Ogden v. Raymond — 18 N.Y. Super. Ct. 16

Majority

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Samuel G. Ogden, Jr., Plaintiff and Respondent, v. William M. Raymond and William H. Forbes, Defendants and Appellants.

Headnote

1. Where, in an action by the indorsee of a note against the makers, the complaint alleges the making by the defendants of a note payable, by its terms, to the International Insurance Company, or order, that such Company afterwards and before its maturity “ duly indorsed the said promissory note, and the same was, thereupon, duly transferred and delivered to the plaintiff;” and where the answer merely avers that said Company never had “ any legal existence as a corporation,” and denies that “it had any legal power or capacity to transfer said note to the plaintiff by its indorsement or otherwise;” the making of the note by the defendants, and

• its actual and due indorsement and transfer by the Company, are admitted if proof be given of the incorporation of such Company under a charter authorizing it to transfer by indorsement promissory notes which it may own.

2. Under such pleadings the defendants cannot show that the note, with others, amounting in all to over $1,000, was transferred without a previous resolution of the Board of Directors of the Company authorizing such transfer.

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3. Nor can they under such pleadings show that some of the original subscribers, whose subscription notes were taken as the capital stock on its commencing business, were irresponsible and minors.

4. Nor can they show under such pleadings that the corporation was dissolved and a receiver of its effects appointed, by due judicial proceedings, subsequent to the transfer by the Company of the note thus sued upon.

5. Where, in such an action, and upon such pleadings, the pleadings alleging no other defense except that the note was an accommodation note and was known to the plaintiff to be such when he took it, and that it has been paid from other collaterals transferred with it as security for a loan made to the Company, and where it has been proved that a loan of $15,000 was made on the security of $19,000 of collaterals including the note in suit, and that only $12,000 of the loan has been repaid; it is not error to reject evidence of the whole number of collaterals; or that judgments have been obtained upon some of the collaterals, or of what securities were at any time received for the loan, or were held at the time of the trial.

(Before Bosworth, Oh. J., and Hoffman and Monchief, J. J.)

Heard, April 12th;

decided, May 21st, 1859.

This is an appeal by the defendants, (William H. Raymond and William H. Forbes,) from a judgment against them in favor of the plaintiff, rendered on a trial had before Mr. Justice SlosSON without a jury, on the 13th of May, 1858.

The action is against the defendants as makers of a note, which, with its indorsement, reads thus, viz.:

“ $750. Yew York, October 4, 1855.

“ Twelve months after date, we promise to pay the International Insurance Company, or order, for value received, seven hundred and fifty dollars payable at the People’s Bank.

(Signed) “ Raymond & Co.”

[Indorsed.]

“For the International Insurance Company.—M. Starbuck, President.”

The complaint alleges the defendants to be partners, under the firm name of Raymond & Co., and that as such, they made and delivered the note to said Company; that the Company after-wards duly indorsed said note before its maturity, and the same was thereupon duly transferred and delivered to the plaintiff; that the note is past due, and no part of it has been paid, and prays judgment for the amount of it with interest.

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The answer denies (an allegation in the complaint) that said Company “is a corporation duly organized under and pursuant to the laws of the State of New York,” and avers that it “has not now or ever had any legal existence as a corporation.”

It denies that the Company “ had any legal power or capacity to transfer said note to the plaintiff by its indorsement or otherwise.”

It avers that said note “ was loaned to the payee thereof and was and is an accommodation note for which the defendants received no consideration whateverthat it was given on the agreement that it should not be transferred by indorsement or otherwise, “ of all which facts and circumstances ” the plaintiff had notice before he took it.

It also alleges that plaintiff claims to hold the note as collateral security for a loan to the Company, and avers that said loan, if ever made, has been paid out of the proceeds of other collaterals placed in his hands, and denies that the plaintiff is the lawful owner and holder, or the real party in interest.

It was proved at the trial by Charles W. Ogden, vice-president of the Company, that the International Insurance Company transacted business as such Company, in the city of New York, from May, 1855, into November, 1856; that Moses Starbuclc was President of the Company from the 6th of February, 1856; that the note in suit, with other subscription notes of the Company, amounting in all to about $19,000, were transferred on the 15th of April, 1856, to the plaintiff’s father, S. G\ Ogden, to secure a loan of $15,000, then made by him to the Company, and that only $12,000 of such loan had been repaid.

