Hadden v. Linville

38 A. 900, 86 Md. 210, 1897 Md. LEXIS 147

• Court: Court of Appeals of Maryland
• Decided: November 18, 1897
• Status: Published

Opinion

Page, J.,

delivered the opinion of the Court.

In this case an attachment was issued out of the Superior Court of Baltimore City, at the instance of the appellants, against the Natchaug Silk Company, a Connecticut corporation. It was laid in the hands of Charles H. Linville, garnishee, who has pleaded non assumpit on behalf of the defendant, and nidia bona as to himself.

At the trial the plaintiffs having first offered other evidence to establish their claim, introduced the garnishee himself, and proved by him that he has been the agent of the Silk Company in Baltimore; and as such, had in his possession on the 25 th of April, 1895, certain of its goods. That up to the 27th of December, 1895, when the attachment was laid in his hands, he still retained the possession' of the goods, or the proceeds of the sale thereof; and that he yet holds them, exactly as he had before. On cross-examination, he testified that on the 26th of April, 1895, Mr. Chaffee, the president and general manager of the Silk Company, told witness, that “ to recompense or make good a claim which the bank had against the company,” the goods in his hands had been transferred to Mr. Dooley (who was the receiver of the bank), and also asked witness if he would “ continue to represent the bank or Mr. Dooley inthe sale of the goods.” This he- consented to do ; and thereupon received from Solomon Lucas, then present, as the attorney for Dooley, an authority in writing to so act. Subsequently witness received letters from Dooley about the goods, a copy of one of which, recognizing Linville as his agent, is exhibited in the record. That under this authority, the witness, after the 26th of April, held the goods as agent of Dooley. To the admission of the evidence thus given on cross-examination, the plaintiffs objected on the ground that the conversation between Chaffee and the witness was hearsay, immaterial, and particularly because it was not shown that Lucas had any authority at that time to represent Dooley. As to the last objection, we think it clear that Dooley, by his letter of 12th of July, recognized the authority of Lucas and ratified his act. The witness having testified that on the 25th of April he had in his possession goods of the Silk Company, and that he still held “these same goods,” it was entirely proper to interrogate him on cross-examination, how, and for whom he held them, after that date. Such facts were germane to and connected with the main issue, which was, to whom the goods belonged at the time the attachment was laid in the garnishee’s hands. Griffith v. Diffenderfer, 50 Md. 479.

There were present on the occasion referred to by witness, the president and general manager of the Silk Company, the representative of the receiver of the bank, and the person who had actual possession of the goods as agent of the Silk Company. The general manager directs the agent that the goods had been transferred, and inquires if he- will continue to hold them as agent of the receiver ; the agent consents to do so, and receives the authority to so hold them from the attorney of Dooley. Now, if it be assumed that there had already been a contract for the sale of the goods by the proper authority, or if Chaffee had power to transfer them, the effect of all this was to make a delivery of the property to the receiver and to constitute Linville his agent for the custody and saleof the goods. Thompson, Garn., v. B. & O. R. R. Co., 28 Md. 396.

The witness was then asked by the plaintiffs whether there was any written assignment, and replied he “thought there was a bill of sale, but whether on that day or prior thereto he was not sure, and he did not think that he had ever seen that bill of sale.” The plaintiffs then further •objected to so much of the tesimony of the witness as purported to prove a transfer; on the ground the transfer was made by written instruments. Respecting this, it is sufficient to say that it had not appeared the transfer had been •effected by written instruments. The witness only said, “ he thought ” there was a bill of sale, but had never seen it. Such evidence is hearsay, and not sufficient to support the objection made by the plaintiffs.

From what has been said, it follows we find no error in the rulings of the Court set out in the first and second exceptions.

At the conclusion of the evidence, the Court at the instance of the garnishee, instructed the jury that there was no evidence before them from which they could find that there was in the hands of the garnishee at the time of the laying of the attachment or since, any of the goods, chattels or credits of the defendant. The propriety of this ruling, is the question presented by the third and only other exception.

