Statement of case.

410; Tallmadge v. Pell, 7 id. 328, 348; Sackett's H. Bk. v. Codd, 18 id. 242; Oneida Bk. v. Ontario Bk., 21 id. 490; Smith v. First Nat. Bk., 99 Mass. 605; Parish v. Wheeler, 22 N. Y. 494; Allen v. R. R. Co., 11 Ala. [N. S.] 437; R. R. Co. v. Talman, 15 id. 472; Phillips v. Winslow, 18 B. Monr. 431; Bissell v. R. R. Co., 22 N. Y. 258; Brice on Ultra Vires [1st ed.]; Angell & A. on Corp. 200; 1 Cow. 513; 21 Pick. 270; 6 Humph. [Tenn.] 515; Middletown v. Rondout & Oswego R. R. Co., 43 How. 481; South. Life Ins. Co., etc. v. Lanier, 5 Fla. 110,165; Walworth Co. Bk. v. Farmers' L. & T. Co., 16 Wis. 629; Scott v. Johnson, 5 Bosw. 213; Barry v. Merchants' Ex. Co., 1 Sandf. Ch. 280, 289; 1 Seld. 574; Curtis v. Leavitt, 15 N. Y. 9, 62–66; Smith v. Law, 21 id. 298; Belmont v. Erie R. R. Co., 52 Barb. 637, 670; Pusey v. N. J. R. R. Co., 14 Abb. Pr. [N. S.] 435; Butler v. Rham, 46 Md. 541; Carpenter v. Blackhawk Mining Co., 6 N. Y. 43; Cent. Gold Mining Co. v. Pratt, 3 Daly, 263; 2 R. S., 1875, 532, part 1, chap. 18, tit. 15, § 39; Laws of 1850, chap. 140, § 28; Thomp son v. Erie R. R. Co., 42 How. Pr. 68; Hoyt v. Thompson, 19 N. Y. 207; Walworth Bk. v. Farmers' L. & T. Co., 16 Wis. 629; Angell & A. on Corp. 200; 15 Johns.; 1 Cow.; 21 Pick. ; 6 Humph.; South. Ins. & Trust Co. v. Lanier, 5 Fla. 110,165.) Mr. Rucker, while president of the corporation, might lawfully loan to it his moneys for its corporate purposes and take its first mortgage bonds in pledge as security for his repayment to the same extent and in the same manner as any other lender might do. (Hoyt v. Thompson's Exr., 19 N. Y. 207; 5 Abb. [N. S.] 461, 462; 5 Bosw. 178; 26 N. Y. 410; Brice on Ultra Vires [1st ed.], 402; 16 Beav. 485; 10 H. of L. 26; 31 L. J. Ch. 369; Imp. M. C. Ass'n v. Coleman, L. R., 6 H. of L. 189; Story on Agency, §§ 351 et seq.; Twin Lick Oil Co. v. Marbury, 1 Otto [91 U. S.] 587; Koehler v. Black River F. Iron Co., 2 Black, 715; Drury v. Cross, 7 Wall. 299; Luxemburg R. R. Co. v. Maquacy, 25 Beav. 586; The Cumb. Coal Co. v. Sherman, 30 Barb. 553; 16 Md. 456; Hoyle v. Plattsb., etc., 54 N. Y. 314; Buel v. Buckingham, 16 Iowa, 284; Cent. R. R. v. Cleghorn,

Statement of case.

