
    William B. Scott et al., Plaintiffs, v. Jonathan T. Johnson, Defendant.
    1. An Insurance Company which, by the terms of its charter, is authorized,, for the better security of dealers, to receive notes for premiums in advance from those who intend to receive its policies, and to negotiate such notes for the purpose of paying claims or otherwise in the course of its business, has power to transfer such notes as security for the repayment of a loan of money made to the Company, and received and applied to the payment of losses, expenses, &e., in the ordinary conduct of its business.1
    2. ' When it is proved that it is the uniform practice of such a Company to transfer notes, negotiated in its business, by an indorsement in this form, “For the Company, A. B., President,” such proof is prima fade evidence of authority in the President to indorse notes held by the Company, by way of transfer; and such indorsement is sufficient to confer the title on one who receives a note from the Company in good faith, and advances to them money thereon.
    3. A person who lent money to such Company, in good faith, on the transfer to him, as collateral security, of subscription notes given for premiums in advance, amounting to over $1,000, and without any notice that there had been no previous resolution of the Board of Directors authorizing the transfer, is entitled to recover thereon against the makers, although no such resolution had been passed.
    4. Where there is no allegation in the answer under which usury between the Company in such case and the lender can be available as a defense, it is not error to reject evidence of the rate of interest charged on the loan. If proof that the lender charged more than seven per cent per annum is not admissible to establish usury, it is not relevant for any purpose: it has no bearing on the question whether the plaintiff is a bona fide holder in any other aspect.
    
      1 Holbrook v. Basset, ante% p, 147.
    
      5. Whether, under a statute which forbids a corporation to interpose the defense of usury, a transaction, otherwise void for usurjq is not entirely valid? and whether a third person can, for the purpose of affecting the title of the holder of a promissory note, allege and prove that he took it from a corporation and holds it under a usurious contract? Quaere.
    
    6. It seems, that, under the statute last mentioned, if a maker of a note has no defense thereto in the hands of the corporation, he cannot, when sued thereon by an indorsee, allege and prove usury between the corporation and such indorsee. The title of the indorsee, being good as against the corporation, is good as against the maker.
    (Before Hoffman, Woodruff, and Pierrepont, J. J.)
    Heard May 5th;
    decided, July 28th, 1859.
    Action by the plaintiff, as indorsee of a promissory note made by the defendant, for $756, dated January 2, 1856, payable to the order of the International Insurance Company, and alleged in the • complaint to have been indorsed to the plaintiffs by the payee, with á further averment that the plaintiffs are now the lawful holders and owners thereof.
    The answer “ denies that the payees of the note indorsed the same, as alleged in the complaint," and denies that the plaintiffs are the lawful holders and owners thereof, or that the defendant is indebted to them thereon, but says that “ the International Insurance Company, mentioned therein, is the owner of the note, and alone entitled to sue thereon, inasmuch as, he says, the said note was indorsed and delivered to the plaintiffs as collateral security for a loan of a sum exceeding $2,000, made by the plaintiffs to the said Company;” that the said Company is a moneyed corporation, &c., &c.; that, at the same time with the indorsement and delivery of the said note, other notes, amounting to more than $7,000, were, by the same transaction, and as collateral security for the same loan, indorsed and transferred to said plaintiffs; that the indorsement, transfer and delivery of all the notes aforesaid was without any previous resolution of the Board of Directors authorizing the same, and was null and void; of all which the plaintiffs had notice at the time of such indorsement and delivery.
    
