
    THE OHIO NATIONAL BANK OF WASHINGTON v. CENTRAL CONSTRUCTION COMPANY.
    Corporations; Forfeiture; Estoppee; Equity; Peedge; Promissory Notes ; Saee of Coeeaterae Without Notice; Fraud; Accounting.
    1. Failure by a corporation to pay its annual license tax to the State in which it was incorporated, while affording ground for legal proceedings to vacate its charter, will not of itself abrogate or annul its charter, so as to permit a defendant sued by the corporation in another jurisdiction to successfully contend that the corporation has no legal existence.
    2. One who deals with a corporation by taking its note and securities securing payment thereof, is estopped to thereafter deny its corporate capacity on the ground that at the time of the making of the note the corporation had forfeited its charter by failing to pay its annual license tax.
    3. Equity has jurisdiction to entertain a suit by the maker of a promissory note who had deposited collateral to secure the payment thereof, against the payee who claims to have sold the collateral to pay the débt secured, for cancelation and surrender of the note and for discovery and an accounting, where the maker is ignorant of the precise amount of money received from the sale of the collateral and the expense of collection.
    4. Where a bank, the holder of a note secured by the deposit of collaterals, undertakes to sell the collaterals at private sale in its own office without any notice to the maker, in pursuance with authority given in the note so to do, a court of equity will require it to be shown that the utmost fairness and good faith were observed and that the proceeds of the alleged sale were the full market value of the securities.
    5. Where a bank, holding a note for about $18,000, secured by collateral consisting of receiver’s certificates of the face value of upwards of $21,000, the money for the payment of which was in the registry of a court in Tennessee, undertook, in accordance with a provision in the note allowing the collateral to be sold at public or private • sale without notice to the maker, to sell the collateral to itself for $16,000 in the office of the bank in the presence of two or three of its employees, the president acting as auctioneer, with no notice to the maker of the note, and within a week collected the face value of the certificates, it was held that such sale was a nullity so far as the maker of the note was concerned.
    6. Where the maker of a note defaulted in its payment and a bank, the holder, by reason of such default and that of other creditors, was compelled to borrow a large sum of money to meet its pressing necessities, and the maker, under the circumstances, did not occupy the attitude of an ordinary debtor of the bank, and ¡tras seeking relief in equity as against the bank, it was held, on the principle that one who seeks equity must do equity, that in an accounting, the maker was chargeable with a proportionate share of the expense incurred by the bank in making such loan.
    No. 1025.
    Submitted January 23, 1901.
    Decided February 6, 1901.
    Hearing on an appeal by tbe defendant from a decree of tbe Supreme Court of the District of Columbia in a suit in equity for a discovery and an accounting and for the cancelation and surrender of certain promissory notes.
    
      Modified and affirmed.
    
    Tbe Court in its opinion stated tbe case as follows:
    This is an appeal from a decree of tbe Supreme Court of tbe District of Columbia in a suit instituted on the equity side thereof by tbe appellee as complainant against the appellant as defendant for an accounting as to tbe sale of certain personal property pledged by the Construction Company with the bank as collateral security for tbe payment of certain promissory notes of tbe company held by the bank, and for the cancelation and delivery of tbe notes. The appellant, Tbe Ohio National Bank of Washington, was organized in this city in the year 1891 as a body corporate under the national banking act of the Congress of the United States; and it went into voluntary liquidation, under the provisions of that act, on December 31, 1897, since which day it has transacted no business except such as was incidental to the final settlement of its affairs. It was succeeded in its place of business, and to some extent in its actual business and management, by an institution' known as the Washington Savings Bank.
    The appellee, the Central Construction Company, was organized in the District of Columbia, and in the rooms of the Ohio National Bank, which it seems to have used, for a time at least, for such offices as it had, but under the laws of the State of West Virginia, as a body corporate, for the alleged purpose, as stated in the certificate of incorporation, which bore the date of January 16, 1896, of “constructing, owning, operating, leasing and selling railroads; purchasing, owning, operating, leasing and selling mines, quárries, oil wells, and for other purposes and its capital stock was stated in the certificate to be the sum of eight thousand dollars, of which it is' recited that ten per centum, or the sum of eight hundred dollars, had been paid into the company by its organizers. The secretary and treasurer of this Construction Company was at the same time the cashier of the bank and one of its directors; and he continued to hold this latter position of cashier until about November 20, 1897, and he yet remains one of the directors of the bank, as well as the secretary and treasurer of the Construction Company. The charter of this company is claimed to have been forfeited under the laws of West Virginia for failure to pay its annual license taxes on or before May 1, 1897, such non-payment being a ground of forfeiture in that State.
    Under date .of May 13, 1897, the Central Construction Company, by its president, executed and delivered to the Ohio National Bank its promissory note for the sum of $17,868.11,' payable on demand, wfith interest at tbe rate of 6 per centum per annum, to the Ohio National Bank of Washington, or order, at its banking house in this city, purporting to be for value received; and at the same time it deposited with the bank, as collateral security for the payment of the note and for the payment of any and all other claims of the bank against the company, whether due or not, nineteen several certificates for the payment of money, each for the sum of one thousand dollars, and each designated as being a certain number of a certain series, which certificates had been issued in blank, that is, without the name of any payee, by the receiver of a railroad in Tennessee. Authority was given to sell the security on the non-payment of the note. But the recitals of the note and of this authority to .sell are so peculiar that it seems to be proper to transcribe the note here in full. It is as follows:
    “ $17,868.11.
    “ Washington, D. C., 13th May, 1897.
    