That the indorsement of Starbuck’s name upon the note was his writing, and that the words over it were written by Leo Del Banco, the Secretary; that the President was in the habit of indorsing the notes of the Company; and that this was known to several of the Directors, and that he “generally, almost universally,” indorsed, without there being previous resolutions authorizing the transfers. To the admission of this last named evidence the defendants objected and excepted.

A certified copy of the charter of said Company was read in' evidence. The defendants offered in evidence the original minutes of the proceedings of the Company, had on the 20th of

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May, 1854, and excepted to the decision of the Court excluding them. They then read the original act of April 15,1844, an amendatory act passed April 11, 1855, and a resolution of the Company to dissolve, passed February 11, 1853, and moved to dismiss the complaint, and excepted to the decision denying such motion.

Charles W. Ogden, (who was Vice-President from the 9th of October, 1855, until a Receiver was appointed on the 16th of November, 1856,) on his cross-examination, having testified that S. G. Ogden got the note in suit “ from the International Insurance Company, he got it 15th of April, 1856,” was asked (at folio 8) these questions:

“ Q. How did he get it?

“ Q. How many notes were transferred to your father when this was transferred ?”

The questions were overruled, and the defendants excepted.

Having testified that S. G. Ogden made several loans to the Company, and “ one for $15,000, on the day the note was transferred,” that about $12,000 of the $19,000 of securities transferred had been collected, he was asked these questions:

“ Q. Have you obtained any judgments on these notes ?

“ Q. Was there any resolution of the Board of Directors authorizing that transfer?

“ Q. Did your father make any prior loan to the Company?

“ Q. Did your father at any time receive any other securities from the Company which he could hold as security for this loan?

“ Q. What securities does your father hold now for that indebtedness ?”

These questions were severally objected to and excluded, and the defendants excepted. (Folios 11-13.)

The Court excluded evidence upon the question whether there were any losses, under a policy which the defendants obtained from the Company about the time the note was given, and the defendants excepted.

The witness having testified to subscriptions, to an agreement to furnish notes as part of the capital. stock of said Company, upon condition (among others) “ that $200,000 of subscriptions shall be procured from parties satisfactory to the Company,” amounting to over $284,000, was asked, in substance, (folio 17,)

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whether he did not know that more than $100,000 thus subscribed was subscribed by office boys in and about Wall street, less than eighteen years old, and that such fact was not known at the time to the officers of the Company ?

And whether, at the time the Company went into existence, there were four hundred applicants for insurance, the premiums on which amounted to $200,000, of which $40,000 was paid in cash, or notes of solvent parties founded on actual and bona fide applications for insurance ?

And whether there were notes of solvent parties for $160,000 founded on bona fide applications for insurance, in the hands of the Company at the time they commenced business ?

And whether, at that time, the company had a cash capital of $25,000, and eleven trustees?

■ These questions, on objection, were severally excluded, and the defendants excepted.

The note in suit being offered in evidence, the defendants objected, first. That it is not proved to have been made by the defendants; second, That no resolution of the Board of Trustees authorizing the transfer has been proved; and third, Nor any by-law authorizing a transfer by the President without a resolution of the Trustees. The objections were overruled, and the defendants excepted.

The witness, on further cross-examination, was asked these questions, viz.:

“ Q. Did your father then (when he received the notes) know that there was no resolution of the Board of Trustees authorizing the transfer ?

“ Q. Do you mean to say that you never knew of a transaction made by the President without the knowledge of more than two or three Trustees ?

“A. I know but of one instance, to Mr. Regan, who was a Trustee.

“ Q. What was the amount of these notes?”

The two of the last three questions which are unanswered, were excluded, and the defendants excepted.

The plaintiff having rested, the defendants moved for a non-suit, on the grounds, first, That the transfer of the note in suit was not authorized by a previous resolution of the Board of

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Directors of the Company; second, That it was not indorsed by the Company, nor by the President in office at the time of its transfer to S. G. Ogden. The motion was denied, and the defendants excepted.

William H. Forbes, one of the defendants, testified that he signed the note in question, but was not shown and did not sign any subscription agreement; that the note “was loaned to Mr. Marsh, who was at that time the President of the Company, and loaned to him as the President,” without consideration; that “Mr. Marsh promised us that it ishould remain in the hands of the Company; that he would see that it remained with the Company, and that when the note came due, we should call upon the Company for a check to settle it;” that he said “ it was to go to show as part of the capital of the Company; we had an open policy issued to us afterwards; can’t say how long afterwards; but the note was issued while we were dealing with the Company ;” “we have a claim against the International Insurance Company for losses; the losses were near the amount of the note, but never were adjusted.”

