
    Henry D. Brookman et al., Plaintiffs and Appellants, v. Benjamin E. Metcalf, Defendant and Respondent.
    1. A Mutual Insurance Company, for the purpose of increasing its available means, took up a subscription by which its friends agreed to give their notes for premiums in advance of insurances to be effected by them, the subscription not to be binding until §300,000 was subscribed. When the subscription was understood and believed to be made up, no fraud being practised on the defendant, he gave Ms two notes for $500 each for the amount of his subscription, and he effected actual insurance to an amount for which the premiums were over '$900, which was charged to him against his said two notes, and he, in addition thereto, took an open policy upon wMch the premium considerably exceeded the remaining $100, but no other risks were indorsed thereon except those included in the $900: Held, that the two notes for' $500 each were valid binding notes, although it afterwards appeared that the whole $300,000 subscription was not made up; the notes having been voluntarily given and there being no fraud on the part of the 'Company or its Agent.1
    1 Holbrook v. Wilson,{i Bosw„ 64;) Holbrook v. Basset, {ante, p. 147.)
    
      2. A resolution of. the Board of Directors directing the officers to proceed with certain notes, mentioned, to liquidate the indebtedness of the Company, is a sufficient authority to warrant.the officers in settling an indebtedness to the plaintiffs by paying a part, appropriating an indebtedness from the plaintiffs not yet payable, in further payment, and transferring to them a .portion of such notes as security for the balance on their agreeing to givo further time of payment.
    3. Such a transaction makes the plaintiffs Iona fide holders for value in such sense that the transfer to them is valid, even without a resolution of the Board of Directors, though it exceeds $1,000, if they have no notice of the want of such resolution.1
    4. In such case the maker of the note cannot use as a defense by way of set-L off or .counterclaim, an indebtedness by the Company to him for losses which did not become payable until after .the transfer of his notes to the plaintiffs.
    (Before Woodruff, Pierrepont and Moncrief, J. J.)
    Heard, February 10th;
    decided, December 10th, 1859.
    Action on a promissory note, dated November 8th, 1855, for $500, made by the defendant payable to his own order, six months after date, and by him indorsed in blank.
    The answer set up as a defense, that the note was given to the Atlas Mutual Insurance Company in pursuance of a subscription made by the defendant and others, by which they were to give their notes when $300,000 was subscribed, and that the Company obtained the note from the defendant by fraudulently representing that the .amount had been subscribed when in truth it had not. Also that the Company was insolvent when the note was transferred to.the plaintiffs; that the plaintiffs took the note with knowledge of the circumstances and of the insolvency of the Company,: and received it as collateral security for a preexisting indebtedness and parted with no value therefor, and are not the lawful and bona fide holders or owners, of the note for value paid before maturity.
    The answer then -avers that the Company are indebted to the defendant in the .sum of $2,300 for losses on property insured, &c., which sum the defendant will set up by way of set-off and counterclaim.
    The issues were referred to Murray Hoffmah, Jr., Esq., upon whose decision judgment was rendered for the defendant.
    He found the following facts, viz.:
    1 Scott v. Johnson, (ante, 213:) Smithy. Ball, (ante, 319;) Boughtony. Dodge, (post,)
    
    
      “ That the defendant made his promissory note in the pleadings mentioned, dated November 8th, 1855, for §500, payable six months after date, to his own order, which was by him indorsed and delivered to the Atlas Mutual Insurance Company, in the manner and at the time hereafter stated.
    “ That the said Atlas Mutual Insurance Company, a corporation created under the laws of this State, caused to be circulated among its friends and customers a subscription, dated 8th November, 1855, whereby the subscribers agreed to give to the Company their notes in advance for premiums of insurance, payable at six and twelve months, in equal amounts, for the sums set opposite their names respectively, it being understood, that in consideration thereof, the subscribers were to be allowed by the Company, at the maturity of the notes, five per cent on the amount thereof, and that such subscription should not be binding unless $300,000 were subscribed. That the defendant, at or about that time, subscribed $1,000, the plaintiffs subscribed $2,000, and many others subscribed different amounts.
    “ That having so subscribed, the defendant afterwards, and on or about the 12th day of November, 1855, effected a special insurance with the Company, and received a policy therefor, bearing date, the day and year last aforesaid, the premium whereof amounted to the sum of $401.25. That, afterwards, and on the 24th of November in the same year, he obtained an open policy from the Company, the premium whereof amounted to $500, on which the premiums of insurances subsequently taken out by the defendant amounted to $113.63; and that afterwards, and on or about the 1st December, 1855, he effected another special insurance with the said Company, and received a policy therefor, dated the day and year last aforesaid, the premium whereof amounted to the sum of $386.25. That the defendant did not pay the premiums aforesaid, but the same were charged to him in account.
    “That at a meeting of the Board of Directors of the Company, held on the 30th November, 1855, a resolution was adopted, whereby, after reciting that it was understood that $300,000 had been subscribed, it was resolved that the officers commence to collect the notes to that amount, and proceed in liquidating the liabilities of the Company.
    