      “ On demand, with interest at the rate of six per cent per annum, we promise to pay to Ohio National Bank of Washington, Washington, D. 0., or order, at the banking house of said bank, seventeen thousand eight hundred and sixty-eight and dollars, for value received, having deposited with said bank, as collateral security for the payment thereof and of any and all claims, demands, or other indebtedness owing by us to said bank, whether the same be now due or not due, 19 certificates of the receiver of the Tennessee railroad for one thousand dollars each, and numbered 3 to 15, inclusive, 23, 24, 29, 30, 33, & 34, which security, or any portion thereof, and any securities which may subsequently be lodged with the bank in lieu of any of the above or in addition thereto, we hereby authorize and empower said bank, or its president or cashier, in case of the non-performance of the above promise, or the nonpayment of any other claim or demand that may be held by said bank against us • at the maturity of this note, whether the same be then due or not, to sell any or ail of said securities without demand, notice to redeem, or notice of time, place, and manner of sale, at the Washington stock exchange, or at the banking-house of said bank, at public or private sale, at the option of said bank, or its president or cashier, with the right to said bank to purchase any or all of said securities at such sale, and to thereafter hold the same in its own right, absolutely free from any claim of the undersigned, whether said sale be public or private, and apply the proceeds thereof, in the first place, to the payment of all costs and expenses incurred; in the second place, to the payment of the amount then due on this obligation, or any other obligation held by said bank against us, and, lastly, to account to us for the surplus, if any, it being distinctly understood that should there be any deficiency we promise and agree to pay to said bank or other holder of this obligation the amount thereof forthwith after such sale.
    “And we further agree that in case of a depreciation in the market value of the securities herewith pledged or which may hereafter be pledged for this loan, we will make a payment on account to said bank or lodge additional collateral security therewith, so that the market value of the collateral securities pledged shall always be at least 5 per cent, more than the amount of this note unpaid; and in default of such payment being made on account or of such additional collateral security being furnished within 10 days after the day on which a call or notice therefor has been left at our place of business or residence, to wit, 712 East Capitol St., or in case our place of business or residence is not known to said bank, within 10 days after the day on which a call or notice therefor has been deposited in the Washington city post-office, addressed to us at Washington, D. C., this note and all other claims and demands, due or not due, held by said bank against us shall thereupon, at the option of said bank, become due and payable, and said bank, its president or cashier, shall thereupon have full power and authority to sell or dispose of the above-named securities and of such additional securities in the manner and way above provided for, subject to a rebate of interest for the unexpired term or terms, should any such be due.
    “This deposit of security is without prejudice to the right of the holder of this note, at its option, to enforce collection of the same, after its maturity, by suit or in other lawful manner.
    (Signed) “ Central Construction Company,
    “ By--, President.”
    
    As intimated somewhat obscurely by the recitals of the note itself, this was not the beginning of the transaction between the parties; nor was there any money paid by the bank to the company at this time on account of the note. The note was the aggregate of the principal and interest of three previous notes, one for $5,000, another for $6,000, both of the date of February 11, 1896, and a third for $6,800, of the date of May 13, 1896, all of which, whether executed by the Construction Company in its own name or by its officers in their individual names for its benefit does not distinctly appear, had been discounted by the cashier of the bank for the benefit of the company, and the money thereon paid out to the company, notwithstanding that the discounts had been disapproved and refused by the board of directors of the bank. The details of the transaction need not be stated. ' It was with the consent of the bank, however, which probably had no choice but to make the best of the situation, that these previously-existing obligations were merged in the one note of May 13, 1897, for $17,868.11.
    Subsequently, on June 30, 1897, interest on this note being called for to the amount of $139.96, a new note for this smaller sum was executed and delivered by the company to the bank, and a credit of interest for that amount was indorsed on the larger note.
    