      The action was tried on the 16th day of February, 1859, before Mr. Justice Pierrefont and a jury.
    The 11th section of the charter of the International Insurance Company authorized the Company, “ for the better security of' its dealers, to receive notes for premiums, in advance, of persons intending to receive its policies, and to negotiate such notes for the purpose of paying claims, or otherwise, in the course of its business.” (Sess. Laws, 1844, p. 231; id., 1855, p. 505.)
    The evidence showed that the note in suit was given to that Company by the defendant for premiums in advance, and that, at some time prior to June, 1856, it was indorsed for the Company by the President, in these words: “For the International Ins. Co. M. Starbuck, Prest.;” and, together with other notes, (amounting, in all, to $8,215,) was delivered to the plaintiffs as security for the repayment of money loaned to the Company by the plaintiffs, and which money “ was received by the Company, and was applied to its ordinary business, the payment of loans, expenses, &c.;” and, on the 30th day of June, the loan so made was reduced by the Company to $2,800, and the note of the Company, executed by Ogden, their Vice-President, was given to the plaintiffs therefor, and the notes were still left in the hands of the plaintiffs to secure the payment.
    It was shown that the negotiation and indorsement of notes by the President or Vice-President was according to the usage of the Company; that that was the way in which all their business was done, and that no resolution of the Board of Directors was passed authorizing this or any of the transfers of notes by the Company, with this qualification, that on the 3d of May, 1852, after a report had been made to the Board of Directors-showing the disposition by the officers of various notes which had been received for premiums in advance, a resolution was passed approving and ratifying such disposition, and authorizing the officers “ to pay away or negotiate such notes held by the Company, in the further settlement of claims for losses and the debts of the Company;” and the 1st section of the by-laws, adopted December 3d, 1845, was read in evidence, as follows:
    “Sec. 1. It shall be the duty of the President or Vice-President to preside at all meetings of the Board of Trustees, and to perform whatever belongs to the executive department of the Board, and they or either of them shall have authority to make insurances and sign the policies and contracts of the Com? pany, and transact all its ordinary concerns, arid be, ex officio, members of all committees, except those relating to the examination of accounts.”
    In the progress of the trial, the defendant’s counsel inquired of a witness, “What was the rate of interest upon the loan made to the Company ” (i. e., by the plaintiffs,) “ upon these notes?”
    The plaintiffs’ objection to the question was sustained, and the defendant excepted.
    The defendant’s counsel also offered in evidence a -resolution of the Board of Trustees of the Company, passed June 27,1856, reciting that the President (Starbuck) had violated the duties of his office by the issue of certificates of stock unauthorized by the Board, and has also issued promissory notes of the Company without a previous resolution, and resolving that he be suspended in his functions as President, and that Charles W. Ogden (the then Vice-President) act as President till the further order of the Board.
    On objection from the plaintiffs, the evidence was excluded, and the" defendant excepted.
    When the parties rested, the defendant’s counsel moved to dismiss the complaint, on the grounds—
    .That no authority was shown in the Presidentto indorse the note.
    That there was no previous resolution of the Board of Trustees, ‘and,
    That the face of the paper gave notice to the person taking it.
    Which motion was opposed by plaintiffs’ counsel.
    ■ Before the motion was disposed of, the defendant’s counsel admitted, as a part of the case, that the plaintiffs advanced the money in good faith when they took the note, and that they had no actual notice of the want of a resolution of the Board of Trustees, or other notice, except what might be derived from the nature of the transaction.
    It was also stated by the counsel on both sides, that in their judgment there was no question of fact for the jury to pass upon. And the counsel on each side then asked that the Court should instruct the jury that they were respectively entitled to a verdict.
    
      And thereupon tlie said Justice directed the jury to find a verdict for the defendant. To which direction the plaintiffs then and there excepted. The jury thereupon found a verdict for the defendant.
    And the said Justice directed the exceptions to be first heard at the General Term, counsel on both sides stipulating, and the Court directing, that judgment be there entered for the defendant, or the verdict be set aside and judgment entered for the plaintiffs for the amount of the note and interest and costs, or a new trial ordered, as the Court may be advised; and in the meantime that the entry of the judgment be suspended.
    