      “ That the defendant, after the insurances had been effected by him as aforesaid, was called upon for his premium notes, whereupon he gave the Company his two promissory notes for $500 each, one of which is the note in controversy in this suit. That the defendant was charged in the books of the Company with the aforesaid premiums of insurance, and credited, with the notes last mentioned.
    “ That on the 10th December, 1855, the Company was, and for more than a month previously thereto had been, indebted to the plaintiffs in this action upon three several promissory notes, amounting to the sum of $10,139.27, two of which notes, amounting together to $5,574.56, were then past due, but the third had not yet matured.
    
      “ That the plaintiffs received from the Company, at that' time, in payment of the two notes which had so matured, $2,000 in cash, with a credit for their subscription-of $2,000, and .the Company’s note, payable in four months from date, for-$1,751.95, being the balance of the said two notes, together with the defendant’s two notes, so given by him as aforesaid, as collateral security for the payment of the Company’s new note for $1,751.95 above mentioned, and thereupon the plaintiffs gave up to the Company the said two notes which had so matured as aforesaid.
    “ That the Company’s note for $1,751.95, so given to the plaintiffs as aforesaid, has not been paid, nor have the plaintiffs collected the amount thereof from the securities aforesaid, and the note is still held and owned by the plaintiffs.
    “ That there was no resolution of the Board of Directors authorizing such transfer of. the notes to the plaintiffs, except what is contained in the aforesaid resolution of the 30th November, 1855, at which meeting four of the five directors constituting the Finance Committee were present and voted in favor of the resolution.
    “. That this transaction was conducted in good faith on the part of the plaintiffs, and under the belief that the notes were valid, and that the' Company had power to make a valid transfer of the same to the plaintiffs for the purposes intended, and neither the Company nor the Receiver thereof has hitherto, in any way, repudiated the transfer thereof
    
      “That the subscription of $300,000 was not full at the time the defendant gave his notes, nor has that amount been subscribed in binding subscriptions.
    “ That the Company having failed, an injunction was served on its officers the 5th of March, 1856, and a Receiver thereof was appointed on the 21st of the same month.
    “ That on the 28th of the same month of March the defendant entered into an agreement with the said Receiver to cancel the two special policies which had been issued to him on the 12th November and 1st of December, as before stated; and by an indorsement in writing on the back of each of the said policies, signed by the Receiver, it" was declared that the said policies were thereby canceled; and the defendant was entitled to the amount of return premium thereon specified, “to be paid to the holder out of the assets of the Company, ratably .with all legal claims for losses.” And there is also a balance to the credit of the defendant in his account with the Company of $98.87, being the amount of the said two notes left after charging against them the premiums of the two special policies, and the premiums actually earned on one open policy of $500.
    “ That the defendant is the holder of the said two several policies, and entitled to such return premium.
    “ That the Company is also indebted to the defendant to an amount exceeding that due on the note in controversy, for losses which occurred after his notes were transferred to the plaintiffs, as above stated, but before and were payable before their maturity.
    “Upon the foregoing facts I do find, as conclusions of law:
    “ That as the subscription for $300,000 was not filled, the Company could not have demanded from the defendant notes in pursuance thereof; but inasmuch as the Company had issued policies to the defendant, and as he had become, and was at the time the notes were given, a debtor for the premiums thereon, the notes were founded upon a good and valid consideration, and were valid notes in the hands of the Company.
    “That the notes were transferred by the Company to the plaintiffs, in contravention of the provisions of the Revised Statutes; and that the plaintiffs are not purchasers for valuable consideration.
    
