
    The Central Bank of Brooklyn v. William Bailey Lang, George M. Wheeler and Daniel B. Safford.
    A promissory note was by its terms made payable to the makers’ own order, but they omitted to endorse it. It was delivered by the makers, as a premium note upon an open policy, to a Marine Insurance Company. That Company was authorized “to negotiate premium notes for the purpose of paying claims or otherwise, in the regular transaction of its business.” They delivered the note in suit, with others, to the plaintiffs, and had them discounted, and received the proceeds. A smai amount of risks compared with the amount of the note had been taken and premiums earned. The note was to cover premiums to be earned. There was no evidence as to the application of the proceeds of the note, by the Insurance Company.
    
      Meld, that the note was so negotiated by the makers, by its delivery to the Company, as to make it the same in legal effect as if payable to bearer, within the statute (1 E. S. 768, § 6.)
    
      Meld, that the plaintiffs were bond fide holders of the note, getting it from a Company authorized in certain cases to negotiate it, and had a right to the presumption that it was discounted for an authorized purpose.
    
      Meld, that the plaintiffs were entitled to recover the whole amount, whatever might be the equities or rights between the makers and the Insurance Company.
    (Before Duer and Hoffman, J.J.)
    Heard, May 6;
    decided, May 9, 1857.
    This action comes before the Court, at General Term, upon an appeal, by the defendants, from a judgment entered upon a verdict in favor of the plaintiffs
    
    The action is brought upon a promissory note made by the defendants, payable to their own order, dated the 25th of August, 1854, at six months, and held by the plaintiffs. It was not endorsed by the makers.
    The Reliance Mutual Insurance Company was a Corporation organized on the 20th of August, 1853, and was empowered to make Marine Insurances. The statutes then in force, bearing upon its powers, were those-passed on the 10th of April, 1849, the 25th of June, 1853, and the 13th of July, 1853. The period of the organization is admitted by counsel to be that stated.
    The complaint sets forth, that the Reliance Mutual Insurance Company was a Corporation created pursuant to the laws of the state, for the purpose of making insurance, “ and was authorized to receive premium notes, and to negotiate such notes for the purpose of paying claims, or otherwise, in the regular transaction of its business.” That the note in question was a premium note given to such Company, and was delivered to them; that such Company, in the regular transaction of its business, without observing that it was not endorsed by the makers, did endorse the same, and offered it for discount, with other negotiable paper, to the plaintiffs, who negotiated the same in the regular course of business.
    The plaintiffs took and discounted the note and paid the money in good faith.
    The answer admits, that the note was delivered to the Company on the 25th of August, 1854, as a premium note upon an open policy of insurance, that day issued by the Company to the defendants, and proceeds to set forth the grounds of defence embraced within their offer to produce testimony hereafter noticed.
    The answer, by not denying, also admits the allegations as to the authority of the Company to receive premium notes, and to negotiate them, as stated in the complaint.
    The note, being admitted by the pleadings, and produced at the trial, it was proven that it was delivered to the present plaintiffs with several other notes, and discounted by them, and the proceeds paid to such Insurance Company. The note was endorsed by its Vice-President. The discount took place on the 1st of December, 1854.
    It was also shown that a Receiver of the Company had been appointed.
    The defendants produced a book of risks, and proved that there were none other assumed by the Company on this policy, than those contained in such book. They then offered to prove that the premiums earned on the policy amounted to $300 only; that the note was for premiums to be earned, and had no other consideration; and that as to the $300, the defendants had counter claims.
    The Judge decided that such evidence would not alone constitute a defence, and was inadmissible, unless the defendants proposed to assail the position, that the plaintiff took the note before maturity, in good faith, and for full value; that the note, under the statute, had the same validity and effect against the makers as if it had been payable to bearer, it having been negotiated by the makers; and that the plaintiffs, having taken it before maturity, for value, must recover.
    To this ruling an exception was taken.
    The jury Tendered a verdict for the plaintiffs for $2,246. Judgment was entered thereupon, from which this appeal is taken.
    