      These two notes, one of May 13,1897, for $17,868.11, and the other of June 30, 1897, for $139.96, are involved in the present suit, with their accrued interest. »
    The whole transaction met with the. disapproval of the Comptroller of the Currency, and seems to have caused much trouble and anxiety to the officers of the bank; and these latter repeatedly urged the president and secretary of the Construction Company to make some arrangement for the settlement of the matter and for the relief of the bank. But it was evident that the only settlement contemplated by the officers of the Construction Company was by the payment in course of time of the receiver’s certificates deposited as collateral security for the two notes; and no other arrangement was ever made. Now, the payment of these certificates depended on the sale of the railroad, and the application of the proceeds of sale to the redemption of the certificates. The sale was had in course of time; but the record fails to show the date. The purchase money was expected to be paid at or before Christmas of 1897, into the ■registry of the court at Crossville, in the State of Tennessee; and the clerk of that court was the master in chancery for the distribution of the fund. There appears to have been some short delay in the payment; but the money was in fact paid into court some time before January 7, 1898. The Ohio National Bank was informally informed of this payment a few days afterwards by the secretary of the Construction Company; and to a request from the bank for more explicit information the clerk of the court at Cross-ville telegraphed to the bank, under date of January 13, 1898, that the money had been paid in. This telegram was communicated by the president of the bank to the secretary of the Construction Company.
    In the meantime, during the early days of January of 1898, the receiver of the railroad appeared in Washington. This person had some mysterious, or at all events unexplained, connection with the Construction Company. He had been present at its organization; and he seems to have taken some interest in its affairs, although he does not appear as a stockholder or a director. He was not unknown to the officers of the bank. On January 6, 1898, he appeared at the bank, with a paper dated on that day, and signed with the name of the Construction Company by its president and secretary, and also with the signatures of these two individuals in their own individual right, thus evidencing some individual interest on their part in the matter, which paper purported to be an agreement on the part of the signers of it to the effect that, upon the full payment of the notes of the Construction Company, with interest thereon, the Ohio National Bank might surrender to this person the receiver’s certificates deposited by the Construction Company as collateral security for its indebtedness to the bank. And it was added in this paper that the certificates referred to had been issued by this same person as receiver of the Tennessee Central Railroad.
    The paper was delivered to the bank; but the debt of the Construction Company to the bank was not paid ; nor does there seem to have been any offer whatever of payment, either in part or the whole. On the contrary, so far as the record discloses, the effort of this intermediary seems to have been directed towards a depreciation of the value of the securities and a somewhat vague intimation of illegality or irregularity in the certificates which he himself had issued as receiver, and of possible or probable litigation to ensue in regard to them. He offered to purchase them, first for fifty cents, and afterwards at seventy-five cents on the dollar; both of which offers the bank declined. He seems to have had several interviews about this time with the officers of the bank. In one of them he effected an exchange by taking from the bank one of the certificates which he pronounced irregular, and delivering to it in the place of this another certificate bearing the same number and for the same sum of money, which he stated to be unobjectionable. Further than this, there would seem to have been no substantial result from his negotiations with the bank.
    On January 13 or 14, 1898, there was an interview between the vice-president of the bank, acting for and on behalf of the bank, and the secretary of the Construction Company, who was then detained at his house by illness, with reference to the matter of the collection of the certificates, and how it could best be done. The parties differ somewhat in their testimony with regard to the purport of this conference; and it is not perhaps important in the determination of this controversy to ascertain definitely what then happened. At all events,it seems to have been then understood that the bank would send its vice-president and another director to Tennessee to collect the amount of the certificates.
    Under date of January 17, 1898, a communication was addressed by the president of the bank to the president of the Construction Company, and sent by mail to the residence of the latter, No. 712 East Capitol street, in the city of Washington, making demand for the next day, January 18, 1898, of the payment of the two notes, which have been mentioned, of $17,868.11 and $139.96, respectively, with interest, and stating that each would be protested, if not paid.. It is testified that this letter was delivered at the residence of the president of the Construction Company about one o’clock in the afternoon of January 18,1898, and received by him personally only at six o’clock in the evening of the same day.
    On the next day, January 19, 1898, at the banking house of the Ohio National Bank, in the presence only of two or three officers of the bank, the president of the bank, as it is claimed, sold the certificates which have been mentioned, and the bank, which was the only bidder therefor, became the purchaser for the sum of $16,000, which was credited upon the larger note as of that day. The circumstances of the sale, as testified, to by the witnesses called on the part of the bank, are extremely vague, shadowy, and indefinite. The president of the bank, although it is stated that he acted as auctioneer on the occasion, could remember nothing about it. But it is certain that no notice whatever of the sale had been given, that there was no one present at the alleged sale except the two or three officers of the bank, who seemed to have been engaged at the time in their regular duties, whatever they were, and that the sale was at the utmost a mere matter of form conducted by the president of the bank and the assistant cashier. As already stated, the cashier of the bank, who as secretary and treasurer of the Construction Company might have been expected to protect the interest of this company, had severed his connection with the bank upwards of two months before.
    On the evening of this same day, January 19, 1898, the vice-president of the bank and his associate director, who were sent by the bank to collect the certificates, left Washington for Tennessee, and returned to Washington within a week, with the money, $21,105.84, in their possession, and with no other difficulty or delay in its collection than such as necessarily resulted from the fact that Crossville was situated in a rather inaccessible region of Tennessee, and from the further fact that the clerk of the court at Crossville required some confirmation of the title of the bank from the president of the Construction Company, which was given by two telegrams from the latter to the clerk, prepared by the officers of the bank, and in which the president of the Construction Company assured the clerk that the bank was the proper payee of the certificates, and that ■no other certificates of the same series and numbers had ever been issued to him. This last statement seems to have been made in consequence of some question in regard to the duplication of the numbers. The receipt of these telegrams by the clerk removed all difficulty in the way of the payment of the certificates, and the envoys of the bank received the money and returned to Washington.
    