      ■ “That, therefore, there was no valid transfer of the said note to the plaintiffs, and that by reason of the offsets the defendant would have against the Receiver of the Company, if the suit were prosecuted by him, he can set up this defense. • That if the said note was legally .transferred to the plaintiffs, yet, as no value was given therefor, the defendant -is entitled to set off in this-action the several losses mentioned in his account, and also the amount of return ¡premium ($454.50) .so adjusted with the Receiver-as aforesaid, and the said balance- of $98.87, which- sums I have allowed; and exceeding,.as they do, the plaintiffs’ claim, Ido find .and decide that there is nothing due from the defendant to the plaintiffs in this action.
    . “Bated New.Yokk, July 30, 1858.”
    . On the trial, besides the proof stated by the Referee, "the bylaws of the Company were produced, and-the tenth and twelfth thereof read as follows:
    “By-Law X.—The President or -Vice-President, with the advice and consent of the- Finance Committee, ora majority of' them, shall have authority to assign, transfer, or otherwise validly dispose of any bond and mortgages, stocks, bills receivable,' or any assets of-the same, in order to convert the-same into money, or to secure the repayment of money, borrowed by-the Company through them, the payment of losses,, or other-purposes that shall have been sanctioned by the-Finance Committee.
    “XII. Immediately on the. adoption of these by-laws, and annually thereafter, at the first meeting -of the Board after each' annual election of Trustees, the President, or, in his absence, the Vice-President,, shall .nominate, and the. Board appoint, three Standing Committees, viz.: :
    - “ First.—A Finance Committee of five Trustees, three of whom shall constitute a. quorum; said Committee, or-a-majority of them, shall have power -to loan, invest or otherwise dispose of the-cash funds, stocks and assets of the-Company, in any-way they may -deem conducive -to the interests of the Company, in accordance with the charter and by-laws. They-shall also examine the" statements of the affairs of the-Company from time to time, together with .the assets,, and compare the same with the books, and,.-in general, exercise supervision--over all the-financial affairs of the Company/
    
      It should also be stated that no part of the amounts due to the defendant from the Company became due until some time after the note in suit was transferred to the plaintiff.
    Exceptions were filed to the decision of the Referee, and from the judgment entered on his decision the plaintiffs appealed,.
    
      M H. Owen, for plaintiffs, (appellants.)
    I. The note in suit was founded upon a good and valuable consideration, and was valid in the hands of the Company at the time of its transfer to the plaintiffs. In this respect the Referee-has decided correctly, because:
    I. At the time the defendant gave the note, he was justly indebted to the Company for premiums in an amount exceeding the note in question.
    It is not pretended that the subscription was obtained by fraud. It was fairly obtained, although it was not to be binding unless the amount specified should be subscribed.
    The insurances which the defendant afterwards effected, and for the premiums on which he became indebted, were likewise made in good faith, without any condition or qualification; and it is not pretended that there were any representations or other acts, which in any way invalidate the same; whether, therefore, the subscription which was then in circulation, was or was not full, is immaterial as regards the indebtedness fór such premiums.
    II. The note was given and received in settlement pro tanto of such indebtedness.
    In the absence of any proof to the contrary, this would be the legal inference. Giving the note is prima fade evidence of an accounting and of the defendant’s indebtedness. (Lake v. Tysen, 2 Seld., 461 ; Defreest v. Bloomingdale, 5 Denio, 304.)
    3. There was no fraud in obtaining the notes, nor anything connected therewith which rendered them invalid, even in the hands of the Company.
    ■ While there was nothing wrong either in obtaining the subscription, or effecting the insurances, yet it is alleged that when the defendant was called upon to give the notes, - he was told that the subscription had been filled, whereas, in fact, it not so. was
    