It must be borne in mind, that the goods attached, it is conceded, were on the 25th of April, 1895, the property of the Silk Company ; also the fact, that up to and at the time the writ was laid, that is to the 27th December following, the garnishee still retained the possession of them. The only issue therefore between the parties seems to be, did the goods or the proceeds of the sale of them, for any reason, at any time between those dates, cease to be the property of the Silk Company? In presenting this question, many points were raised and exhaustively and ably argued. In our view, however, it will not be necessary for us to consider more than a single phase of the case. At the outset, we may remark, there is no evidence in the record tending to prove the transfer to the bank or its receiver, except that contained in the testimony of the garnishee. There is some evidence that sometime in 1890 and 1894, certain papers called by the witness “bills of sale” were made, but there is no proof whatever that the specific articles mentioned in them included any of the goods that were attached in this case. The first of these so-called bills of sale is dated January 1st, 1890 ; it is only a bill of goods alleged therein to have been sold by the Silk Company to O. H. Risley, cashier of the First National Bank, with the word “ paid” at the end, and signed “ Barrows,” a bookkeeper of the Silk Company. The two others are like the first, except are appended the words, “ the goods represented by this bill are pledged to the National Bank of Willimantic as security for loans made by said bank to the Natchaug Silk Company;” they are signed by J. I). Chaffee, president, and Charles Fenton, treasurer. Of these instruments the treasurer, Fenton, testifies that no record was made of them in the books of the Silk Company or anywhere else; they w'ere never brought up at any meeting of the company ; none of the directors knew of them, “ as far as he knew; ” and none of the goods mentioned in them or either of them, was ever delivered to the bank or set apart for it, but were sold from time to time and used in filling orders, “the same as any other stock.” Without pausing to inquire how far such instruments under all these circumstances could operate to transfer such a title to goods, either in Connecticut or Maryland, as to defeat the claims of an attaching creditor in the latter State, it can be safely stated there is nothing in them on the face of the papers themselves, or connected with them by proof, that in any manner affects the goods in the hands of this garnishee. It must be assumed, therefore, as we have already said, the whole case turns upon the effect of Linville’s statement; and if upon the case made by his evidence, the transfer to the bank or its' receiver was not successfully effected, the title is still in the Silk Company, and the attachment of the plaintiffs must be maintained, although it may appear the receiver of the Silk Company was appointed before the alleged transfer, it being conceded that the right of a creditor to attach goods in Maryland, is not impaired by the previous appointment of a receiver in the State of Connecticut. Now Linville’s testimony is that on the 26th April, Chaffee came to his office in Baltimore ; that he (Linville) had been the agent in that city of the Silk Company for five years, and prior to that time had known Chaffee “only as having been president, manager and everything else connected with the company. ” Chaffee told him, “ that to recompense or to make good a claim which the bank had against the company, these goods had been transferred to Mr. Dooley, and then belonged to him, and he asked witness if he would continue to represent the bank or Mr. Dooley in the sale of the goods.” Linville consented, received from Lucas, the attorney of Dooley, the authority to so act, and did so act up to the date of the attachment. This proceeding on the part of Chaffee was unknown to and without the authority of the directors of his company, and was never ratified by them. Dooley, subsequently at a meeting of the directors in the company’s office in Willimantic, stated that “Mr. Chaffee fiad been to New York, Chicago, St. Louis and Baltimore, in an effort to secure the bank of goods of the Natchaug Silk Company, that were held in these offices, and that it was very necessary that the board * * should ratify what had been done.” This request was not however acceded to ; “ in fact,” says a witness, “ they refused to ratify what had been done.” It thus appearing that Chaffee’s act in making the transfer was without the prior specific authority of his company, and was not subsequently ratified by the board of directors, it remains to inquire whether Chaffee as president, or general manager, zdrtute officii or by usage or otherwise, possessed the power and authority thus to bind the company? To properly meet this question, a brief statement of other facts in the case is required. The Natchaug Silk Company, organized originally as a joint stock association, was incorporated by the Legislature of Connecticut in 1889. Its business was the manufacturing and dealing in silk, leather, wool, or other substances composed wholly or in part of those materials, and to do such other things as are incident to that business. Chaffee was its president and general manager from the beginning. In the course of its business, it became a large borrower of the First National Bank of Willimantic. The record shows that its indebtedness on this account as far back as 1893, amounted to more than $300,000, and it remained at not less than $285,000. It was enabled to secure this large credit with the bank by reason of the fact that the Silk Company’s financial agent, Risley, was also the cashier of the bank. It was this credit only that for several years enabled it to maintain itself as a going concern. In fact it had not been solvent since 1890. Risley died on the 12th of April, 1895, and on the 22nd of the month the bank went into the hands of the receiver; and by reason of these facts the principal, if not the only source of credit of the Silk Company, was entirely cut off. To Chaffee as well as to all who knew the situation, it became evident that the Silk Company’s affairs must also pass at no distant period, into the hands of a receiver. Under these circumstances Chaffee determined to make an effort to secure the bank by transferring to it the goods of his company held in the offices of its agents in New York, Chicago, St. Louis and Baltimore. Probably it was to make his action more effective that shortly after Risley’s death he forwarded goods of large value to New York, assigning as a reason therefor that as he could get no more money from the bank he would make arrangements elsewhere. Almost all the debts, of the Silk Company were to become due on the twenty-second of April or within a few days thereafter. Chaffee seems to have kept his purpose strictly to himself. As he was about to start on his mission, he told Barrows, the-bookkeeper, “ if he needed any counsel in the matter to consult Perkins.” On 22d April he proceeded to New York and transferred all the company’s goods, including those-he had sent there the week before, to the bank, on account, of his company’s indebtedness to the latter; thence he went to Chicago and Baltimore and at each place made a transfer of all the goods held there—thus placing all the property of the company outside the State of Connecticut (so far as the record discloses) in the hands of the bank. It is obvious, such transfers were not made in the usual course of business, but solely for the purpose of devoting all the assets within his control (a receiver having been appointed for the company in Connecticut on the 26th April), to the discharge of the .antecedent claim of the bank; thus constituting, of his own will, the bank a preference creditor of his insolvent company. The twelfth by-law of the company provides for the election of a general manager “ who shall have entire charge of the business and affairs of said-company, subject to the order and approval of the board of directors.” This by-law, by a reasonable-construction, confers full power to do all things and make all contracts that are needed in transacting the ordinary business of the corporation within the legitimate scope, objects and purposes of its organization, but not such authority as that lie may deal at his own pleasure with the assets, outside the regular course of business. Nor does it appear from anything contained in the record that Chaffee had ever arrogated to himself such extensive authority. Prior to the transaction in question, he had never undertaken to dispose of the property of the company otherwise than in the regular course of business. This case is clearly distinguishable from one where the managing officer has disposed of the property for the purpose of procuring credit for his company ; there are cases where that is held to have been a proper exercise of his authority: Fay v. Noble 12 Cushing, 1; Lewis v. Hartford Silk Co., 56 Conn. 36. But with that question we are not now called upon to deal. In this case the transfer was for the purpose of securing or paying an antecedent debt. Chaffee’s authority under the by-law, and all the authority he was permitted to exercise in the management of the affairs of the company, was conferred upon him for the purpose of enabling him to properly and successfully conduct the business, to keep the company a going concern with capacity to earn a profit for its stockholders ; not that he might, after the company became insolvent and was about to go into the hands of a receiver, parcel out its assets or any portion of them among such of the creditors as his caprice or interest might lead him to select. An authority like this has never been accorded as far as we are informed, to any officer charged with the conduct of the affairs of a corporation, whether he be called president, general manager or by any other mime, unless there had been conferred upon him a prior express authority by the directors or stockholders of the company. Ordinarily, it is true, an authority to do a particular act, may be inferred by persons dealing with the corporation from the fact that the officer who is acting for it has habitually assumed and exercised the power in the face of the public. Olcott v. Tioga R. R. Co., 40 Barb., 179; 4 Thompson on Corp., sec. 4626; Ceeder v. Loud & Sons Lumber Co., 86 Mich. 541.

