
    The Marine Bank of the City of New York, Plaintiff and Respondent, v. Nelson Clements, Defendant and Appellant.
    1. The indorsee of a note payable to the order of an insurance company and purporting to have been indorsed by such company by its president'; in an action against the maker in which the allegation of an indorsement by the company is denied, cannot recover, without proving that the president was in fact authorized to indorse it, or had been held out by the company as authorized to indorse such paper in its name.
    2. The president of an insurance company, when not authorized by its charter or by-laws to do so, has no authority as president, to indorse and negotiate notes belonging to it.
    3. An indorsee of a note payable to the order of an incorporated company, who takes it under an indorsement purporting to have been made by its president or other agent, takes it at the peril of being able to show, when his title is questioned, that the person assuming to indorse it in the name of the company, had authority to do the act.
    (Before Bosworth, Oh. X, and Woodruff, X)
    Heard, November 11;
    decided, December 4, 1858.
    This action comes before the Court, at General Term, on an appeal by the defendant from a judgment entered against him, on the report of E. P. Cowles, Esq., as referee.
    The plaintiff sues as indorsee of a note, made by the defendant, dated August 14, 1855, payable “to the International Insurance Company or order, for value received,” twelve months after its date, at the Bank of Commerce, in New York, being for the sum of $1,000. It is indorsed:
    “For International Insurance Company,
    Alactson Marsh, Pres’t.”
    The complaint alleges that, “ the same was duly indorsed by the said International Insurance Company, and delivered to the plaintiffs.”
    The answer puts at issue the allegation last mentioned, and avers, among other things, that no indorsement of the note was made, except by the president of the company; that his indorsement was without any authority from the company, and that this was indorsed with other notes, of greater value than $1,000, without any previous resolution of the trustees or board of directors, and at a time when the company was insolvent. That this was done with the intent of giving to the transferree, who was a creditor of the company, a preference over the other creditors thereof. The action was referred to a referee, whose conclusions of fact and of law, and the exceptions taken by the defendant thereto, are as follows;
    “I. Conclusions of fact.
    “ First. That the note in question was a subscription note, and as such was made and delivered by the defendant 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 & Co., who loaned said company the sum of three thousand five hundred dollars, 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 plaintiff. That said plaintiff received such note, and discounted the same in the regular course of its business, three days before its maturity, and without any knowledge or notice of the circumstances under which it had been originally taken as aforesaid by McCready, Mott & Co.
    “ Sixth. That said insurance company, at the time such note was negotiated to McCready, Mott & Co.® was in fact insolvent, not then having sufficient property with which to pay its debts; but had not at that time committed any open act of insolvency.”
    Upon these facts the referee held as matter of law:
    “ First. That said note was not passed to McCready, Mott & Co. in violation of the statute, with intent to give them a preference over other creditors of such insurance company.
    
      11 Second. That the plaintiff was an innocent and Iona fide holder of such note for value, and as such entitled to recover thereupon against the defendant.”
    The defendant duly excepted to each of the findings of fact and conclusions of law of said referee, particularly and severally.
    There was no evidence that any notes belonging to the company, had been at any time negotiated by the company by being indorsed by its president, or that to the knowledge of the trustees or directors, the president of the company had ever negotiated any of its notes. Nor was it proved that he was authorized by its bv-laws to indorse or negotiate its notes, or make loans in its behalf.
    Judgment having, been entered on the report, the defendant appealed from it to the General Term.
    
      J. L. Jemegan, for defendant and appellant, contended, inter alia, that, the president had no authority by virtue of the charter or by-laws of the company, or by virtue of any usage or custom which appears in evidence, or otherwise, to obtain the loan in question, or consequently to execute the stock note of the company therefor, or to assign the note, on which this action is brought, as collateral security therefor.
    That the plaintiffs were bound to inquire into the extent of the president’s authority, and were chargeable with notice of the limitation of that authority.
    At all events, where the president of an insurance company undertakes to indorse or negotiate paper belonging to, and in terms, payable to the order of such company, and it appears upon the face of the paper that the assignment is made by a person purporting to be the president, or other agent of the company, the plaintiffs take it “at the risk of showing affirmatively, not only that he had the apparent authority to make the drafts [assignment], but also that they [it] were actually made for the benefit of the defendant [company].” This is the language of the Court in the case of the Exchange Bank v. Monteath, 24 Barb., 371; and is also the doctrine of Court of Appeals, in the Mechanics' Bank v. N. Y. and N. H. B. B. Go., 3 Kern., 599, 631, 636.
    
      W. Hutchins, for plaintiff and respondent.
    I. The note in suit is a subscription note given in advance for premiums, on policies of insurance to be issued by the International Insurance Company to the defendant, the maker of the note.
    II. The note was negotiated by the company in the course of its business, and for its benefit, and as it might lawfully do, and was duly transferred for full value to the plaintiffs in this action before maturity, who took the same without notice of any defense, legal or equitable, on the part of the maker; and they are entitled to recover the full amount thereof. The report of the referee should be confirmed.
   By the Court.

Bosworth, Ch. J.

—The International Insurance company cannot be divested of its title to the note in question, nor can any third person acquire a title to it, and a right to sue and recover upon it, until a transfer of it has been ■made by the company; or until it has been indorsed by some person authorized, or who has been held out by the company as authorized, to indorse it in the name of the company.

The company did not authorize its transfer. No resolution or by-law has been produced which authorizes the president to negotiate its notes, or to indorse them in the name of the company. There is no evidence that he had previously done such acts.

The referee has not found, as a fact, that, the company indorsed this note to the plaintiff. The complaint alleges, that the International Insurance Company did indorse and deliver the note to the plaintiff. The answer takes issue on this allegation, and alleges, that the indorsement of it by the president of the company, in the name of the company, was an act done, without any authority so to do, from the trustees or directors of the company, and without any valid authority whatever.

The referee has found, that there was no vote of the board of directors authorizing the loan, which, this note, with others, was transferred to secure, .or for transferring the notes as collateral security.

This case, therefore, as it is now presented, is one in which notes, belonging to this insurance company, have been negotiated, without any authority from the company.

The note being, by its terms, payable to the order of the company, no indorsee of it can acquire any title to it, without at least showing, that according to the usual practice of the company, its notes were negotiated by indorsing them by its president, or that by its course of business he had been held out as a proper person to indorse in their behalf its notes, for the purpose of negotiating them.

Such is not found by the referee to be the fact, nor was it proved at the trial.

Under the charter, by virtue of his powers as president, he had no authority, to negotiate its notes, or to indorse them, in the name of the company. He has no more authority from the charter, by virtue of his appointment as president, to bind the company by any of his acts, than any trustee of the company. (Life and Fire Insurance Co. v. The Mechanic Fire Insurance Co., 7 Wend., 31, 33.)

An insuperable obstacle to a recovery by the plaintiff in this case is that, it not only was not within the actual power, but it was not within the apparent power of the president, to make notes, belonging to and payable to the order of the company, negotiable by his indorsement, or to negotiate them at all. Proof of one or the other of these facts is essential to the plaintiff’s right to recover, as well as that, they are Iona fide holders for value. (Farmers and Mechanics' Bank of Kent Co. v. Butchers and Drovers' Bank, 16 N. Y. R., 125.)

The judgment must be reversed, and a new trial granted, with costs to abide the event.

Judgment accordingly.  