Majority
p. 242CODDINGTON a. GILBERT. New York Superior Court; General Term, October, 1855.
Headnote
RAILROAD BONDS. — PROPERTY.-ATTACHMENT.Bonds, made by a railroad company and placed in the hands of their agents to be sold, are not, either in the hands of the company or of the agents, the property of the company, in such sense that an attachment issued against the company can be levied upon them.
Motion to set aside a verdict taken subject to the opinion of the court at general term.
This was an action brought by Thomas B. Coddington against Messrs. Gilbert, Coe, and Johnson, bankers, under the following circumstances.
On the 17th of November, 1853, the Maysville & Lexington Railroad Company, a foreign corporation, created under the laws of Kentucky, were indebted to the defendants, Gilbert, Coe, & Johnson in about $60,000 upon an unsettled account for moneys advanced. As a collateral security for the payment of this debt, the defendants held 292 second mortgage six per cent, bonds, of the Maysville & Lexington Rail
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road Company, of $1000 each, (endorsed in part by the city of Maysville, and in part by the Louisville & Frankfort Railroad Company), with authority to sell the same to an amount sufficient to reimburse and protect them for the advances made by them for said company.
About the 26th of January, 1854, the plaintiff Coddington, having a demand against the Maysville & Lexington Railroad company for $3027⅛⅛ commenced an action in this court, and issued an attachment under the Code to the sheriff of the city and county of New York. About the 2d of February, 1854, the sheriff delivered a certified copy of the attachment to the defendants, who, at the same time gave the sheriff notice in writing, that all the property in their possession of the Maysville & Lexington Railroad Company, consisted of the bonds above described, and that they held them as collateral security for advances as already mentioned.
The sheriff did nothing further in the matter until after judgment and execution in the action.
May 19th, 1854, the plaintiffs recovered judgment for $3174⅜⅜, against the Maysville & Lexington Railroad Company, and issued execution thereon to the sheriff. The sheriff called on the defendants and informed them he had the execution with instructions to sell the bonds. The defendants requested the sale adjourned, and said to the sheriff they would write the Maysville & Lexington Railroad Company in Kentucky. The sheriff adjourned the sale a week. In the interval the Maysville & Lexington Railroad Company paid the demand of Gilbert, Coe, & Johnson, the defendants, and took the bonds.
The sheriff realized nothing on the execution. The plaintiff therefore commenced this action, claiming (under the Code, § 237, subd. 3; Laws of 1842, ch. 197, § 4, subd. 3), to recover from Gilbert, Coe, & Johnson, double damages for having wilfully withheld from the sheriff, property attached.
Under the direction of the justice who tried the cause, a verdict was taken for the plaintiff, subject to the opinion of the court.
Several questions were raised upon the argument; but the only one discussed in the opinion, was: — Whether the bonds
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were property of the company, upon which the sheriff could levy the attachment?
Albert Mathews, for defendants.
I. The bonds were not property, or liable to levy under an attachment against the Maysville & Lexington Railroad Company. Not having been delivered, they had no legal existence as obligations to pay money. Their first inception could only begin when transferred for full value. The possession of the bonds by the defendants, restricted by their instructions, constituted in legal effect a mere power to raise money in the name of the Maysville & Lexington Railroad Company, for a specific object, and to a limited extent, and this power was revocable upon payment of defendants’ demands. (Keutgen v. Parks, 2 Sand., 60 ; Hall v. Wilson, 16 Barb., 548 ; Tompkins v. Tyson, lb., 456 ; Powell v. Waters, 8 Cow., 685 -9 ; Wilson v. Little, 2 Comst. B., 443).
II. If the idea of property was predicable of these bonds in the hands of the defendants, it could not exist beyond the amount of their demand, until after they had delivered the bonds for the full valué, in pursuance of their power. Until their demand was paid, or the bonds were by them delivered, no person could interfere with the defendants’ possession of the bonds, or the paper on which they were written, or acquire any rights to property therein. The bonds were in the hands of the agents of the Maysville & Lexington Railroad Company, to be delivered for value, with authority to retain the proceeds to the extent of their demand. As dioses in action, they had no legal inception or value until this power was exercised. The corporation could not compel its exercise, much less the sheriff. Their power of sale was not transferable; the instant their demand was paid by any person, the power of the defendants ceased, and the notion of property in the bonds vanished.
III. There was nothing due the corporation upon the bonds. The corporation could not be its own debtor. The defendants owed nothing to the corporation. There was nothing in the defendants’ hands belonging to the Maysville & Lexington
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Railroad Company subject to an attachment against it. (Maine Insurance Co. v. "Weeks, 7 Mass. P., 439).
IV. If the sheriff had taken the bonds, either with or without the discharge of defendants’ demand, he could not have delivered them so as to create a debt by the corporation to the holder. The corporation could not be made a debtor against its will, or without its consent. The sheriff had no power to deliver the bonds. Delivery was a part of their execution, and could be done only by the principal or the authorized agent. The defendants’ possession of the bonds given by the Maysville & Lexington Railroad Company was not a delivery, but an authority to make delivery, conditional, revocable and personal — not to be delegated or transferred. (Wilson v. Little, 2 Cow. JR., 443.)
