text:
    William B. Scott et al., Plaintiffs, v. Jonathan T. Johnson, Defendant.
    1. An Insurance Company which, by the terms of its charter, is authorized,, for the better security of dealers, to receive notes for premiums in advance from those who intend to receive its policies, and to negotiate such notes for the purpose of paying claims or otherwise in the course of its business, has power to transfer such notes as security for the repayment of a loan of money made to the Company, and received and applied to the payment of losses, expenses, &e., in the ordinary conduct of its business.1
    2. ' When it is proved that it is the uniform practice of such a Company to transfer notes, negotiated in its business, by an indorsement in this form, “For the Company, A. B., President,” such proof is prima fade evidence of authority in the President to indorse notes held by the Company, by way of transfer; and such indorsement is sufficient to confer the title on one who receives a note from the Company in good faith, and advances to them money thereon.
    3. A person who lent money to such Company, in good faith, on the transfer to him, as collateral security, of subscription notes given for premiums in advance, amounting to over $1,000, and without any notice that there had been no previous resolution of the Board of Directors authorizing the transfer, is entitled to recover thereon against the makers, although no such resolution had been passed.
    4. Where there is no allegation in the answer under which usury between the Company in such case and the lender can be available as a defense, it is not error to reject evidence of the rate of interest charged on the loan. If proof that the lender charged more than seven per cent per annum is not admissible to establish usury, it is not relevant for any purpose: it has no bearing on the question whether the plaintiff is a bona fide holder in any other aspect.

      1 Holbrook v. Basset, ante% p, 147.

      5. Whether, under a statute which forbids a corporation to interpose the defense of usury, a transaction, otherwise void for usurjq is not entirely valid? and whether a third person can, for the purpose of affecting the title of the holder of a promissory note, allege and prove that he took it from a corporation and holds it under a usurious contract? Quaere.

    6. It seems, that, under the statute last mentioned, if a maker of a note has no defense thereto in the hands of the corporation, he cannot, when sued thereon by an indorsee, allege and prove usury between the corporation and such indorsee. The title of the indorsee, being good as against the corporation, is good as against the maker.
    (Before Hoffman, Woodruff, and Pierrepont, J. J.)
    Heard May 5th;
    decided, July 28th, 1859.
    Action by the plaintiff, as indorsee of a promissory note made by the defendant, for $756, dated January 2, 1856, payable to the order of the International Insurance Company, and alleged in the • complaint to have been indorsed to the plaintiffs by the payee, with á further averment that the plaintiffs are now the lawful holders and owners thereof.
    The answer “ denies that the payees of the note indorsed the same, as alleged in the complaint," and denies that the plaintiffs are the lawful holders and owners thereof, or that the defendant is indebted to them thereon, but says that “ the International Insurance Company, mentioned therein, is the owner of the note, and alone entitled to sue thereon, inasmuch as, he says, the said note was indorsed and delivered to the plaintiffs as collateral security for a loan of a sum exceeding $2,000, made by the plaintiffs to the said Company;” that the said Company is a moneyed corporation, &c., &c.; that, at the same time with the indorsement and delivery of the said note, other notes, amounting to more than $7,000, were, by the same transaction, and as collateral security for the same loan, indorsed and transferred to said plaintiffs; that the indorsement, transfer and delivery of all the notes aforesaid was without any previous resolution of the Board of Directors authorizing the same, and was null and void; of all which the plaintiffs had notice at the time of such indorsement and delivery.

