Barnes v. Trenton Gas Light Co.

or demands against the testator, and that the conveyance to Mr. Potts was in fraud of the provisions of the will, and was made with the fraudulent intent of defeating the complainant's right of dower in the property. The bill charges notice on the defendants, solely on the ground that at the time of the conveyance to them, Mr. Potts was their president.

The executors had power under the will to convey the property in question. They were authorized to sell at their discretion, and the sale was to be made with a view to the investment of the net proceeds on a trust which might last for the lifetime of the testator's widow. The purchaser was not, under the circumstances, bound to see to the application of the purchase money. Perry on Trusts, §§ 704, 799; Nicholls v. Peak, 1 Beas. 69; Doran v. Wiltshire, 3 Swanst. 699; Lewin on Trusts 433; Wood v. Harman, 5 Madd. 368; Lock v. Lomas, 5 De G. & S. 326; Hauser v. Shore, 5 Ired. 357; Balfour v. Welland, 16 Ves. 151. "The general rule," says Perry, "is controlled, if a sale is directed, but the proceeds are not to be paid over to the cestui que trust, but are to be held by the trustees upon some special trusts. In such case the implication is plain that the settlor intended to confide the execution of the trust to the trustees, and that they have power and authority to receive the trust fund and give receipts." The purchase money, it may be assumed, was paid by Mr. Potts. The bill does not deny that it was paid, but it alleges that it was not paid to or received by the executors, "as executors," and that they, "as executors," received no consideration for the conveyance. This qualification forbids the acceptance of the statement as an averment, or as equivalent to an averment that no consideration was, in fact, paid. Lube's Eq. Pl. 350; 1 Dan. Ch., Pr. (4th ed.,) 545. As the statement stands, it is equivalent to an averment that the conideration was paid to and received by the executors, but not in their trust capacity. If the pleader intended to state that, although the consideration was paid to the executors, it was paid in such a way as that it ought not to be regarded as having been paid to or received by them in their representa

Barnes v. Trenton Gas Light Co.

tive or trust capacity, the facts should have been set forth so as to enable the court to determine the character of the pay

ment.

The bill charges that Mr. Potts had notice " of the will and its provisions, and the character, power and duties of the executors." Notice of all these things would not have devolved upon him the duty of seeing to the application of the purchase money, for the reason already given.

Passing by the question as to whether the complainant has any valid claim to dower on the case made by the bill, seeing that her claim to relief is based on the allegation that the executors, of whom her husband was one, were, in selling, guilty of a fraud upon the beneficiaries under the will, who were the testator's widow and children, and giving her the benefit of the general allegation in the bill, that the conveyance was intended to defeat her dower, the main question presents itself, as to whether, on the statements of the bill, the action can be maintained. That the defendants are bona fide purchasers for valuable consideration, is not denied. Their title is not impugned, except on the ground of notice, and the claim to relief is based on the allegation that at the time when the conveyance was made by Mr. Potts to them, he was their president, and this fact is relied upon as, of itself, sufficient to establish notice to them of all the facts which the bill charges were within his knowledge. The general proposition is undoubtedly true, that notice of facts to an agent is constructive notice thereof to the principal himself, where it arises from, or is at the time connected with the subject matter of his agency. The rule is based on the presumption that the agent has communicated such facts to the principal. Story on Agency, § 140. On principles of public policy the knowledge of the agent is imputed to the principal. But the rule does not apply to a transaction such as that under consideration; for, in such a transaction, the officer, in making the sale and conveyance, stands as a stranger to the company. Stratton v. Allen, 1 C. E. Green 229. His interest is opposed to theirs, and the presumption is, not that he will communicate his knowledge of

Coe v. N. J. Midland Railway Co.

any secret infirmity of the title to the corporation, but that he will conceal it. Where an officer of a corporation is thus dealing with them, in his own interest opposed to theirs, he must be held not to represent them in the transaction, so as to charge them with the knowledge he may possess, but which he has not communicated to them, and which they do not otherwise possess, of facts derogatory to the title he conveys. Commercial Bank v. Cunningham, 24 Pick. 270; Kennedy v. Green, 3 M. & K. 699; In re European Bank, L. R., 5 Ch. App. 358; In re Marseilles Extension Railway, L. R., 7 Ch. App. 161; Ang. & Am. on Corp. 308; Winchester v. Balt. & Susq. R. R. Co., 4 Md. 231.

