
    The Marine Bank of the City of New York, Plaintiffs and Respondents, v. Nelson Clements, Defendant and Appellant.
    1. In a suit, by a second or subsequent indorsee against the maker of a subscription note given and in terms payable to the International Insurance Company or order, indorsed by the President of the Company, evidence that, for several months in succession prior to such transfer, it was the usage of said Company to borrow money for the purposes of its legitimate business and negotiate its notes as security for the repayment of the money so borrowed, and that the moneys borrowed were so used, and that its notes, when thus used, were indorsed by its President as such, is sufficient to warrant a-jury in finding that the indorsement of the note in suit was made by sufficient authority to vest title in the plaintiffs, so far as their title depends upon the mere question of the indorsement being authorized by the Company.
    2. And it further appearing that the plaintiffs were holders for value, in good faith, and became such in due course of business before the maturity of the note, they are entitled to recover notwithstanding the negotiation of it to the first indorsee was not authorized by the Company nor valid, and jvas not authorized by a.previous resolution of the Board of Trustees, and the Company was then insolvent.
    3. Where special questions of fact are submitted to a jury, and the charge of the Judge in submitting them is not stated in the case, it will be presumed, on appeal, that such instructions were correct, especially if there be nothing in the case to rebut the accuracy of such presumption.
    (Before Bosworth, Ch. J., and Hoffman and Moncrief, J. J.)
    Heard, December 14th, 1859;
    decided, February 25th, 1860.)
    Appeal by the defendant from a judgment entered on the verdict of a jury rendered on a trial had before Mr. Justice Woodruff, on the 27th of January, 1859.
    The plaintiffs sue as second indorsees of a note made by defendant, dated August 14, 1855, for $1,000, payable to the International Insurance Company or order, at the Bank of Commerce in New York, twelve months after its date.
    The complaint alleges the making of the note; its terms; the indorsement and delivery of it by the payee; the plaintiffs’ ownership of it; that it is past due and wholly unpaid, and prays judgment for the amount of it, with interest from its maturity.
    The answer, 1st, puts at issue the indorsement and delivery of the note by the payee; 2d, plaintiffs’ ownership of it, and avers that it belongs to the payee, or to the firm of McCready, Mott & Company, or to one James D. Fish; and, 3d, as a separate and distinct defense, alleges that the only indorsement made of it was made by the President, without authority from the Trustees, and that it was indorsed and assigned by such President, with other effects of the payee, amounting to more than $1,000 in value, and that such assignment, when made, was not authorized by any previous resolution of the Board of Trustees; that the payee was at the time iqsolvent, and that such assignment was made with intent of giving to the assignee, who was a creditor of the payee, a preference over its other creditors; and that the plaintiffs, if holders, became such with notice of the said want of authority in the President to assign and transfer it.
    The note was indorsed thus: “ For International Ins. Co., Alanson Marsh, Pres’t.” Marsh indorsed the note, and was then the president of the Company, and had been some four months previously. The note was negotiated by the Company, and it was soon thereafter taken up by the Company. Subsequently, and about the 8th of May, 1856, Moses Starbuck, who had been president of the Company since about the 6th of February previous, as such president, obtained for the Company from the firm of McCready, Mott & Company, a loan of their notes amounting to $3,500, for the stock note of the Company, amounting to the same sum due July 28, 1856, on the security of the note in suit, and other notes belonging to the Company, of the aggregate sum of $5,002.50.
    The Company failing to pay their stock note, McCready, Mott & Company sold these collateral notes to J. D. Fish & Company for $3,500, on the 12th of August, 1856. On the 13th of August, 1856, the plaintiffs, on the application of said J. D. Fish, discounted said note and passed the proceeds to the credit of this said firm of J. D. Fish & Company.
    The note not having been paid at maturity, the present action was brought.
    The evidence affecting the decisions made at the trial and considered by the Court on the appeal in determining the exceptions passed upon, is stated in the opinion of the Court, and renders a repetition of it, or a more detailed statement, unnecessary.
    
      
      J. L. Jernegan, for the appellant.
    I. The transfer of the note to McCready not having been authorized by a previous resolution of the Trustees, is void under the 8th section of the act to prevent the insolvency of moneyed corporations. (1 R. S., 591, § 8.)
    ' II. The fact that the note was a subscription note, does not exclude it from the operation of the 8th section.
    It should appear that the note was transferred in “ bona fide settlement of a presumed loss, contingent or absolute, made with the dealers of the Company, in the usual course of business,” or to raise money with a view to.such settlement. (Howland v. Myer, 3 Comst., 290, 293; The Exchange Bank v. Monteath, 24 Barb., 371.)
    The plaintiffs cannot escape from the operation of said 8th section, on the ground that they are “ purchasers for valuable consideration without notice.”
    The note bears on its face evidence that it originally belonged to the Company, and had been transferred by it. This was sufficient notice to put the plaintiffs on inquiry, and prevent their setting up the want of notice. (Smith v. Strong, 2 Hill, 241, 245; Blunt & Pruyn v. Martin, [Cleaveland’s Banking Laws, 7, note 4,] Williamson v. Brown, 15 N. Y. R., 354; The Exchange Bank v. Monteath, supra.)
    
