Marine Bank of N.Y. v. . Clements

Hogeboom, J. I am of opinion that there was no valid exception to the instruction of the court, that the circumstances proved did not amount to notice to the plaintiffs, of the circumstances under which McCready, Mott & Co. received the note. This was a question of fact which the defendant’s counsel did not ask to have submitted to the jury, and upon which, without such request, he is concluded by the finding of the judge. Having allowed the judge to be substituted in the place of the jury on that question, and there being evidence to sustain the conclusion at which the court arrived, the matter of fact involved therein is not the subject of exception, nor reviewable in a court which passes only on questions of law. I have expressed my opinion on this question in a reported case, Davis v. Rush (28 Barb., 180), and refer to the cases there quoted to sustain it. (Jackson v. Packard, 6 Wend., 415; Jackson v. Zimmerman, 12 Wend., 299; Barnes v. Perrine, 2 Kern., 22, 23; People v. Cook, 4 Seld., 78; Beekmom v. Bond, 19 Wend., 444; Hunter v. Trustees of Sandy Hill, 6 Hilt., 410.) Moreover, the question appears, after all, to have been submitted to the jury, and at the request of the respective counsel they found specially upon it, and such finding was, *44 that the plaintiffs were Iona fide holders of the note in suit ■for value paid in due course of business, before maturity and without notice of any circumstances to affect its validity or throw suspicion upon it. It is said that this question was submitted to them under the instruction before mentioned; but if the question was submitted to them, then there was no positive and absolute direction to them on the subject, and nothing more than the holding of the judge on the question of fact. But if the question be an open one and the exception proper for consideration, I am of opinion that there was no error in the instruction. The note was presented for discount in the usual way. Very shortly before maturity, it is true, but that was not unusual with the plaintiffs, and is not, I think, a circumstance which obliges a party to refuse discount without minute inquiry into the circumstances under which the holder, who offered the note for discount, obtained it. The only other circumstance calculated to past suspicion on the note is the fact that it was made payable to an insurance company. I am not prepared to require a bank which discounts paper, otherwise unobjectionable, from that single circumstance alone, to institute cautious inquiries as to its origin and history before it ventures to discount paper of that description at the peril of being deemed mala fide holders of the paper. (Bobcock v. Beman, 11 N. Y., 300; Bank of Genesee v. The Patchin Bank, 19 N. Y., 312; Paush v. Wheeler, 22 N. Y., 494; Thompson v. Tioga R. R. Co., 36 Barb., 80; Buffett v. Troy and Boston R. R. Co., 36 Barb., 427; Steinhart v. Baker, 34 Barb., 436; Davis v. McCready, 17 N. Y., 230.) Moreover, in this case it was expressly conceded by counsel, “that said plaintiffs received such note and discounted the same in the regular course of its business, three days before its maturity.” This is nearly or quite, equivalent to saying that it was a Iona fide holder for value. There was no error in the charge that a uniform practice of the company for a succession of several months prior to the transfer of this note, in case of notes negotiated for the *45 purpose of raising money to carry on its legitimate business, where such notes were payable to the company, to have them indorsed by its president for the purpose of passing the title, would warrant the jury in finding that the indorsement of this particular note was by sufficient authority to make it binding in favor of these plaintiffs. The fact of such uniform practice would, it would seem, abundantly justify an inference of competent authority for such a purpose; and the proposition, I think, is abundantly warranted by adjudicated cases. (Farmers’ and Mechanics’ Bank of Kent Co. v. Butchers’ and Drovers’ Bank, 14 N. Y., 634; 16 N. Y., 125; 20 How. U S., 345; 34 Eng. L. & E., 131; Bank of Genesee v. Patchin Bank, 3 Kern., 318.) See, also, the case of Wood v. Wellington, decided in this court at the June Term, 1864. There was no error in refusing to submit to the jury the question whether the company was insolvent at the time of the transfer of this note by the company. The question was immaterial. To make the note absolutely void, even in the hands of a bona fide holder for value, it was necessary that the transfer should have been made, not only when the institution was insolvent or contemplating insolvency, but with the intent of giving a preference to a particular creditor over other creditors of the company. (1 R. S., 591, § 9; Brouwer v. Harbeck, 5 Seld., 589, 593.) The preference must therefore be to a creditor — to an existing creditor; the act of transfer must be to one to whom the company is owing a duty, and who is unjustly preferred over others to whom it owes the same duty. The reason of the provision does not apply to one who only becomes for the first time a creditor by the very act of transfer, and for which the company receives an ample consideration paid at the time. The question is, however, decided. (Curtiss v. Leavitt, 15 N. Y., 112, 142, 175.) This disposes of all the questions raised in the case, and the result is that the judgment must be affirmed. Davies, J. This action is prosecuted to recover the amount of a promissory note made by the defendant, dated Hew York, August 14,1855, for the sum of $1,000, payable, *46 twelve months after date, to the order of the International Insurance Company, at the Bank of Commerce, in Hew York. The note was indorsed, “For International Insurance Company, Alanson Marsh, President.” The jury found a verdict for plaintiff, and 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 McCready, Mott & Co., or of any want of authority in the president of the company to indorse the note of 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 it was indorsed. Upon the trial the following facts were agreed upon by the counsel of the respective parties: 1. That the note in question was a subscription note, and as such was made and delivered to the International Insurance Company. 