Breese, J.
We think a fair construction of the contract, signed by Henry Dwight, Jr., dated October 3, 1851, reciting the conveyance of land by B. Godfrey to him, and certain bonds and stocks and personal property at the same date, entitles Godfrey to a re-conveyance of the land, and that they were conveyed to Dwight as security only, with the right to dispose of them, should it become necessary to do so, to raise means to complete the railroad.
The proofs abundantly show that they were not used, or needed for such purpose, but that, with the bonds, stocks, and other effects conveyed by Godfrey, Dwight was enabled to complete the road, and make a clear profit of three hundred and eighty three thousand, eight hundred and six dollars, and seventy-seven cents.
The road was completed and delivered up by Godfrey, the contractor, in September, 1852. By the terms of the contract, on the execution of the deed by Godfrey, and the surrender to Dwight of a large amount of stocks and bonds, and mortgaging valuable personal effects, Dwight agreed to act as Godfrey’s financial agent in procuring funds necessary to complete the road, as they were needed.
Nothing is shown in the record how much of the road was completed when this contract was made, but about six hundred thousand ($594,567) dollars had been expended by Godfrey upon it up to that date. As the contract was taken by Godfrey and Cowman at about nine hundred and fifty thousand dollars, it is fair to presume that near two-thirds of the road had been completed, and that a sum not much exceeding three hundred thousand dollars, would be required to finish it. To provide this amount, or such other amount as might be necessary to complete it, Godfrey transferred to Dwight the benefit of his contract with the railroad company, assigned to him by Cowman, together with all the personal property, bonds and stocks to which he was entitled, as such assignee, and which were in value, as estimated, about one million, six hundred and seventy thousand dollars.
There is no complaint by Dwight, that there was any loss, by depreciation or otherwise, on any of these bonds, stocks, or effects, and it is in proof that he completed the road with them, and had the profit of near four hundred thousand dollars, as above stated.
At the same date, to make Dwight perfectly secure, beyond any possible contingency, Godfrey conveyed to him all his real estate in this State, and elsewhere, estimated by Dwight himself at one hundred thousand dollars, and so expressed as the consideration in the deed, but which are proved to have been worth, when conveyed, three hundred and twenty-five thousand dollars, and, at the hearing, about four hundred thousand dollars.
The controversy arises about these lands. We think these lands, not having been used in the building of the road, or needed for such purpose, should be re-conveyed to Godfrey, for several reasons.
In treating of the property conveyed by Godfrey to Dwight, in the contract of October 3rd, 1851, Dwight agreed to keep an account of the amount he should receive on the sale and disposition of the property transferred to him, whether absolutely, or collateral; and upon the completion of the road, he, Dwight, would assume, and pay an amount equal to the amount received for the property he might sell and dispose of in a certain manner, as thus: The contract, having recited that Cowman & Co. had procured Dwight to negotiate a loan for them, of $170,000, and had guaranteed the payment of the loan, or assumed other liabilities in reference to it, which would render him responsible—and also assumed a debt due by Cowman & Co. to J. W. Zacharie, of New Orleans, of $90,000—he, Dwight, agreed to refund and pay this $170,000 to Cowman & Co., and also the said sum of $90,000 to J. W. Zacharie, and all the costs and expenses attending the completion of the road, and the fulfillment of Godfrey’s contract with the railroad company, and all tiie costs, expenses, and counsel fees, Godfrey was, or might be subjected to, or has paid, or assumed to pay, in reference to the transaction, or to the property, or in reference to the railroad, or in reference to any matter or thing connected with, or relating to, his financial agency, and all other obligations and liabilities which Godfrey had assumed, or paid, or incurred, in any way relating to such agency, or in reference to the property and effects transferred to him, or for any liens, incumbrances, charges, taxes and assessments thereon, and also all loans he should procure or negotiate for Godfrey; and he further agrees, if all these undertakings and payments shall not equal the amount he shall receive for the property transferred, he then agrees to pay such balance as may be due by Cowman & Co. to M. Morgan, of New York City, and the Canal Bank of New Orleans, $64,287.36, and the amount of duties on certain iron and spikes, amounting to $12,438.