      The action was tried on the 16th day of February, 1859, before Mr. Justice Pierrefont and a jury.
    The 11th section of the charter of the International Insurance Company authorized the Company, “ for the better security of' its dealers, to receive notes 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.” (Sess. Laws, 1844, p. 231; id., 1855, p. 505.)
    The evidence showed that the note in suit was given to that Company by the defendant for premiums in advance, and that, at some time prior to June, 1856, it was indorsed for the Company by the President, in these words: “For the International Ins. Co. M. Starbuck, Prest.;” and, together with other notes, (amounting, in all, to $8,215,) was delivered to the plaintiffs as security for the repayment of money loaned to the Company by the plaintiffs, and which money “ was received by the Company, and was applied to its ordinary business, the payment of loans, expenses, &c.;” and, on the 30th day of June, the loan so made was reduced by the Company to $2,800, and the note of the Company, executed by Ogden, their Vice-President, was given to the plaintiffs therefor, and the notes were still left in the hands of the plaintiffs to secure the payment.
    It was shown that the negotiation and indorsement of notes by the President or Vice-President was according to the usage of the Company; that that was the way in which all their business was done, and that no resolution of the Board of Directors was passed authorizing this or any of the transfers of notes by the Company, with this qualification, that on the 3d of May, 1852, after a report had been made to the Board of Directors-showing the disposition by the officers of various notes which had been received for premiums in advance, a resolution was passed approving and ratifying such disposition, and authorizing the officers “ to pay away or negotiate such notes held by the Company, in the further settlement of claims for losses and the debts of the Company;” and the 1st section of the by-laws, adopted December 3d, 1845, was read in evidence, as follows:
    “Sec. 1. It shall be the duty of the President or Vice-President to preside at all meetings of the Board of Trustees, and to perform whatever belongs to the executive department of the Board, and they or either of them shall have authority to make insurances and sign the policies and contracts of the Com? pany, and transact all its ordinary concerns, arid be, ex officio, members of all committees, except those relating to the examination of accounts.”
    In the progress of the trial, the defendant’s counsel inquired of a witness, “What was the rate of interest upon the loan made to the Company ” (i. e., by the plaintiffs,) “ upon these notes?”
    The plaintiffs’ objection to the question was sustained, and the defendant excepted.
    The defendant’s counsel also offered in evidence a -resolution of the Board of Trustees of the Company, passed June 27,1856, reciting that the President (Starbuck) had violated the duties of his office by the issue of certificates of stock unauthorized by the Board, and has also issued promissory notes of the Company without a previous resolution, and resolving that he be suspended in his functions as President, and that Charles W. Ogden (the then Vice-President) act as President till the further order of the Board.
    On objection from the plaintiffs, the evidence was excluded, and the" defendant excepted.
    When the parties rested, the defendant’s counsel moved to dismiss the complaint, on the grounds—
    .That no authority was shown in the Presidentto indorse the note.
    That there was no previous resolution of the Board of Trustees, ‘and,
    That the face of the paper gave notice to the person taking it.
    Which motion was opposed by plaintiffs’ counsel.
    ■ Before the motion was disposed of, the defendant’s counsel admitted, as a part of the case, that the plaintiffs advanced the money in good faith when they took the note, and that they had no actual notice of the want of a resolution of the Board of Trustees, or other notice, except what might be derived from the nature of the transaction.
    It was also stated by the counsel on both sides, that in their judgment there was no question of fact for the jury to pass upon. And the counsel on each side then asked that the Court should instruct the jury that they were respectively entitled to a verdict.

      And thereupon tlie said Justice directed the jury to find a verdict for the defendant. To which direction the plaintiffs then and there excepted. The jury thereupon found a verdict for the defendant.
    And the said Justice directed the exceptions to be first heard at the General Term, counsel on both sides stipulating, and the Court directing, that judgment be there entered for the defendant, or the verdict be set aside and judgment entered for the plaintiffs for the amount of the note and interest and costs, or a new trial ordered, as the Court may be advised; and in the meantime that the entry of the judgment be suspended.

