Samuel G. Ogden, Jr., Plaintiff and Respondent, v. Charles Andre, Christian Andre and George Andre, Defendants and Appellants.
L A person who, in good faith, lent money to the International Insurance Company, on the transfer of its subscription notes as collateral security, • amounting in the aggregate to over $1,000, without notice of any fraud affecting the origin of such notes, or that they were transferred without any previous resolution of the Board of Directors of such Company, ia entitled to recover upon them, although they may have been procured from the maker by fraud, and although there may have been no such resolution authorizing the transfer.
2. The fact that the plaintiff took the transfer directly from the Company, is not, per se, constructive notice of the non-existence of such a resolution.
3. Nor is it a defense that the collaterals, when thus transferred, were not indorsed by the then President of the Company, they having been actually-indorsed previously for the purpose of.making them negotiable, by the. then President, and he being the proper officer to make such indorsements.
4. Whe.e the defense is that the Company, at the time of such transfer, was insolvent, the Judge may, in his discretion, require some evidence of notice thereof to the indorsee, or that he took the notes in bad faith, to be first given; and it is not error to exclude proof of such insolvency, when the evidence given not only fails to justify the inference of bad faith, or notice of such insolvency, but, on the contrary, shows good faith, and an absence of any such notice or knowledge.
(Before Bosworth, Ch. J., and Hoffman and Moncrief, J. J.)
Heard, April 12;
decided, May 21, 1859.
*584This is an appeal by the defendants from a judgment against them, entered upon a verdict rendered upon a trial had before Mr. Justice Slosson and a jury, on the 27th of May, 1858.
The plaintiff sues as indorsee of a note, which, with the indorsements thereon, reads as follows, viz.:
“ $1,000. Hew Yore, Dec. 1st, 1855.
“ Twelve months .after date, we promise to pay the International Insurance Company, or order, for value received, one thousand dollars.
(Signed) “Andre Brothers.”
Indorsed: “For International Insurance Company, Alanson Marsh, President. Pay Phenix Bank, S. Gr. Ogden, Jr.”
The complaint states that the defendants, on the 1st of December, 1855, being partners, composing the firm of Andre & Brothers, made the note in question and delivered it to the payees ; that afterwards, and before its maturity, “ the said International Insurance Company duly indorsed” the same; that it “was thereupon delivered to the plaintiffs;” that it is past due, and wholly unpaid, and prays judgment for the amount of the note, with interest from December 4, 1856.
The answer of the defendants admits that they made and delivered the note to said Insurance Company, but avers that it was given to the Company “as a memorandum for premiums of insurance in said Company, to be earned by said Company for insurance therein, to be effected by the defendants when they should desire, or, if they should desire, during the period of the year before the maturity of said note, and that the amount of said premiums should be credited upon said note as the said insurance should be made, and for the amount of the premiums therefor;” that at the time the note was made and delivered, the Company represented to the defendants that they were solvent and duly organized, with a large surplus, and were in good condition, and “that they only wanted said note as a memorandum of insurance;” that if the whole of the note should not be earned at its maturity, the Company would surrender it to the defend*585ants, on being paid the premium upon the amount of insurance actually effected; that, relying upon said representations, the defendants made and delivered the note; that, as matter of fact, the Company was insolvent when said representations were made and the said note was given, and was “not a duly organized Company, but a corrupt and fraudulent association, and the officers thereof, with their associates and the persons engaged in said Company, had combined and confederated together to defraud the community, and they well knew that they were unable to pay any losses,” and did not expect or intend to pay any when said, note was obtained; that soon after the note was given the Company failed, and was closed up, on account of its insolvency and the fraudulent manner of its organization; that the premium on the whole insurance effected by the defendants with said Company, amounts to only $212.12, which sum the defendants offer to pay, with costs, on the note being surrendered to them.
It avers that the plaintiff is not a holder of the note in good faith and for a valuable consideration.
For “ a further and separate answer,” it denies that said Company “ever indorsed or delivered the said note to the plaintiff;” but avers “ that the said note was, without any authority and fraudulently, indorsed and delivered by the President of said Company to the plaintiff as collateral security for a preexisting debt of the said President.”
It also denies “that the plaintiff is the lawful owner and holder of said note.”
At the trial, “ the charter of the International Insurance Company,” as the case states, was read in evidence, but it is not printed as a part of the case.
It was proved that Charles W. Ogden was Vice-President of said Company from October 29, 1855, to March, 1857; and that .Alanson Marsh was President from September 15th, 1855, to February 2d, 1856, when Moses Starbuck succeeded him as President.
Charles W. Ogden, a witness for the plaintiff, was asked, “ by what officer of the Company were the notes of the Company indorsed ?”
