Howard Oil & Grease Co. v. Hughes ( 1900 )

Opinion by

William W. Pontee, J.,

The issue in this case was framed to determine whether the money in the hands of McCreight was properly payable to W. B. Hughes, or under the attachment executions issued upon judgments against the DuBois Electric Light, Power and Heat Company. We are of opinion that no error was committed by the court below, before whom the issue was tried without a jury, in holding W. B. Hughes to be entitled to the fund.

The borough of DuBois desired to pave two of its streets. Hughes was a bidder for the contract. The DuBois Traction Railway Company operated a railway upon these streets. The duty of the company was to conform its road to grade, prepare the same for brick, and do the paving between and for a distance of one foot beyond, the rails. The borough refused to contract with Hughes for the borough paving, unless Hughes would, at the same time, contract with the railway company for the work it was required to do. Hughes declined to do this unless the railway company secured to him the payment of the contract price for their work. The sum of $700 seems to have been due by the borough to the electric light company for lighting the streets. An arrangement was arrived at by which an order was drawn by the borough for $700 payable to the electric light company. This order was indorsed and deposited in the bank of which McCreight was cashier. He agreed to hold the same in trust to secure Hughes under bis contract with the railway company. The transaction was in effect, a payment by tbe light company to the railway company and a deposit by them with McCreight as security aforesaid. There is no disclosure, in the evidence, of the business relations subsisting between the two companies. The transaction on its face indicated that there was an indebtedness by the light com • pany .to the railway company to the amount of 1700. Tbe two companies were ascertained subsequently to be in financial difficulties. Judgments were obtained against the light company, and attachments sur judgment were levied on McCreight as garnishee, claiming the fund in his hands as the moneys of the light company. Hughes completed his work for the railway company and demanded payment from McCreight of the fund in his hands as security.

On behalf of the attachments it is argued that the moneys were diverted from the light company hr aid of the railway company, and that this, in view of tbe impending insolvency of tbe light company and in the absence of any evidence of indebtedness to the railway company, was an unauthorized appropriation of the moneys of the light company.

The question resolves itself into one of corporate power. Tf the light .company had power to make a payment of the money to the railway company, the railway company had undoubted power to deposit it in trust as security for its contract with Hughes. Under the circumstances, is the burden upon the attaching judgment creditors of the light company to prove the diversion of the funds to be ultra vires, or upon Hughes, the other claimant to the fund, to prove the contrary? The attaching creditors stand in no better position in respect to the fund than their judgment debtor. On a claim of that company that its funds have been improperly diverted, the burden would be upon that company to prove a wrongful diversion. The transaction is without the impress of fraud or of knowledge, on the part of the other claimant to the fund, of any wrongful diversion of the funds by the light company. It is but the application of its funds by the indorsement of a borough order for the benefit of another company, with which it presumably had financial relations. In McMasters v. Reed’s Executors, 1 Grant, 36, it is said : “ In general an express authority is not indispensable to confer upon a corporation the right to borrow, to deal on credit or become a drawer, indorser or acceptor of a bill of exchange, or to become a party to any negotiable paper; ” and in the same case, Mr. Justice Lewis says : “ If the holders of bonds and other negotiable paper against corporations, having general authority to make such contracts, were bound to encounter the presumption that they were illegal, their character and value would be destroyed, and the mischief would be intolerable. In this case there is no evidence to repel the presumption that the bonds were issued in the course of the lawful business of the company.”

Applying this presumption to the case at bar, the burden was upon the party alleging the indorsement and delivery of the borough order to be fraudulent or ultra vires to prove the allegation. There was no such proof adduced.

The judgment of .the court below is, therefore, affirmed.