tl. THE LAMBERT BUILDING
(Dist-rict (}Oll-rt, W. D. Pennsylvania.
October 8, IS80.)
L BUILDING ASSOCIATION-TITLE TO BANK DEPOSIT.-C., the treasurer
of a buildiug and loan association, a corporation, who had received over $6,000 of the moneys of the association, opened an account in bank in his name as treasurer of the association, and in that name and title deposited $6,000, taking therefor a certificate of deposit, payable him as such treasurer. Held,that the money so deposited became eo instanti the property of the corporation, and no subsequent act of rat. ification on its part was necessary to complete its title to the fund. 2. SAME-BANKHUPTCY-PREFERENCE.-At the time of the d('.posit C. was in good financial credit, but, in fact, was insolvent, and upon a creditor's petition, filed within 60 days thereafter, was adjudg-ed a bankrupt. The deposit was tIle voluntary and unsolicited acted c., and at that time no member of the association or officer (other than C. him. self) knew of or had any reason to suspect C.'s insolvency or intention to give a preference to the corporation. The corporation had not authorized C. to use its funds 01' commingle them with his own, ami had no knowledge of any such breach of duty on his part. Held, that the corporation was not chargeable with C. 's knowledge of his insolv. encyand intention to givea fraudulent preference. S. S.uffi-SA?m-SAME.-The corporation, not otherwise having any cause to believe C. to be insolvent, or knowledge that the deposit was made in fraud of the bankrupt act, held, that the assignee in bankruptcy could not impeach the deposit as an unlawful preference.
The facts of this case appear in the following charge of the court to the jury. D. T. JVatson and Knax ct Reed, for new trial. T. G. Lazear, cantm. D. J., (charging Jury.) In order to invalidate, as a. fraudulent preference under the banhupt law, a payment made or security given for a debt, it is not enough to show that the debtor was insolvent at the time of the payment or transfer, and that the same was made by him with a view to give It preference to the creditor; but it must also appear that the creditor at the time had such a knowledge of facts as to induce It reasonable belief of his debtor's insolvency, and knew that the payment or transfer was made in fraud of the law. n
LINDSEY V. LAMBERT BUILDING & LOAN ASS'N.
has been held by the supreme court of the United States (Grant v. The Nat. Bank, 97U. S. 80) that it is not sufficient that the creditor may have had some cause to suspect the insolvency of his debtor. The court, in that case, say: "Hun. dreds of men constantly continue to make payments up to the very eve of their failure, which it would be very unjust and disastrous to set aside." . In the present case, under all the evidence, the materia} facts are not the subject of dispute. William F. Casey, for several years prior to August 13, 1875, had been the treasurer of the defendant corporation, the Lambert Building & Loan Association, receiving and disbursing from time to time its funds. Prior to the date mentioned he had never kept any separate bank acconnt of the funds of the association. He kept individual bank accounts in the Anchor Sav. ings Bank and the City Savings Bank. On the date mentioned (August 13, 1875) he had in his hands of the moneys of the association an amount slightly exceeding $6,000. On said date he went to the Bank of Pittsburgh and opened an account in the name of W. F. Casey, treasurer of the Lambert Building & Loan Association, and deposited in that name and title $6,000, and took a certificate of deposit for the same to "W. F . Casey, treasurer of Lambert Building & Loan Association." He was at this time in good financial credit, and no member or officer of the association (except himself) had any knowledge whatever of his insolvency, or had any reason to believe or suspect him to be insolvent. He was in fact then insolvent, as the sequel showed, but this was known only to himself. The next day, August 14, 1875, Casey went to the office of S. A. Johnson, Esq., the solicitor of the association and its secretary, asked him what was the balance appearing against him on the books, and stated that he wished to pay it over, and resign his office of treasurer. Johnson asked him why he did this? To which he replied he would tell him again. Mr. Johnson having informed him of the exact balance due the association, Casey indorsed said certificate of deposit as follows: v.4,no.1-4
"Pay to the order of Wm. J. Flynn and S. A. Johnson, president and secretary of the Lambert Building & Loan Association. W. F. CASEY, "Treasurer of Lambert Building & Loan Association. "Aug. 14, 1875." -and delivered the certificate so indorsed to Johnson. He also paid the latter a small sum of money, in full of the balance due by him as treasurer, and took Mr. Johnson's receipt in full. At the same time Johnson drew up, and Casey signed and handed Johnson, his resignation of the office of treasurer of the association. Down to the close of this transaction it does not appear that Johnson, or any member or officer of the association, except Casey himself, had any knowledge or information whatever of Casey's insolvency. But later, on the same day, (whether before Casey left Johnson's office, or at a second visit, does not clearly appear,) he informed Johnson that he was in pecuniary difficulties. The money deposited in the Bank of Pittsburgh was not drawn from that bank until August 18, 1875, when it was drawn by S. A. Johnson, secretary, and George F. Ewens, vice-president, of the association, both of whom then knew of Casey's insolvency. The latter executed a deed of voluntary assignment, for the benefit of his creditors, on August 19, 1875. On the twelfth of October, 1875, certain of his creditors filed a petition against him for his adjudication as a bankrupt, and he was subsequently so adjudicated. The present action is by his assignee in bankruptcy to recover t'he $6,000 deposited as already mentioned in the Bank of Pittsburgh. The right of the plaintiff to recover depends, I think, upon the determination of the question, when did the title to the fund in controversy vest in the Lambert Building & Loan Association? I am of opinion that it so vested at the time of the deposit on August 13, 1875. It is argued that some affirmative act of ratification on the part of the association was necessary before the title to the fund vested in the association, and that no suchact has been
