Majority
p. 473The Merchants’ Bank in the City of New York, Plaintiffs and Respondents, v. Duncan McColl and Samuel S. J. Frith, Defendants and Appellants.
Headnote
1. Where a stock subscription note, payable to the order of a Mutual Insurance Company, is indorsed by its President and negotiated, and before its maturity is taken by a third person in good faith, and for full value in the usual course of business, and it appears that this is a common mode of negotiating its notes, such holder acquires a good title.2. It is no defense to an action by such a holder against the maker, that the transfer by the Company was of this and other notes amounting in all to
p. 474(Before Hoffman, Woodruff, and Moncrief, J. J.) Heard, January 9th; decided, April 28th, 1860.
over $1,000, as collateral security, and without a previous resolution of the Board of Trustees,[1] nor,
3. That a sufficient amount of the other collaterals to pay the loan, has been collected since the note in question was passed to such Iona fide holder, nor,
4. That by the by-laws of said Company, the President alone had no authority to indorse the notes of the Company, nor,
5. That at the time of the transfer the Company was insolvent, and transferred the note with intent to prefer a third person, a creditor of the Company, over its other creditors, nor,
6. That the subscription upon which the note was given was never made up in good faith to the amount specified in said subscription, nor,
7. That a Receiver of the property of the Company was duly appointed, some forty-five days after the maturity of the note.
Appeal by the defendants from a judgment on a verdict. Trial had before Bosworth, Oh. J., and a jury, November 15th, 1859.
The suit is on a note in these words, viz.:
145
Subscription Note.
$1,000. New York, Aug. 25, 1856.
Twelve months after date, we promise to pay the Globe Mutual Insurance Company, or order, for value received, one thousand dollars, payable at the Merchants’ Bank.
Due Aug. 25-28, 1857.
McCOLL & FRITH.
No. 537.
Globe Mutual Insurance Company.,
Indorsed,
L. Gregory, Pres’t.
Jas. W. Elwell & Co.
The plaintiffs proved that they were an Incorporated Banking Company; that the defendants, being partners, made the note in question; the genuineness of the indorsement, “L. Gregory,
p. 475
President,” and “Jas. W. Elwell & Co.”—that Gregory was President of said Insurance Company during its existence, and that “ it had different ways of indorsing; sometimes in this way/’ and sometimes, “ The Globe Insurance Company,” by the President.
That James Elwell “ received this note from Hotchkiss ” early in September, 1856, with other notes amounting in all to over $1,000, as security for a loan then made, that said Elwell “ had other dealings with the Globe Insurance Company in relation to loans,” and at the time he made this loan “ the Company was indebted to him for other loans. There was no other evidence tending to show who Hotchkiss was, or whether the loan he procured from Elwell was obtained for, and, if so, was known to have been obtained for said Insurance Company.
The plaintiffs also proved that the Marine Bank discounted the note for James W. Elwell & Company on the 22d of July, 1857, and passed its legal proceeds to their credit, and that the same were drawn out by said firm, and that James W. Elwell was then a Director of said Bank. That on the 28th of August, 1857, the Marine Bank transferred it to the plaintiffs and received $1,000 therefor; and that the interest was $155.15, and offered the note in evidence. Defendants objected “that the indorsement is not sufficiently proved.” The objection was overruled; they excepted; the note was read in evidence, and the plaintiffs rested.
The defendants moved for a dismissal of the complaint, on the ground—
That no sufficient proof of the indorsement of the note by the Globe Mutual Insurance Company, had been given.
Which motion was denied, and the defendants’ counsel duly excepted.
The defendants then offered to prove:
First. That the note in suit was transferred by the Globe Insurance Company to James W. Elwell & Company, with other notes, amounting in all .to about $5,000, without the authority of a previous resolution of the Board of Trustees of that Company, and that such transfer was made as collateral security for a loan of $4,000.
Second. That a sufficient amount of the other notes transferred at that time has been, since July 22, 1857, paid to satisfy that loan.
p. 476Hot presenting any printed points, argued the several exceptions, insisting that they were, respectively, well taken. I. The indorsement “L. Gregory, President,” is, under the proofs, sufficient to pass title to the note, and the objection to the sufficiency of such indorsement was properly overruled. (Howland v. Myer, 3 Comst., 290; Commercial Bank of Buffalo v. Kortright, 22 Wend., 348 ; Bank of Vergennes v. Warren, 7 Hill, 91 ; Brouwer v. Harbeck, 1 Duer, 114 ; Caryl v. McElrath, 3 Sand., 176; Aspinwall v. Meyer, 2 id., 180 .)
Third. That at the time of the transfer, the Globe Insurance Company was insolvent and unable to pay its debts, and that the transfer was made with the intent to give a preference out of the money received on such transfer to one Alanson Marsh in the payment of his debt, over the other creditors of the Globe Insurance Company.
Fourth. That the subscription to the Globe Insurance Company, upon which this note was given, was never made up in good faith to the amount specified in such subscription.
Fifth. That by the by-laws of the Globe Insurance Company, the President alone had no authority to indorse the notes of the Company.
Sixth. That a Receiver of the property, &c., of the Globe Insurance Company, was duly appointed on the 14th day of October, 1856.
Seventh. That on the 25th August, 1857, the defendants gave to the paying teller of the plaintiffs notice not to pay the note in suit.
This offer was overruled; and to the decision, the defendants duly excepted.
, The jury thereupon, under the direction of the Court, found a verdict for the plaintiffs for $1,155.15, the amount of the note with interest.