But under no theory of implied power can either a president or general manager transfer the assets of an insolvent corporation about to go into the hands of a receiver for an antecedent debt. The case of Hoyt v. Thompson, 5 N. Y. 320, is instructive on this point. There the Morris Canal and Banking Company, an insolvent corporation of New Jersey, being indebted to the State of Michigan, its president and cashier, without the authority of the directors, to secure the payment of the Canal Company’s debt, assigned to the State of Michigan a debt and mortgage due to the Canal Company by a Railroad Company. There was no proof that the State had any knowledge that the assignments were made without the authority of the directors, and such want of proof, if there were nothing else in the case, might prop-ably authorize a presumption they were executed in pursuance of the authority of the directors, and that the president and cashier of the Canal Company were acting within the general scope of their powers ; but that principle could not apply in that case, for, said Paige, J., “If the assignments had been made to the State of Michigan for a new consideration paid at the time, or if the State had relinquished any security held by it, so as to entitle it to the character of a bona fide purchaser for a valuable consideration, and the agents * * of the State * * had no notice of the want of authority of the officers of the Canal Company making the assignment * * the company would be estopped from denying that the president and cashier had competent authority to execute and deliver the assignments * * But inasmuch as the State of Michigan received the assignments as collateral security, merely for an antecedent debt, the Morris Canal and Banking Company or its representatives are not estopped from denying the authority of its president and cashier to execute and deliver the assignments.”