Dwight further agreed as follows:
1. The said party of the first part further agrees, to and. with the said party of the second part, his legal representatives- and assigns, that if the aggregate of the amount which saidi party of the first part shall receive in money, on the sale and: disposition of'said property thus transferred to him, whether.absolutely, or as a collateral, shall exceed the amount that saidi party of the first part shall have to pay under this agreement, as hereinabove provided for, that the said party of the first part shall, upon the full and final completion of said railroad, pay to said party of the second part, his legal representatives or. assigns, an amount in money, which shall be equal in amount; to twenty-fivé per cent, of such excess of receipts, after deducting the amount paid as hereinbefore provided for.
2. It is further agreed, by and between the parties hereto, that áaid party of the first part shall be allowed .and paid, out .of the receipts of said property, as a compensation for his services, as such financial agent for said B. Godfrey, an amount which shall be equal to seventy-five per cent, of the aggregate amount of such receipts, by said party of the first part, on the sale of said property, after paying the said sums above provided to be paid to persons other than said B. Godfrey; and also to the amount equal to seventy-five per cent, of the actual value of such parts of said property and effects which may not then have been transferred, sold, or otherwise disposed of by said party of the first part, (to pay said sums.)
3. If, upon the final completion of said railroad, any part of said property and effects thus transferred to said party of the first part, shall remain in hand, in specie, not sold or converted into money, and said party of the first part shall have realized out of the sale of a portion of said property, an amount-equal in amount to the sums hereinbefore provided to be paid, then said party of the first part agrees, that he will transfer unto said party of the second part-, his representatives and assigns, such portion thereof as shall be equal in value to twenty-five per cent, of the actual value of said property, as' then remains in his hands in specie, unconverted or undisposed of.
That said party of the first part shall be permitted to retain the remaining seventy-five per cent, of the value of such property then remaining in his hands, in specie, as part of his compensation for such services as such financial agent, as herein provided. The said party of the second part shall not be entitled to the payment to him, or to said transfer to him, until said party of the first part shall' have received and realized out of said property so transferred, a sum equal to the amount provided to be paid, as hereinabove provided to be paid to parties, other than said party of the second part.
The generic term property, as here used, may include lands; and if the land had been sold or disposed of in the construction of the road, and there should have been an excess, over and above the amounts Dwight was bound to pay, he was then obliged, on the completion of the road, to pay to Godfrey, his legal representatives or assigns, an amount in money, which shall be equal in amount to twenty-five per cent, of such excess of receipts, after making the deductions for payments as provided for above.
The difficulty arises out of the clauses we have marked 2, 3. The lands were not sold for the purpose; other funds, more than sufficient for the purpose, were supplied by these stocks, bonds, etc., transferred by Godfrey. The phraseology of these clauses is not such as is usually employed when treating of real estate.
But let us analyze these clauses, for neither they, nor apy part of the contract, are framed with that clearness and simplicity they might have been, and are obnoxious to much of the complaint of the witness, Zaeharie, when speaking of the terms of.the contract, and its unnecessary verbosity. Dwight was to be paid for his services as financial agent; he was to be paid out of the receipts of the property; he was to be paid an amount which should be equal to seventy-five per cent, of the aggregate amount of such receipts; he was to receive that compensation on the sale of the property, after paying the sums provided to be paid by him, to persons other than Godfrey. These, evidently, contemplate a sale of the property; a conversion into money.
It then provides, he shall be paid, also, to the amount of seventy-five per cent, of the actual value of such parts of said property and effects, which may not have been transferred, sold, or otherwise disposed of by him. For what purpose ? Why, to pay the sums he had contracted to pay while the road is in progress. In other words, if, during the progress of the work, he shall find it necessary to sell any of this property, he shall be allowed seventy-five per cent, of the aggregate amount of the receipts, as compensation for his agency, out of the property and effects which may not then have been sold, (when ?) “ also to the amount equal to seventy-five per cent, of the actual value of said property and effects.”
This is wholly unintelligible, and is not the way a business man would frame a fair contract, which he intended should be understood. To what does “ these ” refer ? What does this part of clause two, mean? We cannot say, unless it be taken and construed in connection with clause three. Taken in connection with that, it can have no reference to the lands, but to the stocks, bonds, and other personal property.
If, on the completion of the road, any part of the property and effects thus transferred shall remain in hand, in specie, not sold, or converted into money, clearly means to include the personal property only; for land unsold is never spoken of, or alluded to as remaining on hand, in specie.