The defendants objected to this evidence, and to evidence that Marsh, the President, indorsed the note, unless it was first shown *586that he “ had special authority from the Company to transfer the note, and that such transfer was authorized by resolution of the Board of. Directors.” The objection was overruled and the defendants excepted. • The witness answered, “By the President.” He then proved the indorsement upon the note, and it was read in evidence.
It was further proved that the note, with others of a like description and similarly indorsed, amounting in all to $18,000 or $19,000, was transferred to Samuel G. Ogden, father of the plaintiff, as security for a loan of $15,000, made by him to the Company, and paid to the Company at the time of the transfer of the collaterals.
That prior to such loan and transfer, and previous to February 6, 1856, this note was lodged as collateral with Krollpfeiffer & Borott, while Marsh was President, as security for money obtained from them, and was then indorsed by Marsh as President; that it was taken up by the Company on the 6th of April, 1856, and subsequently transferred (as above stated) to S. G. Ogden, by Starbuck, who was at that time President. That there was no resolution of the Board, of Directors authorizing the transfer to S. G. Ogden. That the defendants, after they made the note in question, took an open policy from said Company, the premium on which was $1,001.25; and that “ under that policy there was $200 or $300 earned, marked off and charged against this note that the defendants never paid any money on it.
When this evidence had been given the plaintiff rested, and the defendants moved for a nonsuit, on the grounds: First. That the transfer of the note in suit was unauthorized by a previous resolution of the Board of Directors of the Company. Second. That the note was not indorsed by the Company, nor by the President of the Company in office at-the time of the transfer to S. G. Ogden. The motion was denied and the defendants excepted.
The defendants offered in evidence a judgment of the Supreme Court “in proceedings taken by the Attorney-General of this State, declaring said International Insurance Company insolvent, and dissolving the same, which judgment was entered on the.... day of............,18...” „ ,
*587The evidence was objected to as irrelevant, and excluded, and the defendants excepted. It was subsequently admitted “ that Mr. Scudder was appointed Receiver of the International Insurance Company, November 1st, 1856, by an order of the Supreme Court, in proceedings instituted by the Attorney-General.”
Charles Andre, one of the defendants, testified, that before the note in suit was made, Mr. Del Banco came to the' defendants’ office, and said “ this Company had a cash capital of $100,000; that they were going to enlarge it by subscription notes to the amount of $500,000, and asked me to be a party to those subscriptions ; we signed a book that Mr. Del Banco had in his possession containing the terms of the subscription; he said that he was not then an officer of the Company, but as soon as those subscriptions were taken, he would be made Secretary.”
“We subscribed $1,000, telling him that we had taken out some policies in other companies, and that we probably would not use that amount for some time to come; Mr. Del Banco then said that if we should not use the premiums, and the note became due, then oh paying what amount we might have taken, and if no premiums had been earned, the note would be returned without payment; the Company sent us that note and we signed it, believing that all the notes had been given.”
On cross-examination, the subscription book signed by the witness was identified by him, and was read in evidence, as follows, viz.:
“ We, the undersigned, hereby subscribe the several sums set _ opposite our respective names as an additional capital stock of the International Insurance Company, said subscriptions to be paid for in our notes at twelve months, and to be insured out in premiums by us, upon condition—
“ 1. That this subscription shall be binding when the sums subscribed amount to at least one hundred thousand dollars, approved by the Board of Trustees.
“ 2. That Edward Richardson shall be President, and Chas. W. Ogden Vice-President, and A. B. Van Olinda Secretary of said Company.
“3. The said Company shall pay us a commission of five per cent for advancing our said notes upon the payment thereof.
“ New York, October 9th, 1855.”
*588It appeared that Del Banco was subsequently appointed Secretary of the Company, and was afterwards removed.
David E. Wheeler, one of the Commissioners appointed by the Comptroller, in “ 1856, to examine into the condition of all the Insurance Companies in the city," gave evidence tending to show that the condition of said Company “was bad;” that “it had a large quantity of' worthless securities, and a large amount of debts, with nothing to pay them with;” that “there was a large amount of notes as assets, the makers and indorsers of which could not be found.”
Morris Hollander gave evidence tending to show that Del Banco requested him, in December, 1855, to give a subscription note to said Company, and represented it to be a first-rate Company, with a cash capital of $200,000.
Alanson Marsh testified that, during his presidency, the Company had enough securities to pay, and did pay, its losses. “There were, probably, $50,000 of notes when I came in; I did not see the first nominal subscriptions; I saw the $50,000 of notes.” He was then asked these questions, (found at folios 46 and 48 of the Case,) viz.:
“ Q. What became of the $50.000 of notes?”
“ Q. How much money had the Company when you became President, September 15, 1855?”
“ Q. Was the $50,000 taken from the Company by its officers, shortly after you became President, without paying the Company any valuable consideration therefor ?”