    Add to this, that Fish did not indorse the note when he transferred it to the plaintiffs, (Calder v. Billington, 15 Maine, 398,) and that they discounted it within three days of its maturity; that Fish is chargeable with full notice, and was a director of the plaintiffs when he obtained the discount; and then, this becomes a much stronger case of notice than that of Smith v. Strong, supra.
    
    IV. The suit is, virtually, for the benefit of Fish, and the plaintiffs have no substantial interest in it. Notice to him is notice to them. As the transaction is conceded to be illegal, it follows that the President had no authority, as against the Company, to transfer the note.
    V. Thé Court erred in refusing to submit to the jury the question of insolvency, because the defendant had a right to show the transfer of the note void under the 8th section of the act to prevent the insolvency of moneyed corporations.
    
      And McCready was a creditor of the Company at and from the moment he received its stock note for the money he loaned to it. The collaterals were transferred to secure this debt. It is of no importance whether he was a creditor of six months or ten minutes’ standing. He was a creditor, and the transfer of the notes preferred him to other creditors.
    The Company having been insolvent at the time, it is not necessary to show that the plaintiffs had knowledge of it, as the transfer is absolutely void. (Brouwer v. Harbeck, 5 Seld., 589, 593.)
    VI. The plaintiffs must show affirmatively, not only that the President had the apparent authority to make the transfer, but that it was actually made for the benefit of the Company. (Exchange Bank v. Monteath, 24 Barb., 371; Mechanics’ Bank v. New York and New Haven R. R. Co., 3 Kern., 599.)
    VII. The Court erred in the instruction on the question of notice, and in that on the question of authority.
    
      W. Hutchins, for respondents.
    I. The note in suit was given upon a good and sufficient consideration, was used by the International Insurance Company in the course of its business, and in a manner authorized by its charter. (Ch. 156, Sess. Laws, 1844; ch. 295, id., 1855.)
    II. The proceeds of the note, on the discount of it, were paid to the said Company in cash. By receiving and applying the same in their business, the Company ratified the acts of its agents in procuring the money on the note.
    III. But the plaintiffs in this suit are the bona fide holders of the note, for value; and took the same before it became due, in the regular course of business, and without any notice of a defense to the same, either legal or equitable, on the part of the defendant. Under these circumstances the plaintiffs are entitled to judgment. (1 Sand. S. C. R., 160.)
    The judgment of the Court below should be affirmed.
   By the Court—Bosworth, Ch. J.

The plaintiffs sue as indorsees of a note made by the defendant; which note and the indorsement thereon, when produced in evidence at the trial, were as follows, viz.:

“ $1,000. New York, August 14, 1855.
“ Twelve months after date, I promise to pay the International Insurance Company, or order, for value received, one thousand dollars, payable at the Bank of Commerce in New York.
“NELSON CLEMENTS.”
(Indorsed) “For International Insurance Company,
Alanson Marsh, President."

The defendant during the progress of the trial, took exceptions to decisions admitting and rejecting evidence; to portions of the charge to the jury; and to the refusal of the Judge to submit to the jury the question whether the Insurance Company was insolvent, when it transferred the note in question. The appellant’s points take no notice of certain of the exceptions appearing in the case; all such exceptions we regard as abandoned.

Preliminary to the consideration of the exceptions discussed in the appellant’s points, it is proper to remark, that when the testimony was concluded, the defendant’s counsel requested the Court to charge the jury in conformity to five several propositions, which he stated. The plaintiffs’ counsel then stated to the Court, that he rested their claim to recover on the facts; that the plaintiffs are Iona fide holders of the note for value; and that the Insurance Company is, upon the evidence given, bound as against such holders of the note, by the indorsement of it as it was in fact indorsed.

Thereupon the counsel of the parties agreed upon certain facts, viz.:

11 First. That the note in question was a subscription note, and as such was made and delivered to the International Insurance Company.

Second. That in the month of January, 1856, Alanson Marsh, the then President of the said Insurance Company, in his official character, as such President, placed his indorsement upon such note with a view to negotiating the same for such Company. That after such indorsement the said note was again returned to and remained with said Company, as the holder thereof, until passed to McCready, Mott & Co., as hereinafter stated.

Third. That on the 2d day of February, 1856, the said Marsh ceased to be the President of such Company.