      George G. Goddard, for plaintiffs.
    I. The 8th section of the first article of the act in relation to moneyed corporations, (1 B. S., 591,) does not apply to the case. As by the section itself it is declared not to apply, first, to the issuing of promissory notes by the officers of the Company in the transaction of its ordinary business ; nor, second, to transfers for value without notice.
    I. This case is within the first exception. (Brouwer v. Harbeck, 1 Duer, 114; reversed, 5 Seld., 589; but not on this point, on which it was impliedly affirmed.)
    • 2. It was also within the second exception. (Howland v. Myer, 3 Comst., 290, affirming 2 Sandf., 180.)
    II. The 11th section of the charter authorized the transaction. This dispensed with a previous resolution. (Howland v. Myer, 3 Comst., 293; Brouwer v. Harbeck, 5 Seld., 591; 1 Duer, 114.)
    III. The transfer of the note by the indorsement of the President was valid.
    1. The 3d section of the charter (Laws of 1844, p. 229,) provides that “ all the corporate powers of the said Company shall be exercised by a Board of Trustees and such officer’s and agents as they may appoint.”
    2. The uniform usage of the Company sanctioned it. (Hoyt v; Thompson, 1 Seld., 333, reversing the decision of this Court, but not on this point; Wood v. The Auburn and Rochester R. R. Co., 4 Seld., 167; Paley on Agency, Dunlap’s ed., 162; Angel & Ames on Corp., § 240, &c.; Conover v. Mutual Ins. Co. of Albany, 1 Comst., 290, 292; Brouwer v. Harbeck, 1 Duer, 114.)
    
      3. The Company received and used the money, and thereby ratified the transfer, and is estopped from denying the authority.The answer itself alleges that the loan was made by the plaintiffs to the Company.
    4. The resolution of the Board, passed May 3, 1852, also authorized it.
    IY. There was no error in excluding the question as to the rate of interest. Ho such defense was made by the answer. (Code, § 149.) That the plaintiffs advanced their money in good faith was admitted.
    Hor was there error in excluding the resolution of June 27.-That transaction was after the transfer of this note to the plaintiffs, and was res inter alios acta that could not affect the plaintiffs.
    Pursuant to the stipulation, the verdict should be set aside, and judgment entered for the plaintiffs for $750, and interest from January 2d, 1857, and costs.
    
      James C. Carter, for defendant.
    Moses Starbuck, the President, had no authority to indorse the note in suit. There is none contained in the charter or bylaws. There is no evidence that the President ever indorsed, in any similar transaction, on behalf of the Company; and, thus, no authority can be derived by implication from usage. It is an indisputable principle that the President or other officer of a corporation has no authority to do any 'act for the corporation, except so far as he is authorized by the charter, or some by-law or resolution of the directors, or by some established usage. (The Life and Fire Ins. Co. v. The Mechanics' Ins. Co., 7 Wend., 31.)
    Any person taking mercantile paper takes the risk of the genuineness of every indorsement, and of the existence of power to indorse, where the indorsement is by an agent.
    II. The transfer of the note in suit by Starbuck to the plain tiffs falls precisely within the terms of the prohibition of the 8th section of the regulations to prevent the insolvency of moneyed corporations, and is, therefore, absolutely void, and the plaintiffs are destitute of any title. (R. S., § 8, art. 1, tit. 2, part I, ch. 18; id., art. 3, tit. 2, part I, ch. 18.)
    The absence of the resolution is an interruption in the chain of legal title. The plaintiffs rely upon legal title; and he who takes such a title, takes it at the peril of all defects. (Blunt v. Hanna, in note to “ Cleveland’s Banking Laws,” p. 7; Gillet v. Phillips, 3 Kern., 116.)
    III. The plaintiffs are not purchasers without notice, so as to entitle them to the benefit of the exception.
    It will not be denied that Starbuck, as an officer of the Company, was a special agent, with limited powers, and that, from the necessity of the case, he could not have, without a resolution, the power to transfer the note, and that whoever undertakes to deal with such an agent is charged with full notice of the extent of his powers, and deals at his peril. (Life and Fire Ins. Co. v. The Mechanics' Ins. Co., 7 Wend., 31.)
    IY. The defect in the plaintiffs’ title cannot be cured by a subsequent ratification of the transfer by the corporation.
    6 1. The purpose of the Legislature in establishing the prohibition in question was to prevent the insolvency of moneyed corporations, by limiting the amount of power in the hands of officers or agents.
    2. The ordinary rule, uomnis ratihdbitio mandato equiparatur," is inapplicable. The application of the rule in such cases would tend directly to frustrate the intention of the Legislature, and would, in fact, require the significant word “previous” to be stricken from the statute.
    Y. But, in the present case, the last point is irrelevant, for there is no evidence of ratification.
    1. It will be conceded that the ratification must be by the Directors; that the statute is not to be so interpreted and applied as to permit an officer to ratify his own unauthorized and void act.
    2. The notion of ratification includes, first, knowledge of the unauthorized act of the agent; and, second, an intention on the part of the principal to assent to and confirm it. (Buller, J., 2 T. R., 209, note; Owings v. Giddings, 9 Pet., 698, 629; Davidson v. Stanley, 2 Man. & Grang., 721.) In this case it appears that the Directors never knew of the transaction, and, of course, could not assent to it.
    YI. Should the Court be of the opinion that the defendant is not entitled to judgment, then there should' be a new trial, for the Judge was in error in excluding the evidence in respect to the rate of interest and to the resolution of the Trustees of June 27,1856.
    