These questions, as they were severally put, were objected to and excluded, and the defendants excepted.
He further testified that, in December, 1855, the Company had, of premium notes, some $80,000 or $90,000, which were considered good.
Charles W. Ogden testified thus: “I communicated to S. Gr. Ogden the result of my knowledge as to the condition of the Company; I told him the Company was doing a good business; had many of the best subscribers, and was in need of money on the subscription notes to pay losses; he agreed to advance the amount of money; I was present at the negotiation; it was conducted by Starbuck; I told S. Gr. Ogden that this note of defendants was a subscription note.”
*589The evidence being closed, the Judge charged the jury as follows :
“ If you- shall find that this note was transferred to Ogden, Sr., for money advanced at the time, and without notice of the fraudulent representations alleged to have been made to the defendants, to induce them to make the note, the plaintiff is entitled to recover, notwithstanding you may find that such representations were made, and were false.
“If you shall find that such representations were not false, or were substantially true, the plaintiff is entitled to a verdict.
“ The elder Ogden having been shown to have advanced $15,000 on the pledge of this and other securities, the burden of showing notice of the fraud, if any, .rests on the defendants.
“ This note formed part of the capital stock of the Company, and the defendants are liable for the full amount of the note, though only $212 of it has been earned, unless you find the fraud before referred to, and the elder Ogden’s knowledge of it, when he made his advance and received the note.
“If the elder Ogden is not shown to have been a holder without notice, and if the fraud existed, the present plaintiff cannot recover, there being no evidence that he paid anything on the transfer of the note to him.”
The counsel for defendants then excepted to the charge of the court, so far as it relates to notice of the fraud to S. Gk Ogden, senior.
He also excepted to the charge that the plaintiff’s recovery is not to be limited to the amount of the premiums earned, but must be, if at all, for the whole amount of the note and interest.
He also excepted to each and every proposition in the charge, except the last of said propositions.
He then requested the court to charge the jury as follows:
1. That if the note in suit was transferred by the officers of the Company in contemplation of insolvency, the plaintiff cannot recover.
2. That Ogden, senior, at the time he received the note, being informed that the note was a subscription note, is chargeable with notice of the terms of the subscription.
8. That the transfer of the notes, (the one in suit and the others,) amounting in the aggregate to more than $1,000, (about *590$20,000,) was invalid for not being authorized by a resolution of the Board of Directors.
4. That Ogden; senior, receiving the notes directly from the officers of the’ Company, is chargeable with notice of the fact that the transfer was unauthorized by resolution of Directors.
5. That if Ogden, senior, knew of the insolvent condition of the Company; or had knowledge sufficient to put him on inquiry, the transfer to him was void, and the plaintiff cannot recover.
6. That the proof offered by the plaintiff is insufficient to show a transfer from the Company to Ogden. 1. There is no proof of authority of the President to indorse. 2. There is no evidence of a resolution authorizing such an indorsement as is made on the note, or such a transfer.
7. That the elder Ogden had notice sufficient to put him upon inquiry into the origin and history of the note.
The Court refused to charge according to either of said requests, to which refusal defendant’s counsel excepted.
The jury found a verdict in favor of the plaintiff for $1,103.40, the amount of the note and interest.
Judgment having been entered on the verdict, the defendants appealed from it to the General Term.
P. Y. Cutler, for appellants.
The International Insurance Company was first chartered under an act to incorporate the Kings County Mutual Insurance Company, passed 15th April, 1844. (Laws of 1844, ch. 156, p. 229.)
The title of the Company was changed to the “ International,” by act of 11th April, 1855. (Laws of 1855, ch. 295, p. 505.)
In 1847, the act of 1844, granting the first charter, was amended. (Laws of 1847, vol. 1, p. 109.)
I. This Company never had a legal existence.
II. The note was taken in a mode and for purposes not authorized by the charter of the Company, and was an attempt to evade the statute. The act was at least ultra vires. Vide Utica Insurance cases. (Utica Ins. Co. v. Scott, 19 Johns., 1.)
III. The International Insurance Company is within the statutes as to moneyed corporations. (1 R. S., 589, pt. 1. ch. 18, tit. 2, arts. 1-8; Gillet v. Moody, 8 Comst., 479; Talmage v. *591Pell, 3 Seld., 328; Supervisors of Niagara v. The People, 7 Hill 504; S. C., 4 id., 20; 1 R. S., 598, § 61; Gillet v. Phillips, 3 Kern., 114.)
1. It was subject to all the general statutes of the State applicable to such corporations, whether passed before or since the General Insurance Law of 1853, except so far as such statutes may be inconsistent with the legislation as to this particular class of moneyed corporations. This has been repeatedly adjudged by the Court of Appeals. (See above cases, and Sagory v. Dubois, 3 Sandf. Ch. R., 488; Leavitt v. Tylee, 1 id., 207; Brouwer, Receiver v. Harbeck, 5 Seld., 589; Gillet v. Phillips, 3 Kern., 114.)
