Sutter St. R.R. v. Baum

McKinstry, J. 1. The court below found: “ Prior to the 21st day of November, 1878, and at all times herein mentioned, the defendant Shrier was, and is, the partner of the defendant Baum; that although the said notes and mortgage were made to the said Shrier by name, yet he never had any real or beneficial interest therein, and never advanced any part of the said $125,000 (the full amount received by plaintiff); that the defendant Baum [51]was the person who advanced all of said money, and that he was the real and substantial owner of all of said notes and mortgage ; and that he negotiated the said loan, and arranged the terms thereof with his co-directors of said corporation; that the said Shrier merely lent his name to the transaction ; * * * that about the 18th of August, 1879, the said notes and mortgage were formally assigned, transferred and delivered to the said Baum; and that ever since said last mentioned day, said Baum has been the (legal) owner and holder thereof, and still is such owner and holder.”

There was sufficient evidence to uphold the finding.

2. It is not necessary to say whether the notes and mortgage were or were not void. For the purposes of this decision, it may be conceded, as is claimed by appellant, that the doctrine laid down by Mr. Taylor (in his Treatise on the Law of Private Corporations, § 634), is just, and sustained by authority. That writer says: “ The following rules regarding loans to a corporation from its officers seem deducible from the preceding and other cases. Directors and other officers may, when they honestly deem it for the interest of the corporation to borrow, advance it money on terms as favorable as any on which they could have procured the money for it from other sources; and they may take from the corporation security for their loan,” etc.

3. The court below found “ from the 10th day of July, 1879, (the date of the resolution which purported to authorize the execution of the notes and mortgage), ten per cent, was an excessive and unjust rate of interest; and from and after said day, according to current market rates, nine per cent, per annum upon said -1125,000 was a fair, just and reasonable rate of interest, the mortgagee paying the tax upon said debt and mortgage. ”

The most that can be conceded to the defendant Baum is, that he believed it to be for the interest of the corporation to borrow one hundred and twenty-five thousand dollars, the money which it actually received. The finding, of course, is to be applied to the transaction before the court, and is to the effect that nine per cent.—the mortgagee paying the taxes—was a just, fair, and reasonable rate to be paid for the use of the one hundred and twenty-five thousand dollars, reference being had to the security in fact given, and to the usual rates paid in similar