      It does not, however, appear that the defendant gave the notes relying solely upon the truth of such representation. On the contrary, it appears that he made inquiries of various subscribers, and finding that some had given their notes, and others were about giving them, he gave the notes in question.
    H. The note in • suit was legally and properly transferred to the plaintiffs before maturity, and they are the lawful owners and holders thereof for value.
    Having been indorsed in blank, it was negotiable and transferable without any other act of the Company than the mere delivery with intent to pass the title thereto.
    Such transfer and delivery was not in contravention of any provision of the Revised Statutes, and the Referee has erred in deciding to the contrary.
    The provisions of the statutes referred to (1 R. S., p. 591, §§ 8, 9,) are not applicable to this case, because:
    I. The plaintiffs were purchasers for a “ valuable consideration and without notice,” and therefore within the exceptions of the 8th section.
    There is no evidence of notice that a previous resolution (which is the “ notice ” referred to in that section) had not been passed.
    The Referee has, in effect, found that the transaction was conducted in good faith, and under the belief not only that the notes were valid, but that the officers had power to make a valid transfer thereof to' the plaintiffs. (Howland v. Myer, 3 Comst. R., 290.)
    The plaintiffs settled with the Company, paid their subscription before maturity, gave up and extinguished the notes upon which they had an immediate right of action, and extended the credit for a portion of their demand, which was a “ valuable consideration ” within the authorities upon that subject. (White v. Springfield Bank, 3 Sandf., 222 ; Youngs v. Lee, 2 Kern., 551; Gould v. Segee, 5 Duer, 260; Goodman v. Simonds, 20 How. U. S. R., 343, 370; Hart v. Hudson, 6 Duer, 304; Story on Prom. Notes, §186; Finley v. Pritchard, 2 Saund. R., 151; Stalker v. McDonald, 6 Hill, 93.)
    As pledgees, the plaintiffs, on default of payment of the principal debt, were entitled to sue the collaterals. (Wheeler v. Newbold, 5 Duer, 29; S. C., 16 N. Y. R., 392.)
    
      2. If the 8th section would have otherwise applied, still the charter of this Company has created an exception, rendering such previous resolution unnecessary.
    The 12th section of the charter of the Atlantic Mutual Insurance Company, (Laws 1842, chap. 217, § 12,) which, by the 8th section of the charter of this Company, is incorporated therein, (Laws 1843, chap. 92, § 8,) authorizes the Company to “ receive notes for premiums in advance,” and to negotiate such notes for the purpose of paying claims, “ or otherwise in the course of its business.”
    If, therefore, the notes in question fall within the class, referred to in the charter, (as they may under the circumstances,) then no resolution was necessary.
    If the 8th section conflicts with the charter, the former must yield to the latter as the last expression of the legislative will. (Howland v. Myer, 3 Comst., 290.)
    3. Regarding the notes, however, as ordinary “premium notes,” and not of the kind referred to in the charter, still it was not indispensable to the legality of such transfer that a previous resolution of the Board should be passed authorizing the same.
    Any approval of such transfer, however manifested, whether before or after the transaction, would be sufficient authority. (Curtis v. Leavitt, 15 N Y. R., 11.)
    Such authority and approval were given and manifested.
    
      {a.) By the by-laws, (authorized by charter,) appointing a Finance Committee, President and Vice-President, with power, under the advice of such committee or of a majority, to transfer or otherwise dispose of notes, &c.
    (5.) By a resolution of the Board, passed 30th November, 1855, at which a majority of the Finance Committee were present, authorizing the officers to collect the notes and proceed in “ liquidating the liabilities of the Company.” And,
    (c.) By the acts of the Finance Committee and officers, and their and the Receiver’s entire acquiescence in the arrangement.
    III. The defendant is not entitled to set off in this action his alleged claim against the Company, for—
    1. If the transfer was legal, and the plaintiffs be considered bona fide holders of the note for value, without notice, then no
    
      claims of the defendant against the Company, however valid, can be set off. (Code, § 112 ; 2 R. S., 354, § 12, subd. § 9; Beckwith v. Union Bank, 4 Sandf., 604; S. C., 5 Seld., 211; Spencer v. Babcock, 22 Barb., 335.)
    2. But if otherwise, and if the defendant (as was decided by the Referee) is entitled to set off any claim, which he might have done if the action had been brought in the name of the Receiver, still he was not entitled to set off either the return premiums or the losses claimed, because neither was in existence at the date of transfer, and therefore not the subject of set-off. (Furniss v. Gilchrist, 1 Sandf. R., 53.)
    
      (a.) As to the return premiums, they were to be paid in a special manner “out of the assets of the Company ratably, with all legal claims for losses,” and in no other way.
    The Receiver was not required to cancel the Policies, (2. R. S., 470, § 85,) and instead of doing so, he might have suffered the risks to continue, in which case the insolvency of the Company would not have furnished any defense to an action upon the notes given for the premium. (Hone v. Boyd, 1 Sandf., 481.)
    (5.) The losses should not have been allowed,.because
    Neither of them was due or payable when the transfer was made, nor even when the Receiver was appointed, and not then a valid set-off.
    The Receiver was appointed the 25th March, 1856. The “papers,” i. e., the preliminary proofs, were left with the Company for “ adjustment,” in one case on the 8th, and in the other on the 21st of February of that year; such losses were, by the terms of the Policies, not payable until thirty days thereafter, which would be after the appointment of the Receiver, and therefore not susceptible of set-off as against him. (Haxtun, Receiver, V. Bishop, 3 Wend., 13; Furniss v. Gilchrist, 1 Sandf., 53.)
    The judgment should be reversed, and a new trial ordered.
    