2. It was subject to the general statutes, entitled, “regulations to prevent the insolvency of moneyed corporations,” and to secure the right of the creditors and stockholders. (1 R. S., 589, 598, §§ 51, 61, took effect January 1, 1828; Gillet v. Moody, 3 Comst., 479; Talmage v. Pell, 3 Seld., 328; Gillet v. Phillips, 3 Kern., 114; Brouwer, Receiver, v. Harbeck, 5 Seld., 589; Leavitt v. Yates, 4 Ed. Ch. R., 134; Leavitt v. Tylee, 1 Sandf. Ch. R., 207.)
3. It was within the general statute, entitled, “ Of proceedings against corporations in equity, which authorizes an injunction to restrain the exercise of powers not granted, and proceedings for dissolution of insolvent moneyed corporations.” (2 R. S., 777, took effect January 1, 1830; id., § 38; Boisgerard v. The New York Banking Company, affirmed by the Chancellor, 2 Sandf. Ch, R., 28; Sagory v. Dubois, 3 id., 466, 485; Gillet v. Moody, 3 Comst., 479; Tracy v. Talmage, in Chancery, before the Chancellor. The case in which the Receiver was appointed for the North Am. Trust and Bank. Co.)
4. It was within the general statute, entitled, “ Of the general powers, privileges and liabilities of corporations;” the third section of which prohibits, in express terms, the exercise of any corporate powers except such as shall be expressly granted, or shall be necessary to the exercise of the express power. (See §§ 33 and 34; 1 R. S., 599; took effect January 1, 1828; Talmage V. Pell, 3 Seld., 328.)
IY. The transfer of the two notes to Ogden is absolutely void, because not authorized by a previous resolution of the Board of Directors. (1 R. S., 591, § 8; Gillet v. Moody, 3 Comst., 479; *592Gillet v. Phillips, 3 Kern., 114; Blunt v. Hanna, Opinion, Vice-Chan.; Sandf. in Pamphlet; Johnson v. Bush, 3 Barb. Ch. R., 209; Talmage v. Pell, 3 Seld., 328; Lessee of Clarke v. Courtney, 5 Peters, 319; Van Ness v. The Bank of the United States, 13 id., 17, 21.)
1. This was a statute corporation, and was capable of exerting its faculties only in the manner which the law authorizes. (Head v. The Prov. Ins. Co., 2 Cranch, 127; N. Y. Fire Ins. Co. v. Ely, 2 Cow., 678; Phœnix Bank v. Curtis, 4 id., 437; Bank of Augusta v. Earle, 13 Peters; Bard v. Poole, 2 Kern., 497, 501; 2 Kent, 290; Williams v. Chester, &c., 5 Eng. L. & Eq. R., 497; Vielie v. Osgood, Paige, J., 8 Barb., 133; Voorhees v. The Presbyterian Church, &c., id., 148, 149.)
And by the third section of the act it is provided that all the corporate powers shall be exercised by a Board of Trustees. (Act of 1844, see Sess. Laws, p. 229, § 3.)
2. Where a power is created or its exercise is regulated by statute the authority must be strictly pursued in all respects or the attempted execution will be void. (1 Story’s Eq. J., §§ 96, 177; Bright v. Boyd, 1 Story R., 478; Vielie v. Osgood, 8 Barb., 133; Voorhees v. Presbyterian Church, id., 149; Atkins v. Kinnan, 20 Wend., 241; Owings v. Hull, 9 Peters, 607, 623; Williams v. Peyton, 4 Wheat., 79; Thatcher v. Powell, 6 id., 109; Ronkendorff v. Taylor, 4 Peters, 349; Jackson v. Shepard, 7 Cow., 88; Jackson v. Esty, 7 Wend., 148.)
3. This principle applies to every individual or body whose powers are given or regulated by statute. (Cow. & Hill’s Notes to Phil. Ev., pp. 1288, 1289, 1290; Const. of 1846, art. 1, §§ 6, 7; Sharp v. Johnson, 4 Hill; Sharp v. Speir, id., 76; Denning v. Smith, 3 Johns. Ch., 332, 344; Sherwood v. Reade, 7 Hill, 431; Powell v. Tuttle, 3 Comst., 396; Hawley v. Bennett, 5 Paige R., 104; Arnot v. McClure, 4 Denio, 41; Miller v. Hull, id., 104; Jackson v. Clark, 7 Johns., 217; Fitch v. The Commissioners of Highways, 22 Wend., 132.)