2. 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. 3. That on the second day of February, 1856, the said Marsh ceased to be president of such company. 4. 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 said note so indorsed to McCready, Mott & Co., 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 com *47 pany as collateral security for such loan. There was no note of the hoard of directors, authorizing the above loan, or the giving of such collaterals. 5. That the note in question passed by successive transfers from said McCready, Mott & Co. to the plaintiffs. That the said plaintiffs received such note and discounted the same, in the regular course of its business, three days before its maturity. The judge thereupon charged the jury, that upon the question whether the plaintiffs were bona fide holders of the note in question, for value paid before maturity without notice, the circumstances found did not amount to notice to the plaintiffs of the circumstances under which McCready, Mott & Co. received the note, however invalid the value 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 the same 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 the plaintiffs, so far as such authority is in question. And to this instruction the defendant’s counsel also excepted. The judge refused to submit to the jury the question whether the company was insolvent when the note was transferred by it, and to such refusal the defendant’s counsel also . excepted. The exceptions were directed to be heard, in the first instance, at the General Term, which overruled the same, and gave judgment for the plaintiffs on the verdict, and the defendant now appeals to this court. *48 Upon the first exception to the judge’s charge, that the circumstances proved were insufficient to bring home notice to the plaintiffs of every defect of the plaintiffs’ title, it is to be observed that the force of this charge and of the exception is destroyed by the finding of the jury on the question of fact submitted to them, namely, ,that the plaintiffs were bona, fide holders of the note for value, paid in due course of business, before maturity, without any notice of the circumstances attending its transfer to McCready, Mott & Co. The charge of the judge upon these questions submitted to the jury are omitted from the case, and therefore are to be assumed to be unexceptionable. If, however, we are to regard what was said by the judge in the light of an instruction to the jury, upon the first question of fact submitted, it would appear that other things were also said to them, and the inference might well be, that the jury were governed by what was thus omitted, in coming to the conclusion which they arrived at on the first question submitted. In the examination of the testimony, I cannot discover that Fish, who transferred the note to the plaintiffs, had any notice of the circumstances under which McCready, Mott & Co. obtained the note. If his testimony is to be credited, and I see nothing to contradict it, he purchased the note in good faith and for a valuable consideration. I do not see that he had any notice of the circumstances under which McCready, Mott & Co. obtained it, or any circumstance which should have put him on inquiry. At any rate, if Fish was not a bona fide holder, it does not follow that the plaintiffs were not. They discounted the note before maturity, in the usual course of business, and passed the proceeds to the account of J. D. Fish & Co. It does not appear whether this amount had been drawn from the bank by that firm; but the usual course of business being to draw moneys from the bank standing to the credit of its customers, it is a natural inference that the money was drawn in the present instance. The facts disclosed do not indicate that the plaintiffs had any knowledge of the circumstances under which McCready, Mott & Co. received the note, or *49 that anything was disclosed that should have put them upon inquiry. In any aspect, therefore, I see no reason for holding that the first exception to the charges can be sustained. The jury having found that the plaintiffs were Iona fide holders of the note, their title is not impaired by the want of a resolution of the board of directors of the company, authorizing its transfer, as required by the eighth section of the Revised Statutes, relating to moneyed corporations. (1 R. S., 591.) The authority of the president to indorse the note, is conceded in cases where the indorsement was made in the legitimate business of the company. I think it may be well maintained here that the indorsement was made in such legitimate business. The company needed money to pay its losses, or otherwise to discharge its liabilities. It cannot be successfully maintained that for such purposes it cannot lawfully borrow money, and if it can do so it can pledge the assets of the corporation for its repayment. To make such pledge effectual a transfer of such assets can be made by its president, and where necessary to a valid trans'fer, he may indorse notes payable to the order of the company. The principle of this instruction is directly within the doctrine of the Farmers' and Mechanics’ Bank, Kent Co., v. Butchers’ and Drovers’ Bank (16 N. Y., 125), and was therefore correct. The judgment should be affirmed. All concur in affirming the judgment except Mullin, J., who was for reversal. Judgment affirmed.