      
      John S. Jenness, for appellant.
    
      E. C. Benedict, for respondent.
    
      
       The action was tried in November, 1856, before Mr. Justice Bosworth, and a Jury.
    
   By the Court. Hoffman, J.

The statute applicable to this case provides, that notes made payable to the order of the maker thereof, or of a fictitious person, shall, if negotiated by the maker, have the same effect, and be of the same validity, as against the maker, and all persons having knowledge of the facts, as if payable to bearer: (1 R. S. 768, § 5.)

This act was intended effectually to remove the difficulty in making title, when a note was drawn in favor of a fictitious person, and to treat a note in favor of the maker, unendorsed, as equivalent to one to a fictitious payee. (Plets v. Johnson, 3 Hill, 112.)

In Smith v. Lusher (5 Cowen, 711), Golden, Senator, observed: “ Often bills are made payable to and drawn upon the makers themselves; and very often bills are made payable to fictitious payees. These bills may be mere waste paper until they are negotiated; but the moment they are endorsed, they become efficient securities in the hands of the endorsees.”

And in the course of the argument, the same Senator put the question to counsel—“ What would you do with a note drawn by yourself and payable to yourself?” The answer was—“ It would be waste paper.” “ But,” replied the Senator, “ you pass it away.” The law of the statute is comprised in these brief sentences.

The Revisers observe, that the provision in question is in conformity with the existing law.

A long series of cases, commencing with Tatlock v. Harris (2 T. R. 174), settled, that a bond fide holder of a bill, drawn in favor of a fictitious person, and endorsed in that name by the drawer, might recover it against the acceptor. Where the acceptor knows the facts, the bill is, in truth, payable to bearer. (Chitty on Bills, 158, and note.)

A note drawn in favor of the maker is, in fact, drawn in favor of a fictitious payee, as far as any additional security is concerned. It should be equally treated as payable to bearer.

The note in spit, in the hands of a bona fide holder, is to be regarded precisely as if the makers had endorsed it, provided they negotiated it. And we consider that a note is negotiated within the statute, when it is delivered out by the maker for a consideration received, or agreed to be received, or delivered for circulation; and when, had it been actually endorsed, it would have possessed the character of negotiability. The note in question was certainly negotiated in this sense.

In Stevens v. Strang (2 Sandf. S. C. R. 138), a note was given by Benjamin H. Strong & Co. to the order of Ebenezer Stevens & Sons. There was no such firm in existence. It had ceased twelve years before, by the death of the father, Ebenezer. But there was a firm of Ebenezer Stevens’ Sons. Proof was allowed of the consideration of the note being a sale of brandy to the makers by the plaintiffs. It was held to be a negotiation within the statute.

In the case of Brouwer v. Hill (1 Sandf. S. C. R. 648), the Court noticed an objection, that the legal title was not in the company, the note being payable to the maker’s order, and not being endorsed, and say: “ If it were delivered to the Company as an 'operative and valid security, the title and the property in it became vested in the company.” The receiver was held entitled to recover.

And upon the point of consideration, the case of Deraismes v. The Merchants' Mu. Ins. Co. (1 Comstock, 371), is decisive. A note like the present is a statutory security, independent of consideration ; and if that was necessary, the obligation upon the company, and other circumstances, afforded ample consideration to support it.

Without entering upon the question not arising in the case, how far the contract would have been available, had the note remained in the Company’s hands, and whether it was not capable of being rescinded at any time, except for premiums earned, we are satisfied that it was negotiated within the statute. And we are also satisfied that the plaintiffs, as bona fide holders, are entitled to recover the whole amount, however small may have been the amount of risks undertaken for the makers. There is no evidence that the notes were discounted for unwarranted purposes. There is nothing to charge the plaintiffs with any knowledge of a misapplication, even if such misapplication in fact existed.

The judgment must be affirmed, with costs.  