      George G. Goddard, for plaintiffs.
    I. The 8th section of the first article of the act in relation to moneyed corporations, (1 B. S., 591,) does not apply to the case. As by the section itself it is declared not to apply, first, to the issuing of promissory notes by the officers of the Company in the transaction of its ordinary business ; nor, second, to transfers for value without notice.
    I. This case is within the first exception. (Brouwer v. Harbeck, 1 Duer, 114; reversed, 5 Seld., 589; but not on this point, on which it was impliedly affirmed.)
    • 2. It was also within the second exception. (Howland v. Myer, 3 Comst., 290, affirming 2 Sandf., 180.)
    II. The 11th section of the charter authorized the transaction. This dispensed with a previous resolution. (Howland v. Myer, 3 Comst., 293; Brouwer v. Harbeck, 5 Seld., 591; 1 Duer, 114.)
    III. The transfer of the note by the indorsement of the President was valid.
    1. The 3d section of the charter (Laws of 1844, p. 229,) provides that “ all the corporate powers of the said Company shall be exercised by a Board of Trustees and such officer’s and agents as they may appoint.”
    2. The uniform usage of the Company sanctioned it. (Hoyt v; Thompson, 1 Seld., 333, reversing the decision of this Court, but not on this point; Wood v. The Auburn and Rochester R. R. Co., 4 Seld., 167; Paley on Agency, Dunlap’s ed., 162; Angel & Ames on Corp., § 240, &c.; Conover v. Mutual Ins. Co. of Albany, 1 Comst., 290, 292; Brouwer v. Harbeck, 1 Duer, 114.)

      3. The Company received and used the money, and thereby ratified the transfer, and is estopped from denying the authority.The answer itself alleges that the loan was made by the plaintiffs to the Company.
    4. The resolution of the Board, passed May 3, 1852, also authorized it.
    IY. There was no error in excluding the question as to the rate of interest. Ho such defense was made by the answer. (Code, § 149.) That the plaintiffs advanced their money in good faith was admitted.
    Hor was there error in excluding the resolution of June 27.-That transaction was after the transfer of this note to the plaintiffs, and was res inter alios acta that could not affect the plaintiffs.
    Pursuant to the stipulation, the verdict should be set aside, and judgment entered for the plaintiffs for $750, and interest from January 2d, 1857, and costs.

      James C. Carter, for defendant.
    Moses Starbuck, the President, had no authority to indorse the note in suit. There is none contained in the charter or bylaws. There is no evidence that the President ever indorsed, in any similar transaction, on behalf of the Company; and, thus, no authority can be derived by implication from usage. It is an indisputable principle that the President or other officer of a corporation has no authority to do any 'act for the corporation, except so far as he is authorized by the charter, or some by-law or resolution of the directors, or by some established usage. (The Life and Fire Ins. Co. v. The Mechanics' Ins. Co., 7 Wend., 31.)
    Any person taking mercantile paper takes the risk of the genuineness of every indorsement, and of the existence of power to indorse, where the indorsement is by an agent.
    II. The transfer of the note in suit by Starbuck to the plain tiffs falls precisely within the terms of the prohibition of the 8th section of the regulations to prevent the insolvency of moneyed corporations, and is, therefore, absolutely void, and the plaintiffs are destitute of any title. (R. S., § 8, art. 1, tit. 2, part I, ch. 18; id., art. 3, tit. 2, part I, ch. 18.)
    The absence of the resolution is an interruption in the chain of legal title. The plaintiffs rely upon legal title; and he who takes such a title, takes it at the peril of all defects. (Blunt v. Hanna, in note to “ Cleveland’s Banking Laws,” p. 7; Gillet v. Phillips, 3 Kern., 116.)
    III. The plaintiffs are not purchasers without notice, so as to entitle them to the benefit of the exception.
    It will not be denied that Starbuck, as an officer of the Company, was a special agent, with limited powers, and that, from the necessity of the case, he could not have, without a resolution, the power to transfer the note, and that whoever undertakes to deal with such an agent is charged with full notice of the extent of his powers, and deals at his peril. (Life and Fire Ins. Co. v. The Mechanics' Ins. Co., 7 Wend., 31.)
    IY. The defect in the plaintiffs’ title cannot be cured by a subsequent ratification of the transfer by the corporation.
    6 1. The purpose of the Legislature in establishing the prohibition in question was to prevent the insolvency of moneyed corporations, by limiting the amount of power in the hands of officers or agents.
    2. The ordinary rule, uomnis ratihdbitio mandato equiparatur," is inapplicable. The application of the rule in such cases would tend directly to frustrate the intention of the Legislature, and would, in fact, require the significant word “previous” to be stricken from the statute.
    Y. But, in the present case, the last point is irrelevant, for there is no evidence of ratification.
    1. It will be conceded that the ratification must be by the Directors; that the statute is not to be so interpreted and applied as to permit an officer to ratify his own unauthorized and void act.
    2. The notion of ratification includes, first, knowledge of the unauthorized act of the agent; and, second, an intention on the part of the principal to assent to and confirm it. (Buller, J., 2 T. R., 209, note; Owings v. Giddings, 9 Pet., 698, 629; Davidson v. Stanley, 2 Man. & Grang., 721.) In this case it appears that the Directors never knew of the transaction, and, of course, could not assent to it.
    YI. Should the Court be of the opinion that the defendant is not entitled to judgment, then there should' be a new trial, for the Judge was in error in excluding the evidence in respect to the rate of interest and to the resolution of the Trustees of June 27,1856.

