Nelson v. Edwards

Mullin, J. The Atlas Insurance Company had an undoubted legal right to receive the note of the defendant in payment, of the premium on the insurance of his vessel, and the note was a valid and available security in its hands. The said company was authorized by § 12 of the charter of the Atlantic Mutual Insurance Company, (which was made a part of the charter of the Atlas company,) “ to receive the notes of its dealers 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.” It (the Atlas company) was justly indebted to the American Exchange Bank, in large sums of money, and the note in suit, with others, was held by it as collateral security for the payment of said indebtedness. In January, 1856, the said Atlas Insurance Company being largely indebted and unable to pay, its officers, and firms of which they 'were members, entered into an agreement to loan their notes to the company to be used to pay such indebtedness, on the condition that the company should deliver to the plaintiffs collaterals sufficient to secure the repayment of such loans. On the 4th February, 1856, the vice president of the company assigned to the plaintiffs the notes in suit, together with [284] others, in trust to collect and pay such sums of money as they might procure for said company. This transfer was unquestionably made to carry out the arrangement of the 15th January, 1856,- above referred .to. This transfer could not take effect at, its date, the lien of'the bank not then being discharged; nor did it take effect until May, 1856, when the bank transferred to the plaintiffs the securities held by it as collateral, as above mentioned. If the transfer of the 4th February was valid, the plaintiffs ' acquired at that time a legal interest in the note in suit, and are entitled to hold it discharged of the offset of the defendant. The court find that the cestuis que trust advanced their notes to-the amount of $40,000, pursuant to their agreement of January, 1856. There was therefore a valid consideration for the assignment made by the officers in February thereafter. Under such circumstances no person should be permitted to raise the question as to the power of the officers to transfer, except some person who could be injured thereby. A member of said company, or its creditors, might be injured by such a transfer, but not the defendant, who holds no such relation to said corporation. And so I understand the court of appeals to hold, in Eno v. Crooke, (10 N. Y. Rep. 66.) We must hold, therefore, I think, that the assignment of February conveyed to the plaintiffs the said collaterals held by the bank, and of which the note in suit was a part. The trust of which the plaintiffs are trustees was a valid one under our statutes, being for the benefit of creditors. And if valid, there can be no doubt of the rights of the trustees to collect the notes held by them for the purposes of the trust. It is the right of the holder of choses in action as collateral security to enforce payment of them and thus satisfy the principal debt, unless prohibited from so doing by the contract under which he obtained such collaterals. The transfer to the plaintiffs was made in February, and the loss which is the subject of set-off insisted upon by the [285] answer was not adjusted until the 5th March thereafter. The set-off did-not accrue tp the defendant, therefore, until after the transfer of the note to the plaintiffs. This, it seems to me, is a bar to the .set-off.. I think the judgment should be reversed and a new trial ordered. Sutherland, J. concurred.