Casey v. La Societé de Credit Mobilier de Paris. struction to be given to the 52d section of the Currency Act, then the moment a bank becomes embarrassed, it must give up and suspend payment, for all who come to its assistance must do so without security. In my judgment, the preference of one creditor to another, mentioned in the 52d section, is a preference given to an existing creditor for a pre-existing debt. If a customer or friend of a bank, knowing it to be embarrassed and in need of assistance, proffers it, for instance, a loan of $50,000 in cash, in receiving security for the amount by a transfer of a part of its portfolio, that cannot be fairly construed as giving him a preference over other creditors. Other creditors are not injured by such a transaction, for the securities that such a creditor takes out, he leaves an equivalent in cash. He becomes a creditor solely on condition of receiving security. The policy of the law is plain, namely: to prevent preference among creditors holding pre-existing debts. It clearly was not the purpose of the act to forbid the bank from giving security to its friends for means to be advanced on the spot or in the future. The general creditors are not injured by such an arrangement; they may be greatly benefited by it. Take the case in hand. Suppose the association were actually insolvent on the 12th of July. The societé in effect puts one million of francs into the possession of the bank, and takes security for it. Is the general creditor any worse off? The bank had nothing when the securities were transferred. It gets dollar for dollar for what it transfers. Can that be called giving a preference to one creditor over another? As claimed by counsel for defense, it is in effect an exchange of value rather than the giving of a preference to a creditor. It seems to me to be established beyond all controversy by the evidence in this case, that the pledge of the notes of the association complained of was not made in contemplation of insolvency, but it was a struggle on the part of the officers of the bank to avoid insolvency; it was not made to give preference of one creditor over another, but it was a plan adopted by the bank to secure means to carry on its business with a view to be able to pay all its creditors. The construction claimed by complainant for the 52d section of the Currency Act, would make the banks a trap in which the means of their friends, furnished on the pledge of securities, would be drawn in and applied to the payment of the general creditors. In Casey v. La Societé de Credit Mobilier de Paris. my judgment the construction placed on the 35th section of the Bankrupt Act is applicable also to the 52d section of the Currency Act. That section of the Bankrupt Act declares that any sale or other disposition of property made by a person insolvent, or in contemplation of insolvency, within six months before the filing of a petition in bankruptcy, by or against him, by any person who has reasonable cause to believe him insolvent, such sale being made with a view to prevent the property coming to his assignee in bankruptcy, etc., shall be void. Under this section it has been held that a sale made in good faith, for the honest purpose of discharging a debt, and in the confident expectation that by so doing the person could continue business, will be upheld. Tiffany v. Lucas, 15 Wall. 410. So in Cook v. Tullis, 18 Wall. 332, it was held that an exchange of values may be made at any time, though one of the parties to the transaction may be insolvent; that there is nothing in the Bankrupt Act that prevents an insolvent from dealing with his property, selling or exchanging it for other property, at any time before proceedings in bankruptcy are taken by or against him, provided such dealings be conducted without any purpose to delay or defraud his creditors or give a preference to any one, and does not impair the value of his estate. And in Tiffany v. The Boatmen's Institution, 18 Wall. 376, it was held that a man really insolvent, but not having yet openly failed, and hoping to overcome his difficulties and to carry on his business, violates no provision of the Bankrupt Act by pledging his property for money lent, this money being lent at the time when the pledge was made. See, also, Clark, Assignee, v. Iselin, 21 Wall. 360. On the strength of these authorities, construing a provision of the Bankrupt Act similar to the 52d section of the Currency Act, and upon my own independent judgment of what is the purpose and intent of said section, I am of opinion that the original transfer made by the banking association to the societé of the assets mentioned was not void. But the complainant insists that the transfer was void, because not made in compliance with the Code of Louisiana. It is claimed that the Code requires that when a negotiable instrument is pledged by a debtor it must not only be delivered to the creditor to whom it is transferred, but must be indorsed (Civil Code, art. 3123), and Casey v. La Societé de Credit Mobilier de Paris. as it was conceded there was no indorsement of the notes in question, the attempted transfer was ineffectual to carry title. There has been some confusion in the legislation of Louisiana upon this subject, so that it is not by any means clear whether an indorsement as well as delivery of a negotiable instrument is necessary in order to complete an act of pledge. The act approved March 15, 1855, entitled "An act relative to pledges" (see Fuqua's Civil Code, 421, note), appears to have been a re-enactment of the act of 1852 (see acts of 1852, p. 15). The first section of this act declares that when a debtor wishes to pawn promissory notes, bills of exchange, etc., he shall deliver to the creditors the notes, bills of exchange, etc., so pawned; and such pawn so made, without further formalities, shall be valid as well against third persons as against the pledgers thereof, if made in good faith. There can, it seems to me, be no doubt that the purpose of this section was to make the delivery of a promissory note without indorsement sufficient as an act of pledge. But in a subsequent revision of the statute law of the State, the provision requiring indorsement was allowed to