Mr. Ogden, being recalled by the defendants, testified thus: “ Before the $15,000 loan was made, I had several conversations about it with my father.”

“ Q. Did you at that time know the condition of the Company ?

“ A. Yes, sir; I communicated it to my father; I told him all I knew about the affairs of the Company; all the notes were in the ordinary form, with two exceptions.

“ Q. Did your father know at the time that the parties who signed the notes did not owe the Company the amount expressed in the notes at the time of the transfer?”

This question was objected to and excluded, and the defendants excepted.

Evidence was offered to show that proceedings had been duly taken by the Attorney-General to dissolve said Company; that an order had been entered in them dissolving said Company; that in the course of said proceedings Mr. Scudder was appointed a Receiver of the Company, on the 1st of November, 1856, and that he then notified the defendants not to pay the note in suit to the plaintiff.

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The case states that “the said Judge thereupon found and decided as matters of fact:

“ 1st. That. the International Insurance Company was originally incorporated by a special act of Legislature, passed on the 15th day of April, 1844, by the name of the Kings County Mutual Insurance Company. The original act of incorporation is chapter 156 of the Session Laws of 1844, page 229.

“ (To which finding of fact the defendants, in due time and due form of law, excepted.)

“ 2d. That under that act of incorporation, the Kings County Mutual Insurance Company organized and commenced the business of insurance, pursuant to the act of incorporation, in Brooklyn, shortly after the date of that act, and they thus continued to transact business until the 23d ■ day of May, 1854, when the Trustees and stockholders passed a resolution to dissolve the corporation, and the same was declared by a resolution adopted by the Trustees to have been dissolved, on or about the 11th day of February, 1853, in the following words, viz.:

“ 1 The ordinary business of this corporation having been suspended for one year, it is resolved, That the corporation is dissolved, and that we, the present Trustees, will settle the affairs of the corporation pursuant to the provisions of the Revised Statutes, sections 9 and 10, first volume, page 603.’

“ 3d. Afterwards a resolution was introduced into the Board of Trustees of the Kings County Mutual Insurance Company, that the charter of that Company be offered for sale; and after much negotiation, the same was sold to George Briggs and others for the sum of five thousand dollars.

“ The facts contained in this and the next preceding finding, are stated by the said Justice, but they were excluded by him. He decided that they were inadmissible in this action, and he rules that they are not to be considered in deciding this action.

“ (To which decision the defendants’ counsel, in due time and form of law, excepted.)

“ 4th. That on the 11th day- of April, 1855, an act of the Legislature of this State was passed, which is chapter 295 of the Laws of 1855, and is in the Session Laws of that year, at page 505.

“ 5th. On the 1st day of May, 1855, the International Insurance Company began to transact the business of insurance in

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the city of New York, and continued to transact such business until the 16th day of November, 1856, when, in certain proceedings taken by the Attorney-General, pursuant to statute, Henry J. Scudder, Esq., was appointed Receiver of the International Insurance Company, by an order of the Supreme Court.

“ 6th. That the note declared on, -was made by the defendants and delivered to the International Insurance Company.

“ 7th. It was transferred by the President to Mr. Ogden, together with other similar notes, amounting to about $19,000. No resolution was adopted by the Trustees or stockholders authorizing such transfer.

“ 8th. Mr. Ogden advanced $15,000 on the security of such notes.

CONCLUSION OF LAW.

“ That the plaintiff is entitled to recover the amount of the note described in the complaint, with interest.

“ (To which ruling and decision of the said Justice, the defendants, in due time and in due form of law, excepted.)”

Judgment having been entered for the plaintiff, the defendants appealed from it to the General Term.

P. Y. Outler, for appellants, (the defendants.)

George W. Stevens, for respondent, (the plaintiff.)

Each counsel made and argued the same points substantially as in Ogden v. Andre, reported 4 Bosw., 588 .

The complaint alleges that the defendants as partners made the note, that the payee (The International Insurance Company) duly indorsed it, and that it was thereupon duly transferred and delivered to the plaintiff, and that it- is unpaid and became due before suit brought.

1. Denies that the International Insurance Company is a corporation duly organized, and avers that it never had any legal existence as a corporation.