Fourth. That Moses Starbuck became the President of such Company in the place of said Marsh. That said Starbuck, while being such President, and assuming to act as such, negotiated such note, as so indorsed, to McCready, Mott & Company, who loaned said Company the sum of $3,500, taking at the same time from said President a stock note of the Company therefor, together with the note in question, and other notes, to the aggregate of about $5,000, held by such Company, as collateral security for such loan. There was no vote of the Board of Directors authorizing the above loan, or the giving of such collaterals.

Fifth. That the note in question passed, by successive transfers, from said McCready, Mott & Co., to the plaintiffs. That said plaintiffs received such note and discounted the same in the regular course of its business, three days before its maturity.

The Judge thereupon stated the foregoing concessions to the jury, and among other things instructed them—

“ Upon .the question whether the plaintiffs were bona fide holders of the note in question for value paid before maturity without notice. That the circumstances proved do not amount to notice to the plaintiffs of the circumstances under which McCready, Mott & Co., received the note, however invalid the loan made by them was, as in fact it is conceded to have been.

To this instruction the defendant’s counsel excepted.

And upon the question, whether the transfer of the note was made by sufficient authority, the Judge charged the jury,

That, if they should find that for a succession of several months prior to the transfer of this note by the Company, it was the usage of the Company to borrow money for the purposes of its legitimate business, and negotiate its notes for the purpose of raising money for such purposes, and the moneys so borrowed were so used, and such notes when negotiated were uniformly indorsed in the same form as the note now in question was indorsed, that is evidence enough to warrant the jury in finding that the indorsement of this note was by sufficient authority to make it binding in favor of these plaintiffs, so as to give them title to this note, so far as such authority is in question.

And to this instruction the defendant’s counsel excepted.

The Judge refused to submit to the jury the question whether the' Company was insolvent when the: note was transferred by the Company. ...

And to such refusal the defendant’s counsel excepted.

The jury found a verdict for the plaintiff for the.amount of the note in suit, with interest, $1,169.

And in pursuance of a direction to find specially upon the facts next mentioned; which direction was given by request of the respective counsel, the jury also found specially:

1. That the plaintiffs are bona fide holders of the note in suit, for value paid in due course of business-before the maturity thereof, and without any notice of the circumstances under which the note was transferred to MeCready, Mott & Company, or of any want of authority in the President of the. Company to indorse the note for the Company, or of other facts impairing its validity.

2. That the President of the Company had authority to indorse and transfer the note in the manner and form in which it was indorsed.

The Court thereupon ordered, that- the defendant’s exceptions. be heard in the first instance at the General Term, and that the judgment be in the meantime suspended.”

The only exceptions noticed in the appellant’s points, are those above stated; and exceptions to decisions .excluding evidence, that “the Company was reported to be solvent” when Marsh was President; and that the Company was insolvent when the note in suit was transferred to .MeCready, Mott & Company, which was in May, 1856.

Exceptions were taken to two propositions contained in the charge. The Judge charged, “ that the circumstances proved do not amount to notice to the plaintiffs of the circumstances under which MeCready, Mott & Co. received the note, however invalid the loan made. by them was, as it is in fact conceded to have been.”

To this instruction the defendant excepted.

James D. Fish testified that he, on the 12th of August, 1856, about 3 P. M., bought this note and others, amounting together to the principal sum of $5,002.50, of McCready, Mott & Company, for $3,500. “ McCready, Mott & Co. told me at the time that they had made a loan to the International Insurance Company, which was past due, and they were authorized to sell the notes, which they held as collateral.”

McCready, Mott & Company, assuming the concession of plaintiffs’ counsel, (in stating the grounds on which he based their right to recover,) that their “ stock loan was not authorized or valid,” to be the truth of the case, acquired no title to the notes, nor any right to sell them. Fish, when he took this and the other notes, knew that McCready, Mott & Co.’s right to hold or sell them depended upon the terms and validity of a contract between them and the Insurance Company, in regard to a loan alleged to have been made to the Company on the security of such notes. If this knowledge was sufficient to put him upon inquiry of the Insurance Company, then the presumption must be, that, if he had inquired, he would have ascertained the fact to be, as upon the trial it was conceded to be, that the transfer of the note to McCready, Mott & Company was unauthorized and invalid.

On the 15th of August, 1856, the first of the three days of grace given by law to the maker within which to pay it, Mr. Fish, then a Birector of the Marine Bank, presented this note to the President and Cashier of the Bank, and asked them to pass it to the credit of his firm, which was done. “ Hothing else was said by either party in relation to the note. Williams (the President) asked me if Clements was good,” . . . About the time the note was protested, the Bank requested Fish to pay it, or signified a wish to that effect. Fish replied, “ Sue the maker of the note: if you cannot get it of him, look to us.” The Cashier of the Bank was examined, and was asked by defendant’s counsel, “Has it ever been your practice to discount single notes of similar amounts two or three days before they fell due?” His answer was, “Yes. We had for a longtime a written guaranty from Mr. Fish of the payment of all notes discounted by us for him. My impression is that the date of it is subsequent to our discount of this note.”

