merous indorsements made by him while holding himself out to the public as having authority so to do, an indorsement made by him is binding on the corporation, though the indorsee had no knowledge of the previous indorsements.

7. Where a corporation's treasurer acts as its general agent in indorsing from time to time large quantities of its commercial paper, it will be bound thereby, if the directors ought to have known he was so doing.

8. A manufacturing corporation has no authority to give accommodation paper.

9. A manufacturing corporation is bound by an indorsement of paper given for accommodation only, when in the hands of a bona fide holder.

10. A trading corporation owning most of the stock of a manufacturing corporation was the agent for the sale of all the product manufactured, and received the entire proceeds of sales. It supplied the manufacturing corporation with running expenses, and to such end turned over commercial paper which the manufacturing corporation indorsed and discounted at banks, using a large amount of the cash thus obtained in meeting pay rolls, and some of it going to the credit of the trading company. Held that, in view of the relations of the corporations, the paper whose discount went to the credit of the trading company was not accommodation paper.

11. Even if a part of the paper was accommodation paper, the banks were bona fide holders. 12. A trading and a manufacturing corporation carried on the business of manufacturing and selling sewing machines as one entire business. The one owned most of the stock of the other, and paid an agreed dividend to the holders of the balance of said stock, and such was the only accounting had between them. The one delivered to the other large quantities of customers' and agents' notes, which were indorsed by the other, and discounted at a bank, which placed the discount to the credit of the other, which used a part of the funds for its own benefit, and also signed checks on said bank named as payee, to be paid out of said discount, for money that was applied to taking up other notes of like character previously discounted in said bank by said trading corporation, without the indorsement of said manufacturing corporation. Held, that none of the paper indorsed by the manufacturing corporation was accommodation paper.

13. The bank did not take such paper with knowledge of any infirmity in it, or with such suspicion, with regard to its validity, as that its conduct in taking it was fraudulent.

14. Where one corporation, by indorsing the paper of another, obtains a bank discount which is used in paying obligations due from it, but which is charged against said other corporation primarily bound to pay said obligations, there can be no escape from liability to the bank on said indorsement on the ground that it was made for accommodation only.

15. A corporation is liable on an unauthorized indorsement of notes made by its assistant treasurer, where, after such indorsement, the notes were discounted, and it received the discount, which was used in paying its employés.

16. In 1881, a sewing-machine company, to secure bonds due from it, transferred to a trustee by a deed of trust certain shares of stock in a manufacturing company. Subsequently the trustee agreed that upon the execution of certain mortgages he would transfer to the sewing-machine company said stock. The mortgages were executed, but he did not surrender the stock, and three years thereafter the sewing-machine company became insolvent before paying said bonds, and a receiver was appointed. Held, that said security given in 1881 was unimpaired.

17. Said receiver could not compel said trustee to convey said stock to him.

18. A transfer by an insolvent Ohio corporation of all its assets to a New Jersey corporation, assuming all indebtedness, is not void under the laws of Ohio as against bondholders of the Ohio corporation.

19. Where one corporation transfers all its assets to another assuming all indebtedness, the bondholders of the former are creditors of the latter. 20. Such bondholders, however, have no equitable lien on its assets, in preference to other creditors of the latter, whose claims arose subsequent to such transfer.

Separate bills by David Blake against the Domestic Manufacturing Company and by Eliza A. Blake and others against the Domestic Sewing-Machine Company and others to secure the payment of bonds and preserve the rights of complainants as creditors. Andrew Kirkpatrick was appointed receiver in both actions. Eliza A. Blake and others, bondholders of the Domestic Sewing-Machine Company, appealed from the determination of the receiver allowing the claims of six banks, to wit, the Phoenix National, the Garfield National, the National Broadway, the National Park, the Chemical National, and the First National, against the Domestic Manufacturing Company. Heard on bill, cross bill, answers, and replications, and on said appeals, proof being taken orally. Appeals dismissed, except that as to the claim of the First National Bank, and the rights of complainants determined.

Charles L. Corbin, S. B. Brownell, and Rush Taggert, for complainants. T. N. McCarter, Mr. Doyle, and Mr. Reeve, for National Park Bank and others. R. V. Lindabury and J. C. O'Connor, for Garfield Nat. Bank and others. J. E. Howell, for Andrew Kirkpatrick, receiver.