remain; so that we have in the same statute book an article declaring that indorsement as well as delivery is necessary to the pledge of a promissory note, and another article in effect declaring that indorsement is not necessary. In my judgment it is not necessary to determine in this cause whether indorsement is or is not essential. The receiver holds only the estate and title of the bank in its assets. His title is the same as that of an assignee in bankruptcy. It will not be pretended that the bank could recover back the assets which it had pledged and delivered to the agents of the societé because they were not indorsed, and at the same time hold on to the proceeds of the draft, for the acceptance of which the assets were pledged, unless there was fraud; and there was no fraud in this case. An assignment in bankruptcy, like any other assignment, by operation of law, passes the rights of the bankrupt precisely in the same plight and condition as he possessed them, subject to all equities. Mitford v. Mitford, 9 Ves. Jr. 100; Gibson v. Warden, 14 Wall. 248; Campbell v. Slidell, 5 La. Ann. 274; Mitchell v. Winslow, 2 Story, 630; Ex parte Dalby, Lowell's Dec. 431. There seems to be no reason why the position of receiver of an insolvent bank under the Currency Act is any better than that of Casey v. La Societé de Credit Mobilier de Paris. an assignee in bankruptcy. If the receiver held the same title to the assets of the bank that the bank itself held, he cannot avoid a pledge which the bank could not avoid. He is not a third person in the sense of the Civil Code. In the case of Matthews v. Rutherford, 7 La. Ann. 225, it was held that a notarial act of pledge or a written act registered in a notary's office is a formality which is necessary to protect the payce against third parties, but its omission is unimportant as between pledger and pledgee. I am of opinion, therefore, that the failure to indorse the notes pledged by the bank is a defect of formalities in making the pledge of which neither the bank nor the receiver can take advantage. It is further claimed by the complainant that C. Cavaroc, Sr., the president of the association, could not at the same time act as president and agent of the association and as the agent of the societé. It is true that the same person cannot sell as the agent of one and at the same time buy as the agent of another, and a contract made by one who acts as the agent of both parties may be avoided by either principal. See Story on Agency, § 211, and note. Such a contract, made by a person acting as agent for two principals, involves an absurdity. But in this case the contract was made between the "societé" and the "association," the latter acting through its president. But it seems to me clear that there was no legal obstacle, the contract having been made and being in force, to the turning over by the association, acting through Cavaroc, its president, of the assets in pledge to be held by the commercial firm of C. Cavaroc & Son. In fact, C. Cavaroc & Son were mere depositaries or stakeholders, and all stakeholders are agents for both parties. It is further claimed by complainant that Cavaroc, the president of the banking association, could only act by authority of the charter or by vote of the directors in making the pledge of the assets of the association, and that no such authority is found in the charter or minutes of the board of directors. The minutes of the board of directors are evidence, however, that they knew what arrangement had been made between their bank and the "societé," and they approve it by voting a compliment to C. Cavaroc, Jr., by whose agency the arrangement had been made. The books of the bank showed that it had received a million of francs as the result of Casey v. La Societé de Credit Mobilier de Paris. this arrangement. It is impossible that the directors should have been ignorant of these facts they never repudiated the contract nor returned to the societé the fruits of it. This is a ratification. The acts of a corporation evidenced by a vote, written or unwritten, are as completely binding upon it, and as full authority to its agents, as the most solemn acts done under the corporate seal, and promises and engagements may as well be implied from its acts and the acts of its agents as if it were an individual. Abb. Dig. on Corp. 579, and cases there cited. A corporation which has received the benefit of a loan cannot avoid liability on a mortgage to secure its payment by denying the authority of those who contracted the loan on its behalf. Bissell v. Railroad Company, 22 N. Y. 258; Bank v. Dandridge, 12 Wheat. 70, 71. It is claimed, lastly, by the complainant, that the contract between the banking association and the societé was not legitimate banking business, and could not be lawfully carried out. We are not cited to any clause in the National Currency Act forbidding such a contract, and can see no reason why the association might not lawfully make it. But conceding that the Currency Act, which is the charter of the association, did not authorize such a contract, it does not follow that the association can repudiate the contract and keep its fruits. Corporations have no right to violate their charters, but they have capacity to do so and to be bound by their acts when a repudiation of such acts would result in manifest wrong to innocent parties. Bissell v. Railroad Company, 22 N. Y. 258. When it is a simple question of capacity to contract, arising either on a question of regularity of organization or of powers conferred by the charter, a party who has had the benefit of the contract cannot be permitted in an action founded upon it to question its validity. Navigation Company v. Weed, 17 Barb. 378; see, alз0, Dispatch Line v. Bellamy Manuf. Company, 12 N. H. 205; Moss v. The Rossie Company, 5 Hill, 137. I am of the opinion, therefore, that even admitting that the business carried on under the contract between the association and the societé was irregular, and not within the limits of legitimate banking, that, having made the contract and enjoyed its fruits, neither the association nor its receiver can demand to keep the money of the societé, which was received by virtue of the contract, |