      1. The inquiry as to the rate of interest was put in order to prove usury. This is pertinent to the question of good faith in the plaintiff as holder. I do not claim that we had a right to prove usury as a defense: we have not set up usury, and- do not wish to do so, but insist we had a right to prove that the plaintiff took the note oh a usurious contract, as bearing on the question of his good faith.
    2. The excluded resolution was pertinent to the inquiry whether the Company ever ratified or assented to the transfer.
   By the Court—Woodruff, J.

The answer in this case begins with a denial that the plaintiffs are the lawful owners and holders of the promissory note in question, and denies that the payees of the note indorsed the same as alleged in the complaint, or that the defendant is indebted to the plaintiffs thereon in any sum whatever. If these denials stood in the answer unqualified they might perhaps create an issue which would involve every question of legality in the plaintiffs’ title which the defendant could raise by proof. The words of the answer which immediately follow, however, show that it was not the design of the pleader nor is it the true meaning of the answer to take any such broad defense; they define and limit the generality, of the previous denials, for the sentence continues, “but he says that the International Insurance Company mentioned therein is the owner of the said note and alone entitled to sue for the recovery of the same, inasmuch as he says the said note was indorsed and delivered to the plaintiffs as a collateral security for a loan of a sum exceeding $2,000, made by the plaintiffs to said Company.” The answer then states that the amount of notes indorsed and transferred at the same time to the plaintiffs exceeded $7,000, and the indorsement and delivery of all of them was made without any previous resolution of the Board of Directors authorizing the same and was null and void; of all which the plaintiffs had notice. The plain meaning and only true meaning of which is, not that the note in question has not been indorsed and delivered to the plaintiffs if that can be done without a previous resolution of the Board of Directors of the corporation, but that the plaintiffs made a loan to the Interriational Insurance Company, the payees and owners of the note, of a sum exceeding $2,000, and to secure the payment thereof the Company indorsed and delivered to the plaintiffs this and other notes to an amount exceeding $7,000; but inasmuch as that.Company was a moneyed corporation and no previous resolution of the Directors had been passed authorizing the transfer, the plaintiffs acquired no title; and this is I think the whole of the defense. The defendant thus places himself on the single point of objection to the transfer, that there was no previous resolution of the Directors authorizing the indorsement and transfer, but admits that the indorsement and transfer were made.

Upon this state of the pleadings I incline to the opinion that unless it is true, as a matter of law, that a moneyed corporation cannot make a valid indorsement and transfer of notes exceeding in amount $1,000 in any manner, unless a previous resolution of the Board of Directors be obtained, then the plaintiffs were entitled to judgment on mere production of the note at the trial, unless the defendant proved that the plaintiffs knew when they received the note that no such authority existed, which was not attempted. It will hereafter be seen that such a transfer may be made, and that a bona fide holder for value without notice will take a valid title thereby.

The plaintiffs might upon the answer have taken the fact of indorsement and transfer to them as admitted, and confined the inquiry on the trial to the simple question whether there was such a resolution of the Board or whether they took the note in .good faith without knowledge of the want of such a resolution.