V. The statute gives authority to the sheriff, not to sell, but only to collect, dioses in action by action in the name of the debtor. How could he prosecute these bonds ? Not as representing the defendants, for the attachment was not against them. Not as representing the corporation, for then the obli-gor and obligee would be the same party. Not as representing himself or any third person, as holders by an independent title, because none such was ever created. {Code, §§ 232, 23T; Parish v. Stone, 14 Piole., 199 ; Harris v. Clarke, 2 Barb., 100 ; 3 Comst. B., 934).
S. P. Nash, for plaintiff.
I. The defendants contend that the bonds, being in the hands of the obligors, and not yet delivered, were not property liable to attachment. This point is raised entirely upon allegations in the answer, and upon assumptions and inferences, and not upon the evidence. The certificate of the defendants states, they had in their possession “ property” of the Maysville & Lexington Railroad Company; that such property consisted of bonds “ issued” under second mortgage, and bearing interest, and that they held them as collateral security for moneys advanced. They proved on the trial, that these bonds were guarantied by two other Kentucky corporations; that bonds of the same issue were held by other parties, and sold in New York city, and that the defendants had authority to sell these for their own reimbursement. On
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this proof, the court must bold that the bonds so issued, and held as property by the defendants to secure advances made on them, and which they had power to sell in market, were property in fact. It was for the defendants who withheld the bonds from the officer, and sent them secretly out of the State, to show explicitly what were those facts wduich exempted these securities from the ordinary incidents of property.
II. But assuming the defendants’ position in the case, the bonds were still liable to levy and sale. It is not pretended that the bonds were unauthorized. It is to be presumed that they "were valid as corporate obligations. The defendants, at any rate, so considered them in their hands. As pledgees, they could sell them, and the purchaser would have a valid title. Defendants’ interest in them could be reached by their creditors, who by legal process, could through the officers of the law, sell the property and give a good title to the purchaser. Any surplus on the sale would belong to the Mays-ville & Lexington Railroad Company, and would be liable to levy under attachment against them. It seems preposterous to say, that securities held here by pledgees with power of sale, the surplus proceeds of which, on such sale, could be attached by process against the pledgors, are themselves exempt from levy.
III. The defendants’ position, that a debtor’s own obligations and liabilities cannot be his own property, is more fanciful than real. As between debtor and creditor a debtor’s property may be considered as the means of paying his debts, whether consisting in fact of real property, personal property, or his own promise to pay put into a negotiable shape. The debts of an individual or corporation put into negotiable shape and secured by a specific appropriation of property, become in law, and according to the usage and custom of business, property themselves. (laws of 1850, 225, subd. 10).
By the Couet.
The bonds in question not having been issued by the Maysville & Lexington Railroad Company, were not properly in their hands or in the hands of their agents in such sense that any creditor, of the company by attaching them, could enforce the obligation which their
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terms import, either by action on the bonds or by a foreclosure of the mortgage by which they purported to be secured, or by action against the City of Maysville, or the Louisville & Frankfort Bailroad Company on their respective guarantees.
As well might a creditor on attachment against his debtor, seize a note made by the debtor, and left with an agent to be negotiated, but which had not been negotiated at the time of such seizure.
The attachment requires the sheriff to attach and safely keep all the property of the Maysville & Lexington Bailroad Company within his county, &c.
The words “ property” as used in the Code, included property real and personal, section 464.
The words “ personal property” as used in the Code included “money, goods, chattels, things in action, and evidences of debt,” section 464.
The bonds were not things in action on which the company issuing them could maintain an action, nor were they evidences of debt owing to the company. As obligations they had no validity and were valueless.
For the purpose of raising the questions of law to be passed upon at the general term, they were treated as valid obligations, precisely as they would have been, if they had been issued and negotiated by some other company, and at the time belonged to the defendants in the attachment. One question which it was considered would arise for the consideration of the court, was whether bonds executed by a railroad company and in the hands of its agents to be negotiated for it, could be seized on an attachment against the company, and by such seizure give to the creditor any right to enforce the bonds against the company, or to enforce any claims against those who had guaranteed the bonds for the purpose of enabling the company to negotiate them on better terms.
We are clearly of the opinion that no such rights could be required by such an attachment.
The fact that Gilbert, Coe, & Johnson were authorized to sell enough of the bonds to reimburse them the amount the company was owing them, does not strengthen the plaintiff’s case. The only property in the bonds as obligations which
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this authority could create, was the property of Gilbert, Coe, & Johnson. When they were paid, the bonds so far as relates to the capacity of the plaintiff to proceed against and attach them, were in precisely the same condition as they would have been if Gilbert, Coe & Johnson, had never been creditors of the company, but had at all times held them merely as agents of the company, with power to negotiate them for the company.
The decision of this point being sufficient to dispose of the case, we deem it unnecessary to pass upon any other of the numerous questions discussed at the hearing, and which it was insisted were fatal to the plaintiff’s right to recover.
The verdict must be set aside and the complaint dismissed.