2. Denies that it had any “ legal power or capacity to transfer said note by its indorsement or otherwise.”

3. It avers that the note was made for the accommodation of the payee, the latter agreeing not to negotiate it, and that these facts were known when the plaintiff took it.

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4. That the loan, as security for which the plaintiff held it, has been fully paid.

The making of the note and its indorsement by the Company are therefore admitted.

The existence of the International Insurance Company as a corporation was sufficiently proved, as against the present defendants.

The remaining matters of defense are, that the note was made to accommodate the Company, that the plaintiff'knew this when he took it, that he claims to hold it as security for a loan, and that such loan has been paid. If the loan has not been paid, and if more of it in amount than the face of the note and interest is unpaid, then there is no, defense, based on the facts alleged in the answer.

How the minutes of the Company affected any of the issues raised by the answer is left to conjecture merely. The case does not disclose their contents. The rejection of them does not appear to be a matter which could possibly have prejudiced the defendants. The exception to the decision rejecting that evidence is therefore untenable.

The motion to dismiss the complaint was properly denied. Ho evidence had then been given that the note was made for the accommodation of the payees.

The questions (at folio 8) were only adapted to show that the note in suit, with others, was taken by S. Gr. Ogden to secure money lent by him, and that the plaintiff took it knowing that fact.

The question whether there was any resolution of the Board of Trustees authorizing the transfer was properly excluded, as the due indorsement of the note by the Company was admitted.

How many securities the lender held is of no moment. The material question is, had the loan been paid ? The questions in respect to those matters were properly overruled. It appeared ■ that $15,000 was lent and only $12,000 repaid. On this point there is no conflict of evidence. The exceptions (at folios 11-18) are not tenable.

There is no allegation in the answer that the defendants’ subscription was procured by fraud, and therefore the evidence offered (at folio 17) tending to show such to be the fact, was properly excluded.

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The objection, to the reading of the note in evidence, and the exception to the decision admitting it are, for the reasons already stated, untenable.

The evidence admitted, as to what officer was in the habit of indorsing the notes of the Company, was immaterial and in no way prejudicial to the defendants, as the due indorsement of the note by the corporation was admitted by the answer.

As the case stands, and viewing it as one in which no issues were to be tried except those raised by the pleadings, it is simply this:

The defendants are sued as the makers of a note, and the plaintiff sues as indorsee. It is admitted that the payee, which is a corporation, duly indorsed it to the plaintiff, and that it was thereupon duly transferred and delivered to the plaintiff, with this qualification; that the defendants deny that the payee ever had a legal existence as a corporation, or “ any power or capacity ” to make any transfer of the note.

The payee was created a corporation by a special act, passed in 1844, and after that its name was changed by statute in 1855, and subsequently did business for years as a corporation, and the defendants dealt with it as such. For all the purposes of this action, its existence is fully established, and of course its capacity to indorse and negotiate any note owned by it.

The only other defense set up is disposed of. Although an accommodation note, and known to be so to the first indorsee when he took it, he was a holder for value as he had advanced on its credit and on that of other notes transferred with it $15,-000, only $12,000 of which has been repaid.

The defendants are therefore liable. The evidence justifies the conclusion that it is a business note, and upon full consideration, by force of the 11th section of the charter of the Company.

The facts as found, do not state whether it was an accommodation note, nor whether the loan had been repaid. But the facts as found, assuming them to be all the facts which the evidence given established, are sufficient, including those admitted by the pleadings, to support the judgment.

I think it should be affirmed.

Bosworth, Ch. J., concurred in this opinion.

The complaint sets out the making and delivery of the note to the Company; that it was drawn to the order of such Company by name; and that, before maturity, the said International Insurance Company duly indorsed the said promissory note, and the same was thereupon duly transferred and delivered to the plaintiff.

The defendants answer as follows: “And these defendants deny that the said alleged corporation, The International Insurance Company, had any legal power or capacity to transfer said note to the plaintiff, by its indorsement or otherwise.” •

Thus the allegation of an indorsement by the Company is impliedly admitted; the actual fact of indorsement, by authority of the corporation, through some competent agency, is conceded; and all that is put in issue is, a legal proposition that the Company itself had no legal capacity or power to transfer the note.