But on the trial and on the argument of the appeal the ease was conducted as if two questions were open: First, whether, -independent of any legal question growing out of the want of a resolution of the Board, the note was in truth duly indorsed and delivered to the plaintiffs ? and although I think the answer of the defendant virtually concedes this, it has been the subject of discussion, and in my opinion that discussion and the proofs clearly show that if the question be an open one upon the pleadings, it must be answered in the plaintiffs’ favor. And second, in the .absence of any resolution of the Board, did the plaintiffs acquire a good title to the note by virtue of the indorsement and delivery to them, notwithstanding the statute relied upon by the defendant which prohibits a conveyance, assignment or transfer of any of the effects of a moneyed corporation exceeding in value $1,000 without such previous resolution ?

1. The note in suit is a valid note; to that the defendant has no defense; it was proved to have been given to the International Insurance Company for premiums in advance ; the Company had power, by its charter, to receive such notes, and when received they became the property of the Company, assignable and transferable as its own property for any lawful purpose within the proper scope of its business. The eleventh section of its charter authorized it to negotiate such notes in the course of its business, and the fourth section plainly contemplated that it would do so. (Laws of 1844, ch. 156, p. 229; id., 1855, ch. 295, p. 505.) The note was indorsed and delivered to the plaintiffs prior to the 27th of June, 1856, as collateral security for a loan made to the Company, and the money was received by the Company and applied to its ordinary business, the payment of losses, expenses, &c.

There was no want of power in the Company to raise money for.such purposes, and therefore there was no illegality in this respect in the transfer. (Bank of Genesee v. Patchin Bank, 13 N. Y. R., [3 Kern.,] 309; 19 id., 312; Marvine v. Hymers, 12 id., [2 Kern.,] 223; Central Bank Brooklyn v. Lang, 1 Bosw., 202; Holbrook v. Basset, decided in this Court July 9th instant.)

On the 27th June, 1856, the amount of the loan by the plaintiffs was reduced to $2,800, and to that amount the loan was continued, and the same notes remained in the plaintiff’s hands as security, and the loan has not been repaid. It would be difficult to suggest any ground upon which the Company could in equity defeat the plaintiffs’ title even if the formal indorsement was defective (unless the statute to be presently noticed invalidates the transfer.)

But the note when transferred to the plaintiffs was indorsed to them by formal indorsement for the Company, signed by Moses Starbuck, their President.

This indorsement was abundantly shown to have been made in conformity with the usual course of business of the Company, according to its uniform habit and usage. That it was the way in which all their business was done.

This was prima facie sufficient authority for the transfer, and the plaintiffs had a right to rely upon it, and the Company having received the money and used it in their business, it was presumptively so far sanctioned and affirmed that unless it was invalid by the statute the plaintiff, as between him and the Company, is entitled to collect it. Nor does it appear that the Company have ever denied the validity of the transfer or sought to disaffirm it.

So far as the plaintiffs’ title depends upon the authority of the President to indorse (irrespective of the statute) it is sufficient, and in that respect is plainly distinguishable from the Marine Bank v. Clements in this Court where, no authority was proved. The uniform usage of the Company was authority enough, as to bona fide takers of their negotiable paper for value in the usual course of business.

2. But the defendant insists that inasmuch as the amount of notes transferred as security exceeded $1,000, the transfer is illegal and void because it was not authorized by a resolution of the Board of Directors, and is therefore subject to the prohibition of the eighth section of the act to prevent the insolvency of moneyed corporations. (Sec. 8 of art. 1, title 2, ch. 18, part I of the Revised Statutes.)

There was no evidence whatever that the plaintiff’s had any notice that no such resolution had been passed. Not only so, it was admitted on the trial as a part of the Case that the plaintiffs advanced the money in good faith when they took the note, and had no such notice. It has been repeatedly held in this Court that one who receives a transfer from such a corporation in the usual course of business in good faith, and advances his money in reliance upon an indorsement made in due and proper form, in the manner the corporation is in the habit of indorsing and transferring its notes for the purposes of its business, without any notice that there has been no such resolution, is a bona fide holder for value, and is within the saving annexed to the section referred to, and is not to be affected by the want of such a resolution. (Brouwer v. Harbeck, 1 Duer, 114; 5 Seld., 589; Howland v. Meyer, 2 Sand., 180; 3 Comst., 290, and cases next below cited.)