4. And the like principle in substance applies to conventional powers. (Fitch v. The Commissioners of Highways, 22 Wend., 132; 1 Eq. J., § 97; 2 Denio, 61; Ewin’s Appeal, 16 Penn. St. R., 266; Doolittle v. Lewis, 7 Johns. Ch. R., 45; 1 Sugden on Powers, 6 Lond. ed.; in Law Library, vol. 15, pp. 264, 268, 334, 341.)
*593Y. It is obvious that the directors did not and could not delegate their powers to any officer of the corporation. (1 Sugden on Powers, 340, 341, 221, 225; Gilles v. Bailey, 1 Foster’s R., 150; Call v. Wades, 16 Vesey, 27; Pearson v. Jamison, 1 McLean’s R., 197; Graham v. Gibbeson, 10 Bing., 263; Hawkins v. Kemp, 3 East., 410; Powell v. Tuttle, 3 Comst., 396; Thompson v. Schemerhorn, 2 Seld., 92.)
YI. The plaintiff is not within the saving clause of the 8th section, for he is not a purchaser for a valuable consideration and without notice.
In the absence of a resolution, the officers have no authority to act in such a manner, and those who deal with the officers, without seeing that they have been duly authorized, act at the peril of acquiring no title, if there is, in fact, no resolution. (Blunt v. Hanna, opinion of Vice-Chancellor Sandford; Doolittle v. Lewis, 7 Johns. R., 45, 48; Williams v. Peyton, 4 Wheat., 77, 79, 80; Cow. & Hill’s Notes to Phill. Ev., 1288; Denning v. Smith, 3 Johns. Ch. R., 344; Wyman v. Hal. & Aug. Bank, 14 Mass. R., 58, 63; Salem Bank v. Gloucester Bank, 17 id., 28, 29.)
VII. The transfer of the notes was void, because made by the Company when insolvent, or in contemplation of insolvency, with the intent of giving a preference to a particular creditor over other creditors of the Company, and the receiver is entitled to the property, for he represents both creditors and stockholders of the Company. (1 R. S., 4 ed., 115, § 9; 1 R. S., pt. 1, ch. 18, tit. 2, art. 1, p. 591, § 9; see also 1175, § 4; Gillet v. Moody, 3 Comst., 479.)
The Company was clearly insolvent when these assignments were made, and always had been so. (Wheeler’s ev., and all the evidence.) It-cannot be pretended that insolvency was not contemplated when this transaction occurred. As all men are presumed to intend the natural result of their own acts, it must be deemed that the officers of the Company by whom the transfer was made intended to create a preference in favor of a particular creditor. Insolvency actually existed.
Vni. The judgment is against law and evidence, and should be set aside with costs.
The several exceptions to the rulings of his Honor the Judge, were well taken.
*594Geo. W. Stevens, for respondent.
I. The Insurance Company was authorized by its charter to transfer the notes received by it for the payment of losses or otherwise. (Laws of 1844, p. 231, § 11.)
II. No previous resolution of the Board of Trustees authorizing the transfer of the note in suit was necessary. The silence of the Company amounted to a ratification of the acts of its officers (Howland v. Myer, 3 Comst., 290; Curtis v. Leavitt, 15 N. Y. R., 15; White v. Haight, 16 N. Y. R., 310.)
III. The father of the plaintiff having advanced his money to the Company and received this note, (with others,) as security for his advances, was a holder in good faith, and. for a valuable consideration, and his transferee, (the plaintiff,) has good title to the note. (Curtis v. Leavitt, 15 N. Y. R., 15.)
IY. The defendants having dealt directly with the Insurance Company, are estopped from denying the validity of its organization as a corporation. (Palmer v. Lawrence, 3 Sand., 161; McFarlan v. Triton Ins. Co., 4 Denio, 392.)
Y. There is no evidence that at the time of the transfer of the notes to the elder Ogden, the Company was insolvent, or contemplated insolvency,- or that the transfer was made with the intent to give him the preference over any other creditor of the corporation.
Moncrief, J.
It is proved, and there is no evidence tending to create any doubt as to the fact, that S. Gr. Ogden lent and advanced to the International Insurance Company $15,000 on the security of the note in suit, and of other notes. The money was lent, on an application made in behalf of the Company for it, and by its officers. The money lent was received by the Company, and there is no pretense that the .loan has been repaid.
Whatever representations may have been made by Del Banco to the defendants to induce them to subscribe, and however false and fraudulent they may have been, there is not the slightest evidence that-S. Gr. Ogden had any notice or knowledge of them, or'the slightest reason to suppose they had been made.
On the contrary, he was told at the time of the application and loan, that “the Company was doing a good business; had many of the best subscribers, and was in need of money on the subscrip*595tion notes -to pay losses; he agreed to advance the amount of money.” The negotiation in behalf of the Company was conducted by its President, in the presence of its Vice-President, and the money lent was paid for the Company, to its Secretary.