Fow, the testimony presents this state of facts: The President was proven, by sufficient evidence, to have been in the habit of indorsing the notes; the Finance Committee were made aware of this, as well as several of the other Directors: indeed, the testimony is, that the Finance Committee knew of the transaction with S. Gr. Ogden upon which this and a mass of other notes were delivered to him.

Yet it is also proven that it was not the custom of the Board to inquire into the financial matters; consequently the Board, as a Board sitting, did not know of the transaction.

Then, a question was put to the witness Ogden, Vice-President of the Company: “Did your father know that there was no resolution of the Board of Trustees authorizing the transfer?” The question was, on objection of the plaintiff, ruled out, and an exception taken.

The 8th section of the act of moneyed corporations, (1 R. S., 588,) is applicable to the present Company. The transfer of effects exceeding the value of $1,000, without a previous resolution, is void, except to a purchaser for valuable consideration without notice. The notice must be of the fact that there had been no previous resolution. The fact of notice must be positivety proven or necessarily inferable from what is proven. And here the defendants offer to prove knowledge by Ogden at the time of the transfer to him, that there was no such resolution.

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See the case of Blunt v. Hanna, (reported in Cleaveland’s Banking System, p. 7, note,) before Vice-Chancellor Sandford.

I do not understand that that case, or that of Gillet v. Phillips, (8 Kern., 114,) is affected or questioned in any of its positions by the later authorities, except upon the question of a banking corporation, created under the general act,, being governed by the provisions as to moneyed corporations. (17 N. Y. R., 521.) Notice of the absence of a resolution of a Board was there chiefly deduced from the situation of the assignee as a Director.

The question, then, seems to resolve itself into this: Has the defendant debarred himself from the defense by the form of his answer ?

It is insisted that'the answer admits of the construction that the Company had no power to transfer but through a resolution of the Board; that, by this allegation, involved in the denial, they put the plaintiff to prove his title through a resolution, or through something equivalent to and a substitute for it.

But, in our opinion, the language will not justly bear such a meaning. We must construe the answer with reference to the complaint. The allegation is, that the Company duly indorsed the note, and the same was thereupon duly transferred and delivered to the plaintiff.

This fact of indorsement by the Company is met by an averment that the Company had not legal capacity to indorse and transfer the note. The defendant tenders only the issue that there was no such capacity. Presumptively, a corporation has the power to pass away notes held by it, for some purposes; and the transfer will not be assumed to be for illegal purposes. The defendant, therefore, was to show some prohibition, or fact, which destroyed this capacity in the present case. This he has failed to do; and the fact of indorsement by the Company stands conceded.

2. Another branch of the defense taken by the answer is, that the Company was never duly organized, and had not a legal existence.

The charter of the Company was produced in evidence. Proof of acts under it were given. Proof of the defendants’ dealing with it as a corporation is given, besides the note itself. Its legal existence is fully made out as against these defendants.

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8. The answer next sets up that the note was an accommodation note to the Company, and this was known to the plaintiff; and, further, that the loan of the plaintiff to the Company has been fully paid.

There is no evidence of Ogden’s knowing the character of the note. There is evidence that his loan was not paid. And, in that case, even if he knew it was accommodation paper, there would be no defense on this ground.

The exceptions taken upon the trial remain to be considered.

The defendants’ counsel offered to read the minutes of the Company, which was overruled, and an exception taken. In what way these minutes bore upon any issue in the case, does not appear. The counsel did not state in his offer the object of it, nor the contents or tenor of the minutes.

'The question was asked, how Ogden got the note from the Company. It was objected to, and the question ruled out, and an exception taken. Ho question was raised by the answer as to the manner in which Ogden acquired the note from the Company—that it was in an illegal or fraudulent manner. Besides, the question seems fully answered by replies to other questions.

It was asked, how many notes were transferred to Ogden upen the transfer of this note. On objection this was ruled out, and an exception taken. This fact was immaterial to the issue. The only question pertinent to this part of the case was, whether Ogden had been paid in full. Afterwards, the fact is testified to. He got about $19,000 in notes, of which $12,000 had been paid.

The question as to the judgments had on any of the notes was equally irrelevant, and so also was the question as to the securities now held by Ogden, and that as to loss under the policy.

The inquiry as to the character of the subscribers to the stock, being office-boys, insolvent, &c., was irrelevant, when there was no allegation in the answer of the subscription of defendants being obtained by fraud.

The extent of capital and number of trustees, were facts equally irrelevant.

The judgment should be affirmed.

Judgment affirmed.