Opinion
June Term, 1865
Beebe, Dean Donohue, for the appellant.
E.H. Owen, for the respondents.
By the charter of the Atlas Mutual Insurance Company (Sess. Laws 1843, ch. 92, § 8), the twelfth section of the charter of the Atlantic Mutual Insurance Company (Laws 1842, ch. 217) is incorporated into and made a part of the charter of the first named company. That section provides that the company "may receive notes for premiums in advance of persons to receive its policies, and may negotiate such notes for the purpose of paying claims or otherwise in the course of business."
The note in suit was given for "premiums in advance" within the sense of this provision. The subscription expressly provided for the giving of such notes; and by receiving policies, the premiums of which were to apply on this note, and the subsequent dealings of defendant with the company and the receiver, by which they were practically so applied, there can be no room for saying that the note was not a valid security in the hands of the company, whether the original subscription could have been enforced or not.
In Wood v. Wellington (not reported) this court passed directly on the question whether the transfer of such paper by this company is within the prohibition of the eighth section of the first article of the title of the Revised Statutes relative to moneyed corporations. (1 R.S., 59.) In the opinion of HOGEBOOM, J., furnished me in MSS., it is said: "But I think this case must rest on the charter of the company granted in 1843, which adopts a section of the charter of the Atlantic Insurance Company granted in 1842." (Ch. 92 of 1843, § 8; ch. 217 of 1842, § 12.) These acts were passed subsequent to the Revised Statutes, and so far as they prescribe a rule for the transfer of paper held by the company, different from that declared by the Revised Statutes, they must be deemed to overrule the former law. This was distinctly held in a case in this respect precisely similar. ( Howland v. Meyer, 3 Comst., 291.)
Nor is this in conflict with the decision of this court in Houghton v. McAuliffe, in December, 1863. There was nothing in the latter case to show that there was any provision in the charter of that insurance company which conflicted with the rule laid down in the Revised Statutes, and the latter was therefore properly held to be applicable. We must, therefore, examine the case with reference to the charter of the Atlas Insurance Company. That charter, in regard to notes received in advance, authorized the company to negotiate them for the purpose of paying claims or otherwise in the course of its business.
In the light of this decision, the note in suit was lawfully transferred in the course of the business of the company. The transfer to plaintiff was not in strict conformity to the by-laws of the company, but there was a compliance with them by previous and subsequent action of the board of trustees, sufficient, I think, to have precluded the company from disputing the right of plaintiffs to hold the notes for the purposes of the transfer. Besides, it is not perceived on what principle the defendant could attack plaintiffs' title to the paper on the ground that the company had transferred it without following the formalities indicated by their by-laws. The referee was, therefore, in error in holding that the plaintiffs' right to the note in suit was affected by the provision of the Revised Statutes above referred to.
The remaining question is, whether the plaintiffs are to be considered bona fide holders of the note for value within the meaning of the law, so as to cut off the equitable defense of the defendant.
In The Bank of the State of New York v. Vanderhorst, this court, at its present term, have passed upon this question, and its further discussion is not necessary. That case settles the principle that parties receiving negotiable paper as collateral security are entitled to be protected as bona fide holders, to the same extent and under the same circumstances as parties who become owners of such paper.
Within that rule, the court are of opinion that the plaintiffs parted with value in this case when they made the settlement with the company, and delivered up their former securities on receiving the note for the balance owing them, payable at a future day, and the note in suit as collateral thereto. The judgment should be affirmed.
All the judges concurred.
Judgment affirmed.