      Shortly after their return the Construction Company requested a settlement from the bank. The answer to the request was a letter to the secretary of the Construction Company from the president of the bank, in which the latter stated, that, acting upon the power and authority conferred on the bank by the collateral note of the Central Construction Company for $17,868.11, upon which.demand and protest had been previously made, they (the officers of the bank) had sold all the. nineteen (19) certificates of the Tennessee Central Railroad, held as collateral to said note, for the sum of sixteen thousand dollars ($16,000), and credited that amount on the note. This was the first notification of the sale which the Construction Company had, and it was not then stated when the sale had taken place. The letter amounted to a refusal by the bank to recognize any right in the Construction Company to any part in the proceeds of the certificates; and it left that company in debt to the bank for a balance upon its note of upwards of $2,600. Upon the theory of the Construction Company that no sale had taken place, there was a balance due from the bank to the company of upwards of $2,000.
    In this condition of things the Construction Company commenced the present suit by filing a bill in equity for an accounting, discovery, vacation of the alleged sale which had taken place, the cancelation and surrender of the promissory notes, and for general relief. The bank first demurred; and when its demurrer was overruled, it answered the bill of complaint, substantially denying its equity. After testimony taken, the court below referred the cause to the auditor of the court to state an account between the parties, reserving all other questions until the coming in of the auditor’s report. The auditor took further testimony, as he was allowed by the order ’of reference to do; and he returned á report, showing, upon the theory that there had been no valid sale of the securities by the bank on January 19, 1898, that there was a balance due, on January 28, 1898, from the bank to the Construction Company, on account of the redemption of the receiver’s certificates, amounting to the sum of $2,144.91.
    Exceptions were filed to this report on behalf of the bank, but the exceptions were overruled, and the court rendered a decree confirming the report, adjudging that the indebtedness of the company to the bank had been paid, and decreeing that the promissory notes in question should be delivered to the company, and further that the bank should pay to the company the sum of $2,144.91, found by the auditor’s report to be due from the bank to the company.
    From this decree the bank has appealed, and has assigned eleven alleged grounds of error; but several of them have reference to the same questions of law, and they need not all be considered separately.
    