The note was therefore transferred by due authority as between the Company and the plaintiffs, when so indorsed by its proper officer, the President, and there is nothing in the statute referred to which invalidates the transfer, the plaintiffs having received the note for value, in good faith, without notice. (Central Bank of Brooklyn v. Lang, 1 Bosw., 202; The Marine Bank v. Clements in this Court, November, 1858; Ogden v. Andre and Ogden v. Raymond, April, 1859; Hoyt v. Thompson, 1 Seld., 333.)

It is therefore unnecessary to consider the effect of the resolution of May 3d, 1852, or of the first section of the by-laws of December 3d, 1845, which it is claimed are sufficient to warrant the transfer upon broader grounds. (See a similar-by-law construed in Howland v. Meyer, ubi supra.)

3. The question, what was the rate of interest on the loan made to the Company on the notes, was properly excluded. It was not alleged in the answer that the transfer was usurious, and therefore evidence to invalidate it .on that ground was not admissible. (McKyring v. Bull, 16 N. Y. R., 297.)

In no other aspect was it material what was the rate of interest. If the transfer was not invalid because of usury it would not have made the plaintiffs any less bona fide holders for value had it been shown that more than seven per cent per anmun was-reserved upon the loan. The transaction was not either by the answer, on the trial, or on the argument of the appeal, claimed to be invalid by reason of usury. If such a claim had been made, it is at least doubtful whether the statute which prohibits a corporation from interposing usury as a defense, has not operated to render transactions with corporations valid which but for the statute would be usurious and void, and not only valid as against the corporations but so that third persons cannot allege usury of such a transaction and claim that it confers no title upon the lender. Be this as if may, we do not perceive that the question of good faith could in the present case have been affected by any proof on the subject. If corporations cannot interpose the defense of usury and there is no fraud practised, there is no proof of bad faith in merely showing that the lender reserved and the corporation agreed to pay more than seven per cent interest. Besides, in the case now before us, it being clearly proved that the note was valid in the hands of the Company, it is quite plain, we think, that the defendant could not set up usury between the corporation and the plaintiffs. Whatever may be the rule where the defendant has a defense good against the note in the hands of the Company, if in truth he has no such defense he cannot refuse to pay and defeat the plaintiffs’ action by proof which the Company could not be permitted to give in assertion of a title to reclaim the note. The plaintiffs’ title being good as against the Company, and the defendant having no defense to the note, the plaintiffs’ title is good as to him. (Laws of 1850, chap. 172, § 1, p. 334; 3 R. S., 5th ed., p. 75.)

4. The resolution of June 27,1856, suspending Starbuck from exercising the “ functions ” of President, was properly excluded for several reasons. The note had been transferred to the plaintiffs previous to that time as security for the loan, and the subsequent suspension of Starbuck could not affect their title. The continuance of the loan by way of renewal of a portion thereof did continue to plaintiffs the title originally acquired. That was good until the whole loan was paid off. Besides, the renewal was negotiated and agreed to by Ogden, the Vice-President, who by the very resolution was authorized to discharge the duties of President. And, finally, the plaintiffs had no notice of the resolution and could not therefore be affected by it.

No evidence having been improperly received or rejected; it having been conceded on the trial that there is no question of fact which should have been submitted to the jury; and we being of opinion that upon the facts proved the plaintiffs were entitled to recover, the verdict should be set aside and judgment entered for the plaintiffs for the amount of the note and interest, with costs, in accordance with the stipulation made at the trial.

Ordered accordingly. 
      
      
        Ante, p. 147,
     
      
       3 Bosw., 600.
     
      
       Since reported, 3 Bosw., 600, 4 id., 585, and ante, p. 16.
     