1 Speers' Eq. 545; Van Hook v. Somerville R. R. Co., 5 N. J. Eq. 137-633; St. Louis v. Alexander, 23 Mo.

; Merrick v. Penn. Coal Co., 61 Ill. 492; So. Baptist Ch. v. Clapp, 18 Barb. 35; 20 Vt. 425; 13 Metc. 497; 21 Pick. 270; 22 N. Y. 526; Hoyle v. R. R. Co., 54 id. 314; Brice on Ultra Vires, 400, et seq.; Risley v. Ind. R. R. Co., 62 N. Y. 247; Smith v. Lansing, 22 id. 520; Barnes v. Brown, 11 Iun, 315 [Ct. App. MSS. April, 1880]; Coe v. N. Y. Midland R. R. Co., 4 Stewart's Eq. [N. J.] 105, 137; Chicago Building Soc. v. Crowell, 65 Ill. 458; De Groff v. Am. L. T. Co., 21 N. Y. 127-8; Parish v. Wheeler, 22 id. 503; Bissell v. M. S. & N. I. R. R. Co., id. 258; Story on Agency, §§ 329 et seq.; Mayor v. Ray, 19 Wall. 468; Alleghany City v. McClurken, 14 Penn. St. 81; Ass. Co. v. Ass. Co., 3 Griff. 521; affirmed on appeal, 8 Jur. [N. S.] 628; Society v. Co., 5 De G., M. & G. 465; Wilson's Case, L. R., 12 Eq. 521; 7 Chan. 45; Tallmadge v. Pell, 7 N. Y. 728, 748; Sackett's H. Bk. v. Codd, 18 id. 242; Oneida Bk. v. Ontario Bk., 21 id. 490; Dillon on Municipal Corp., 750; Matter of German Mining Co., Ex parte Chippendale, 4 De G., M. & G. 19; Ex parte Rignold, 22 Beav. 353; Lowndes v. Mining Co., 33 L. J. Ch. 418; 3 N. R. 601; Matter of Cork Ry Co., L. R., 4 Ch. 748.) A lender of money in good faith, holding bonds as security for his repayment, stands to the extent of his loans as a bona fide purchaser of the bonds, and is entitled to the same protection and relief in the enforcement of his rights as if he were a purchaser of the bonds at their full value. (Brookman v. Metcalf, 32 N. Y. 591; Bank v. Hoge, 35 id. 65; Platt v. Beebe, 57 id. 339; Nelson v. Edwards, 40 Barb. 279; 42 N. Y. 490; 3 Sandf. 222; 63 Barb. 215-237.) While upon a consolidation of two railway corporations, the legal debts of both become the unquestionable debts of the consolidation, yet that principle has no application to the fraudulent debts of either, and there can be no presumption of validity or of lawful lien in respect of such fraudulent debts, because the consolidated company has seen fit to exchange its bonds for bonds so fraudulently obtained. (Peterson v. Mayor, 17 N. Y. 449; 17 Barb. 397;

Statement of case.

Cumb. Coal Co. v. Sherman, 30 id. 553.) While the mere default in paying coupons is not of itself a prevention to the transfer of bonds to bona fide purchasers, it is a circumstance of suspicion and notice that may, when coupled with other circumstances, destroy such a character in a purchaser. (First Nat. Bk. St. Paul Co. v. Commissioners, 14 Minn. 77.) The claimants contesting the claims of Rucker are concluded by the rightful action of the corporation through whom alone they claim. If the corporation is lawfully bound and directly concluded as to Rucker from making any claim against him, the assigns of the corporation are equally estopped, there being no fraud or lack of good faith imputed to the transactions. (Hoyt v. Quicksilver Mining Co., 78 N. Y. 159; Walworth Co. Bk. v. Farmers' L. & T. Co., 16 Wis. 629; Kelsey v. Nat. Bk., 69 Penn. St. 426; Story on Agency, $$ 239, 252, 260.) The suit began in Connecticut, and the proceedings setting off the property of the corporation in that State having been declared null and void, and it being adjudged that nothing was taken by virtue of them, Mr. Rucker's claim, lien and debt against the railroad company and his bonds were not affected or impaired by reason. thereof. (2 R. S. [Edm. ed.] 389.) The transaction with the National City Bank of Brooklyn being illegal, gives to the bank no higher or more perfect right to the bonds than Mead himself has. (Barton v. Plank R. Co., 17 Barb. 397.) It was the duty of the president of the bank to satisfy himself as to the bonds, with the degree of notice that he had; and, not having done so, he stands in submission to the fact, whatever it might be. (Wade on Notice, §§ 37-39; Story v. Arden, 1 Johns. Ch. 261; Birdsall v. Russell, 29 N. Y. 220.) There is in the General Railroad Act no prohibition against the corporations created thereby contracting legitimate debts in the ordinary course of their business, and mere indiscreet management will not be ground for interference by a court called on to review a corporation's acts. (Bk.. of U. S. v. Dandridge, 12 Wheat. 113; 1 Sandf. Ch. 280; Smith v. Law, 12 N. Y. 296, 299; 15 id. 62, 220, 266, 268; Laws of 1850, chap. 140,

Statement of case.