      Mr. Thomas O. Taylor and Mr. Conway Robinson for the appellant:
    1. The pretended agreement set out in the bill, and sworn to by Roome only, is a mere nudum pactum, and is null and void for want of consideration. It contains no agreement that the pledgee will not exercise or waive its power to sell; and it is absolutely denied and completely sworn away by the answer and by the evidence in favor of appellant. A pledgor is always liable to the pledgee for costs and expenses incurred in collection of the securities pledged. Gregory v. Pike, 67 Fed. Rep. 838; McDougall v. Hazelton Co., 88 Fed. Rep. 224; Story on Bailm. 206; 18 Amer. & Eng. Encyc. Law, 658, and cases cited; Morgan v. Dodd, 3 Oolo. 554; Loomis v. Stave, 72 Ill. 624.
    2. The non-existence of the complainant corporation at the institution of the suit, the previous forfeiture of its charter, and the facts which show the legal dissolution of the corporation, are fully, sufficiently and properly set forth in the answer of appellant, and the bill should have been dismissed. Railroad Co. v. Baptist Church, 137 U. S. 572; 
      Bank v. Dyer, 60 Pa. St. 439; Brown v. Cement Co., 1 App. D. C. 235; Field on Corp., Sec. 494.
    3. The bank would have been fully justified in’ selling the collaterals upon the strength of the oral demands for payment of the notes proved to have been made. Carson v. Gas Co., 45 N. W. Rep. 1068; McDougall v. Hazelton Co., 88 Fed. Rep. 222, Written demand was, however, sufficiently made by the letter of January 18, 1898, received at the domicile of the president of the complainant at 1 P. M. on that day; and it is immaterial whether he was personally there at the time or not. The legal effect is the same as if he had then and there received the letter. Worthington v. Tormly, 34 Md. 194; Bank v. Ayers, 16 Pick. 394; Bryan v. Baldwin, 7 Lans. (N. Y.), 177.
    4. The sale of January 19, 1898, was a lawful, valid and bona fide sale for a full and fair price at the time and under the circumstances as made, and should be sustained. Cole v. Dalziel, 13 Ill. App. 25; King v. Insurance Co., 58 Tex. 673 ; Hamilton v. Bank, 22 Iowa, 313; Fitzgerald v. Blacker, 32 Ark. 752; Mowry v. Wood, 12 Wis. 461; Fidelity Co. v. Iron Co., 81 Fed. R. 450 ; Chouteau v. Allen, 70 Mo. 329; Smith v. Lee, 84 Fed. R. 561; Milliken v. Dehon, 27 N. Y. 369 ; Jones on Pledges, See. 730; Glidden v. Bank, 42 N. E. Rep. 997. A sale of a pledge by the pledgee to himself (when made without express authority) is not void, but merely voidable; if ratified by the pledgor, it is a perfectly lawful and valid sale ; if repudiated by the pledgor, it is no conversion, but the parties are remitted to their rights as they existed before. Bryan v. Baldwin, 52 N. Y. 235; Stokes v. Frazier, 72 Ill. 428; Jones on Pledges, Secs. 637, 638. Although the pledge of commercial paper, as collateral security for the payment of a debt, does not usually, in the absence of special power for that purpose, authorize the pledgee to sell the security so pledged, upon default of payment, either at public or private sale, yet when an express power is given the pledgee to sell such paper upon default, the necessary conclusion is that the power of sale is given, not for the purpose of restricting or curtailing the rights of the pledgee, but for the purpose of enlarging his rights and making the pledge more advantageous to him by giving him a more effectual and speedy means of obtaining money from his security. Jones on Pledges, Sec. 651; Nelson v. Wellington, 5 Bosw. (N. Y.), 187. Such paper may always be sold by a pledgee under express power of sale conferred upon him, and such sale made in good faith to one capable of buying will pass the title beyond the pledgor’s reach, although it be sold for less than the sum due upon it. Jones on Pledges, Secs. 652, 653; Fraker v. Reeve, 36 Wis. 90; Brightman v. Reeve, 21 Tex. 77. Under a pledge of promissory notes, with the agreement between pledgor and pledgee that if the debt for which the notes are pledged is not paid at maturity the pledgee may make the money out of them in the best way he can, he may sell the notes for that purpose. Goldsmith v. Church, 25 Minn. 205; Zimpleman v. Veeder, 98 Ill. 615.
    5. If for any reason the sale be irregular, illegal or void, complainant has a plain, adequate and complete remedy at law in an action of assumpsit for money had and received. Consequently, there is a want of jurisdiction in equity, and the bill for this reason should be dismissed. Insurance Co. v. Dalrymple, 25 Md. 264; Genet v. Howland, 45 Barb. (N. Y.), 568 ; Earle v. Insurance Co., 7 Daly, 307 ; Jones on Pledges, Secs. 649, 650 ; Larcombe v. Fostall, 120 U. S. 564; Taylor v. Turner, 87 Ill. 302; Belden v. Perkins, 78 Ill. 450; Doyle v. Murphy, 22 Ill. 508 ; Palmer v. Fleming, 1 App. D. C. 528 ; 8 Wait A. and D. 3 and cases cited; Grand Chute v. Winegar, 15 Wall. 375 ; Hipp v. Babin, 19 How. 277; Killian v. Ebbinghaus, 110 U. S. 571; Lewis v. Cocks, 23 Wall. 466; Ellis v. Davis, 109 U. S. 503; Parker v. W L. C. Co., 2 Black, 550.
    