As the part of the charge now under consideration was given as a guide to the jury in determining “ the question whether the plaintiffs were bona fide holders of the note in question for value paid before maturity without notice,” we must consider the evidence above recited (in order to sustain the charge, if this were the whole of the charge on that point,) as not justifying the inference that the plaintiffs’ President and Cashier had cause to sus- ' pect that Mr. Fish was anxious, for some reason, as to which they chose not to inquire, to make a formal transfer of the note to some one who would, in form at least, be a holder of the note for value before its maturity, (although only two days before,) and who, as such, on the note being protested, would sue the maker and attempt to collect it.

I cannot resist the conclusion that the facts tend to show, though not at all conclusively, that the plaintiffs’ officers, who passed this note to the credit of the firm of which Mr. Fish was a member, had reason to believe, and that it is not improbable they did believe at the time, that the whole object in procuring a formal discount of the note was to make the plaintiffs apparent indorsees for value, and thus discourage an attempt to defend a suit brought by them, when one would be attempted to a suit brought by Fish.

The evidence does not disclose that the firm of Mr. Fish had any present use for the money passed to their credit, or that they have not at all times since had on deposit a larger sum to their credit in the Bank than the nominal proceeds of the discount of the note. The accommodating conduct of the Bank in suing Clements, and forbearing to sue Mr. Fish, furnishes some evidence in favor of this view.

I think these circumstances should have been considered by the jury in determining whether the plaintiffs took the note without notice; which question involves the inquiry whether they took it without knowledge of any circumstances which should have put them upon inquiry into the circumstances under which it was obtained from the Insurance Company and by Fish. And if the case did not disclose that this question was not disposed of under this instruction alone, I should be strongly inclined to think that it must have been understood by the jury as importing that the evidence would not justify them in finding that the note was not taken by the plaintiffs in good faith, in the usual course of business, for value paid, and before maturity; and that, if not so meant, it was calculated to mislead.

But as it appears, that the question whether the plaintiffs were such holders, was specially submitted to the jury, and answered by them in the affirmative, it is perhaps a just construction of the part of the charge first excepted to; that all it was- meant or ■understood to affirm is, that the circumstances proved, do not show, or justly tend to show, that the plaintiffs had notice of the transaction between McCready, Mott & Company, and the Insurance Company. That may be conceded to be true, as I think, it must be; and it may also be true that the jury were instructed to weigh all the circumstances proved, in determining the question whether the plaintiffs took the°note in actual good faith, and in the ordinary course of business, and without any knowledge or notice which should have led them as men of ordinary prudence to inquire into the circumstances under which the note was obtained from the Insurance Company and acquired by Fish.

The case states on its face, that it does not contain the whole charge; and we, therefore, conclude that we are bound to presume, that the instructions pertinent to a proper disposition of the special question first submitted were given, and were satisfactory to both parties.

The second exception to the charge, may be briefly disposed of.

There was uncontradicted evidence, that transfers ot notes belonging to the Company were made upon loans negotiated by “ the finance committee,” and that" in all cases the mode of indorsing their paper on transferring it, was the same as that of the indorsement upon the note in question, and that all this was ‘ known to the Company. There was evidence enough to justify the jury in finding that it was the usage of the Company, to make the notes belonging to it and payable to. its order, negotiable by the indorsement of its President as such.

And I think there can be no doubt, that after such a usage has been uniformly pursued for months, any one who becomes a holder of its paper so indorsed in good faith, in the due course of business, for full value, before its maturity, will acquire a good title to it, and can recover upon it. As against such a holder of its paper so indorsed, I think it quite clear that the mere fact that the Company was insolvent when the note was first negotiated to some prior holder, constitutes no defense.

This case is open to the further observation, that the defendant has no defense to the note, except the single one that the plaintiffs have no title to it. Neither the Company nor its receiver, so far as can be seen from the evidence, has questioned, or given notice of an intention to question, the plaintiff’s title. The Company had of McCready, Mott & Company, $8,500, which was advanced on the security of this and the other collaterals, and has used the same in its business. Mr. Pish had realized at the time of the trial of this action (the 27th of Jan., 1859,) about $2,800, from all the collaterals, exclusive of the sum passed to the credit of his firm on the discount of the note in suit. McCready, Mott & Company obtained no more on the sale of the notes to Fish, than they loaned to the Company, and Fish has received less than he paid, (excluding the sum received on the discount of this note). We do not see that any injustice will result to any one from an affirmance of the judgment, or that any rule of law will be violated by it.

Judgment affirmed. 
      
       (See Scott et al. v. Johnson 5 Bosw., 213; Brookman v. Metcalf, id., 429; Ogden v. Andre 4 Bosw., 583.)
     