And again, in the last member of this clause, Godfrey is to have twenty-five per cent, of the value of this property and effects which may remain on hand, in specie, unconverted or undisposed of, and Dwight to retain the remaining seventy-five per cent, of the assets then remaining in his hands, in specie, as part of his compensation as financial agent; but Godfrey is not to be entitled to this, or to the transfer, until Dwight shall have received and realized, out of the property transferred, a sum equal to the amount provided to be paid as hereinabove provided to be paid to parties other than Godfrey.
What could have been the use in so framing a contract, which need not, to have been understood, filled more than one page of legal cap paper ?
Well might Godfrey complain that he did not understand it; that he wanted time to examine it; to submit it to friends. Godfrey never read the contract. It was read by the scrivener, and we are not at all surprised Godfrey did not understand it when read. We think this part of the contract fairly construed, as verbose as it is, has no reference to the real estate, but only to such personal property as remained on hand, in specie, out of which Dwight was to have seventy-five per cent, of its value.
Godfrey complains that this contract, as written, does Snot contain the terms of the contract actually agreed upon, and prays that it be reformed. Zacharie’s evidence, who was an interested party in all these contracts, being a creditor of Cowman & Co. to a large amount for advances for iron, freight, etc., for the road, and who was present when the contract was signed, says distinctly and positively, without any equivocation or mental reservation whatever, that a basis for a contract had been agreed upon by Godfrey and Dwight, and reduced to writing by Mr. Keating, the active manager, confidential agent and counselor of Dwight. That basis is Exhibit E, and is as follows:
“ Mr. Dwight requires:
“First. That you (Godfrey) transfer to him your individual property.
“ Second. That you transfer the property of A. T. Cowman & Co.
“ Third. That you transfer the benefits of the contract of A. T. Cowman & Co.
“Fourth. That you authorize him to receive all cash, stock, bonds, etc., coming from the company.
“ In return, Mr. Dwight agrees :
“ First. To advance the funds necessary to build the road as needed.
“ Second. To use the securities, as he would his own means,, to the best advantage.
“ Third. To pay over to B. Godfrey one-fourth of all profits remaining after the completion of the road, and the payment of liabilities accrued under the contract of A. T. Cowman & Co.
“ Fourth. In case there are any profits, and the property of B. G. is not needed to complete the road, to re-deed to B. Godfrey his individual property.
“ In addition to the above, and as part of the arrangement:
“ First. Mr. Dwight is to have control of the directory.
" Second. The company are to give $50,000 in bonds and $250,000 in stock additional to amount now provided for under the contract of A. T. Cowman & Co., which is to go directly to Mr. Dwight.”
Zacharie’s testimony is full to the point, that these were the terms, and the only ones, agreed upon by the parties. That Godfrey had neither time nor opportunity allowed him to examine the contract as expanded by the scrivener into the dimensions it now has, when the signature of the parties to this writing, with a date to it, would have answered the purposes. It is clear and explicit, and contains, in itself, all that was necessary to be stated.
The contract has not in it the fourth item composing an essential and important part of this basis. That this was the understanding of the parties—that such was the contract—that the lands were to be re-conveyed to Godfrey—we have the positive testimony of Zacharie, uncontroverted. The fact that Dwight charged Godfrey with the payment of the taxes on them after the deed was made; the testimony of Mr. Breath, who says Keating said, Dwight was to re-deed the lands to Godfrey ; and a statement of Godfrey’s, on his return, after the contract was made with Dwight, (and brought out by the defendants on their cross-examination of Mr. Breath,) that Godfrey admitted he owned no property ; that he had conveyed it all to Dwight; but when the road was finished, he was to have his lands again, if they were not used up in constructing the road.
We think the testimony is conclusive, on the point that the lands were to be re-conveyed to Godfrey; and so the contract should have stated, according to the terms of the basis agreed upon, and it must be so reformed. On the acceptance of the road by the railroad company, in September, 1852, or in April, 1853, when it was finally completed, Dwight should have rendered a full account of all his expenditures to Godfrey, and should have then paid over to Godfrey one-fourth of the profits on the work, and re-conveyed the land. He did not do so : he rendered no account to Godfrey, kept all the profits, and the lands also, and conveyed them by an absolute deed, in 1854, to the Metropolitan Bank of the city of New York, in exchange for thirty bonds of $1,000 each, issued by the Southern Michigan Railroad. It is thus the bank becomes a party to this suit, and we are to inquire if the bank has any power to hold them.
The bank is organized under the general banking law of New York, passed April 18th, 1838. It being a creature of that act, from it all its powers must be derived. We have that act before us, in the form agreed by the parties to be used in this case. It is entitled “ Cleaveland’s Banking Laws of New York.”