The defendants, then, according to the bill, are bona fide purchasers for valuable consideration, without notice. The complainant can have no relief against them.

The demurrer will be sustained and the bill dismissed, with costs.

COE and others, TRUSTEES, vs. THE NEW JERSEY MIDLAND RAILWAY COMPANY.

1. An application by receivers of an insolvent railroad to issue certificates of indebtedness to cover certain expenses, and an order of the court thereon accordingly, does not bind the receivers or the trust fund to pay particular items of such expenses, the propriety of whose payment was not before the court..

2. Application to compel the receivers of an insolvent railroad company to deliver to creditors certain certificates of indebtedness, which the receivers were authorized by this court to issue, and which they had offered to such creditors in payment of rolling stock, and which the creditors had accepted, refused; the creditors having had it in their power to retake their property at any time, and it appearing that it would have been to the disadvantage of the trust fund for the receivers to have paid the contract price.

On petition of The Rhode Island Locomotive Works Company, for an order requiring the receivers of the defendants to

Coe v. N. J. Midland Railway Co.

deliver to the petitioners certain certificates of indebtedness, which the receivers were authorized by this court to issue, and to which the petitioners claim to be entitled.

Mr. Cortlandt Parker, for petitioners.

Mr. Ashbel Green, for receivers.

THE CHANCELLOR.

The respondents are the receivers appointed in this suit on application of the complainants, as mortgagees. One of them, Mr. Garret A. Hobart, was, previously to the filing of the bill in this cause, appointed receiver for the creditors and stockholders of the defendants, under proceedings taken under the act "to prevent frauds by incorporated companies." The petitioners, The Rhode Island Locomotive Works Company, on or about the 13th of January, 1875, entered into an agreement with the defendants, by which they furnished to the latter ten locomotive engines and tenders, as upon lease, but with the agreement that on payment in full of the rent reserved, ($119,536.36,) they should be the property of the defendants. The rent was payable in installments, between the date of the agreement and the 5th of January, 1876, and the defendants gave to the petitioners their notes for the amount of it. At the time of the appointment of the receiver in insolvency there was, according to the petition, due to the petitioners for rent about $120,000. The locomotives and tenders were then in the possession of the receiver, and (except one of the locomotives, which had been so damaged by fire as to be useless,) were in use on the road. Nothing has been paid to the petitioners since then. The petitioners base their claim to the relief they seek, on the ground that, shortly after his appointment, the receiver in insolvency requested them to leave the locomotives and their tenders in his possession, for use on the road, he guaranteeing that he would keep them in good order, and promising to apply to the Chancellor for authority to pay their claim for

Coe v. N. J. Midland Railway Co.

rent under the lease; on the faith of which undertaking they permitted the property to remain in his hands; that subsequently, application was made by the receivers appointed in this cause, (which is a suit for the foreclosure and sale of mortgaged premises) for authority to issue certain certificates of indebtedness, to be used for the purposes of their trust, among which was the payment of the rent which had become due, and was unpaid, and that which would accrue up to the 31st of December, 1875, in all $28,300.23.

Of the rent reserved, $85,354.68 did not, by the terms of the lease, become due until the 5th of January, 1876. The authority for issuing the certificates was obtained, and one of the receivers applied to the treasurer of the petitioners, stating that the receivers found difficulty in negotiating the certificates, and suggested that the petitioners should take them as so much money. It is alleged that before that communication was made, the receivers had offered to deliver the certificates in payment of so much of the rent, and the offer was accepted, but the certificates were not sent. The receivers admit, by their answer, the foregoing facts, substantially.

They allege, however, that they have been warned and notified by persons interested in the first mortgage bonds of the defendants not to pay the rent or deliver the certificates therefor, because, as is alleged, the property is not worth the amount agreed to be paid for it, but a very much less sum, and the receivers say they have ascertained that it is not for the interest of the trust which they represent that the rent should be paid.

The petitioners have no equity arising from the conduct of the receivers to have the agreement between them and the defendants specifically performed, without regard to advantage or disadvantage to the trust fund. The most that can be said of the transaction is, that the petitioners were induced by the hope, and, perhaps, reasonable expectation engendered by the statements of the receivers, to leave their property in the possession of the receivers for use on the road. It was alleged on behalf of the receivers, on the argument, and was not denied,