6.) In the absence of a statutory prohibition, a corporation can deal precisely as an individual can. (Mott v. Hicks, 1 Cow. 513; Curtis v. Leavitt, 15 N. Y. 64, 66.) The fact that Mr. Kirkland was an officer of the company at the time he took the security does not vary his rights so long as his debt was a just one, untainted with fraud, and so long as he secured no undue advantage to himself as against other persons interested in the property of the corporation. (Coe v. Pennock, 23 How. 117; F. L. & T. Co. v. Hendrickson, 25 Barb. 484; King v. Mer. Ex. Co., 1 Seld. 547; Leavitt v. Blatchford, 17 N. Y. 557; Parish v. Wheeler, 22 id. 494; Nelson v. Eaton, 26 id. 410; Hoyt v. Thompson's Ex'r, 19 id. 207.) The delivery of the bonds to Kirkland being open and above board, and the deliberate act of the board of directors, the representatives of the corporation, and its lawful statutory managers, must be sustained. (Bk. of U. S. v. Dandridge, 12 Wheat. 113.) Under these circumstances no other purchaser or holder of bonds can complain. (Caylus v. Kingston, etc., R. R. Co., 10 IIun, 295; 76 N. Y. 609.) Until an offer of payment and redemption is made, and its refusal is shown, the holder of the pledge holds it for its value, and retains all his rights. (Bruen v. Hone, 2 Barb. 586; Wood v. Oakley, 11 Paige, 400; Carnes v. Platt, 59 N. Y. 405; Mumford v. Am. L. Ins. & T. Co., 4 id. 482-3; McDonald v. Neilson, 2 Cow. 139.)

Jesse Johnson and E. Ellery Anderson for National City Bank of Brooklyn and others. There was no authority in the trustees or the company to use bonds issued under the mortgage to the trustees to pay debts incurred prior to and not released or affected by its issue. If such authority existed it could not be exercised to the prejudice of bona fide purchasers of the bonds. (3 Edm. Stat. at Large, 628, § 28, subd. 10; Seymour v. Canandaigua R. R., 25 Barb. 284; 14 How. Pr. 531; 7 Edm. Stat. at Large, 337; chap. 779, Laws of 1868; Cumberland Coal Co. v. Sherman, 30 Barb. 565, 567; Gardner v. Ogden, 22 N. Y. 343; Butts v. Wood, 37 id. 317; Coleman v. Second Avenue R. R. Co., 38 id. 201; James v. Cowing,

Opinion of the Court, per FINCH, J.

17 Hun, 256; Barnes v. Brown, 11 id. 315.) Mead had such a possession and indicia of title that he could, as toward a person acting in good faith, give a good and available title. (Barnard v. N. Y. & II. R. R. Co., 25 N. Y. 496.) Whatever the title of Mead or the bank may have been in the old bonds, it is now perfect and absolute in these bonds. (Coal Co. v. Sherman, 30 Barb. 563.) Every holder in good faith and for value of the bonds of a corporation is entitled to recover their full amount against the maker. (Cromwell v. Co. of Sac, 96 U. S. 51-60.) The fact that the loan made to the maker was less than the face of the bonds does not affect or diminish the right of the holder, except that it limits his recovery to the amount of the loan and interest. (Hodge's Appeal, 84 Penn. St. 359.)

FINCH, J. It is not possible, in this case, to go much beyond a brief statement of our conclusions. To discuss all the questions raised by the numerous appeals, through their voluminous and complicated details, would prolong an opinion beyond what is either necessary or profitable.

We have reached the conclusion that the appellant, Rucker, should be allowed to prove in full all of the $810,000 of bonds, which he holds as a pledge, to secure the debt due him from the railroad company of $81,000 and interest, and which he can produce for that purpose; and is entitled to share in the distribution upon that basis to the extent of such indebtedness. It is not intended to deny, or question the rule that whether a director of a corporation is to be called a trustee or not, in a strict sense, there can be no doubt that his character is fiduciary, being intrusted by others with powers which are to be exercised for the common and general interests of the corporation, and not for his own private interests, and that he falls, therefore, within the doctrine by which equity requires that confidence shall not be abused by the party in whom it is reposed, and which it enforces by imposing a disability, either partial or complete, upon the party intrusted to deal, on his own behalf, in respect to any matter involving such confidence.