The evidence offered at folios 46-48, was doubtless offered to show, that the condition of the Company at the time the note was given, was such, that Del Banco’s representations must have been both false and fraudulent. But it could not have tended to show, that S. Gr. Ogden knew or should have suspected that false representations were made to induce the giving of the notes.
Immediately following these offers and exceptions; testimony was given by the defendants, apparently with a view to show such notice to S. Gr. Ogden, as would charge the notes in his hands with the consequences of the fraud. This implies that the Judge, in his discretion as to the order of proofs, called for some evidence on the question of notice, as a condition, to allowing the defendants to show the Company’s operations and condition, for the purpose of establishing the fraudulent character of Del Banco’s representations.
The evidence thus elicited, (and which is in no way impaired by any other evidence given or ’offered,) established, that S. Gr. Ogden was not only a holder for value, but in entire good faith, without the slightest reason to suspect that any representations had been made to the makers of the note to induce them to give it.
There was no offer to show that S. GL Ogden had any reason to suppose there was no resolution of the Board of Trustees authorizing the transfer.
The fact that S.. Gr. Ogden received the note from the officers of the Company, did not charge him with such notice, and the Court did not err in refusing to so charge. All dealings with a company are' done with its officers.
Such a resolution is not, under all circumstances, indispensable to a valid transfer. In Howland v. Myer, (3 Comst., 290,) the plaintiff dealt directly with the officers of the Company, and that case decided the precise point, that the absence of such a resolution would not defeat a recovery.
The Company transacted this kind of business in this manner : This note had been previously transferred to Krollpfeiffer & Borott, under similar circumstances, while Marsh was Presi*596dent. The Company took it np, and subsequently transferred it to the plaintiff; and neither the defendants nor the Company can. now object that it was negotiated with the indorsement of Marsh as President, instead of that of Starbuck, to give it negotiability. The indorsement was written while Marsh was President.
The note in suit, in respect to creditors of the Company, and in respect to persons taking it from the Company, in good faith, and in the usual course of business, is payable absolutely and in full. (White v. Haight, 16 N. Y. R., 324.) There is no error in the parts of the charge excepted to.
The first request to charge was properly declined. There is nothing tending to show that S. Gr. Ogden suspected the Company was insolvent, or contemplated reaching that condition.
The second request was also properly declined. The fact that a note is a subscription note, does not justify the inference that it was obtained by fraud, or was made on any conditions.
The third and fourth requests need no observations beyond those already made.
There was no evidence justifying such an instruction as the fifth request called for. -
The views already presented show that the Judge should not have charged in conformity-to the sixth request, and that the seventh does not state a tenable proposition.
The evidence contained in the case is meagre, and whatever doubts'may be raised by a casual reading of some of the exceptions, we think it is established, without contradiction or doubt, that S. Gr. Ogden was a holder for value, paid to the Company itself, in good faith, without the slightest reason to suspect that the Company was not in a prosperous condition, or that any misrepresentations had been made to induce the defendants to give the note, or that the officers who transferred it to him were not acting under such by-laws and resolutions as were necessary to formal accuracy, and the creation of full and perfect authority to do the acts which they performed.
An insurance company, whose capital consists almost entirely of notes, having a long time to run, and which is called upon from time to time to pay losses, must, from the necessity of the case, procure some of its notes to be discounted, or obtain temporary loans on their credit. One mode is as unobjectionable as *597the other m principle, and also in fact, if the money is procured at the same rates.
A resolution of the Company, adjusting a loss and directing its proper officer to pay it, would imply to a business man, without more specific instructions, a direction to obtain a discount or a loan.
In reference to such a transaction, the fact that no resolution was passed authorizing the transfer or discount of any specific notes, should not defeat the title of one who, in good faith, discounts it for, or loans money on its credit to the Company.
And unless we are not only at liberty, but are bound to disregard the decision in Howland v. Myer, (supra,) we must permit such a holder to recover. The Company, having received the $15,000 could not reclaim the note from Ogden without refunding the money.
And, as between the plaintiff and the defendants, the former, on the general principles of commercial law, is entitled to recover.
The judgment should be affirmed.
Bos worth, Ch. J., concurred in this opinion.
Hoffman, J.
The charter of the International Insurance Company, which was produced in evidence, and is referred to by counsel on both sides, dates back to the year 1844, (eh. 156;) was amended in 1847, (ch. 113;) and the name was changed from The Kings County Mutual Insurance Company, to the present title, in 1855 (ch. 295). By the last, act, the designation “ of Brooklyn,” as its locality, was stricken out, and the word “ New York” inserted. In other particulars these amending acts are unimportant.