EMERY, V. C. The litigation in these cases arises out of the failure of two corporations of this state, the Domestic SewingMachine Company and the Domestic Manufacturing Company, which were declared insolvent on June 2, 1893, on separate bills, the defendant Hon. Andrew Kirkpatrick being appointed the receiver of each corporation. These two companies had been connected in the manufacture and sale of sewing machines on a large scale since the organization of the sewing-machine company in April, 1891. Previous to this date, and since the organization of the manufacturing company, in 1881, a similar business connection existed between the manufacturing company and the Domestic ganized in 1870, under the laws of the state Sewing-Machine Company, a corporation orof Ohio. The sewing-machine company of New Jersey was organized to take over the assets and continue the business of the Ohio company, and by deed dated April 22, 1891, the New Jersey company purchased the assets of the Ohio company, and assumed its indebtedness, and also that of the Domestic Manufacturing Company, and to carry out and fulfill all existing obligations and contracts. The deed further declared that the New Jersey company "hereby pledges all the property and assets above conveyed and transferred to it for the payment of the obligations so assumed." At the time of this transfer of its assets from the Ohio company to the New

Jersey company the Ohio company had an outstanding bonded indebtedness of about $300,000, which remained unpaid at the failure of the company. This same bonded indebtedness also existed on the part of the Ohio company in 1881 at the time of the organization of the manufacturing company, having been created as early as 1875. The Ohio company owned 1,980 shares of the entire 2,000 shares of the capital stock of the manufacturing company, and upon the organization of the latter company, in 1881, and by deed of trust dated April 21, 1881, the Ohio company conveyed to Eli J. Blake and John Dane, Jr., as trustees, this 1,980 shares of stock to secure these bonds and other obligations specified. The disputes now to be settled arise out of a twofold claim made by the complainants, who are the holders of $291,000 of these bonds. Their first claim is based upon the pledge of the manufacturing company stock to secure their bonds, and also upon their rights as creditors of the sewing-machine company, which is the owner of the stock, subject to the pledge for their benefit. The receiver has allowed or approved claims to the extent of about $300,000, which have been proved against the Domestic Manufacturing Company, by six banks holding notes indorsed, or purporting to be indorsed, by the manufacturing company. The complainants, as such creditors of the sewing-machine company, appeal to this court under the statute"Corporations," § 82 (1 Gen. St. p. 923)—from the determination of the receiver allowing these claims. The ground of appeal is that the indorsement of the manufacturing company made on these notes was an indorsement by David Blake, the treasurer of the company, without authority, and that the indorsements are not binding upon the company. So far as relates to this dispute, the formal proceeding is that of separate appeals by the complainants from the allowance of the claim of each bank.

A preliminary motion to dismiss the appeals was made upon the ground that the complainants had no interest in the allowance of the claims. This was overruled on the ground that, as the complainants were certainly creditors of the sewing-machine company, even if their claim to a lien was invalid, and the sewing-machine company, as part of its assets, owned the manufacturing company stock, the complainants were directly interested in protecting this latter company against unfounded claims; and, inasmuch as the same receiver represented both companies, and had allowed the claims, the equitable situation was one where the greatest possible latitude should be given to the other creditors of either company in contesting claims against the manufacturing company, supposed to be invalid. The other claim of the complainants is the one upon which their bill in equity is based, and, briefly stated, the nature of this claim is that at the time of the transfer by the Ohio company of its assets to the New Jersey company

the Ohio company was insolvent; that the transfer to the New Jersey company was void under the laws of Ohio, and that it was in fraud of the complainants as creditors of the Ohio company, and that complainants have a lien upon all the real and personal assets of the Ohio company existing at the time of the transfer prior to the claim of the creditors of either of the New Jersey companies. If, however, the transfer of its assets by the Ohio company to the New Jersey company should be held valid, then complainants claim that by virtue of the pledge of the existing assets made by the New Jersey company upon the transfer to pay the debts of the Ohio company the complainants, as creditors of the Ohio company, have a lien on this property in the receiver's hands superior to any claim of any creditor of the New Jersey Sewing-Machine Company. The complainants also claim that the patents and trade-marks originally belonging to the Ohio company and assigned to the New Jersey company were specially pledged to secure their bonds, and are so applicable in the receiver's hands to their claims. The bill further specially attacks the validity of the indorsement of the manufacturing company's notes by David Blake, and the allowance by the receiver of the claims of the banks founded thereon, and states that appeals are pending from these determinations, and the receiver and the banks were made defendants to the bill. The claims presented and allowed against the sewing-machine company amount to about $1,500,000, while the claims allowed against the manufacturing company are mainly the claims on the notes held by the banks. The principal asset of the sewing-machine company in the hands of the receiver is the stock of the manufacturing company, and the main dispute between the bondholders, the receiver, and the banks, both in the equity case and on the appeals, is as to the liability of the manufacturing company on the notes indorsed by David Blake as its treasurer. The equity cases and the appeals were therefore heard together, and in the disposition of the cases I will first take up the question of the validity of notes proved against the manufacturing company, leaving certain features of the equity case, not directly connected with this main question (including the matters set up in the answer and cross bill of the receiver) for a further separate statement and conclusion after disposing of the question which is the substantial one in both proceedings.