By section 24 of that act, it is enacted, (page 221,) It shall be lawful for such association to purchase, hold and convey real estate for the following purposes:
1. Such as shall be necessary for its immediate accommodation in the convenient transaction of its business ; or,
2. Such as shall be mortgaged to it in good faith by way of security, for loans made by or moneys due to such association ; or,
3. Such as shall be conveyed to it, in satisfaction of debts previously contracted in the course of its dealings ; or,
4. Such as it shall purchase at sales under judgments, decrees, or mortgages held by such association. The said association shall not purchase, hold, or convey real estate in any other case or for any other purpose; and all conveyances of such real estate shall be made to the president, or such other officer as shall be indicated for that purpose in the articles of association ; and which president or officer, and his successors, from time to time, may sell, assign and convey the same, free from any claim thereon against any of the shareholders, or any person claiming under them.
By the deposition of Henry Meigs, the cashier of this bank, it appears, that by the fourth article of the articles of associa-x tion, “ it was provided, that the president of the association, for the time being, shall preside at every meeting of the board, etc.; and he is hereby indicated as the officer to whom conveyances shall be made of real estate, to take, hold, and convey the same on behalf of the association, according to the provisions of the said act of the legislature.”
Now, what explanation does the bank give of this transaction?
In their answer to the bill first filed by Wason, who was a judgment creditor of Cowman & Co., and which opened up this whole controversy, they state that these lands were conveyed to them by Dwight and Keating, for the consideration mentioned in the deed from Dwight, which Wason states in his bill to have been $95,000. In a subsequent part' of their answer, they say that Dwight was indebted to them more than one hundred thousand dollars, and to secure this indebtedness, the bank had caused an attachment to be issued and levied on these lands; that before the levy, Dwight had conveyed the lands to Keating; that they were advised the conveyance was without consideration, and that the attachment would hold them; that afterwards, Dwight conveyed the lands to them in payment and satisfaction •of these claims, and procured Keating to execute a deed of the same, and that they then dismissed the attachment. The bank further say, they purchased the said lands of Dwight for a full and valuable consideration, as above stated, without any notice, etc. In the answer of the bank to the first cross-bill filed by Godfrey, the bank alleges that they purchased the lands from Dwight for a full and valuable consideration, without notice, etc., as stated in their answer to Wason’s bill, and refers to that answer as containing a full and particular statement of the consideration paid by them to Dwight.
On this, answer, Godfrey amended his cross-bill, charging in it, that the bank held these lands as security merely, and called upon them to answer to that charge, and for what amount of indebtedness, and whether there was not an understanding that when Dwight paid the bank, the lands were to be re-conveyed, and that the bank should be required to apply the other securities they held of Dwight’s, before they should be permitted to sell the lands.
To this amended bill the bank answers, in substance, that for the consideration of the conveyance of these lands by Dwight, and the purposes for which it was made, and the amount of Dwight’s indebtedness to the bank when the deed was made, and the amount of securities it then held for such indebtedness, and of what they consisted,— and all agreements, contracts, and understandings between them and Dwight, concerning his indebtedness, the securities they held, and the conveyances for the lands, ■—they refer to the deposition of Henry Meigs, Jr., (taken by Wason in the .suit,) for the facts, and make that deposition their answer.
Now what does Mr. Meigs, the cashier, say ? Mr. Meigs says, he has been the cashier of this bank since the fifth of April, 1853.
From his answers to the interrogatories, and from the several schedules he furnishes, (as explanatory of his testimony, and of the facts,) we should infer that the bank at no time purchased from Dwight these lands, or any portion of them; that they did not receive them in payment, or in satisfaction of any part of Dwight’s indebtedness; that the bank has never credited Dwight for these lands upon his indebtedness. Schedule' B, presented by Meigs, shows that the bank has continued to hold, and now holds, Dwight’s paper for the greater part of his indebtedness, existing at the time of the conveyance, amounting to near two hundred thousand dollars, after allowing credits, and has continued to cast the interest upon it down to July 1, 1856, crediting only such cash receipts as they obtained from other collaterals, but not anything on account of these lands.