      
      Mr. Tracy L. Jeffords and Mr. Warder Voorhees for the appellee:
    1. The order complained of was passed upon all the pleadings and proof, and after full argument on the merits, and was made after all the facts which could possibly bear on the case were before the court. Such a course is entirely within the discretion of the trial judge. 2 Beach on Mod. Eq. Pr., Sec. 674 and notes; Field v. Holland, 6 Cr. (U. S.) 8.
    2. The fact of the corporate existence of appellee is abundantly proven by the testimony; but even if not proven, it does not lie in the mouth of appellant to deny same, having dealt with it'as a body corporate. The law of estoppel applies. 6 Thomp. on Corp., Sec. 7647; Railroad Co. v. Church, 137 U. S. 568. The appellee is a corporation of West Virginia, and under the laws of that State there can be no forfeiture of charter rights except by a direct proceeding by the State against the corporation by quo warranto or otherwise. Lumber Co. v. Ward, 30 W. Va. 43; Miller v. Coal Co., 31 W. Va. 836. See, also, Electric Lighting Co. v. Leiter, 19 D. C. 575. Even if the appellee by forfeiture, non-user, or otherwise had been dissolved, it still would have had the right to bring suit for the purpose of collecting its debts and claims and winding up its affairs.
    3: The pledgee is a trustee for the pledgor and as the holder of collaterals is only entitled to reimbursement for the reasonable and necessary expenses of collection. 18 Am: & Eng. Encyc. Law (1 Ed.), 681,699; Colebrooke on Collateral Securities, Sec. 87; Schouler’s Bailments, Sec. 215; Story’s Bailments, Sec. 306a, 343; Iron Co. v. Scioto Co., 82 Ill. 548 ; Starrett v. Baker, 20 Me. 457 ; Cressman v. Whitall, 16 Neb. 592; Bank v. Brown, 53 S. W. Rep. 206; Masich v. Bank, 34 La. Ann. 1207. All such were assented to and allowed by the auditor. The.claim for 10 per cent, commission could only be allowed by express agreement or by virtue of custom, in either of which cases the onus would be upon appellant to prove the one or the other, neither of which has it done.
    4. Courts of equity -exercise great care and scrutinize closely all contracts between mortgagor and mortgagee. Ritchie v. McMullen, 79 Fed. Rep. 522. These collateral notes are similar in all substantive respects to real estate and chattel mortgages with like powers of sale, and as to such it is held that if the mortgagee uses the powers given him illegitimately, from ill motive, to effect means and purposes of his own, or without good faith and a suitable regard for the interests of the mortgagor, it will be considered fraud in the exercise of the power. 2 Pingrey on Mort., Secs. 1425,1437; 2 Jones on Mort., Secs. 1801, 1881, 1883; Jones on Chattel Mort., Secs. 801, 808, et seq.; Montague v. Davis, 14 Allen, 369; Clark v. Simmons, 150.Mass. 357. The requirements of a sale of collaterals under a power of sale note are precisely the same, i. e., the sale must be made in good faith, and .with due regard to the interest of the pledgor, and unless so made the sale will be considered fraudulent. Schouler on Bailments, Secs. 210, 227, et seq; Colebrooke on Coll. Secu., Secs. 118, 122. While there seems to be no reported case on all fours with the one under review, all the cases below cited show the scrutiny of courts in seeing that good faith is exercised. Smith v. Lee, 84 Fed. Rep. 557; Fidelity Co. v. Roanoke Co., 81 Fed. Rep. 439; Morris v. Railway Co., 95 Fed. Rep. 13; Hayward v. Bank, 96 U. S. 611; Lacombe v. Forstall, 123 U. S. 562; Harris v. Thomas, 37 Ill. App. 517; Stokes v. Fazier, 72 Ill. 428; Trust Co. v. Rigdon, 93 Ill. 458; Zimpleman v. Veeder, 98 Ill. 613; Schaaf v. Fries, 77 Mo. App. 346; Norton v. Baxter, 41 Minn. 146. Appellant having knowledge that the money to pay the certificates was already in court, and that nothing was necessary to be done but to collect it, acted in bad faith in making sale and then collecting on its own account, and should now be held accountable.
    5. As to the jurisdiction of equity to grant relief in a case like this, see cases above cited, and also, especially as to the cancellation of void or paid instruments, 1 Story Eq. Jur., Sec. 439; 2 Id., Secs. 694, 700, 705; Hamilton v. Cummings, 1 Johns Ch. 517 ; White v. Clarke, 5 Cr. C. C. 102; Clarke v. White, 12 Pet. 178; Cornish v. Bryan, 10 N. J. Eq. 146; French v. Savings Inst., 67 Ill. App. 179; Foley v. Kirk, 33 N. J. Eq. 170; Garrett v. Railroad Co., 1 Freem. (Miss.), 70; Fitzmaurice v. Mosier, 116 Ind. 363; Martin v. Graves, 5 Allen, 601; Ferguson v. Fisk, 28 Conn. 501.; Glastonbury v. McDonald, 44 Vt. 453; Green v. Luckett, 1 App. D. C. 92.
   Mr. Justice Morris

delivered the opinion of the Court:

It is objected, in the first place, that the appellee, the complainant in the court below, is not a body corporate, and is not therefore entitled to maintain this suit, inasmuch as it has forfeited its charter by its failure to pay the annual license tax required by the laws of the State of West Virginia under which it was incorporated.

But we think this position to be wholly untenable. Under the decisions of the courts of West Virginia, which may well be taken as a guide in this regard, and which are in accord with the general tenor of judicial decision on the point, a charter of incorporation is not ipso facto abrogated or annulled by failure to pay a license tax, notwithstanding that the statute may provide that such failure shall work a forfeiture. Such failure, of course, will afford ground for a legal proceeding to vacate a charter; but it requires a legal proceeding, by way of' quo warranto or other equivalent process, to vacate a charter of incorporation. Mere proclamation by an' executive officer will not accomplish the result. Lumber Co. v. Ward, 30 W. Va. 43; Miller v. Coal Co., 31 W. Va. 836. See, also, U. S. Electric Lighting Co. v. Leiter, 19 D. C. 575, and Railroad Co. v. Fifth Baptist Church, 137 U S. 568.

Moreover, under the laws of West Virginia, even after alleged forfeiture, a company may bring suit for the settlement of its affairs. Code of West Va., Ch. 53, Sec. 59.

And again the appellant here, having dealt with the appellee by taking its note and securities after the date when the alleged forfeiture is said to have occurred, is in no position to question the corporate capacity of the appellee. Close v. Glenwood Cemetery, 107 U. S. 466." In fact, if the contention were sustained, it might have serious results for the appellant; for then the appellant would have dealt with a fictitious person, and might be required to surrender the collateral security or its proceeds to those who had advanced it for the benefit of the supposed company, and yet possibly might not be able to recover the money with which it had parted. But we do not regard the contention as at all tenable.

