AMERICAN NAT. BANK v. NATIONAL WALL-PAPER CO., 77 F. 85

CALDWELL, Circuit Judge, after stating the case as above, delivered the opinion of the court. The court did not err in overruling the motion to compel the plaintiff to elect upon which count of the complaint it would go to trial. It is probable the plaintiff’s cause of action could have been stated in one count, but the pleader conceived the transaction was of such a character as to make it

an act of prudence to state it in two aspects. The first count alleges that “the defendant owned and controlled the A. Gauthier Decorating Company,” and agreed to pay for the goods that might be sold to the manager of that company on credit; and the second count alleges a sale of goods to the defendant, without mentioning the A. Gauthier Decorating Company. We think the averments of the first count, fairly construed, mean that the bank owned and controlled the A. Gauthier Decorating Company, and the business carried on in that name, and promised and agreed to pay for the goods sold to the manager of that company.

So construed, the business conducted in the name of the A. Gauthier Decorating Company was the bank’s business, and the two counts are, in legal effect, the same, and upon the proof in the case a recovery could be had on either. Under both counts the bank was the real debtor, and primarily liable, if liable at all. The motion to strike oat parts of the first count was rightly overruled. The clauses which it was desired to strike out were either material or surplusage.

If material, — and we think they were, — they ought not to have been stricken out; but, if they were immaterial, (heir presence does no harm and is not prejudicial error. The demurrer to the second count was rightly overruled. The plaintiff was not bound to anticipate the bank’s defense. City of Fergus Falls v. Fergus Falls Water Co., 19 C. C. A. 212, 72 Fed. 873. We have now disposed of the first four assignments of error. Assignments 3 to 37, both inclusive, relate to the admission of evidence over the defendant’s objection. For the purpose of illustrating their character we here copy two of them: “

(7) The court below erred in permitting tlio witness Gauthier to answer the iiuesrion, ‘For whom did Mr. O'Donnell buy this stockV’ ” “GO The court below erred in overruling tito motion of (he defendant to strike out the answer of the witness Gauthier to the question, ‘Who was Ballenline7’ ” The rest are similar to these two. Where they relate to the questions, they do not show the questions were answered; and where they relate to the answers, they do not show what the answers were. Ituie 11 of this court (11 C. C.

A. cii, 47 Fed. vi.) declares: “When the error alleged is to the admission or to the rejection of evidence, the assignment of errors shall quote the full substance of the evidence admit.ted or rejected.” Under this rule we cannot notice any of these assignments. We will add, however, that upon a careful examination of the record we find that all of the objections are without merit. It is assigned for error that the court refused, at the close of the evidence, to instruct the jury to return a verdict for the defendant It would serve no useful purpose to set out the evidence in detail.

It is sufficient to say that there was abundant evidence to send the case to ihe jury, and from which they might well find the facts as we have summarized them in the statement, and which we need not here repeat. One reading the testimony in the case cannot wink so hard as not to see that the A.

Gauthier Decorating Company was a creation of (he hank for its own purposes, that the business conducted in (he name of this new creation was the hank’s business, and that the bank was the recipient of the proceeds of the business, and was fully advised of all that was going on, including the purchase of the goods from the plaintiff. It does not matter that the goods were billed to this creation of the bank, and not to the hank itself.

In a recent case we bad occasion to say: “One corporation cannot keep another corporation under its management and control, and use it as a scapegoat for its debts, whenever it finds it desirable or profitable to do so.” Glidden & Joy Varnish Co. v. Interstate Nat. Bank, 32 U. S. App. 654, 16 C. C. A. 534, and 69 Fed. 912, 919. The law is not to be cheated by any gloss of words. It judges things by what they are' in fact, and not by their names. Words are not things. If the relation of the bank to the A.

Gauthier Decorating Company was not what we find it to be from the facts and circumstances disclosed in the evidence, it was an easy matter for the bank to show it. Some of the same persons were directors and officers in both corporations. The bank had the custody and control of its books and papers, and it was in its power to show precisely what its relation was to the A. Gauthier Decorating Company, and what disposition was made of the goods and the money received for them. But it declined to put a single witness on the stand, or offer a single book or paper in evidence.

It is a well-settled rule of evidence that when a party has it in his power to rebut the inferences which the testimony tends to establish, and he declines to offer such evidence in rebuttal, the jury are at liberty to presume that the proof, if produced, instead of rebutting, would support, the inferences against him. Railroad Co. v. Ellis, 10 U. S. App. 640, 4 C. C. A. 454, and 54 Fed. 481.

In Starkie, Ev. (10th Ed.) p. 75, it is said: “The conduct of a party in omitting to produce that evidence, in an elucidation of the subject-matter in dispute, which is within his power, and which rests-peculiarly within his knowledge, frequently affords occasion for presumption against him; since it raises a strong suspicion that such evidence, if adduced, would operate to his prejudice.” This rule is applied in capital ahd other criminal cases. Com. v. Webster, 5 Cush. 295, 316; People v. McWhorter, 4 Barb. 438.

It is commonly supposed that banks and bank cashiers represent the highest type of business honor and integrity, and generally this high opinion is fully justified; but the correspondence between the plaintiff and this bank through its cashier reveals on the part of the bank and its cashier that vulgar type of dishonesty of obtaining goods on credit, and then refusing to pay for them, and a court of justice is deliberately asked to put its seal of approbation on this method of doing business.