We infer further, from the testimony of Meigs, that the only consideration given by the bank for these lands, was the surrender'to Dwight, on the 30th December, 1855, of thirty-three bonds of the Southern Michigan Railroad, for one thousand dollars each, and which bonds were held by the bank as collateral security for Dwight’s note to the bank of thirty thousand dollars, given October 1, 1853. This is shown by the resolution of the board of directors of that date, which Meigs gives in his deposition. That resolution is as follows:
“ Resolved, To give up to H. Dwight, Jr., thirty-three bonds of the Michigan Southern Railroad Company, of one thousand dollars each, on condition that he gives a full and satisfactory title to all the lands in Illinois attached by the bank.”
In obedience to this resolution, these bonds were given up to Dwight, and he conveyed the lands11 to the bank by warranty deeds, as Mr. Meigs states.
From all that appears, the bank yet holds Dwight’s note of $30,000, and has, ever since December 30,1853, continued to cast interest upon it. It is the second item in Schedule B, and it does not appear that. Dwight’s account has been credited by the lands. It is certain they were not received in payment of the note, or it would have been surrendered. This transaction thus appears in Schedule C, attached to Meigs’ deposition stating Dwight’s account, under date of December 31,1853 : “ Returned to H. Dwight, Jr., thirty-three bonds Michigan Southern Railroad Company, $33,000, and received deeds of sundry parcels of land.”
And under date of January 16, 1856, there is this entry:
“Securities now on hand — Alton City bonds, $57,000 — Chicago and Mississippi R. R. bonds, $101,000 —1,100 shares Chicago and Mississippi Railroad stocks, $110,000—deeds for sundry parcels of land.”
We therefore infer that the bank neither purchased these lands from Dwight, nor did they take them in payment, or in satisfaction of any portion of Dwight’s indebtedness.
We hold the conveyance of these lands was made to the bank, and are now held by them as one, among other collaterals, for Dwight’s indebtedness, which existed prior to the execution of the deeds. It does not appear that any part of Dwight’s indebtedness was created after, or upon the credit of either of these conveyances.
The legal propositions which flow from these facts will be now briefly stated.
It has been settled by the highest courts of the State of New York, that banking associations, organized under their general banking law, as this was, are corporations. The People v. The Board Supervisors the 4 20 Gillet, Receiver, etc., v. Moody, 3 Comstock, 479.
This being- so, this bank can exercise its faculties only in the mode and manner prescribed by the banking law. It is so with all bodies, officers, or persons, having a statutory existence
It was declared, in the case of Head & Amory v. The Providence Insurance Co., 2 Crunch, 150: In its corporate capacity a corporation is a mere creature of the act to which it owes its existence; it may correctly be said to be precisely what the act incorporating it has made it; td derive all its powers from the act; and to be capable of exerting its faculties only in the manner that act authorizes.
This doctrine has been recognized and adhered to by all courts in this country, without any serious departure from it. 2 Kent’s Com. 298; Dartmouth College v. Woodward, 4
Wheaton, 636 ; Safford v. Wyckoff, 4 Hill, 443; Talmage v. Pell, 3 Selden, 340 *
These being the faculties of a banking association, under the general banking law of New York, the testimony of Meigs is quite satisfactory, that in taking these lands, being neither purchased, nor conveyed in satisfaction of debts previously contracted in the course of its dealings — nor purchased for their immediate accommodation in the convenient transaction of its business — nor purchased at sales under judgments, decrees, or mortgages held by the bank — nor mortgaged in good faith by way of security for loans made by, or money due to the bank — the bank has acted beyond the scope of its legitimate powers.†
We do not consider they were mortgaged in good faith, by way of security for loans made, or for money due the bank, for the reason the bank, in their answer, claimed to be a purchaser of the lands, for a consideration stated—and because the deeds, on their face, show they were such purchaser. It does not lie with them now to say that the deed was a mere security for money due. Dwight might so contend.
The spirit of our recording system requires that the record of a mortgage should disclose, with as much certainty as the nature of the case will admit, the real state of the incumbrance.
If a mortgage is given to secure an ascertained debt, the amount of that debt should be stated; and if it is intended to secure a debt not ascertained, such data should be given respecting it, as will put any one, interested in the inquiry, upon the track leading to a discovery. If it is given to secure an existing, or a future liability, the foundation of such liability should be set forth. North v. Belden,13 Conn. 376; Hart v. Chalker et al., 14 ib. 77.
It must be remembered that these moneys, claimed to have been loaned by the bank to Dwight, have no connection whatever with the construction of the Alton and Sangamon Railroad, for which Godfrey was the contractor; nor did the moneys inure to Godfrey’s benefit in any manner.