All of the notes in question purporting to bear the indorsements of the manufacturing company are similar in character, and are notes made by persons who were selling agents of the Domestic Sewing-Machine Company (of New Jersey), and are made payable to the order of the sewing-machine company at its place of business in New York City. They are all indorsed, in the first place, by the Domestic Sewing-Machine Company, by David Blake, vice president; his authority to indorse for this company not being called in question.

They are then (with three exceptions, which will be specially noted hereafter) indorsed in the following form: "Domestic Mfg. Co., David Blake, Treas." Thus indorsed, the notes were received by five of the banks, the Phoenix National, the Garfield National, the National Broadway, the National Park, and the Chemical National, for discount to the credit of the manufacturing company in its account with these banks respectively, and the proceeds of the discounts were by these banks respectively passed to the credit of the manufacturing company. The Second National Bank of Cooperstown purchased in the open market two of the notes, similarly made and indorsed, for full value, before maturity. The First National Bank holds five of the notes (similar in form), amounting to $29,714, as collateral to demand notes of the sewing-machine company, and these notes held by the First National Bank appear to have been so received as collateral in substitution for other notes to which the manufacturing company were not parties, and which were held as collateral to this loan made by the First National Bank to the sewing-machine company. The original loan by the First National Bank to the sewing-machine company of Ohio was made in 1890, and the notes indorsed by the manufacturing company were received by it in substitution for the other collateral in April, 1893. All of the notes held by each bank were duly protested for nonpayment. purchase of the notes by the Cooperstown Bank in open market, and the receipt of them by the First National as collateral for the sewing-machine company's debt, involve questions not raised in reference to the notes received by the banks discounting for the credit and account of the manufacturing company; but the preliminary question in all of the cases is as to the authority of David Blake to impose the liability of indorser upon the manufacturing company, and this question will therefore be first considered.

The

The complainants, in their bill and by their petitions of appeal, charge that these indorsements were made without authority from the manufacturing company, and without the knowledge or consent of its board of directors, and were made for the purpose of using the credit of the manufacturing company to borrow large sums of money, in order to enable the sewing-machine company to carry on its business. The banks, in their several answers to the bill and petitions of appeal upon this question of authority, allege that the indorsements were made with the knowledge and consent of the board of directors of the manufacturing company, and in the regular course of the business of the company, with which the directors were familiar; that David Blake, the treasurer of the manufacturing company, was also its general agent and manager, and invested by its directors with the entire management and care of the business, and with the possession and collection of its assets, and the application

of their proceeds to its business; and that David Blake, as treasurer, was held out to the world, and to the creditors of the manufacturing company, as authorized to indorse these notes for discount or sale. The five banks discounting the paper further insist that the proceeds of the discounted notes actually came to the use of the manufacturing company and were received for its benefit; and it cannot, therefore, escape liability for the repayment of the money, even if the indorsement was unauthorized. The Cooperstown Bank, in its answers, also alleges that the notes held by it were commercial paper of the manufacturing company, made in the regular course of business, and that this money raised therefrom was used by David Blake, as treasurer, in the business of the company. In answer to the claim of the banks that the money procured by the discount or sale of the notes in question was in fact received by the manufacturing company, and applied to its use, and that the company is therefore liable, even if the indorsement of the treasurer was originally unauthorized, the complainants claim that with the exception of the sum of $10,023.35 of the claim of the National Broadway Bank (to which extent liability is admitted) the entire amount raised by the discount and sale of the notes was used in the payments of debts and obligations of the sewing-machine company, and did not in fact come to the use of the manufacturing company; this application, as well as the discounts, being made without the knowledge or consent of the directors of the manufacturing company, and without their ratification. The issues raised, therefore, in reference to the notes, are as follows: First. Was David Blake, the treasurer, authorized to indorse the notes to the banks? Second. Were the notes accommodation paper of the manufacturing company, and to be so treated as invalid on that account in the hands of the banks? Third. Did the proceeds of the notes, or any of them, come to the use of the manufacturing company in such manner as to charge it with liability either for the notes or the money received thereon?