      G. Dean, for defendant, (respondent.)
    I. The plaintiffs were not entitled to recover, because the proof did not sustain the allegations of the complaint.
    They were not the absolute owners, but held the notes in trust, and, when paid, the right to possession would revert to the Atlas Insurance Company.
    
      This action is prosecuted for the benefit and on account of the Atlas Insurance Company.
    It is questionable whether the plaintiffs can sue even as Trustees, inasmuch as the instrument under which they were transferred gives them liberty only to “ dispose of them for account of the Company.” (Nelson & Sturges v. Eaton, 7 Abb. Pr. R., 305; Albany Fire Ins. Co. v. Bay, 4 Comst., 9 ; Waldron v. McComb, 1 Hill R., 111; S. C., 3 id., 361.)
    II. The fact found by the Referee, that this transfer or trust was in violation of the statute, and therefore void, because not authorized by a previous resolution of the Board of Trustees, is supported by the evidence, and disposes of the whole case.
    In the case of Howland v. Myer, (3 Comst., 290,) the plaintiff was a bona fide holder, and the decision is put on that ground.
    The resolution of 30th November is not an authority for - this transaction; because it was founded in an error of fact, if not in a fraudulent misrepresentation. And also it does not authorize the liquidation of the liabilities with the notes.
    But if it did, the President was not thereby authorized to deposit with creditors assets of the corporation to an unlimited extent on such trusts as he should choose to create.
    
      Palmer v. Yates, (3 Sand., 152,) and Curtis v. Leavitt, (15 N. Y. R., 9,) are cases where the parties came within the exception to the 8th section.
    III. The defendant was in a position to avail himself of this defense, because he was a creditor and member of the corporation.
    1. A corporation, or its stockholders, or Receiver, may in every case impeach any contract made by Directors or other officers or agents, in the name and professedly by such corporation, by showing that such contract was made in a manner or for a purpose not authorized by its charter or the laws of the land. (Hodges v. The City of Buffalo, 2 Denio, 110; McCullough v. Moss, 5 id., 567; 3 B. & Ald., 1; 1 Hill, 11; 4 id., 442; 3 Comst., 430; 1 id., 19.)
    2. The transfer being contrary to law and public policy, is void, and there is defect of title in the plaintiff. (Johnson v. Bush, 3 Barb. Ch. R., 207; Code, § 111.)
    IV. As there had been no valid transfer of the title to this note, the defendant had a right to avail himself of any defense which, he could have made, if the action had been brought by the original holder, viz.:
    Want of consideration; fraud in obtaining it. (Stewart v. Trustees of Hamilton College, 2 Denio, 403.) Set-off under the statute. (2 R. S., 354, §12, subd. 10; 1 Sandf., 53; id., 257.) Counterclaim under sections 149 and 150 of the Code. Any matter constituting a defense. The right of the defendant is expressly reserved by section 112 of Code.
    V. Defendant’s demands consisted of a loss adjusted in February, and therefore liquidated and due.
    Of claims for return premiums. Of $97.87, the balance of the two notes after charging against them all premiums. It is insisted that under the finding of facts these constituted a defense to the notes. (Holbrook v. Receiver Am. Ins. Co., 6 Paige, 222, 228; in the Matter of the Receiver of the Globe Ins. Co., 2 Edw. Ch. R, 625.)
   Moncrief, J.

The note was valid in the hands of the Company.

The Referee so found, and correctly. (16 N. Y. R., 324.) In respect to creditors of the Company, in good faith and in the usual' course of business, it was payable absolutely and in full. There was an actual loan of money at the time of transfer in this case. (Ogden v. Andre, MS.; heard, April, 1859; decided, May 21.)

The transfer to the plaintiff was made in good faith.

The Referee so found, and, I think, correctly. Neither the Receiver of the Company nor any of its officers has ever demanded or claimed the return of this note. The Referee so found.