Ho questions arose on the pleadings. From the judgment entered on the verdict this appeal is taken.
S. Sanxay, for appellants.
B. W. Bonney, for respondents.
p. 477II. The alleged facts, which the defendants offered to prove, were not sufficient to defeat the action, and the offer was properly rejected, and the evidence ruled out by the Court. 1. The note in question, before its maturity, was regularly indorsed and delivered, for valuable consideration, to Elwell & Company, and also by them indorsed and delivered, for valuable consideration, to the Marine Bank. Neither Elwell & Company nor the Marine Bank had any notice of any irregularity in, or want of authority for, the indorsement; and their title could not be impeached for want of a resolution of the Board of Directors authorizing the transfer. (1 R. S., p. 591, § 8; Howland v. Myer, 3 Comst., 290; Curtis v. Leavitt, 15 N. Y. R., 1; see pp. 11, 191, 192; Brouwer v. Harbeck, 1 Duer, 114 ; Caryl v. McElrath, 3 Sand., 176; Aspinwall v. Meyer, 2 id., 180 .) 2. That since 22d July, 1857, (when this note was discounted by the Marine Bank,) a sufficient amount of the other notes transferred to Elwell & Company, has been paid to satisfy the loan made on the security of such transfer, can in nowise affect the right to recover on the note in question. 3. There was no offer to prove that the transfer of the note was made by the Globe Company “ when insolvent, or in contemplation of insolvency, with the intent of giving a preference to any particular creditor over other creditors of the Company,” within the intent and meaning of the statute, declaring such an assignment invalid. (1 R. S., p. 591, § 9; Brouwer v. Harbeck, 1 Duer, 114 .) But if said transfer was within the purview and prohibition of the statute, the plaintiffs would, nevertheless, be authorized to collect the amount of this note from defendants, subject (perhaps) to liability to account therefor to the creditors or stockholders of the Company, or their trustees. (Statute, § 9, as above.) 4. That the subscription to the Globe Company, upon which this note was given, was never made up to the amount specified in such subscription, is no defense to the note in the hands of a bona fide holder for valuable consideration, without notice. There is no allegation or pretense, or offer to prove, that either Elwell & Company or the Marine Bank had any knowledge or notice in relation to such alleged subscription.
p. 4785. That by the by-laws of the Company, the President alone had no authority to indorse the notes of the Company, is no defense to the note in the hands of a bona fide holder for valuable consideration, without notice. < 6. The appointment of a Receiver of the Company, on 14th October, 1856, could not affect the title of a bona fide holder , who received the note early in September, 1856, or of any person deriving title through such holder. 7. The plaintiffs, on receiving the note from the Marine Bank on 28th August, 1857, and then paying to that Bank the full amount thereof, succeeded to all the rights of the Marine Bank in such note, and notice to the plaintiffs on 25th August, 1857, not to pay the note, did in nowise impair such rights. (Story on Promissory Notes, § 191; Jacks v. Darrin, 3 E. D. Smith, 557; Watson v. Flanagan, 14 Texas R., 354; Boyd v. McCann, 10 Maryland R., 118; Howell v. Crane, 12 Louisiana An. R., 126; Haskell v. Whitmore, 19 Maine R., 102.) Neither of the exceptions at the trial was well taken; and the judgment should be affirmed, with costs.
The first exception, to the ruling that the indorsement was not sufficiently proven, is not well taken. The proof of the habit of the Company to indorse in the manner followed in this instance, was sufficient. (Caryl v. McElrath, 3 Sandf. S. C. R., 176; Ogden v. Andre, 4 Bosw., 583 ; Scott v. Johnson, 5 id., 213.)
The admissibility of the first four offers of the defendants’ counsel to prove the matters stated in them respectively, depends upon the fact whether the plaintiffs are in the position of holders of the note for value without notice. They got it from the Marine Bank, who, it is insisted, took it for valuable consideration without notice before maturity.
The note fell due August 25th-28th, 1857. In September, 1856, one Hotchkiss had possession of it, and delivered it with other notes to Elwell & Company, upon a loan, for which it was given as security. It seems as if it was again deposited-as such security with Elwell & Company for another loan in July, 1857. However this may be, Elwell & Company appear to have got it on a valuable consideration before maturity.
p. 479
Elwell & Company parted with it to the Marine Bank on a discount of it, at seven per cent, on the 22d of July, 1857. The money was passed to their credit, and drawn out. On the 28th of August, it was certified' by the Merchants’ Bank, and the Marine Bank received the amount from the Merchants’ Bank the present plaintiffs.
The title of the Marine Bank seems indisputable; and this title passed to the plaintiffs by the payment on the day of maturity. The plaintiffs have a right to avail themselves of the title of the Marine Bank. (Story on Prom. Notes, § 191; Haskell v. Whitmore, 19 Maine R., 102.)
The notice to the teller of the plaintiffs not to pay the note, could only, if of any avail, let in the defendants to any defenses which they had against the Marine Bank. If they could have sustained an action, the present plaintiffs were right in paying, and may sustain it also.
The appointment of a Receiver of the Company, can have no effect upon the rights of the parties.
And as to the by-laws, not authorizing the President of the Company to indorse its notes, it is sufficient to say that a bona fide holder is not chargeable with notice of them, as of a general statute or the charter; and no actual notice of such by-laws to the Marine Bank, was offered to be proved.
The judgment should be affirmed, with costs.
Ordered accordingly.