As to the authority of David Blake, as treasurer, to indorse the commercial paper of the company, it is not disputed that such authority was not directly conferred upon the treasurer, either by the by-laws of the company or by any formal resolution of the board of directors. The only provision of the by-laws relating directly to the treasurer is a section providing for his giving bond for the faithful discharge of his duties. These duties were not specified, nor was there, either from the by-laws or from any resolution of the board of directors, any direct authority to any officer of the company either to make or to indorse its commercial paper in the course of business. Counsel for the banks claim that the treasurer of a manufacturing and trading corporation of this char

acter has the right, by virtue of his office, to indorse the business paper of the corporation, and to bind the corporation thereby, and the decisions in some states relating to the implied powers of cashiers and treasurers are cited as supporting this contention. But in my judgment, they do not reach to the extent claimed, and, in view of the general provisions of our statute laws that the business of the corporation is to be managed by the directors, and the numerous decisions of our courts that the powers of the officers of a corporation are simply the powers of agents delegated to them by the board of directors, I am of opinion that the treasurer of a manufacturing corporation is not merely by virtue of his office, and in the absence of any authority delegated to him by the directors, authorized to indorse the company's note for discount or sale. Such delegation of authority, however, may be made by the directors in other methods than by express resolution; and the claim made here by the banks is that by the entire method and course of business of the company adopted by its directors, or under their authority or permission, the treasurer was held out to the public and to the defendants as its general agent for the purpose of indorsing paper of this character, and the company are therefore bound by his indorsements. Such holding out, either to the public or to any of the banks whose claims have been allowed, is denied by the complainants, and is the main question of fact involved in this branch of the case. The evidence relating to this point involves directly the connection and course of business of both companies from the time of their organization, and the principal facts which I find to be established by the evidence are as follows:

The business of manufacturing and selling the sewing machines known as the "Domestic Sewing Machines" commenced with the organization in 1870, under the general laws of the state of Ohio, of "The Domestic Sewing-Machine Company," and this company was organized for the manufacture as well as the sale of sewing machines. Its principal office, designated by its charter, was in the state of Ohio; but the business of manufacturing machines was carried on in Newark, N. J., while the head office of the sales department was located in New York City, at the "Domestic Building," on Union Square, which was occupied under lease. The manufacture of the machines from the date of the organization in 1870 up to 1881 was carried on in or near Newark in different departments, upon property belonging to or controlled by the sewingmachine company, the legal title to the real estate being in Eli J. Blake, as trustee, and the personal property used in the manufacture, including machinery, tools, etc., belonging to the sewing-machine company. A firmJames R. Blake & Co.--leased the entire property (or a considerable portion of it), and manufactured the machines for the sewing-ma

chine company under a contract with the company. Other departments of work connected with the machines were under the control of other persons, and in the spring of 1881 the directors of the sewing-machine company resolved upon the policy of increasing its facilities, and rendering more effective management of the various departments of manufacture connected therewith, by combining under one head or management the various manufacturing departments, and for that purpose determined to organize under the laws of New Jersey a company to be called the "Domestic Manufacturing Company," to which all machines, plant, stock, and all the personal property of the company (including the leases) were to be conveyed, subject to an existing mortgage for $198,000, given by the sewingmachine company. The sewing-machine company was to receive of the manufacturing company stock as consideration for the purchase,-1,980 shares out of a total of 2,000 shares. The manufacturing company was accordingly organized on or about April 31, 1881, by Eli J. Blake, John Dane, Jr., Robert Blake, and James Blake, four of the five directors of the sewing-machine company. The entire capital stock was fixed at 2,000 shares. of $100 each, of which Eli J. Blake, the president of the sewing-machine company, was declared to hold 1,700 shares, and each of the other subscribers 100 shares. The business. of the company was to be commenced when $2,000 was paid in, and at a meeting of the stockholders held on April 19, 1881, this. amount was paid in proportionately by the four subscribers, E. J. Blake paying $1,700, and each of the others $100, and a resolution was passed by the stockholders for the purchase from the sewing-machine company of all its property used in the manufacture of sewing machines in the city of Newark, and to lease its real estate and assume its leases, and the president, E. J. Blake, was authorized with the treasurer to consummate the purchase subject to ratification by the stockholders. The board of directors of the sewing-machine company, at a meeting held on April 21, 1881, attended by E. J. Blake, James Blake, and John Dane, Jr., three of the fourstockholders of the manufacturing company,. adopted a resolution setting out the plan and policy adopted, with the reasons therefor, as above given, and directed their president, E. J. Blake, to execute the necessary conveyances to the manufacturing company, and authorized him to receive in payment therefor 1,980shares of the stock of the manufacturing company, which was to be issued, not to the sewing-machine company, but to Eli J. Blake and John Dane, as joint trustees. A trust deed of the stock for this purpose, executed by the sewing-machine company to the trustees, dated April 21, 1881 (being the trust deedSchedule D-annexed to the bill of complaint), was approved by the board, and this deed conveyed the stock issued for property of the company to the trustees in order to secure