There was no offer to show that the plaintiffs had any reason to suppose there was no resolution of the Board of Trustees authorizing the transfer. The fact that the plaintiffs received the note from the officers of the Company did not charge them with such notice. 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 decides the precise point' that the absence of a resolution would not defeat a recovery.

The Company had power to make the transfer. (3 Comst., 290.) The power was sufficiently exercised to pass the note to the plaintiffs.

The resolution of November 30,1855, was passed at a meeting of the Board of Trustees, (eleven members being present, and four of the Finance Committee,) and it directed “ that the officers commence at once to collect the notes to that amount, ($300,000,) and proceed in liquidating the liabilities of the Company therewith.”

By-law X expressly authorizes the President or Vice-President, with the advice and consent of the Finance Committee, or a majority of them, to assign, transfer, or otherwise validly dispose of, bills receivable, or any assets, to secure the repayment of money borrowed by them,.the payment of losses, or other purposes, that shall have been sanctioned by the Finance Committee.

The two notes, held by the plaintiffs past due, were pressing for payment. They probably were for losses. It was an undisputed claim against the Company. •

At the meeting of the Board of Trustees on the 7th November, all of the Finance Committee were present, when the “ Committee appointed to settle with Mr. Brookman, (plaintiff,) reported that they had not yet completed the settlement.” (The pro-gramme for procuring the necessary means had not yet been matured. The subscription list is dated the next day, the 8th.)

At the time of the transfer, December 10th, the President, Vice-President, and two of the Finance Committee were present. (Probably others sanctioned it.) It required but three members to constitute a quorum of the Finance Committee, a majority of whom could transfer, &c., &c. The transfer has never been repudiated, and no question ever raised as to the proper transfer to the plaintiffs, except by the defendant.

Gardiner, J., (3 Comst., 292,) says: “I apprehend that the Company were not restricted by the statute to a negotiation for the purposes of payment exclusively. They might procure the note to be discounted, and apply the avails in discharge of their responsibility for losses incurred; or, if this could not be done, the same result might be obtained by a transfer of the note to the plaintiff, upon the indorsement of the Company—the creditor giving time until the securities matured.”

It will be borne in mind that the note in that case was transferred by the President as collateral security. The point is expressly taken, (2 Sandf., 180-183;) and it is at least doubtful whether the loss was contingent or absolute for which it was given to secure the payment. It is questionable whether anything was given up at the time of receipt of the note.

In the present case, an absolute liability of the Company existed. - Two notes of the Company, over due, were in the hands of the plaintiffs, and they were pressing payment. The claim was indisputable. The amount was $5,574.56. The Company, at the time of the transfer of this note to the plaintiffs, paid them $2,000 in cash, and the plaintiffs permitted the Company to charge them their subscription of $2,000 as cash, thus leaving due to them, at the time of the transfer, the sum of $1,574.56 and interest.

. Upon receiving the note of the Company for the balance due on those two notes—$1,574.56 and interests $1,751.95—and the note in suit, with others, as collateral, the plaintiffs gave up the existing liability of the Company. The two notes were given up.

It seems clear to my mind that the present is a stronger case than Aspinwall et al. v. Myer, (2 Sand., 100,) and is embraced and determined by the principle laid down in 3 Comstock, 290.

Again, I do not see how it can justly be said that this transaction conflicts with section 8 of the statute. The act was passed to prevent insolvency. The arrangement entered into with the plaintiffs assisted the statute, in enabling the Company to continue its business, and actually did earn for the defendant a large amount of premiums which he did not pay to the Company.

. In my opinion the Referee erred, and a new trial should be directed, &c.

Woodruff, J.

The defendant had by a subscription with others agreed to give to the Atlas Mutual Insurance Company, notes in advance for premiums to the amount of $1,000. He did so. in two sums of $500 each. The condition of the subscription was that it should not be binding until the sum of $300,000 .was subscribed, and if it had never been subscribed the Company could not have required the defendant to give the notes; but on the other hand he could waive the condition and if he afterwards gave the notes and no fraud upon him is shown, he must be deemed to have waived the condition by voluntarily giving the notes to the amount of such subscription; and on this ground alone'I regard the notes as valid, binding notes even in favor of the Company, although the fact be taken to be as the Referee has found, that the $300,000 subscription was not made up. If it were material, the correctness of that finding upon the evidence might be questioned. But still more clearly is the defendant bound in this case, for after his subscription he took out policies of insurance, the premiums upon which (exclusive of unearned premiums on his open policy) was nearly equal to the amount of his two notes. As that open policy was taken in pursuance of his subscription and in performance of his agreement, I apprehend the Company were entitled absolutely to require that the whole amount of the premium be paid. It was not the ordinary case of an open policy, on which premiums can only be collected to the amount of the risks indorsed thereon.