The first loan to Dwight,'it appears from the testimony, was not made until June, 1853, nearly a year after the completion of that road, and at a time when, as this record shows, Dwight was in debt to Godfrey upwards of one hundred thousand dollars, being his one-fourth share of the profits on that road, and for which Dwight failed to render any account.
The note of Dwight, to secure which he pledged the thirty-three bonds of the Southern Michigan Railroad, was not given to the bank until the first of October, 1853, and not until December 31st were these bonds given up for the deeds for these lands.
We cannot hold the bank to be a purchaser of these lands in good faith, and for a valuable consideration, even if, under the general banking- law, they had the power to purchase. It was not good faith to take an absolute conveyance of the lands, when a mortgage only was intended. Sanford v. Wheeler, 13 Conn. 165; and the case in 14 Conn., before cited, Hart v. Chalker et al.
These deeds did not disclose the true nature of the transaction between Dwight and the bank, and were calculated to impose upon and mislead all who might be induced to deal with the property; and at the very time the deeds were made to the bank, they held other securities of Dwight, amply sufficient to satisfy his whole debt.
The authorities are conclusive upon the point, and reason speaks the same language, that taking an absolute conveyance, and attempting to set it up as a purchase, when, in truth, it was a mere security for a debt, will, under most circumstances, be regarded as a fraud, and would prevent the party from claiming as a bona fide mortgagee.
The case of Sanford v. Wheeler, before cited, is to this effect—and so is the case of Moore v. Payne, 3 Alabama, 444. Surely, it cannot be considered as good faith, to insert in a deed a consideration of ninety-five thousand dollars, when the real and only consideration was the surrender of thirty-three railroad bonds, of one thousand dollars each, and their value not shown, and which were held as collateral security for a note of but thirty thousand dollars.
Nor do we conceive it fair and honest, in an answer to a bill in chancery, when the facts are demanded, to aver that the lands were conveyed in payment and satisfaction of the entire claim the bank had on Dwight, when the truth was, as shown by Cashier Meigs’ deposition, that the bank yet holds their claim against Dwight, in nowise satisfied or credited by these lands. In equity, if Dwight should pay .this note of thirty thousand dollars, then it is apparent the deeds would be without consideration, and Dwight might claim a re-conveyance of the lands. If this note was paid by Dwight, the deeds would be inoperative, as voluntary conveyances, without consideration, and the land be subject to Godfrey’s equity under his contract with Dwight, or as his creditor, to an amount exceeding one hundred thousand dollars, for which he has a decree, not excepted to by Dwight.
There is another difficulty in the way of the claim now set up by the bank to hold these lands as a security for the note of thirty thousand dollars.
It is this: the proofs in the cause show that the bank has sold and conveyed away a portion of these lands, thus depriving them of the power to restore the fund as it was when they received it as security. This, of itself, is conclusive that the bank did not treat the conveyances as a mortgage or security for a debt; and after treating the land as their own property, it is now too late, when they cannot re-convey the property, or restore the fund as it was, to claim that the instrument was a mortgage.
Though Dwight might claim the conveyances were intended . to be a mortgage, the bank cannot—the bank cannot put their own estimate on the mortgage property, and sell and dispose of it, and then state, as they choose, the balance due, without judicial inquiry. Lockridge v. Foster et al., 4 Scam. 574.
Nor do we regard it as good faith, fair and honest, after the original -bill was filed in 1855, by Wason, alleging the conditions on which Dwight held the real estate, and making Dwight and the bank parties, that the bank should, in January, 1856, enter into an agreement with Dwight to sell these lands, and make Dwight’s debt out of them, as appears from the deposition of Meigs and Schedule E, they did do; the more especially as the bank had at that very time collaterals deposited by Dwight, of which his debt could be made.
Nor was it good faith on the part of the bank to deal with these lands as their own, absolutely, and make sales of a portion of them, when, as now claimed by the bank, they were merely security, and taken in exchange for other securities delivered up to IJwight.
Nor do we consider the bank a purchaser for a valuable consideration, for it is not shown that they advanced any new consideration beyond Dwight’s original indebtedness for the lands—or relinquished any securities they held for such indebtedness. Receiving a conveyance merely in payment of a preexisting debt is not sufficient where there is a collision of bona fide claims.
