[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 268 The argument in behalf of the appellant is extremely difficult to answer if we suffer ourselves to be tied down by the form of the transaction and shut our eyes to its substance. But if we have courage to cut through the technical outside shell, we shall find within nothing which the law condemns or which drives us to the commission of a regretted injustice.
Let almost everything urged on behalf of the appellant be admitted for the sake of the argument, though without so deciding. Let us concede that the will of Mrs. Burnside gave to her husband only a life estate with a power of sale and liberty to appropriate the proceeds to his own use; that the construction of the will is to be governed by the law of Rhode Island, and so is not affected by our statute relating to powers; that, therefore, General Burnside had no right under the will to pledge the bonds; that those in question were the individual bonds of General Buckner, and not negotiable paper within the meaning of the law-merchant; that the defendant knew them to have formed part of Mrs. Burnside's estate and was fully cognizant of the terms of the will; admit all this, and yet I think the plaintiff must fail, as in the interest of justice he ought to fail.
For consider what actually happened. General Burnside borrowed $15,000 of the defendant corporation. It supposed its loan was secured by the pledge of the Buckner bonds. But that pledge was not made, because it could not be made, and the inevitable legal result was that it had loaned its money without security, and solely upon the personal responsibility of the borrower. The bonds were in the possession of the trust company, and had been registered as payable to bearer, but remained the property of the life tenant and subject to the provisions of the will. The loan became due; the debtor could not pay; and some way out of the emergency was necessarily to be adopted. General Burnside, under the will, was at liberty to sell the bonds and appropriate the proceeds to his own use. That the Rhode Island court, without *Page 271 hesitation, concedes. He was at liberty to put them upon the market, to sell them for such price as he could obtain, and use the proceeds so far as they would go in the payment of his loan. But undoubtedly the bonds were not salable except at a very great sacrifice. They were the obligations of an individual, secured by a mortgage on land, and were estimated by the president of the defendant company to be worth only one half of their face value. What happened was that the debtor, having lawful right to sell, did sell to his creditor; and being at liberty to use the proceeds for his own benefit, did therewith extinguish his debt. The fact is sworn to distinctly and decisively by Mr. Rolston, who transacted the business. He testified: "The General came to my office, into the office of the Farmers' Loan and Trust Company, and stated that it was impossible for him to pay that loan, and that we would have to take the bonds for the money we had advanced him; I cannot give you the exact words I said to that; I accepted his proposition; I know I said, `Very well, General.'"
The witness adds later that it was his intention to release him from any personal obligation. No note had been given for the debt, so that there was nothing for the defendant to surrender except the unsecured debt. That was discharged. No demand or claim for principal or interest was afterward made by the vendee, and no offer of payment or intimation of existing liability proceeded from the debtor. The transaction between them ended then and there. The truth of this statement there is no just reason to doubt. The probabilities are strongly in its favor. General Burnside could make no better or more advantageous disposition of his bonds than to cancel his debt by a sale to the creditor. The latter stood in an awkward position and plainly could do no better. General Burnside was poor, and the creditor knew it, for Mr. Rolston says that outside of the bonds there was no means of recovering the debt, and that was in his mind when he accepted the bonds in discharge of it. That was all that he supposed he could get, and that he did get. Comment is *Page 272 made upon the absence of any written memorandum. Beyond the legal question thus raised the circumstance breeds no reasonable doubt as to the facts. Plainly there was great respect on both sides, and corresponding confidence. Rolston loaned the $15,000 without even taking a note. The chains and fetters with which capital binds its debtors were notably absent. The confidence thus exhibited was quite naturally continued to the end. Two other circumstances are adverted to. It is said that the accounts of the defendant company ran on as before, and showed no cancellation of the loan. That is true, but an explanation of the custom and habit of the company in the keeping of its books furnishes an answer. The ultimate result of each separate loan was sought to be shown by the accounts, and so its treatment as a loan was continued until the final result was reached. The manner of keeping such an account, notwithstanding the surrender of collateral, was shown to be customary and usual, and while the bonds were not strictly collateral they had been supposed to be and invited no change in the customary accounts.
Another circumstance is claimed to be inconsistent with the story of a sale and to throw doubt upon its truth. The purchase of the bonds proved to end in a profit instead of a loss. Good management exercised on behalf of the bondholders resulted in the ultimate payment of the whole of the mortgage debt and gave to the defendant company over and above the principal and interest of its investment a surplus of a little over $5,000. General Burnside was dead. The defendant remitted that surplus to the administrator of his estate. It is now said that the account was kept and settled on the theory of a pledge, and so tends to contradict the proof of a sale. Mr. Rolston says that this remittance was a gift, and we are asked if we soberly believe in the existence of a moneyed institution surrendering a profit which it could legally hold. Well, we may admit, as a general rule that, "corporations have no souls," but if, in some exceptional instance, we discern the shadowy outline of one, at least we may suffer it to live. *Page 273 While Mr. Rolston calls this remittance a gift, it was something more than that, and had another element about it. I believe that a sense of business honor has not utterly disappeared from among business men. More of it remains and among larger numbers than in our sometimes hasty judgments is commonly supposed. There are men whose sense of right is not fenced in by the boundaries of the law, and who feel impelled to do a just thing which no compulsion could force. I have mentioned the evident respect and confidence which characterized the relations between General Burnside and Mr. Rolston. The bonds were sold by the former when in some pecuniary distress. They were taken by the latter as the sole possible payment by the debtor, and with evident doubt as to the ultimate result, When instead of a loss they produced a profit a natural and honorable impulse would tend to produce the precise action which occurred. Whether Mr. Rolston regarded the profit as flowing from surrendered collateral or a direct sale of the bonds is totally immaterial. In either event it belonged to the company; in either event its restoration was an honorable duty which the defendant recognized and performed. We ought not, out of this just action, to frame an inference which should falsify the sworn statement of a sale of the bonds.
It is insisted, however, that the sale cannot stand because the contract was void under the statute of frauds. But that statute affects only executory and not executed contracts. (Dodge v.Crandall, 30 N.Y. 304.) It is the rule of evidence where one party or the other is seeking performance or damages for non-performance. It has no office to perform when the contract has been executed on both sides, has been fully carried out by the parties, and requires no aid from the law. That is the situation here. Long before this action was commenced Burnside had been discharged from his debt, the bonds had passed into the possession and ownership of defendant under the parol agreement; their interest had been *Page 274 collected and appropriated by the owner, in part before the death of Burnside; the bonds had been wholly paid, and the debtor's representatives had accepted the surplus. The whole contract, in every detail, and on both sides had been fully executed and all its purposes accomplished. To such a case the statute has no application.
Without, therefore, passing upon the questions raised upon the construction of Mrs. Burnside's will, we are of opinion that the order was right and should be affirmed and judgment absolute ordered against plaintiff on his stipulation, with costs.
All concur.
Order affirmed and judgment accordingly. *Page 275