The Company received by the original act the general powers of a corporation given by the 3d title of the 18th chapter of part 3d of the Revised Statutes; and also authority to make insurances on dwellings, &c., against fire; and marine' insurances upon vessels, &c.
Upon receiving applications for insurances to the amount of $100,000, the Company was to be organized. But no policy should be issued until _ the sum of $25,000 had been received, either for premiums or on the certificates which might be issued *598under the 12th section of the act, or from the avails of notes authorized' to be taken in advance for premiums, in and by the 11th section. (Ch. 156, § 11, Laws of 1844.)
By that 11th section, the Company, for the better security of its dealers, may receive notes for premiums in advance, of persons intending to receive its policies, and may negotiate such notes, for the purpose of paying claims or otherwise, in the course of business. On such portions of the said notes as might exceed the amount of premiums paid by the signers thereof, (at the period of the annual statement afterwards prescribed;) and on new notes taken in advance thereafter, - a compensation might be allowed to the signers not exceeding five per cent per annum, and be paid from time to time.
The system pointed out in the 12th section, of certificates issued for money received, need not be considered in the present case.
The history of the legislation of our State, as to what is termed insuring upon the mutual principle, is given in detail by Denio, Ch. J., in White v. Haight. (16 N. Y. R., 310.) The special charters granted with similar general features, and some particular modifications, down to the act of 1842 incorporating The Atlantic Mutual Insurance Company, are referred to, so far as to show the general regulation of the scheme. That act introduced a new feature, the one contained in the 11th section of the act, as to the present Company, and before stated at length. It was the 12th section in the charter of 1842. The learned Judge says: “The notes given under this 12th section have frequently been before the Courts, and it is perfectly well settled in the courts of original jurisdiction, and in this Court, that they are payable absolutely, and may be collected without any allegation of losses, and without an assessment.”
• 1. The first, and a very important question "is, whether the note was legally transferred and negotiated to Ogden within the provision mentioned.
In Howland v. Myer, (3 Comst., 290,) it was held that the statute did not restrict the Company to a negotiation for the purposes of payment merely. A Company might discount the note, and so apply its avails .in discharge of losses. It might transfer a note to the claimant of a loss. In a word, any bona fide settle*599ment of a presumed loss, contingent or absolute, made with the dealers of the Company in the usual course of business, was authorized.-
In The Central Bank of Brooklyn v. Lang, (1 Bosw., 202,) the proof was of a delivery of the note sued upon, with several other notes, to the plaintiffs, who discounted them, and the proceeds were paid to the Insurance Company which had received them, to be applied to their general business purposes.
The proof here is of an actual loan by Ogden of' $15,000, to the Company, on a transfer of this and other notes; that he was informed the notes were subscription notes, and that a discount- was wanted to enable the Company to meet its losses. I think the proof warrants us in holding that Ogden took the notes ignorant of any intended misappropriation, and was authorized to consider'that the transfer was for a legitimate purpose.
The next point of importance relates to the authority of the President, Marsh, to indorse the note, so as to transfer the title of the Company to the plaintiff through S. Gr. Ogden, the elder.
The complaint alleges .an indorsement by the Company. The answer puts this allegation distinctly in issue. The testimony is, that the notes of the Company -were indorsed by the President. All the notes given to Ogden were indorsed by him. The note in question had been previously indorsed by Marsh, and lodged with Krollpfeiffer and Borott for money received by them, and had been taken up by the Company before the transfer to Ogden.
In The Central Bank of Brooklyn v. Lang, (ut supra,) the complaint averred the making.of a note in favor of the Company, its indorsement- by the Company, and an offer of it, with other notes to the plaintiffs, who discounted them in the regular course of business. These allegations, by not being denied, were admitted by the answer. The note was indorsed by the Vice-President.
In The Marine Bank v. Clements, (3 Bosw., 600,) the note was precisely in the form of the note in the present case, except being payable at the.Bank of Commerce. It was to the same Company, and was indorsed by Marsh, the President. The allegation in the complaint of an indorsement by the Company was expressly put in issue by the answer, and it was therein averred, that the *600note was indorsed, without a resolution of the Board, by the President, when the Company was insolvent, and to give a preference to the transferree, a creditor.
Ho resolution of the Board was proven, no by-law conferring authority on the President, no evidence that any notes belonging to the Company had ever been negotiated - and indorsed by the President, or that this had ever been done with the knowledge of the Directors, was produced. '
It was held, that the title of the Company had not been divested. It could only be by a transfer by some person authorized to indorse it in the name óf the Company, or who had been held out by the Company as .so authorized. This could be evidenced by his acts, and the usual practice of the Company. His office of President by itself showed no such power.
In Howland v. Myer, (ut supra,) both usage of the Company and its by-law in the case, were held sufficient to show authority in the President to indorse the note.
