Home Savings & State Bank v. Wheeler

Mr. Justice Dibell deliveeed the opinion of the Court. The assignee is not the representative of the creditors, but the agent of the assignor for the distribution of the property. The assignment does not pass to the assignee any interest in property previously fraudulently transferred by the assignor, nor any right to impeach or set aside such fraudulent transfer. Bouton v. Dement, 123 Ill. 142; Hanford Oil Co. v. First National Bank, 126 Ill. 584. The assignee takes no greater interest or better title than his assignor possessed. His title to the assigned property is affected with every infirmity and subject to every defense and to every equity that existed in respect thereto in the hands of the assignor. He may do that which the assignor might have done. Davis et al. v. Chicago Dock Co., 129 Ill. 180; Knights et al. v. Martin, 155 Ill. 486. The assignee takes the property as a volunteer and subject to every burden which rested upon it in the hands of the assignor. Union Trust Co. v. Trumbull, 137 Ill. 146. He takes, subject to liens and contract rights which are not of record, and of which he has no notice. Hooven O. & R. Co. et al. v. Burdette, Assignee, et al., 153 Ill. 672. Under these principles this assignee has no greater right to recover in this case than Singer & Wheeler would have had if no assignment had been made and it had brought this suit on March 26, 1896. There are no equities or presumptions or rules of evidence in his favor except such as would have been equally available to Singer & Wheeler if no assignment had been made and it had brought this suit. The question, therefore, is whether Singer & Wheeler would have had a right of action to recover the value of the whiskey under the facts in evidence. We think the evidence does not tend to show any actual fraud or lack of good faith on the part of the bank in taking these certificates as security for P. J. Singer’s note. There is nothing to show but that the bank officers honestly believed his statement when he told them Singer & Wheeler owed him more than $10,000, and that he could pay the bank if the company would pay him, but that its financial condition did not permit it to withdraw that amount of money from its business at that time. The vice-president did not urge him to do a dishonest act, nor to exceed his powers as an officer of Singer & Wheeler. The vice-president of the bank knew ■ Singer & Wheeler had valuable whiskey certificates pledged for a note, four-fifths of which was paid. He might well suppose a concern doing a business of nearly a million dollars a year, would be likely to have other assets available as collateral. What the vice-president did urge upon P. J. Singer was that he get his company to turn out to him on his debt whiskey or other merchandise, and then pledge that to the.bank on the extension he was seeking. P. J. Singer after discussion said he would see what he could do, and on a later day returned and said he could make an arrangement and had made an arrangement, and would pledge the whiskey, and thereupon signed a new note on extended time and a collateral agreement pledging the whiskey as security therefor. What P. J. Singer said would be understood by the vice-president to mean that he had made an arrangement with Singer & Wheeler by which it had authorized him to take whiskey certificates either as payment or security on its debt of over §10,000 to him, and had obtained the right to pledge those certificates to the bank to secure his own debt. We see no reason to doubt that the officers of the bank believed these statements and acted in entire good faith in giving P. J. Singer an extension on the faith of said certificates. But P. J. Singer was then transacting his own business and not that of Singer & Wheeler, and undoubtedly his declaration, favorable to himself and against Singer & Wheeler under these circumstances, did not bind Singer & Wheeler. But other events followed which both tend to create an estoppel against Singer & Wheeler (and therefore against its assignee) from disputing the validity of this pledge, and also tend to prove it is true Singer & Wheeler did owe such a debt to P. J. Singer, and did turn out to him or give him authority to pledge these certificates for his debt. Six days later Singer & Wheeler paid the last one thousand dollars on its note to the bank and took it up; but did not take up, and, so far as appears, did not claim or ask for its warehouse certificates. It left them with the bank. Whoever made the final payment and took up the note and left the certificates, was then engaged in the business of Singer & Wheeler with its authority, and that action was in harmony with P. J. Singer’s previous statement to the bank. The bank officers would naturally understand the failure to take up the certificates as a confirmation of the statements of P. J. Singer. A very few days later an officer of the bank took the warehouse certificates to the office of Singer & Wheeler and asked its secretary to indorse them so as to put the title in the bank, and told him the bank had held them as collateral to the Singer & Wheeler note, and now held them as collateral to the note of P. J. Singer. The secretary was an officer of the company and trusted by the' company to transact its business, and was at the company’s office where its books and accounts were kept, and was actively engaged in the company’s business to which he gave all his time, and might justly be presumed by the bank to be fully conversant with Singer & Wheeler’s affairs. He uttered not a word in denial or question of the right of the bank to hold these certificates as collateral to the note of P. J. Singer; he treated it as a matter of which he was fully advised; and at once, in the name of Singer & Wheeler, made the indorsement requested, and while doing so made