It is said the court should do this for the protection of the bank’s stockholders,' but we know of no principle of law or morals that would justify the court in holding that a bank can obtain the property of the citizen by promising to pay for it, and, after obtaining it, convert it into money, and put the money in its vault, and then refuse to pay for the property upon the ground that such action would be prejudicial to its stockholders, or that it had no legal'right to parchase the property. If it had no right to purchase the property, it should return it or its proceeds.

The stockholders of the bank have no legal or moral right to profit by such illegal or dishonest acts of the bank at the expense of the innocent merchant whose property it has appropriated. The bank seeks to escape paying for the goods upon two grounds. The first is that the cashier acted without authority of the bank. This, as we have seen, is an error of fact; but, assuming the cashier, who had long held that position in the bank, and who still holds it, did act in the premises without sufficient authority from the hank, that circumstance constitutes no defense to this action upon the facts of this case.

The cashier acted in good faith towards the bank. He did not appropriate to himself the goods purchased for the bank in the name of the A. Gauthier Decorating Company. They were sold, as was contemplated when they were purchased, along with the stock purchased by the bank at sheriff’s sale, and the proceeds of the sale received and retained by the bank, after it had full knowledge of the circumstances under which the goods were purchased, if it did not have that knowledge before.

The law on this state of facts is well settled, and is thus slated by Judge Thompson: “It is a general principle in the law of agency that, where one person assumes, without authority, to make a contract for another, and that other receives the benefits accruing from the contract, and elects to retain them after being possessed of knowledge of the circumstances under which they have been procured from the other contracting party, he is thereby estopped from repudiating the contract without restoring the benefits and putting the other party in statu quo.

This principle is applicable in its fullest sense to corporations, which, from their nature, can act only through ¡he instrumentality of agents. If, therefore, an officer of a corporation, or other person, assuming- to have power to bind the corporation by a given coniract, enters into the contract for the corporation, and the corporation receives the fruits of the contract, and retains them after acquiring knowledge of the circumstances attending the making of the contract, it will thereby become es-topped from afterwards rescinding or undoing the contract.

In other words, by retaining the fruits of the unauthorized contract with knowledge o£ the circumstances which entitle it to its election either to affirm or disaffirm it, the corporation ratifies the contract, and makes it good by adoption.

Speaking generally, and. voicing1 the weight of judicial authority, the corporation is in like manner estopped by retaining, with knowledge, the fruits of the contract, from pleading ultra vires as a defense to an action thereon; that is, from setting up as a defense to an action to compel 1he performance of the contract on its part that it was without power to enter into it.” Thomp. Corp. § 5258. It is next said that the hank had no authority under its charter to buy and sell goods, and that any purchase of goods by the hank, or any one for it, was ultra vires, and did not hind the bank.

We entertain no doubt of the bank’s right to purchase the A. Gauthier stock at the sale thereof on the judgment in its favor; and the right to purchase to save a pre-existing debt due the bank carried with it by necessary implication the right to sell the goods so purchased.

How the bank should proceed to dispose of the goods purchased at the attachment sale, and whether, in order to sell that stock to the best advantage, it could rightly buy fresh goods to mingle with if, we need not inquire; for, conceding that it had no right to purchase any goods, not even those purchased at the attachmeni sale, its liability to pay for the goods purchased from the plaintiff is not affected on the facts of this case. “The great mass of judicial authority,” says Judge Thompson, “seems to be to the effect that, whore a private corporation has entered into a contract in excess of its granted powers, and has received the fruits or benefits oí ihe coniract, and an action is brought against it to enforce the obligation on its part, it is estopped from setting up the defense that it had no power to make it.” Thomp.

Corp. § 6016. Continuing the subject, the learned author further says it is a general principle of law that no party will be permitted to set up the defense of ultra vires while retaining the fruits or the benefit of the contract. This doctrine rests upon the unanswerable ground thus stated in Pennsylvania by Mr. Justice Porter: “A man who has enjoyed a privilege has no right to say that because he ought not to have enjoyed it he will not pay for it. However unlawful the act, it would be unsound policy to give him this immunity.” Id. § 6015.

The reason of the rule is that honesty and fair dealing are the highest public policy, and that a private corporation, which is a mere collection of individuals, is no more privileged to repudiate its engagements, and act dishonestly, than a single individual is. Id. § 6017. Where, therefore, a corporation purchases property contrary to a prohibition, or without an authorization in its charter, it cannot retaifi the property, and refuse to pay the price, or set up the defense of ultra vires when sued for the same. Id. § 6018.

The authorities supporting the text of the learned author are too numerous to require citation. The doctrine has become familiar learning. The charge of the court, each paragraph of which was duly excepted to, was, when applied to the law and the facts of the case, more favorable to the defendant than it had any right to ask, as will readily be seen by reference to the charge. The jury returned a verdict in favor of the plaintiff for “the sum of $3,201.94, with interest at 6 per cent.” The amount of the verdict was the principal of the plaintiff’s demand.

The court below refused to render judgment on the verdict in any other form than that in which the verdict was returned, namely, “for the sum of $3,201.94. with interest at 6 per cent.” To this ruling the plaintiff below duly excepted, and has brought error.

Section 2252 of the Colorado Statutes (Mills’) provides that creditors shall receive interest on money due on account from the date when the same became due. The account sued on was probably due some time before suit was brought, but the fact of recovery in the action settles conclusively that it was due when the suit was commenced, and from that date, namely, the 19th day of October, 1894, the plaintiff was plainly entitled, under the verdict of the jury, to have the interest calculated on the principal sum, namely, $3,201.94, at 6 per cent., and the circuit court will amend the judgment accordingly. Thus modified, the judgment of the circuit court is affirmed.