      1. The inquiry as to the rate of interest was put in order to prove usury. This is pertinent to the question of good faith in the plaintiff as holder. I do not claim that we had a right to prove usury as a defense: we have not set up usury, and- do not wish to do so, but insist we had a right to prove that the plaintiff took the note oh a usurious contract, as bearing on the question of his good faith.
    2. The excluded resolution was pertinent to the inquiry whether the Company ever ratified or assented to the transfer.
   By the Court—Woodruff, J.

The answer in this case begins with a denial that the plaintiffs are the lawful owners and holders of the promissory note in question, and denies that the payees of the note indorsed the same as alleged in the complaint, or that the defendant is indebted to the plaintiffs thereon in any sum whatever. If these denials stood in the answer unqualified they might perhaps create an issue which would involve every question of legality in the plaintiffs’ title which the defendant could raise by proof. The words of the answer which immediately follow, however, show that it was not the design of the pleader nor is it the true meaning of the answer to take any such broad defense; they define and limit the generality, of the previous denials, for the sentence continues, “but he says that the International Insurance Company mentioned therein is the owner of the said note and alone entitled to sue for the recovery of the same, inasmuch as he says the said note was indorsed and delivered to the plaintiffs as a collateral security for a loan of a sum exceeding $2,000, made by the plaintiffs to said Company.” The answer then states that the amount of notes indorsed and transferred at the same time to the plaintiffs exceeded $7,000, and the indorsement and delivery of all of them was made without any previous resolution of the Board of Directors authorizing the same and was null and void; of all which the plaintiffs had notice. The plain meaning and only true meaning of which is, not that the note in question has not been indorsed and delivered to the plaintiffs if that can be done without a previous resolution of the Board of Directors of the corporation, but that the plaintiffs made a loan to the Interriational Insurance Company, the payees and owners of the note, of a sum exceeding $2,000, and to secure the payment thereof the Company indorsed and delivered to the plaintiffs this and other notes to an amount exceeding $7,000; but inasmuch as that.Company was a moneyed corporation and no previous resolution of the Directors had been passed authorizing the transfer, the plaintiffs acquired no title; and this is I think the whole of the defense. The defendant thus places himself on the single point of objection to the transfer, that there was no previous resolution of the Directors authorizing the indorsement and transfer, but admits that the indorsement and transfer were made.

Upon this state of the pleadings I incline to the opinion that unless it is true, as a matter of law, that a moneyed corporation cannot make a valid indorsement and transfer of notes exceeding in amount $1,000 in any manner, unless a previous resolution of the Board of Directors be obtained, then the plaintiffs were entitled to judgment on mere production of the note at the trial, unless the defendant proved that the plaintiffs knew when they received the note that no such authority existed, which was not attempted. It will hereafter be seen that such a transfer may be made, and that a bona fide holder for value without notice will take a valid title thereby.