In the case of Dickerson et al. v. Tillinghast et al., 4 Paige Ch. 215, it was held, to constitute a bona fide purchaser, for a valuable consideration, within the meaning of the recording act, he must, before he had notice of the prior equity of the holder of an unrecorded mortgage, have advanced a new consideration for the estate conveyed, or have relinquished some security for a pre-existing debt due him. The mere receiving a conveyance in payment of a pre-existing debt, is not sufficient. Therefore, where the owner of a lot of ground gave a mortgage on it to one who neglected to have his mortgage recorded, and after-wards, and before the mortgage was recorded, the mortgagor conveyed the premises to another who had no notice of the mortgage, in payment of a precedent debt, the court held this purchaser was not a bona fide purchaser, for a valuable consideration, within the meaning of the recording act, so as to give him a preference over the prior unrecorded mortgage.
The case of the Manhattan Co. v. Evertson, 6 ib. 457, recognizes the same principle, and so does the case of Brown v. Welsh, 18 Ill. R. 343, decided by this court.
These lands are not shown, as we have already remarked, to have been received in satisfaction of a pre-existing debt, or any credit entered on that d’ebt for the lands ; nor is there any proof that the railroad bonds, which were surrendered, were of any value. In answering the special interrogatories as to the consideration, the bank failed to show any value paid by them for the lands.
The case of Brown v. Welsh, in this court, holds that a party who claims to be a purchaser for a valuable consideration must aver and prove what the consideration was; how and when it was paid; and if in something other than money, he must show its value. It is not for the court to infer it was valuable. 18 Ill. R. 347.
As to the notice, all the testimony taken to that point shows that Godfrey was in possession of some of the most valuable portion of the lands, which were in an improved condition, and paid taxes on all unimproved at the time Dwight and Keating conveyed to the bank, and during all the time subsequent to the date of his conveyance to Dwight. Such possession we have repeatedly held evidence of notice of some right, or some equity in the party in possession, sufficient, at least, to put persons interested upon inquiry as to the terms under which he holds this possession.
The possession being adverse to the claim of title set' up by Dwight when he conveyed, his vendee, the bank, is presumed to have taken the conveyance subject to whatever claim or title upon which the possession may be founded. Mc Connel v. Reed, 4 Scam. 123 ; Dyer v. Martin et al., ib. 151.
In Williams v. Brown, 14 Ill. R. 205, we say: A person who buys land in possession of another, is bound to inquire of the person in possession, by what tenure he holds possession, and what interest he claims in the premises. See also Prettyman et al. v. Wilkey et al., 19 ib. 241. So it is held that possession of lands by the grantor in a deed, absolute on its face, but intended as a mortgage, was notice, to a purchaser from the grantee, of the equities of the grantor. Wright v. Bates and Niles, 13 Vermont, 350; Roberts v. Anderson, 3 Johns. Ch. 380-1; Grimstone v. Carter, 3 Paige’s Ch. 437.
In Buck v. Holloway's Devisees, 2 J. J. Marshall, 180, the court say, the only sensible rule is, that actual residence upon the land is notice to all the world of every claim which the tenant may legally assert in defense of his possession.
It is insisted, however, by the counsel of appellant, that the only notice the bank had of Godfrey’s equities is this possession by Godfrey of some of the lands when the bank took the conveyance, and that was limited to a very small portion of the several parcels conveyed by the deed—that much the larger part was occupied by Godfrey’s tenants, under leases given by Godfrey before he conveyed to Dwight, or was unoccupied land.
It is true, Godfrey was in actual possession of the Monticello property only, being his homestead, and of other farms by his tenants, and had no actual possession of the uncultivated lands, but after making the conveyance to Dwight, and the several contracts of the same date, his position in regard to all the property was in no respect altered, and he claimed at all times that all the lands were to be re-conveyed to him.
The bank dealing with these lands, and seeing Godfrey in the actual possession of the most valuable portion of them, and the unchanged position he occupied with regard to all of them, and paying taxes upon them, was put upon the inquiry—How is all this ? We see, Mr. Dwight, your grantor is in the undisputed possession of the most valuable part of this property, and leasing other portions of it, and paying taxes on all of it. .We must inquire into this.
Had the bank inquired, the equities of Godfrey would have doubtless been fully stated to them; but they made no inquiry, nor did they do any act to put Godfrey upon resistance. The attachment suit, which he could have enjoined and shown his equities, was dismissed. It was not until Wason’s bill was filed, in 1855, to subject these lands to the payment of his judgment, that Godfrey was called upon to act. And he' is charged by appellant with failing to set up his claims in his answer to that suit. We do not think he was called upon to do so.