In the second place, it is urged that the appellee, as complainant, had an adequate and complete remedy at law, and that therefore it had no standing in a court of equity. The argument here on behalf of the appellant is, that, if the sale of the certificates, stated to have been made on January 19, 1898, was valid, the complainant has nothing of which to complain; and that, if such sale was invalid, the remedy of the complainant was in a suit at common law to recover the difference between the amount received by the bank on account of the certificates and the amount of the indebtedness of the company to the bank at the time. But this position is no more tenable than the previous one. The suit is for discovery and an accounting, and for the cancellation and surrender of the notes. It does appear that the appellee knew precisely what amount of money was received on the certificates. It did not know what the expense was of collection, which was undoubtedly a proper charge against the fund. On the theory that the certificates were still in pledge until the date of payment and that there had been no valid sale of them to any one, the complainant was plainly entitled to a discovery and accounting; and this could properly be had through a court of equity. And, of course, the matter of the cancellation and surrender of the notes was properly cognizable in equity. We think it very clear that only a court of equity could have given the proper relief in the premises.

The important question'in this case is that of the validity of the sale which the appellee claims to have made of the pledged certificates to itself on January 19, 1898. On the determination of this the whole controversy depends. All the other questions are subordinate and of minor importance.

Were it necessary, in the exercise of jurisdiction in this case, to go back to the beginning of the transaction, a court of equity might find it difficult to entertain a suit on behalf of the appellee in view of the fraudulent, and possibly even criminal manner in which the funds of the bank were first transferred to the use of the Construction Company. But the bank has chosen to condone the fraud. In view of the apparent irresponsibility of the Construction Company, it scarcely had any option to do otherwise than to affirm the transaction as a loan and to retain the securities for whatever it might afterwards realize from them. This has been done, and we are not required to go back of the 13th day of May, 1897, at which time the bank and the company came to su settlement of their previous transactions- and entered into a new arrangement, whereby, in consideration of the money previously received by the company from the bank, the latter took the note of the company and received the collateral security which has been mentioned. That the arrangement was yet unsatisfactory, that it was disapproved of by the Comptroller of the Currency, that the bank was thereafter constantly seeking to get back its money and constantly importuning the officers of the company to make some further settlement, which could only be, of course, either by the repayment of the money or of some part of it or by giving additional or more satisfactory security, does not militate against the proposition that, on May 13, 1897, the bank, in contemplation of law, made a loan to the Construction Company, took its promissory note therefor, and received a deposit of certain receivér’s certificates as collateral security for the payment of such note. The relation of mortgagor and mortgagee, or of pledgor and pledgee, was thereby created between the parties; and their respective lights and duties were to be governed by the general rules of law applicable to that relation and by the special covenants of their agreement, not in violation of the general principles of law; for in the establishment of the relation of mortgagor and mortgagee covenants are sometimes made which the law will not tolerate, or which courts of equity, when they have cognizance of the matter, will not enforce or permit to be enforced. In fact, it may be said that the whole doctrine of equity on the subject of mortgages is based upon the theory to some extent that a court of equity will not permit the mortgage contract to be enforced according to its strict letter.

When we come to examine the contract in the present case which is embodied in, or rather appended to, the promissory note given by the Construction Company to the bank, we find «various incongruities and inconsistencies, and features of unusual harshness. While it is provided, in the event of the depreciation in value of the securities, and demand thereupon made for either a partial payment on account or the deposit of additional security, that the maker of the note shall have ten days within which to comply with the demand, yet in the far more important event of a sudden demand for the payment of the whole note, with a liability in the case of failure of immediate compliance for the immediate sale of the securities, no time at all is given. Then the provision that, upon demand made for the payment of the note and failure of immediate compliance, the bank might sell the securities either at public or private sale, at the stock exchange or at its own bank, without notice of any kind of the time or place or manner of sale, and might itself become the purchaser, is of so shocking a character, so pregnant with the possibility of fraud and dishonesty, that a court of equity might well declare it to be absolutely null and void as against public policy. A court of equity will certainly require that, when such an authority to a mortgagee is sought to be exercised in accordance with its letter, the utmost fairness and good faith are to be observed, and the proceeds of such alleged sale must be the full market value of the securities.

The sale, which is claimed to have been had by the bank on January 19, 1898, may have been a wise precautionary measure to perfect the title of the bank, and incidentally the title of the appellee, and to guard against the contingencies of threatened litigation, obscurely intimated by the receiver while acting as intermediary between the company and the bank in the early part of that same month, but which, so far as the record shows, had no existence whatever except in his own imagination, or possibly in a sinister purpose to get possession of the certificates at a large discount. But as between the two parties to this suit, the mortgagor and mortgagee, it would be absurd to call by the name of sale the proceeding which took place at the banking house of the bank, on January 19, 1898, when the president of the bank, in the presence of two or three employees of the bank, who were attending at the time to their ordinary duties at their desks, without notice to any one or any possibility that any one else could become the purchaser, put up these securities for sale, and bid them in for the bank for the sum of $16,000. If he had merely gone to his bookkeeper and told him to enter these securities on his books as the property of the bank, and at the same time to enter a credit of $16,000 on the note, the proceeding would not have been more absurd. It is safe to say that the elementary principles of equity and fair dealing were violated in this alleged sale. The certificates at the time were of the face value of upwards of $21,000; the money for their payment was at that moment in the registry of the court in Tennessee, and the bank had been officially advised that it was there; there was no difficulty in the way of its collection, and within a week it was in fact collected by the persons sent for the purpose by the bank. To uphold such a sale under such circumstances as against the mortgagor would be to convert the law into a mockery.