See also Partridge v. Badger. (25 Barb., 146.) I think that the evidence in the present does sufficiently )prove a usage, for -the President to indorse and negotiate the notes, sanctioned by the Company. •
There was no evidence in the case, and none offered to show that Ogden had’ reason to suppose there was no resolution of the Board for the transfer. The fact of his dealing with the officers is not enough to charge him with such notice, and the Court did not err in refusing so to charge.
3. Ho objection founded upon the original, irregular or unlawful or fraudulent organization of the Company, can' now avail the defendants. They recognized it, subscribed to its stock, dealt with it, gave the present note to it by its name, and that note has gone into the hands of a holder for value without notice proven to have been possessed by him of any such matters. (Palmer v. Lawrence, 3 Sandf. S. C. R., 161.)
4. The learned counsel of the defendants insists, that the transfer of the note was void under the 8th section of the act “ to prevent the insolvency of moneyed corporations,” because it was a transfer of effects exceeding in value $1,000, and was not authorized by a previous resolution of the Board of Directors, (1 R. S., 591, § 8,) and that the plaintiff is not within the exception con*601tained in such section, not being a purchaser for a valuable consideration without notice.
Justice Comstock, in Curtis v. Leavitt, (15 N. Y. R., at p. 46,) says, that some of his brethren were of opinion that the holders of the securities in that case were purchasers within the act. They were pledgees of the bonds secured by a transfer of corporate assets. He says that he does not dissent from those views. Justice Brown deems it needless to pass upon it, but plainly leans in its favor. .Justice Shankland supports it, (p. 138,) and Justice Paige is extremely dear and decided upon the point (p. 192). In Howland v. Myer the plaintiff took the title from the President on account of his claim for a loss.
In Palmer v. Yates, (3 Sandf. S. C. R., 137,) it was held, that any person who, for what the law holds a valuable consideration, has acquired a title, whether legal or equitable, by an assignment or transfer from a moneyed corporation, is to be -deemed a purchaser within the meaning of the act, and this whether the assignment is made absolutely or as a collateral security.
It appears to me to be a well warranted proposition, that a party who advances money for the use of a corporation of this description and receives from it as collateral security notes taken and held as this note was, is a purchaser for valuable’ consideration within the exception in the 8th section, and is protected, unless it is affirmatively proven that he had notice of a want of a previous resolution. (See also Leavitt v. Blatchford, 17 N. Y. R., 521.)
As to that notice, Mr. Justice Paige considers that it should be as clear .and certain as that which is necessary to break in upon the registry acts. (Curtis v. Leavitt, 15 N. Y. R., 192.)
In Palmer v. Curtis, (ut supra,) it was held that there was no implication of knowledge, or duty to inquire, in an ordinary purchaser, although there might be in a director or officer. The omission to inquire was not sufficient. There must be, as a general rule, actual notice of the want of a resolution.
There is no evidence in this case sufficient to establish that Ogden had any notice of the want of a resolution.
It is not necessary to consider the important suggestion of Justice Gardiner, in Howland v. Myer, that if the 8th section is in conflict with the provisions of the charter, it must yield.
*6025. The next point is that the transfer was within the 9th section of the statute avoiding such transfer, when made in contemplation of. insolvency, giving a preference to creditors. (1 R. S., 591, § 9_
_ By section 61st of article 3d, (1 R. S. 598,) this Company was a moneyed corporation within the statute. By section 17th of its charter, sections 19 to 25, inclusive, were declared inapplicable to it. .
But Mr. Ogden, the party from whom the plaintiff got his title, did not occupy the position of a preexisting creditor. He created a debt from the Company to himself directly, by advancing' his money on the faith and pledge of these notes. (Leavitt v. Curtis, ut supra.)
6. Another point raised is as to the effect of the representations of Del Banco which induced the defendants to subscribe, and which it is alleged were false and fraudulent.
The Judge charged that if Ogden received the note for money advanced at the time, and without notice, then, although the representations were fraudulent and false and influenced the defendants, the plaintiff could recover.
The Jury had no evidence before them on which to found a verdict of Ogden’s knowledge of the fraudulent statements having been made. Whether then, they concluded that the defendants had been misled or not they were equally warranted in finding their verdict, Ogden being found ignorant of the false statements, and the charge of the Judge on this point we think was right.
Questions were asked by the defendants’ counsel tending to show an abstraction of a large amount of assets of the Company by its officers for their own use (folios 46, 48).. The effect of such proof would be to support the allegation of the false statements of Del' Banco, or to show the actual insolvency or rottenness of the Company. B.ut if Ogden did not know of the statements, and did not know of the insolvency, he could not. be affected. As to the latter, the Company was represented to him to be in a good condition, and nothing forces knowledge of' its actual state upon him.
The judgment must be affirmed.
Judgment affirmed.