Ogilvie v. Knox Insurance Company (63 U.S. 380)

THIS was an appeal from the Circuit Court of the United States for the district of Indiana.

It was a bill filed on the equity side of the court, by Ogilvie, Angle, & Co., traders in partnership in Iowa, together with twelve other persons, citizens of Missouri, Ohio, and Michigan, against the Knox Insurance Company, and against Levi Sparks and thirty-six other persons, subscribers to the capital stock of the company. Being a creditor's bill, filed by the complainants and such other creditors as might make themselves parties, thirty-two other creditors came in and made themselves parties to the suit. The bill alleged that the complainants had recovered divers judgments against the insurance company, upon which executions had issued, the return to which had been, 'no property;' that the other defendants severally subscribed for stock in the company, and were still indebted for it, payment not having been enforced by the company. The prayer of the bill was, that they might be decreed to pay their subscriptions, and that the judgments might be satisfied from the fund thus produced.

At the September rules, 1852, the bill was taken pro confesso against all the defendants; but afterwards they all (except the company) appeared, demurred, and, upon the demurrer being overruled, answered. The securities, being the subscription notes, were brought into court. Collum's answer was adopted by most of the other defendants, which answer is particularly noticed in the opinion of this court. After sundry other proceedings, not necessary to be mentioned, the court dismissed the bill, and the complainants appealed to this court.

It was argued by Mr. Gillet for the appellants, upon which side there was also a brief filed by Mr. Judah, and submitted on a printed argument by Mr. Crawford for the appellees.

The points made by the counsel for the appellants were, of course, similar in substance. The following were the fourth and fifth points of Mr. Gillet, and the third and fourth of Mr. Judah:

Mr. Gillet:

IV. The subscriptions and obligations of the defendants are not void, or voidable, even if it shall be admitted that the facts set up in their answers are true.

The defendants do not aver that the company authorized the false representations complained of, or that they approved of them after they were made. Nor do they aver that they repudiated the transaction as soon as they learned the true state of things. Nor do they state that they offered to restore things to their original condition. They set up that, on the 25th of June, 1851, more than a year afterwards, they would have nothing more to do with the company, nor would they pay their notes or bills. This was about a year after they knew of the heavy losses. In order to defeat their liability, they must connect the company with the fraud alleged. This they have wholly failed to do, both in their answers and evidence. An unauthorized falsehood, told by their agent, was no act of theirs, and they cannot be held responsible for it.

If Carnan misrepresented the condition and affairs of the company, that was a matter between him and those who subscribed on the strength of the representation. It was he, and not the company, that deceived them. The answers do not set up a legal defence to the defendant's obligations. They do not even aver that they offered to restore things to their original condition. They do not allege that they returned, or offered to return, the stock to be cancelled. Nor do they state that they asked the company to do anything at all. They kept the consideration of their obligations, and at the same time repudiated them, not because the company had deceived them, but because Carnan told them two falsehoods, as they aver. As they have presented their case by their pleadings, the defendants have no defence to their obligations.

'It (a corporation) is not, however, responsible for unauthorized or unlawful acts, even of its officers, though done colore officii. To fix the liability, it must either appear that the officers were expressly authorized to do the act, or that it was done bona fide, in pursuance of a general authority in relation to the subject of it, or that the act was adopted or ratified by the corporation.'

Angel and Ames, pp. 250, 251.

In Thayer v. Boston, (19 Pick., 516, 517,) Chief Justice Shaw used the same language.