To this it may be also added that the negotiations of officers of the bank with officers of the Construction Company, both before and after the day of the alleged sale, with reference to the course to be pursued for the collection of the money, are not indicative of good faith on the part of the bank, if it was the purpose at that time to regard the alleged sale as foreclosing all the rights of the mortgagor in the premises, and not merely as a means of fortifying the position of the bank in the collection of the money. If the sale was intended only for the latter purpose, and the appropriation of the money by the bank to its own use was only an afterthought, the failure of the bank to inform the officers of the Construction Company of its occurrence until after the request for a settlement, was natural enough; otherwise, it might be regarded as almost a fraudulent concealment. - We think that there was no purpose on the part of the bank to deprive the Construction Company of its just rights, and that the purpose to insist upon the validity of the alleged sale was an afterthought, the result, as developed in the record, of the consideration of the great pecuniary loss sustained by the bank by the abstraction of so large a part of its available resources, whereby and for other similar losses it was compelled to go into liquidation.

But however-this may be, the sale in question can not be sustained upon any principle of equity; and it must be regarded, so far as the mortgagor is concerned, as an absolute nullity. No such sale was contemplated by the parties in their agreement; for it is not possible that there can be a private sale, in the sense of this agreement, where the mortgagee in its own office sells to itself without the presence of any other person, for an arbitrary figure fixed by itself.

There having been no valid sale of the securities, an account was proper, and the court below rightly referred the cause to the auditor to state an account. But it is urged, and this is the burden of the first assignment of error, that the court should not have so referred the cause without a preliminary decree to the effect that the complainant was entitled to an accounting. This is a mere technicality without substance. The order of reference was, by necessary implication, an adjudication that there should be an accounting.

The only remaining assignments of error that require to be noticed are based upon exceptions to the auditor’s report.

In stating the account between the parties the auditor charged the bank with the receipt of $21,105.84 as the proceeds of the certificates, less $325.96 for the cost and expense incurred in the collection on account of the sending of its two envoys to Tennessee, an item which the Construction Company agrees to be right and proper, thereby leaving the net amount of the collection to be $20,779.88; and he credited the bank with the amount of the two notes and interest, which was the sum of $18,634.97. The balance due to the complainant, therefore, he stated to be $2,144.91, as of the date of January 28,1898. Four other items of account were presented on behalf of the bank, which were not allowed. These were: (1) A charge of commissions amounting to ten per centum on the amount of the certificates collected, which charge was $2,110.58; (2) A claim for money paid to the Washington Savings Bank in respect of said collection, $320; (3) Another similar claim for money yet payable to the Washington Savings Bank on the same account, $52.66; (4) For “expenses incurred by reason of the failure of the defendant to pay the notes on demand, being two per cent, (afterwards in the course of the auditing reduced to one per cent.) the bank paid for that amount of money to supply its immediate necessities to the extent of the defendant’s default on its note, $367.84 (but as reduced, $183.92).”

As to the items numbered one, two and three, they are so plainly inadmissible as to require no consideration from us. As to the fourth claim, that of $183.92, being the proportionate share of the percentage on the sum of one hundred thousand dollars which the bank was compelled to borrow on account of its pressing necessities, caused by the default of the complainant and other creditors, the auditor, in view of the circumstances, recommends it to the court, but does not allow it in his statement of the account. The court ignored the recommendation, and confirmed the report without any reference to it. Undoubtedly, if the Construction Company occupied the attitude of an ordinary debtor of the bank, we know of no rule of law or principle of equity that would sanction such a claim as this. But from the statement of the case it is apparent that the Construction Company does not occupy the place of an'ordinary debtor. In this connection it is justifiable to refer to the circumstances of the original transaction, and to the fact that in its inception the transfer of the funds of this bank to the Construction Company was not by way of a voluntary loan, but was a fraudulent abstraction of them; and that, in the injury which it did to the bank, the effect of the fraud was perpetuated to the end, notwithstanding that the bank was compelled by the force of circumstances to legitimate the transaction. In consideration of these circumstances and of the peculiar and extraordinary relations of the Construction Company, through its officers, to the bank, and not upon any supposed equity arising from the mere relation of debtor and creditor, we think that the auditor’s recommendation was founded upon principles of justice, and that it should be carried into the account. The principle will here apply that he who seeks equity must do equity.

The appellant’s claim, therefore, for reimbursement in this connection to the amount of $183.92 should be allowed, and the amount due from it to the appellee should be reduced to that extent. The net balance due will then be $1,960.99, as of the date of January 28, 1898. With this modification the decree appealed from should be affirmed.

We are of opinion that the decree of the Supreme Court of the District of Columbia in the premises, so modified as aforesaid, should be affirmed, with costs. And it is so ordered  