Brookman et al. v. Metcalf.

"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.

Brookman et al. v. Metcalf.

"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, I do find and decide that there is nothing due from the defendant to the plaintiffs in this action.

"Dated NEW YORK, 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, or a 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."

Brookman et al. v. Metcalf.

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.

E. 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:

1. 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 for 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 facie 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 was

not so.

Brookman et al. v. Metcalf.

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.

II. 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:

1. 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.)

Brookman et al. v. Metcalf.

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.

(b.) 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