a remark to the bank officer, which, though not very clearly expressed, would certainly be understood by that officer to mean that P. J. Singer’s debt to the bank would have been paid before if Singer & Wheeler had been able to spare the money out of its business—plainly implying Singer & Wheeler did owe P. J. Singer enough to enable him to pay the bank if it would pay him. Still later the secretary presented at the bank a new certificate for five barrels of whiskey duly indorsed by Singer & Wheeler, and deposited it with the bank in the place of a certificate for five barrels-which he took away. He was acting in the business of Singer & Wheeler and as its officer when he did this. He knew the bank held the certificate as collateral to P. J. Singer’s debt; he recognized the bank’s right to so hold it, and deposited another certificate to take the place as such security of the one he wished to withdraw. At two different times thereafter taxes and warehouse charges in large sums accrued. The first time the draft therefor was drawn directly upon the bank, and the second time it was'drawn on Singer & Wheeler, and its secretary requested the bank . to pay it. The bank had no interest in advancing this money except to protect said certificates as its own security for the note of P. J. Singer. The secretary of Singer & Wheeler knew it would, only advance the money to protect the certificates as its own security, and yet he requested the bank to so advance the money and it complied, and Singer & Wheeler afterward gave its note for said advance, and still later by its president sold or authorized the sale of what whiskey was sold, not only enough to pay said advance but over $3,000 more. Singer & Wheeler never asked that this surplus be paid to it, but the bank, without objection from Singer & Wheeler so far as appears, applied said surplus oh the note of P. J. Singer. Singer & Wheeler was a going concern and doing a very heavy business for about two years and four months after P. J. Singer pledged these warehouse certificates for his own debt. During all that time every act of Singer & Wheeler was in harmony with said pledging, and in apparent recognition thereof as a proper and authorized disposition of said certificates. If Singer & Wheeler had promptly repudiated the transaction the bank in turn could have repudiated the extension of ninety days it gave P. J. Singer on the faith' of his right to make such pledge, and could have sued him and recovered judgment for its debt. It was lulled into security by the acts and acquiescence of the corporation above set forth. The necessities of business require that the public when acting in good faith may deal with officers of corporations in reliance upon the strength of their apparent power. Ashley Wire Company et al. v. Illinois Steel Company, 164 Ill. 149. The acts and assent of corporations, like those of individuals, may be shown and inferred from facts and circumstances. Louisville, N. A. & C. Ry. Co. v. Carson et al., 151 Ill. 444. Notice to a director or managing officer of a corporation about the business, of the corporation while he is engaged in its business in the line of his authority binds the corporation. American Strawboard Co. v. Peoria Strawboard Co., 65 Ill. App. 502; Bartlett v. Woodbine Savings Bank, 57 Ill. App. 425. It will not do to say W. A. Singer was a son of P. J. Singer and liable to combine with his father in illegal acts, and therefore notice to him should not be treated as notice to the company. The corporation put them both in their offices and kept them in'control of its business with knowledge of their relationship, and it must be bound by notice to them and by their acts and omissions in and about the corporate business as it would have been bound by any other officers. If its officers did not act honestly toward it, it was the business of each director and of the stockholders to find it out and change its officers, and promptly repudiate their unlawful acts.. Third parties who deal in good faith with a corporation must be protected in a reliance upon what its officers do and omit to do. The conduct of its officers must bind the- corporation where an individual would be bound by his own conduct. Viewed in this light, it is a serious question whether Singer & Wheeler and its assignee are not estopped by the acts, silence and delay herein recited, to now question the right of the bank to hold these certificates as security for P. J. Singer’s note. As there may be other evidence which will throw light on this subject, we leave that question undecided, but we are of opinion that the facts and circumstances herein set forth are evidence tending to show Singer & Wheeler did owe P. J. Singer over $10,000 and did place these certificates in his control, either as payment or security to him, in such a way as authorized him to pledge them to the bank for his own debt. There is no presumption the officers of Singer & Wheeler violated their duty and defrauded the corporation by their conduct. The presumption must be that their acts were legal and that the facts were as they admitted and recognized by their conduct that they were, till the contrary appears. Singer & Wheeler and its assignee were presumably possessed of all the books and data to show its dealings with .P. J. Singer and the1 state of his accounts with it. This evidence was not equally accessible to the bank. The fact that no record could be found of.a directors’ meeting at which he was authorized to pledge this stock for his own debt is deprived of all force when it is found they kept practically no such records. As plaintiff did not otherwise attempt to rebut the case made by the facts and circumstances stated we think the trial court should have found for defendant. The judgment will be reversed and the cause remanded for a new trial. Eeversed and remanded.