Holbrook v. Basset et al.

would not be obligatory in the hands of the Company, and also insist that the equities of the plaintiff are not superior to those of the Company.

Conceding that the sum of $300,000 was not subscribed, in subscriptions valid at law, it does not follow that, because no action could have been maintained upon the subscription itself, and the contract it created, that none can be upon notes given by the subscribers to the Company for the amount of such subscriptions. The notes were given in advance of premiums upon insurance which the defendants intended to effect with the Company. They might lawfully give notes for such a purpose, and the Company might lawfully receive them. If they have been given voluntarily for such a purpose, and no fraud has been practised to obtain a delivery of them, they may be enforced by action, although the defendants could not have been compelled to give them, and although no action would have lain against them for refusing to give them.

Stewart v. Trustees of Hamilton College, (2 Denio, 403,) was an action brought upon the subscription itself, as the contract between the parties. Sandford v. Handy, (25 Wend., 475,) and Sandford v. Halsey, (2 Denio, 235,) were actions upon the original instrument or contract between the plaintiff and the defendants as subscribers thereto.

Berry v. Yates, (24 Barb., 199,) was an action upon the subscription as a contract, to recover the amount due upon it, as damages for a breach of the contract by reason of a refusal to give a note or pay the subscription.

But the defendants, instead of refusing to give, have given their notes, and the Company has negotiated the one in suit and received into its treasury more than the amount of the note advanced on the security of this and other notes; and the question is, can this note be collected by the person so advancing on the security of it and of other notes?

Three hundred thousand dollars was in form subscribed. But various grounds are stated why some of the subscriptions should be regarded as nullities; and why, therefore, it should be held that $300,000 has not been, in fact or in law, subscribed.

The subscription of $40,000, taken under a subscription paper dated October 12, 1855, was counted as part of the $300,000.

Holbrook v. Basset et al.

The defendants insist that, to make subscriptions to the latter obligatory, it was essential that $300,000 should be subscribed, exclusive of the $40,000.

The $300,000 subscription, by its terms, declares that this "subscription is towards the $400,000 subscription authorized by a resolution of the Board of Trustees of this date, and is not to be binding until the sum of $300,000 is subscribed." The "resolution" of that date reads thus: "On motion, it was resolved that a subscription in the sum of $400,000, in premium notes, to be written against, be obtained; subscriptions to be binding when $300,000 is subscribed, including the $40,000 already subscribed."

Each of the several subscription books, used to obtain subscribers, had in it, and preceding the $300,000 subscription, a copy of the $40,000 subscription.

There is no proof that any one who subscribed to the $300,000 subscription was deceived or misled by anything said or done by any agent of the Company as to the terms of the resolution authorizing that subscription. There is no ground upon the evidence to impute to any officer of the Company any intent to deceive any such subscriber in that respect.

The mere fact, therefore, that the $40,000 subscription was counted, in order to ascertain if the $300,000 had been subscribed, is no defense to an action upon the note in suit.

It is also satisfactorily proved there was an original paper called the $50,000 subscription paper, a copy whereof was written on the first page of the several subscription books used in procuring the $300,000 of subscriptions.

The fact that several whose names were signed to that paper, or that all of them, subscribed to the $300,000 subscription, does not invalidate the latter, or affect the liability of any of the subscribers to the latter, notwithstanding no notes were, before the failure of the Company, given under the $50,000 subscription itself. As to the persons who subscribed to both the $50,000 and the $300,000 subscriptions, it may be truly said that, in computing to ascertain if the $300,000 had been subscribed, their subscriptions to the latter were alone counted, and those made to the $50,000 subscription were not counted.

If the purpose which they testify they had in view in signing the original paper called the $50,000 subscription cannot be shown

Holbrook v. Basset et al.

to exonerate them from liability upon it, on its being made to appear that they subscribed the like amount, or more, to the $300,000 subscription, it by no means follows that the subscriptions to the latter are not obligatory. The $50,000 subscription itself was not counted as a part of the $300,000.

I do not perceive any irreconcilable conflict between the terms of the paper called the $50,000 subscription and an agreement among themselves, intended to be thereby expressed, and to be thereby notified to those who might be solicited to subscribe to the subscription for $300,000, to the effect that they would subscribe to the latter the sum of $50,000 on the same conditions and terms in all respects as the other subscribers, with the single difference that for the $50,000 so to be subscribed by them, notes should be given at thirty, sixty and ninety days, or four months, instead of notes at six and twelve months.