The charge in the bill was a fraudulent conveyance of these lands to Dwight. It was only necessary, therefore, for Godfrey, at that stage of the proceeding, to repel the charge of fraud ; but when the bank set up their claims by their answer, then Godfrey filed his cross-bill, setting out his equitable rights, and then, and at that time, was the only occasion he had for such showing. He is in no sense chargeable with having acquiesced in Dwight’s claim to hold these lands, for he was in no condition to act in respect to them, until action was commenced by parties interested against him. He reposed upon his possession, which was visible, open and adverse; upon his unchanged position in respect to all the lands, and could not have supposed a claim was set up to them until it was actually preferred and insisted upon by the bank. It is in vain to say, the bank had not notice suEcient to put them on inquiry, the result of which probably might have induced them to decline having anything to do with them.
It is true, as contended for by appellant, under the contract between Godfrey and Dwight and the deeds, Dwight had a right to sell the lands conveyed, but sub modo only, if we understand the nature of the contract, and as we have explained it. What was the object of conveying the lands? Certainly nothing more than to hold them as a reserved fund; and if all other resources failed, then to sell them to complete the road. It cannot be contended they were a gratuity—a boon bestowed by Godfrey on Dwight, when available securities had been transferred to him, amounting to fifteen hundred thousand dollars, to finish a road eighty miles in length, of which two-thirds was completed at a cost of not more than six hundred thousand dollars. No sane man would have bestowed such a boon for such a purpose, and no court would enforce such a contract, on the ground that it is unconscionable.
The clear import of all the contracts made on the 3rd of October, 1851, and they must all be taken together, as being in pari materia, is, that the securities were to be used only except in case of deficiency, when the lands should be converted into money. Dwight was not a trustee to sell, for any purpose, except to raise means to finish this particular road.
It is objected, that the cross-bill of Godfrey does not pray to reform the contract with Dwight. It does not, in terms, so pray, but the whole case proceeded on the assumption that there was a mistake in the contract, and the proof of it, we think, is entirely sufficient. It is clear and strong, and entirely satisfactory, and accounts for the fact that Godfrey did not examine it closely. He was assured, in the hurry of its execution, that whatever was not right in the contract, as signed, should be made right. Godfrey was then under arrest, in a strange city, far from home and friends, on account of debts contracted for this road, and was in a state of financial exhaustion, when Dwight stepped in with his project, as drafted by Mr. Keating, his confidential agent, and which was agreed to by Godfrey. It was this contract, or nothing, and Godfrey was induced to sign without examination, he supposing that it contained the terms agreed upon.*
There is nothing to impeach Zacharie’s testimony, but all the facts confirm it, and strengthen it.
But, if we be in error in these views, as to the right of the bank to hold these lands, there still remains an insuperable objection thereto. No power has been granted by the act of assembly before cited, to the bank, to take and hold land in its corporate name. We have referred to the doctrine of the exer-'l cise of power by a corporation,, and have shown that, as they ' are the mere creatures of the act giving them an existence, and bestowing upon them faculties, they cannot exercise those faculties except in the manner authorized by the act.†
The act creating this corporation, directs that the corporation shall indicate some one of its officers in whose name, and to whom, all conveyances of real estate shall be executed; and the facts show, that by a resolution of its board of directors, the president of the corporation was so indicated. To that officer, and to him only, can such conveyances be executed. There is no power existing in the bank to take lands in its corporate name, and the conveyance to it cannot be sustained. We do not regard it as a case of misnomer, but as a question of power. 1
No power has been granted to the Metropolitan Bank to be, by its corporate name, the grantee of lands. It is indispensable to the validity of such conveyances, that they should be made to the officer indicated by the bank. That functionary alone has the capacity to take lands conveyed for the use of the bank.
We, therefore, decree, that the deeds for the lands conveyed to the Metropolitan Bank, by Dwight and Keating, are inoperative and void, and the same are hereby canceled. That the lands, by the terms of the contract, as we have reformed it, between Godfrey and Dwight, revert to Godfrey, and are subject to the satisfaction of Wason’s judgment, and that Michael G. Dale, of Madison county, be, and he is hereby appointed a commissioner to convey said lands to said Godfrey, on his demand of a conveyance for the same.
Decree affirmed.
The notes to this opinion were prepared by John Cleveland, Esq., of the city of New York.