The plaintiffs might upon the answer have taken the fact of indorsement and transfer to them as admitted, and confined the inquiry on the trial to the simple question whether there was such a resolution of the Board or whether they took the note in .good faith without knowledge of the want of such a resolution.

But on the trial and on the argument of the appeal the ease was conducted as if two questions were open: First, whether, -independent of any legal question growing out of the want of a resolution of the Board, the note was in truth duly indorsed and delivered to the plaintiffs ? and although I think the answer of the defendant virtually concedes this, it has been the subject of discussion, and in my opinion that discussion and the proofs clearly show that if the question be an open one upon the pleadings, it must be answered in the plaintiffs’ favor. And second, in the .absence of any resolution of the Board, did the plaintiffs acquire a good title to the note by virtue of the indorsement and delivery to them, notwithstanding the statute relied upon by the defendant which prohibits a conveyance, assignment or transfer of any of the effects of a moneyed corporation exceeding in value $1,000 without such previous resolution ?

1. The note in suit is a valid note; to that the defendant has no defense; it was proved to have been given to the International Insurance Company for premiums in advance ; the Company had power, by its charter, to receive such notes, and when received they became the property of the Company, assignable and transferable as its own property for any lawful purpose within the proper scope of its business. The eleventh section of its charter authorized it to negotiate such notes in the course of its business, and the fourth section plainly contemplated that it would do so. (Laws of 1844, ch. 156, p. 229; id., 1855, ch. 295, p. 505.) The note was indorsed and delivered to the plaintiffs prior to the 27th of June, 1856, as collateral security for a loan made to the Company, and the money was received by the Company and applied to its ordinary business, the payment of losses, expenses, &c.

There was no want of power in the Company to raise money for.such purposes, and therefore there was no illegality in this respect in the transfer. (Bank of Genesee v. Patchin Bank, 13 N. Y. R., [3 Kern.,] 309; 19 id., 312; Marvine v. Hymers, 12 id., [2 Kern.,] 223; Central Bank Brooklyn v. Lang, 1 Bosw., 202; Holbrook v. Basset, decided in this Court July 9th instant.)

On the 27th June, 1856, the amount of the loan by the plaintiffs was reduced to $2,800, and to that amount the loan was continued, and the same notes remained in the plaintiff’s hands as security, and the loan has not been repaid. It would be difficult to suggest any ground upon which the Company could in equity defeat the plaintiffs’ title even if the formal indorsement was defective (unless the statute to be presently noticed invalidates the transfer.)

But the note when transferred to the plaintiffs was indorsed to them by formal indorsement for the Company, signed by Moses Starbuck, their President.

This indorsement was abundantly shown to have been made in conformity with the usual course of business of the Company, according to its uniform habit and usage. That it was the way in which all their business was done.

This was prima facie sufficient authority for the transfer, and the plaintiffs had a right to rely upon it, and the Company having received the money and used it in their business, it was presumptively so far sanctioned and affirmed that unless it was invalid by the statute the plaintiff, as between him and the Company, is entitled to collect it. Nor does it appear that the Company have ever denied the validity of the transfer or sought to disaffirm it.

So far as the plaintiffs’ title depends upon the authority of the President to indorse (irrespective of the statute) it is sufficient, and in that respect is plainly distinguishable from the Marine Bank v. Clements in this Court where, no authority was proved. The uniform usage of the Company was authority enough, as to bona fide takers of their negotiable paper for value in the usual course of business.

2. But the defendant insists that inasmuch as the amount of notes transferred as security exceeded $1,000, the transfer is illegal and void because it was not authorized by a resolution of the Board of Directors, and is therefore subject to the prohibition of the eighth section of the act to prevent the insolvency of moneyed corporations. (Sec. 8 of art. 1, title 2, ch. 18, part I of the Revised Statutes.)