That paper does not state the proportions in which they were severally to subscribe or had subscribed in subscribing the $50,000. It declares they subscribe "on the same condition set forth in the resolution" of the 8th of November. And while it declares that, it also declares that the subscriptions were to be paid "in cash or notes at thirty, sixty, ninety days, or four months." Such short notes would be beneficial to the Company, and no prejudice to other subscribers. By the "same condi tions" must therefore have been meant, that the notes for the amount subscribed were to be given "in advance of premiums of insurance," and that on the amount of such notes at their maturity, the subscribers were to be allowed by the Company five per cent. There has been no attempt on the part of those persons to appropriate any assets of the Company to secure them for the short notes they gave as subscribers to the $300,000 subscription. I do not think the transaction furnishes evidence of an intent to defraud persons who should subscribe to the $300,000 subscription, by giving an assurance not intended to be kept as the parties themselves understood it, and supposed all others would understand it, which of itself will make the note in suit void in the plaintiff's hands. Whether, therefore, they can be permitted to show that they signed the $50,000 subscription for the purpose and on the understanding to which some of them have testified, in order to escape from liability as such subscri

Holbrook v. Basset et al.

bers, is a question which I do not deem it necessary to attempt to determine. I think they acted in good faith at the time, and without any intent to thereby mislead or defraud.

There is no satisfactory evidence that either before or at the time the paper for $50,000 was signed it was agreed between the signers of it and the Company that any subscription for $300,000 should be accepted in lieu of, or in satisfaction of, their liability as subscribers to the $50,000 subscription. Nor that the short notes given for the subscription to the $300,000 subscription were accepted by the Company in satisfaction of, or as a performance of, the contract created by the $50,000 subscription.

If there are no other grounds of defense than the two, viz., that the $40,000 was counted in making up $300,000 of subscriptions, and that those signing the paper called the $50,000 subscription did not intend to make and did not suppose they had made themselves liable for the latter amount, in addition to their subscriptions to the $300,000 subscription itself, the plaintiff is entitled to recover. If the terms of the $50,000 subscription are such as to preclude those signing from alleging and showing the understanding had between themselves, nothing has since occurred to exempt them from any liability they incurred by signing it, and using it as it was used.

The defendants are sued upon a note which they have made and delivered. The burden of proving facts constituting a defense rests upon them.

I do not think they have established the fact that they were induced by any fraud, practised or intended to be practised on them, to give the notes.

Including the $37,000 subscribed by Insurance Companies, I have no doubt that the Trustees believed $300,000 had been subscribed when the resolution was passed which stated that, "It being understood that $300,000 is now subscribed under the resolution of the Board of November 8th, it is therefore resolved that the officers commence at once to collect notes to that amount and proceed in liquidation of the liabilities of the Company therewith."

Any subscriber being shown a copy of this resolution, or told its contents, and asked for his notes, could not say that any fraud had been practised upon him, if the result should demonstrate Bosw.-VOL. V.

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Holbrook v. Basset et al.

a small error in computation, or an error in treating a copy of one or two subscriptions as an original. The fact may turn out to be contrary to his belief; but in such a case there would be no misrepresentations to deceive, nor any intent to defraud him; and a subscriber asked to give notes under such circumstances would be notified of the purpose of the Company to use them immediately in liquidating its liabilities. Using them for such a purpose would not be a misappropriation of them as between himself and the Company, nor would such a use of them be a fraud or surprise upon him.

Does the use made of them create a bar to the right of those to whom they were negotiated, to sue upon and collect them?

The Company, to put itself in the possession of money, must procure the notes to be discounted or borrow on the security of them. If solvent, I see no difficulty in the Company's procuring money in either mode. Either form would be a valid transaction. Certain gentlemen, of such credit that their notes at short dates would be discounted, advanced such notes on the security of the note in suit and other notes. The notes so advanced, the Company converted into money, and used the money in paying the just debts of the Company. The notes so advanced were paid. Why should not those advancing and paying their notes, collect from the securities on which they advanced, enough to reimburse the sums so advanced?

answer.

I can see no answer to their right to do so, in any of the facts of the case thus far considered, unless the fact that the persons so advancing were Trustees of the Company, is of itself a good I cannot think that if such an advance, when made by third persons, would be legal, and the transaction upheld, that Trustees so advancing lose all right to enforce such a note as the one in suit, merely because they were Trustees when they advanced or loaned to the Company on the security of some of its premium notes.

Nor do I think that the defendants can escape liability upon the idea that the Company was, or was supposed by its Trustees to be, insolvent either on the 8th of November, 1855, or when the note in suit was transferred, with others, to secure advances made on their credit, in any such sense that such a transfer was prohibited and made void by statute.