It has always been held, that unless there is prior express authority, or subsequent ratification or unless some principle of estoppel intervene, the president or managing agent has only the authority to bind the company while acting within the scope of his duties and in the ordinary routine of business. 4 Thompson on Corp., sec. 4849, et seq. and authorities there cited. This is a general principle for which many cases could be cited. It has been often applied, as for instance where managing officers have undertaken to consent to the appointment of a receiver (Walters v. Anglo Am. Mortgage Co., 50 Fed. Rep. 316); or to release claims, Bank of U. S. v. Dunn, 6 Peters (U. S.), 60; or alien property, Luse v. Isthmus Transit R. Co., 6 Or, 125; Bliss v. Kaweah Canal, &c., 4 Pac. Rep. 507; Walworth County Bank v. Farmers' L. & T. Co., 14 Wis. 325; Hyde v. Larkin, 35 Mo. App. 365; Bank v. Lumber Co., 116 N. C. 828; England v. Dearborn, 141 Mass. 590.

There is nothing in conflict with what we have said, in Hadden v. Natchaug Silk Co., 74 Fed. R. 429. In that case Judge Shipman said: “The decisions of the State of Connecticut apparently recognize that a president and unlimited general manager of one of its manufacturing corporations is vested with such power” (that is to sell the property of the corporation in part payment of its debts) “and that such transfer is valid ; ” but adds that this being a question of law, “ may be controlled by the facts which may subsequently appear as to any limitation of Chaffee’s actual powers of which the bank had knowledge.” The Court did not decide as to the power of Chaffee; as to that the question was of a character which cannot be determined on affidavits. Nor does he decide what the power of a general manager is in Connecticut, but only what it “ apparently is ” and that it is subject to modification by other facts than those before him in that case.

We are of opinion, for these reasons, that Chaffee had no power under these circumstances disclosed by the evidence contained in the record, to make an effective transfer of the goods, and that the plaintiffs were entitled to maintain their attachment.

Finding error in the granting of the defendant’s prayer, the judgment must be reversed.

Judgment reversed with costs and cause remanded for new trial.

(Decided June 23rd, 1897).

A motion for a re-argument was made and in disposing of the same,

The motion for a re-argument must be overruled. It is not desired because of error supposed to exist in the opinion already filed, but because it is contended this Court should have held that the Court below was without jurisdiction, because it is alleged the proceedings show upon their face that the requirements of the statute have not been substantially complied with, in that the affidavit appears to have been made several months prior to the time of the suing out the attachment. The counsel for the appellee insist that the statute clearly implies that the affidavit must be made, either at the time of the institution of the suit, or as shortly before as conveniently may be. But while we are of opinion that this is a very proper' practice, and that there may be such delay between the making of the affidavit and the suing out of the writ as may reasonably induce a presumption, when taken in connection with other facts properly proven, that the process of the Court is being abused or that the facts set forth in the affidavit may not be true when the suit is instituted, yet we do not think such divergence of dates is a jurisdictional matter that will enable this Court on appeal to consider the question in a case like the one at bar, where the point was not raised and considered below, on appropriate motion or plea. It is only when the want of a substantial compliance with the requirements of the statute appears on the face of the proceedings, that an objection to the jurisdiction can be relied on appeal, where such objection has not been made below. Coward v. Dillinger, 56 Md. 62.

Now we think it cannot properly be held that our statute requires the affidavit shall be at or near the time of the institution of the suit. By the 4th section of Art. 9, Code, it is provided, “ no attachment shall issue unless there be an affidavit, &c.;” and by the 5th section, such affidavit may be made in the State, in the United States or in any foreign country. The words of the 8th section “ upon making the affidavit and producing the proofs, &c.”—cannot be construed therefore as implying, that the affidavit shall only be made where the suit is instituted, because it may, by the fifth section, be lawfully made in a country so remote as to make it impossible to have it within the State for days or even weeks after it was made. Nor does the statute direct that it shall be made within a reasonable time. If this construction of the statute be insisted on, it may be asked by what facts and circumstances is the reasonableness of the time to be determined ? Is it to depend on distance, facility of intercommunication, diligence, or the vicissitudes of the weather? In Wilson v. Arnold, 5 Michigan, 104, the Court very properly remarks : “We fear if we had power to give such a construction to the statute and should so construe it, more evil than good would be done by it. The uncertainty it would throw over the title of real estate taken on attachments, would more than counterbalance its advantages. A jurisdictional question above all others, should not be left in so much uncertainty." McClanahan v. Break, 46 Miss. 258.

In this case there were three exceptions. Two of them to the admission of testimony and one to the granting of an instruction. There was no question raised below, as to whether the delay between the making of the affidavit and the bringing of the suit worked an injury to the defendant or garnishee, or whether the process of the Court was being abused, or whether the facts set out in the affidavit were untrue when the proceedings began. This could have been done by proper motion or plea, and it may be, if that course had been pursued, the delay might have been an important matter in connection with such other facts as it would have been within the power of the defendant to prove.

(Decided November 18th, 1897).