There was no evidence whatever that the plaintiff’s had any notice that no such resolution had been passed. Not only so, it was admitted on the trial as a part of the Case that the plaintiffs advanced the money in good faith when they took the note, and had no such notice. It has been repeatedly held in this Court that one who receives a transfer from such a corporation in the usual course of business in good faith, and advances his money in reliance upon an indorsement made in due and proper form, in the manner the corporation is in the habit of indorsing and transferring its notes for the purposes of its business, without any notice that there has been no such resolution, is a bona fide holder for value, and is within the saving annexed to the section referred to, and is not to be affected by the want of such a resolution. (Brouwer v. Harbeck, 1 Duer, 114; 5 Seld., 589; Howland v. Meyer, 2 Sand., 180; 3 Comst., 290, and cases next below cited.)

The note was therefore transferred by due authority as between the Company and the plaintiffs, when so indorsed by its proper officer, the President, and there is nothing in the statute referred to which invalidates the transfer, the plaintiffs having received the note for value, in good faith, without notice. (Central Bank of Brooklyn v. Lang, 1 Bosw., 202; The Marine Bank v. Clements in this Court, November, 1858; Ogden v. Andre and Ogden v. Raymond, April, 1859; Hoyt v. Thompson, 1 Seld., 333.)

It is therefore unnecessary to consider the effect of the resolution of May 3d, 1852, or of the first section of the by-laws of December 3d, 1845, which it is claimed are sufficient to warrant the transfer upon broader grounds. (See a similar-by-law construed in Howland v. Meyer, ubi supra.)

3. The question, what was the rate of interest on the loan made to the Company on the notes, was properly excluded. It was not alleged in the answer that the transfer was usurious, and therefore evidence to invalidate it .on that ground was not admissible. (McKyring v. Bull, 16 N. Y. R., 297.)

In no other aspect was it material what was the rate of interest. If the transfer was not invalid because of usury it would not have made the plaintiffs any less bona fide holders for value had it been shown that more than seven per cent per anmun was-reserved upon the loan. The transaction was not either by the answer, on the trial, or on the argument of the appeal, claimed to be invalid by reason of usury. If such a claim had been made, it is at least doubtful whether the statute which prohibits a corporation from interposing usury as a defense, has not operated to render transactions with corporations valid which but for the statute would be usurious and void, and not only valid as against the corporations but so that third persons cannot allege usury of such a transaction and claim that it confers no title upon the lender. Be this as if may, we do not perceive that the question of good faith could in the present case have been affected by any proof on the subject. If corporations cannot interpose the defense of usury and there is no fraud practised, there is no proof of bad faith in merely showing that the lender reserved and the corporation agreed to pay more than seven per cent interest. Besides, in the case now before us, it being clearly proved that the note was valid in the hands of the Company, it is quite plain, we think, that the defendant could not set up usury between the corporation and the plaintiffs. Whatever may be the rule where the defendant has a defense good against the note in the hands of the Company, if in truth he has no such defense he cannot refuse to pay and defeat the plaintiffs’ action by proof which the Company could not be permitted to give in assertion of a title to reclaim the note. The plaintiffs’ title being good as against the Company, and the defendant having no defense to the note, the plaintiffs’ title is good as to him. (Laws of 1850, chap. 172, § 1, p. 334; 3 R. S., 5th ed., p. 75.)

4. The resolution of June 27,1856, suspending Starbuck from exercising the “ functions ” of President, was properly excluded for several reasons. The note had been transferred to the plaintiffs previous to that time as security for the loan, and the subsequent suspension of Starbuck could not affect their title. The continuance of the loan by way of renewal of a portion thereof did continue to plaintiffs the title originally acquired. That was good until the whole loan was paid off. Besides, the renewal was negotiated and agreed to by Ogden, the Vice-President, who by the very resolution was authorized to discharge the duties of President. And, finally, the plaintiffs had no notice of the resolution and could not therefore be affected by it.

No evidence having been improperly received or rejected; it having been conceded on the trial that there is no question of fact which should have been submitted to the jury; and we being of opinion that upon the facts proved the plaintiffs were entitled to recover, the verdict should be set aside and judgment entered for the plaintiffs for the amount of the note and interest, with costs, in accordance with the stipulation made at the trial.

