate and opposing character. These officers both acted as agents: they saw and felt the necessity of procuring gravel from this land, for the use of the road; and that this could be done only, by effecting a purchase of the land itself. And although they gave their own notes, and received a deed of the land in their own names; yet this was done only, for and on behalf of the company, whose officers and agents they were. It was because, under the depressed credit of the Rail-Road Company, they could not procure either the gravel or the land, without a pledge of their personal responsibility, for the benefit of the company. The very nature and manner of the negotiation show this to be true. The Rail-Road Company, by the original contract, were to pay 88 dollars in cash, and to secure the balance of the purchase money, by its notes and mort — 400 — gage; but for reasons, personal to Sturges, the grantor, this mode was abandoned, and the same result effected, by the course subsequently adopted. The company paid 88 dollars, part of the purchase money, and also paid the interest on the notes given by these defendants for the balance, amounting to the sum of 141 dollars. This money was paid by the company, from its own funds in the hands of Sterling, as its treasurer, and was so entered upon its books. Thus, the corporation assumed the payment of the purchase money, and ratified the acts of its agents. So also the Rail-Road Company, with the assent of the defendants, and without any other contract, acted as the sole proprietors of this land. They took the gravel according to their original purpose, and at their own expense, and for their sole accommodation. Such being the state of things, while the legal title to the land remained in the defendants, they sold so much of it as was not necessary for the company’s use, and from the avails, paid the note which they had given for the purchase of the land, and which had been recognized by the company as due from itself; leaving a balance of 598 dollars, 98 cents, in cash, as well as the residue of the land, which now constitute the subject of the present controversy; because one of the defendants sets up a claim to retain both land and money in opposition to the claims of the plaintiffs, and the rights of the corporation. We cannot fail to see, that here has been an agency on the part of the defendants, and an assent and ratification by the Rail-Road Company, throughout the whole of this business, until it terminated in a fortunate speculation, of which one of the defendants claims to retain the benefit, to the exclusion of the company. But it is too late to do this. An agent employed to purchase for another, cannot purchase for himself, whether he be actually or constructively an agent. He is, in such case, a trustee for his employer. East-India Company v. Henchman, 1 Ves. jr. 289. Massy v. Davis, Id. 317. Campbell v. Penn's. Life Ins. Co., 2 Wharton, 64. Bartholomew v. Leach, 7 Watts. 472. Ringo v. Binns & al. 10 Peters, 269. 2 Cromp. & Mees. 139. Story on Agency, sec. 211. Banks v. Judah, 8 Conn. R. 145. Johnson v. Blackman, 11 Conn. R. 342. Can any one doubt, if the result of this contract had been a — 401 — less, that the defendants would have claimed an indemnity from the company? But an agent cannot be permitted to turn the consequences of a bad speculation off upon the principal, and pocket the results of a good one. The controuling reasons for these principles, are the same which pervade the whole law of fiduciary connexions—the preservation of unsuspected good faith, and an undivided motive for the advancement of interests which are committed to others. To make out the case stated by the superior court, parol proof was admitted, and especially the testimony of Mr. Burrall, the president of the Rail-Road Company, and one of its stockholders. This testimony was admitted, on the plaintiffs’ motion, and in support of their claims; and this furnishes another ground of objection on the part of the defendants. Parol proof was admissible in the case, to show an implied or resulting trust. The ground of the plaintiffs’ claim, is, that the defendants became their trustees, by force of the circumstances proved. And if the principles we have before stated, be admitted as the law, this claim must be conceded. Here is no pretence of an express trust, in opposition to the terms of the deed, but a trust created by operation of law, resulting from the relation in which the parties stood to each other as principal and agents, and from the clearly proved fact, that the only real consideration advanced in payment for the land, was paid by the plaintiffs. Such a trust may be proved by parol, even under the English statute of frauds and perjuries, and of course, under our statute, which is silent on the subject of trusts. Sugden's Law of Vendors, 414. Roberts on Frauds, &c. 94. 2 Sw. Dig. 112. Gascoigne v. Thwing, 1 Vern. 366. Lane v. Dighton, Amb. 409. Lench v. Lench, 10 Ves. 517. Finch v. Finch, 15 Ves. 50. Dean v. Dean, 6 Conn. R. 285. Boyd v. McLean, 1 Johns. Ch. R. 582. Botsford v. Burr, 2 Johns. Ch. R. 405. German’s lessee v. Gabbald, 3 Binn. 302. But if the plaintiffs relied upon an express trust, we do not see but their proof would be relieved from any objection arising from the statute of frauds and perjuries, by reason of the several unequivocal acts of performance, which have been proved—not alone by the payment of the purchase money; for this, by itself, has sometimes been denied to amount to such a part performance as will take a case out of the statute — 402 — of frauds, &c.; but also by an entry and occupation under the contract, as well as by expensive improvements made by the company upon the land in question. Roberts on Frauds, App. 8. 153. 1 Sch. & Lefroy, 40, 41. The defendants deny that acts of performance can be shown, before the contract is specifically proved; and they claim, that in the present case, such acts were permitted to be proved, to help out the proof of the contract. That the contract relied upon, must be very satisfactorily proved, before a performance of it will be decreed, and that a trust must be clearly established, before it will be enforced, is conceded; but that this full proof is to be a preliminary in the plaintiff’s course of inquiry, is denied: this would rather be a reversal of the proper order of proceeding. Acts of performance lay the foundation of the introduction of parol proof; and such acts maybe, and perhaps ought to be, of such a nature as to furnish material evidence of the contract or trust relied upon. Roberts on Frauds, 161. Fonbl. Eq. ch. 3. s. 8. n. e. (Am. ed.) Phelps v. Thompson, 1 Johns. Ch. R. 149. Lindsey v. Lynch, 2 Sch. & Lefroy, 1. 2 Sto. Eq. 72. in notis. Mr. Burrall was admissible as a witness, on the part of the plaintiffs, to prove the facts averred in their bill. He is a defendant, but a voluntary witness. He is a stockholder in the Rail-Road Company; but to what extent does not appear; and in this respect, he had a corporate interest, which might have been advanced by his testimony; but this was necessarily overbalanced, by the private and individual interest which he had in the subject of this controversy, and which his testimony conduced directly to oppose and destroy. We are of opinion, therefore, upon the facts found by the superior court, that the defendants were agents and trustees of the Rail-Road Company, in the purchase and sale of the land; that the plaintiffs’ bill is sufficient; that the parol evidence offered, was admissible; and we shall advise, that the defendants convey to the Rail-Road Company the land remaining unsold, and pay to them the avails of the land sold, now remaining in their hands. In this opinion the other Judges concurred. Decree for plaintiffs.