V. LAMBERT BUILDING & LOAN ASS'N.
shown until the money was drawn out of bank by the vicepresident and secretary, both of whom then had knowledge of Casey's insolvency, and that ratification was then too late. But I cannot adopt this view. In opening the account at the Bank of Pittsburgh and making the deposit for the benefit of the association, Casey merely performed a duty he owed the association. He should, from the first, have kept the moneys of the association separate and apart from his own. The Bank of Pittsburgh was a safe and proper place of deposit for the money of the association. Had he died immediately after the deposit it would hardly be pretended that the fund so deposited would have passed to his personal representative. I affirm the defendant's third point, viz.: "that, under all the evidence in the case, the verdict should be for the defendant." Under the undisputed facts, and for the reasons already stated, I refuse the plaintiff's several pointo.
The jury having found a verdict for the defendant, the plaintiff moved the .court for a new trial, which after argument was refused, the court filing the following opinion, October 8, 1880: ACliESON, D. J. I adhere to the opinion I entertained at the trial, when W. F. Casey deposited the $6,000 in the Bank of Pittsburgh to his credit, as treasurer of the Lambert Building & Loan Association, taking the certificate of deposit payable to his order as such treasurer, the· money became eo instanti the property of the defendant corporation. Confirmatory of this view is the case of Stapleton v. Stapleton, 14 Simons, (Eng. Ch. R.) 186. It must be remembered that Casey was the mere custodian of the moneys of the association, and at all times should have kept the trust fund distinguishable from his own moneys and separate therefrom. Hence, when he made the deposit in the Bank of Pittsburgh, he merely restored to the trust fund its ear-mark, which it had temporarily lost by reason of his unauthorized act in mixing the trust moneys with his private funds. To use the language
of the lord chancellor, in E:cparte Sayers, 5 Ves;"169, 172, uif the money got into the general fund, it got out again." It seems to me, therefore, that the title to the deposited fund vested immediately in the association, and no act of ratification on its part was necessary to complete the transaction. It is, however, urged with great earnestness that if the foregoing view is correct the deposit in question was an unlawful and void preference. But to avoid a preference as fraudulent under the late bankrupt law, it must appear that the party receiving it, or to be benefited thereby, had at the time reasonable cause to believe that the debtor was insolvent, and knew that the payment or security was made or given in fraud of the act. In Clark v. Iselin, 21 Wall. 360, 375, after stating what must concur in order to .avoid a preference, Judge Strong says: uIn fine, there must be guilty collusion to coustitute'tne fraudurerit preference condemned by the !:Itatute." , That case arose under the thirty.fifth sec. tion of the original act, but the amendment of June 22, 1874, went further to uphold preferences than did the original act. Having reasonable cause to ,believe that stich person is'insolYent, and knowing that such · · · payment, pledge, assignment, or conveyance iEj ,made in fraud of the provisions" of the act, is the language of the amendment. : Reasonable cause to believe that insolvency exists, and 'knowledge of So fraudulent intent to gives. preference, must both be shown. Now, if under the original act it was necessary to show "guilty collusion" in order to set aside a preference, much more is it necessary under the amended act. But where is there any evidence tending to show"guilty collusion" between W. F . Casey and the Lambert Building & Loan Association? Throughout this whole transaction the good faith of the association is conspicuous. As -already observed, Casey was the mere custodian of the moneys of the association. It was not intended that the relation between him and the corporation should be that of debtor and creditor. The association did not contemplate that Casey should use the trust funds or commingle them with his own, and at the time the deposit was made had no actual knowledge that he had violated his
BUILDING & LOAN ASS'N.