Ordered accordingly.

        Ante, p. 147,

       3 Bosw., 600.

       Since reported, 3 Bosw., 600, 4 id., 585, and ante, p. 16.


source: Caselaw Access Project

author: By the Court—Hoffman, J.

license: Public Domain

text:
    Peck, Plaintiff and Respondent, v. The New York and Liverpool United States Mail Steamship Company, Defendant and Appellant.
    1. A cause of action for extra work and materials alleged to have been done and furnished in enlarging the Capacity of and completing a vessel, originally contracted to be built for an agreed sum, where no time of payment for such extra work is stipulated, accrues when such extra work has been completed.
    2. The presentation of a bill, containing items of alleged extra work, within six years before suit brought, and the payment of such bill, with the exception of one item, the accuracy of which and liability for which is promptly denied, will not prevent the statute barring all right' of action for such item at the end of six years from the time when the alleged service was fully performed.
    3. The items of debit for the contract price of the vessel, and for extra work alleged to have been done, and of credits for payments made, do not make a case of “ reciprocal demands,” within the meaning of section 95 of the Code.
    4. To make payments on account of extra work done save all items of work actually done from the operation of the statute, such payments must have been made generally on account, so that they may be properly applied, as well on account of the work which is the subject of the action as of that the liability for which does not subsequently become a matter of dispute. But payments made on account, accompanied with a denial of any liability and refusal to pay for a particular item, do not operate to prevent the running of the statute as to that item.
    (Before Hoffman, Woodruff and Pierrepont, J. J.)
    Heard, May 10;
    decided, July 28th, 1859.
    This is an appeal by tbe New York and Liverpool United States-Mail Steamship Company, the defendant, from a judgment against it in favor of Zachary Peck, the plaintiff, for $14,237.17, entered March 4, 1858, on the report of Hon. William Kent, as Referee..
    The action was commenced on the 2d of February, 1856, by the plaintiff as general assignee of William H. Brown, (under an assignment alleged to have been made and to be dated October 24, 1855,) to- recover $25,639.75 for extra work and materials alleged to-have been done and furnished by Brown in completing the steamer Atlante, “ from on or about the 1st of May, 1848, to on or about the 8th of March, 1850and also the further sum. of $10,166.69 for extra work and materials done and furnished in completing the steamer Arctic, from about the 8th of May, 1850, to on or about the 8th of March, 1851. The answer puts at issue all the allegations of the complaint, pleads payment in full for all extra work done, and the statute of limitations “ to so much of the plaintiff’s demand as relates to the said steamer Atlantic.”
    When the testimony was concluded, the plaintiff admitted that it was “ proved that all the items specified in the bill of particulars of the plaintiff’s demand had been paid prior to the commencement of this action, except that specified in the said bill of particulars, as extra tonnage of ship (Atlantic) more than contract, $9,473.68.” The plaintiff'claimed to- recover this sum, with interest from the 1st of April, 1851.
    The Referee, by a report dated February 22, 1858, reported in favor of the plaintiff,, allowing said item and interest thereon to the amount in the aggregate of $14,050.63, and therein stated his conclusions of fact and of law as follows, viz.:
    “ 1st. That the work for which the said charge for enlargement of the said ship Atlantic was made, was fully proved to have been performed, and that such charge was made according to the usual mode of calculating for such work, and there was no contradictory evidence upon this point.
    “ 2d. That the said William H. Brown built the steamships Atlantic and Arctic for what is usually called the ‘ Collins’ line; that the act of incorporation of ‘The New York and Liverpool United States Mail Steamship Company’ was passed April 11th, 1849. That the building of the said ship Atlantic was commenced sometime in the year 1848, and of the Arctic soon after-wards, but both the said ships passed into the possession of the said Company on the formation thereof, and were built under the sole direction of E. K. Collins, who has continued the.agent of the said Company up to the present time.
    “ 3d. That large amounts became due to the said William H. Brown for extra work on the said ships, and that in March, 1851, bills or accounts for the said extra work, including the item in question, were rendered by the said Brown to the said defendant, or to its agent, E. K. Collins; that on the rendering of the said accounts as aforesaid, the Secretary of the said Company, in the office of the said agent, undertook to adjust the same with the said Brown ; that the whole of the said bills were allowed, with the exception of the item in question, which was disputed, and one other item for the Atlantic which appeared to be included in the contract.
    “ 4th. That there was a large running account between the said William H. Brown and the said E. K. Collins, (as agent of the said Company,) coming down to March, 1851, and the receipts given by the said Brown to the said Company for the said extra work, (and which were produced by the defendant,) stated that it was ‘on account of extra work,’ but there was no receipt in full, and it was admitted on the part of the defendant'that the item in question had not been paid for; and it was admitted on the part of the plaintiff that all the other extra work had been paid for; and I think it right to infer, and I do conclude, that the item in question was, at the adjustment aforesaid, reserved for further consideration, and being now proved and admitted not to have been paid, must be allowed, unless there are other grounds for rejecting it.
    “5th. It was urged on the part of the defendant that they were not liable, because this particular item of work must have been done before the said Company was organized. But I think it evident, and so conclude, that the Company, so soon as it was organized under the act of incorporation, recognized the previous acts of their agent, Mr. Collins, and assumed the debts and liabilities he had incurred in respect to these ships; and this view of the case is confirmed by the fact that the Company paid all the other items in the said bills for work done as well before as after this particular item.
    “-6th. Tt was also urged that this claim was barred -by the statute of limitations. I do not think this defense can prevail, as I find as a fact that the item in -question was part-of a long running mutual account between the said Brown and the said Com.pany, (by their agent, Mr. Collins,) reaching into March, 1851, whereas the suit was-commenced on the 2d of February, 1856, less than five years.
    “It appeared, moreover, from the evidence of Mr. Youle, (a witness for the defendant,) and I so find, that the -bills were rendered in March -or April, '1851, and that he and Brown then went into an adjustment, from which it would be fair to infer, and I so conclude, that that was the proper time for the presentation of the bills; but without this consideration, I think, for the reasons above stated, the statute of limitations cannot apply.
    “All which is respectfully submitted.”
    The defendant duly excepted to the several conclusions of the Referee. The references in the points and in the opinion of the Court, to the evidence, present so much of it as it is important should be stated, in order to understand the principle decided.
    The present appeal is from the judgment entered on the report of the Referee.