After not only giving his notes but actually receiving policies for the amounts, and more than the amounts of his notes, it is too late for him to say, in the absence of any fraud, that the $300,-000 subscription was not made up. (Holbrook v. Wilson, November Term, 1858; Holbrook v. Basset, July, 1859. )

The defendant had agreed to gives notes in advance.

The note in question was therefore not only a note given for value in due course of business, but it was also a subscription note given in advance for premiums under the 12th section of the charter of the Company.

By the terms of that section, the Company were authorized to negotiate such note for the purpose of paying claims or otherwise in the course of its business.

It has often been held that such notes are valid binding notes, founded on sufficient consideration, and subject to transfer as business notes.

By the tenth of the by-laws of the Company the President or Vice-President, with the advice and consent of the Finance Committee or a majority of them, has authority to transfer bills receivable to secure the payment of losses or other purposes that shall have the sanction of the Finance Committee.

On the 30th of November, 1855, the Board of Directors, after reciting the subscription which the defendant and others had made in advance of premiums, resolved “ that the officers commence at once to collect the notes * * * and proceed in liquidating the liabilities of the Company therewith.”

The Company was at that time indebted to the plaintiffs in a large amount.

On the 10th of December, two notes of the Company, amounting to $5.574.56, were past due.

The statute authorized the Company to transfer the note in question for any lawful purpose in due course of business.

The Board of Directors, by a specific resolution, authorized the officers of the Company to proceed at once in liquidating the indebtedness of the Company with this and other notes mentioned.

Here was authority enough, in my opinion, for the action of the officers.

Thereupon, a settlement was made with the plaintiffs in which they accepted $2,000 in money; consented to apply $2,000 of the money due to them on a subscription also in advance of premiums, thus accepting as cash a subscription for which, they were entitled to give notes on time; and agreed to give time for the payment of the residue of the sum then due to them for four months; in consideration of which the officers transferred to them the note in question as security for the payment of such residue at the end of such four months.

I think this was a valid transfer, authorized and upon sufficient consideration and in no wise inhibited nor invalidated by the statute.

If this be so the decision of the Referee was erroneous. At the time of the transfer to the plaintiffs, there was nothing due to the defendant, and therefore there was no right of set-off which can defeat the plaintiffs’ recovery.

If there be no existing debt due to the defendant, at the. time of the transfer of his note, he cannot set off a debt subsequently becoming due as against the assignee, although the assignment be made to secure an antecedent debt. In other words, an assignee, although he takes a note to secure a precedent debt, if there be no fraud, can collect such note notwithstanding his assignor may, by debts becoming due after the assignment, owe the maker of the note the same or a greater amount.

Besides, in this case, the plaintiffs received the note, as already stated, for a sufficient consideration in the consent to allow as cash a subscription for which they had a right to give notes on time, and in the forbearance of the residue of the debt due them.

It is claimed, that inasmuch as the receipt given by the plaintiffs for the note in question, as collateral security to the note of the Company, contained a reservation of authority to sell the notes, if the note of the Company was not paid, that therefore a sale was the plaintiffs’ only remedy. That they are mere trustees to sell for account of the Company, and cannot sue on the notes. This claim is groundless. They received the notes as security, and have the legal title. They can, therefore, sue and collect the note. They have also the equitable title, holding the note as security they have a right to retain the money collected, and the circumstance that when collected it will go so far towards discharging the debt of the Company is only what is always true when the holder of such securities collects them. In that sense only the collection is for account of the principal debtor. (Nelson v. Wellington, July Term, Superior Court, 1859.)

I concur, therefore, in the result to which Justice Moncrief has arrived.

The judgment must be reversed, and a new trial ordered. Costs to abide the event.

Ordered accordingly. 
      
       Since reported, 4 Bosw., 583.
     
      
       4th Bosworth, 64.
     
      
      
        Ante, p. 147.
     
      
      
        Ante, page, 178.
     