duty in the premises. Moreover, at that time no member or officer of the association, other than Casey himself, had any . suspi0ion of the latter's insolvency, or knew of his intent to give a preference to the corporation. It is quite certain that if the relation between Casey and the association had been simply that of debtor and creditor, the payment by him to the corporation of this money, under the circumstances disclosed by the eyidence, could not have been impeached as an unlawful preference. But it is contended that inasmuch as Casey was treasurer of the corporation his knowledge of his insolvency and intention to give a fraudulent preferelJ.ce was the knowledge of the corporation. Upon what principle, however, is thtl association chargeable with knowledge of Casey's insolvency.? ,What interest bad.the corporation in his private affairs? being the mElrecustodian of the moneys oftheassociation, how did it concern the latter whether he was solvent or insolvent? Furthermore. Casey's knowledge of his insolvency was not. by him while acting in his capacity of treasurer; nor was he bound to communicate the fact to the COrporation. :aut if the information was not-acquired by him in the:course of his dutief? as treasurer, and he was under no obligation to communicate it to. the corporation, then the latter; is Ilot chargeable with constructive notice of his insolvency.. Philadelphia v. Lockha1'dt, 78 Pa. St. 211; Wharton on Agency, § 178. Undoubtedly the general rule is that notice to, or knowledge acquired by, an agent in the course of the transaction in which he represents his principal binds the latter. Therefore, where a creditor secured a preference from an insolvent debtor through the intervention and by the solIcitation of an agent, the knowledge of such agent was held to be the knowledge of his principal. West Phil:delphia Bank v. Dickson, 95 U. S. 180, 181. But in the present case, in making the deposit in the Bank of Pittsburgh, Casey was acting for himself and not as agent for the corporation. The latter was not seeking any preference. The assoc:ation had not solicited the deposit. It was the voluntary act of Casey. The motir6
which induced him to take this step, it may well be supposed, was altogether a personal one, viz.: his desire to escape the criminal consequences of the embezzlement of trust funds· .It is a well-recognized rule that neither the acts nor knowledge of the officer of a corporation will bind it in a matter in which he acts for himself and deals with the corporation as if he had no official relations to it. Angell & Ames on Corp. § 308; TVinchestcr v. Balt. If S. R. Co. 4: Md. 281; Commercial Bank v. Cunninghmn, 24 Pick. 270; Stevenson v. Bay Oity, 26 Mich. 44:; First Nat. Bank oj Hightstown v. Christopher, 4:0 N. J. (Law) 435; Barnes v. The Trenton Gas-light Co. 12 C. E. Green (N. J. Eq.) 33. Thus, where the general superintendent of a corporation conveyed land to it, the corporation, it was held, was not chargeable with his knowledge· of an a:dverse claim to the land. Wickersham v. Chicago Zinc Co. 18 Kan. 4:81. The corporation agent's knowledge, when /tcting for himself, is not the knowledge of the corporation. Id. I hold the present case to fall within this principle. If my agent, who had fallen in arrears in his accounts, had . voluntarily made me a payment during the life-time of the bankrupt law, would anyone pretend that I could be deprived of the benefit of such payment upon the ground of constructive notice of his insolvency and intent unlawfully to prefer me, if in fact I were ignorant thereof and free from guilty colwith such agent? And why should the defendant corporation, upon the ground of imputed knowledge, be compelled to surrender a preference which it acquired innocently, and without actual knowledge of any intended fraud upon the bankrupt law? Having obtainecl the fund in controversy honestly, the defendant can in good faith retain it. The motion for a new trial is denied; and it is ordered that judgment for the defendant be entered upou the verdict.
DOWNIE V. DOWNIE. BISSELL and others v. DOWNIE ana others.
(Owcuit Oourt, V.Indiana. -,1880.)
L FElll.-A will contained the following clause: "I give and devise to my hone ored mother, Melissa E. Downey, all my property and estate, both real and personal, to hold and enjoy the same. during her life, with full power to sell the same, or any part thereof, and to appropriate the proceeds to her own use and benefit; and all deeds and conveyances of real estate by her made shall pass a title in fee to the purchasers, it being my will that she shall enjoy the same as though it were devised to her in fee. Should my mother die first, then, and in that case, I devise all the remainder of my estate to Charles Lindley Downey. After the death of my mother,l devise all of the said estate to my half-brother, Charles Lindley Downey." Held, that Mrs. Dow. ney had an estate for life in the property devised, with the power under the terms of the will to dispose of it for the purposes named. SAME-SAME-POWER TO 1r!oRTGAGE.-Held, further, that such power did not, in the first instance, include a vower to mortgage.
WILL-CoN8TRUCTION-LIFE ESTATE-POWER TO SELL IN
In Equity. Demurrer to Bill. Herod a Winter, for plaintiffs. Harrison, Hines a Miller, for defendants. DRUMMOND, C. J. The plaintiff filed a bill for the purpose of quieting his title to certain tracts of land which he claimed under the will of Alanson G. Stevens; and George P. Bissell, one of the defendants, having advanced a large sum of money to Mrs. Downie, also a devisee under the same will, the latter of whom had executed mortgages to him for the purpose of securing the sum advanced. A bill in the nature of s crossbill is filed by Bissell for the purpose of foreclosing the mortgages, or one of them, if only one of them shall be considered 3S valid. And the question arising in the case is under the will made by Stevens. So far as it is necessary to consider it for the purpose of deciding the matter in controversy here, the will is as follows: "1 give and devise to my honored mother, Melissa E. Downie, all my property and estate, both real and personal, to hold and enjoy the same during her life, with full power to flell the same, or any part thereof, and to appropriate the proceeds to her own use and benefit; and all deeds and con-