Houghton v. Dodge et al. 1. The Company have never repudiated that settlement by any action. They have adopted and sanctioned it by receiving and using the note of Avery for $4,361. 2. The note in suit was charged to Avery on the books of the Company, and a memorandum was in their pocket book showing that all the notes mentioned in the settlement of April 21st, 1856, were in his possession. As respects third parties, the Company must be deemed to have acquiesced in and adopted the transfer of the note in suit. (Angell & Ames on Corp., 167, 168; Conover v. The Mutual Ins. Co., 1 Comst. R., 290; New Hope and Del. B. Co. v. The Phoenix Bank, 3 id., 156; The Bank of Genesee v. Patchin Bank, 3 Kern. R., 309; The Mechanics' Bank v. N. Y. and N. H. Railroad, id., 622, 626; Curtis et al. v. Leavitt, 15 N. Y. R., 12.) III. The indorsement and transfer being obligatory upon the Company, the defendants are necessarily precluded from any defense on the ground of an alleged defect in those respects. IV. Mr. Oakes was a bona fide purchaser of this note for value, and the Company and the defendants are precluded from disputing the transfer, in which the Company are shown to have acquiesced. V. The plaintiff has succeeded to and is entitled to enjoy and enforce all the rights which Mr. Oakes acquired in the notes in question. The Court erred in dismissing the complaint. G. Dean, for defendants, (respondents.) I. No matter what may be the decision of the Courts as to the necessity of a previous resolution of the Board of Directors, to the transfer of the assets of banks incorporated under the General Banking Law, this Insurance Company was, by its charter, made subject to the provisions of the 8th section of the statute to prevent the insolvency of moneyed corporations. (1 R. S., 4 ed., 1122, § 54; Laws of 1844, 233.) II. The alleged transfer to the plaintiff was illegal and void, because contrary to statute, and also against public policy. 1. The transfer was contrary to statute. (1 R. S., 592, §8; Gillet v. Phillips, 3 Kern., 116.) (a.) Avery being a Director and officer of the Company, precludes him from saying that he had no notice of the want of a Houghton v. Dodge et al. resolution of the Board. (3 Kern., 116; id., 599; Hood v. N. Y. and N. H. Railroad Co., 22 Conn. R., 502, 508, 512; Wyman v. Hallowell and Augustu Bank, 14 Mass. R., 58, 62.) (b.) The plaintiff is not within the exception to the 8th section, because he took the note with notice of the want of authority in Avery to transfer it. 2. The transfer was against public policy, which forbids an officer of a Company to transfer its assets to pay himself. “A Trustee can never appropriate the trust funds to his own use." "This rule is of univeral application, and to be enforced with unrelenting rigor." (Hill on Trustees, 159, 536; 12 Ves., 372; Conger v. Ring, 11 Barb., 356.) (a.) A trust will be implied against one who purchases at his own sale. (b) Our statutes, which renders one liable to imprisonment for moneys received in a fiduciary capacity, is a legislative declaration of the settled conviction of all minds of the impolicy of permitting a Trustee to deal with the trust funds, except in strict accordance with the terms of the trust. III. The plaintiff in this action took the note in suit, with notice of the defect of title, and cannot recover, unless Avery himself could have sustained the action. 1. To bring a party within the protection of the law merchant, he must not only be a holder for value, but also without notice. (3 Kent Com., 80.) Here there was no transfer in form by the Company, and the defect was patent. 2. "A citizen who deals directly with a corporation, or who takes its negotiable paper, is presumed to know the extent of its corporate power." (16 N. Y. R., 129.) 3. He is also bound to know the manner in which the law requires these powers to be exercised. 4. When a party takes a note, indorsed by a person by virtue of a special power, he takes it upon the credit of the person who indorses it, and is only reasonable prudence to require the production of that ity. (Attwood v. Munnings, 7 Barn. & Cres., 278; Alexa v. McKenzie, 6 Mann., Grang. & Scott, 766; Dows v: Perrin, 16 N. Y. R., 330.) 5. This note did not purport to have been transferied or indorsed by the corporation. Houghton v. Dodge et al. IV. The transaction between Avery and some of the officers of the corporation was not only void but illegal. No right of action accrued either to him or to any person who received the note through him, while it was not indorsed by the corporation. V. There was no ratification by the corporation of this remarkable transaction. Ratification or not was a question of fact, which was passed upon by the Judge who tried the cause. VI. 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 corpora tion, 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. City of Buffalo, 2 Denio, 110; McCullough v. Moss, 5 Denio, 567; 3 Barn. & Ald., 1; 1 Hill, 11; 4 id., 442; 3 Comst., 430; 1 id., 19.) 1. The defendants can set up this want of title; because, (a.) They are members of the Company, and have an interest in its assets. (§ 6 of Charter.) (.) They are creditors for the return premium. (c.) 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.) VII. The fact that the note in suit is for less than $1,000 is immaterial, because the evidence is uncontradicted that Avery, at the time he appropriated it, transferred eff cts of the corporation exceeding $1,000 in value. (Gillet v. Phillips, 3 Kern., 116.) BY THE COURT-BOSWORTH, Ch. J. On the evidence presented at the trial, the note in suit must be assumed to be a business note. The evidence tends to show that six, seven or eight hundred dollars of its amount had been received in premiums upon policies issued to the def ndants by the Company. To this extent, at least, it was a valid note in the hands of the Company, without any d fense against it. The sale by Mills to Oakes, even though made at a rate of discount exceeding seven cent per annum, would not make the transaction usurious, as the note was a business note, made upon a valuable consideration, ! Houghton v. Dodge et al. Treating the note as not so indorsed that the plaintiff can, by the rules of the common law, sue in his own name, the important question is, did P. J. Avery acquire such a title to it as would enable him to recover upon it upon the evidence before us, if he were the plaintiff in this action? If he acquired a valid title to the note, he or his vendee can sue in his own name (under the Code) as being the actual party in interest. The 10th of the by-laws authorized the Finance Committee to settle and audit all accounts and liabilities of the Company. As early as the 29th of October, 1855, the Finance Committee audited and allowed the claim of P. J. Avery, for his services and expenses in procuring the charter and amendments to it, at $25,000. A formal resolution to that effect, and of that date, signed by the Finance Committee, was entered on the book of the minutes of its proceedings, (at page 105.) That committee was competent to audit and settle this claim, and was the appropriate committee to make a legal decision in respect to it, which, at the least, would be, prima facie, valid as against the Company. No action was ever taken or initiated by the Board of Trustees to disapprove of this settlement, much less to rescind or reöpen it. None has been taken by the Receiver, if a Receiver has been appointed, nor does it appear by the evidence that he makes any claim to the note. No testimony was given on the present trial with a view to question the propriety or justice, in whole or in part, of any other item of credit allowed to P. J. Avery in the settlement of the 21st of April, 1856. If it be assumed, for the purposes of this trial, that the settlement of the 29th of October, 1855, was valid, then it follows, for aught that has been shown, that the final settlement of the 21st of April, 1856, was just as between Avery and the Company. At and prior to that time, Avery was possessed of the note in suit, and the fact of such possession, and the manner in which he acquired the note, and his refusal to restore it to the Company, constituted part of their claim against him. There was not any transfer made or attempted to be made in form by the Finance Committee of the note in suit, and the eight other notes of which Avery had previously possessed himself, Hougnton v. Dodge et al. and which he insisted upon retaining. In the account with him, as settled on the 21st of April, 1856, they are charged to him under the date of October 31, 1855. It is not an unnatural inference that he had them as early as that date, if not prior thereto. Indeed, the testimony of Mr. Marsh tends to show that Avery had the note at as early a day as that on which it is charged to him. An action could have been maintained against him for the conversion of these nine notes, or to recover the possession of them. The liability of P. J. Avery for these notes constituted a part of the claim of the Company against him. On the 21st of April, 1856, all claims, either of Avery against the Company, or of the Company against him, were fully and finally settled. Many of the Trustees were parties to discussions in relation to it, and knew at the time of the terms of the settlement. The settlement was laid before the Board in May, but at how early a day does not appear. Whatever the date, the Trustees, as a Board, were then officially informed of the fact of the settlement and of its details. As a part of the terms of the settlement, P. J. Avery gave his note, payable thirty days thereafter, to the Company, as, and it was received by the officers acting in its behalf in that matter, "in full satisfaction and discharge of all and every claim of every name, nature and description, on the part or behalf of the International Insurance Company against the said Perez J. Avery." This note was for the sum of $4,361. Subsequently to this, "the Company used the note which Avery gave for the balance of the account. They paid it to the Globe Insurance Company in payment of a debt which they owed to the Globe Company." There was no attempt to prove that this note was not paid at maturity. It matured on the 24th of May, 1856. Such a use of this note by the "International Insurance Company," with a knowledge of the circumstances and agreement under which Avery had given it, and the officers of the Company had accepted it, was a ratification by the Company of the settlement made with Avery on the 21st of April, 1856. The note thereby became his property, if not previously his. The Company could not compel him to surrender it; certainly Bosw.-VOL. V. 43 |