      J. N. Whiting, for defendant, (appellant.)
    . The claim for enlarging the Atlantic, viz., $9,473.68, is barred by the statute of limitations.
    Cause of action accrued when the hull was made one foot deeper and six or seven feet longer. By plaintiff’s showing, this work formed part of the contract, and is estimated in the same way. The contract establishes when and how the indebtedness accrued.
    The frame was erected by 22d May, 1848. All the deck plank laid 18th September, 1848. 2d February, 1849, ship was launched. The hull was then completed. The keel of the Arctic had been laid and paid for as early as the 2d May, 1849:
    The ship was then at the wharf of the Novelty Iron Works, receiving her engines. There has been no act by the New York and Liverpool United States Mail Steamship Company to prevent the statute from attaching.
    1. No promise in writing.
    2. No payment on account of this item, but the reverse.
    3. This item was disputed by Collins.
    4. No evidence of its having been acknowledged or adopted by Mr. Collins.
    5. No mutual account. No account whatever between the plaintiff and the defendant.
    Nor between William H. Brown and the defendant.
    To constitute a mutual account, there must be reciprocal demands. (Code, § 95; 1 Sandf. S. C. R., 220; 4 id., 312; 4 Kern., 225.)

      There was not even an open, running mutual account between Brown and E. K. Collins, embracing the items in question.
    The account current contained no such item: it simply relates to pecuniary dealings generally between the parties.
    The bills rendered by Brown, (of which copies are in evidence,) contain no running or mutual accounts.
    The books of account in evidence on the part of plaintiff contain items on one side only—not mutual accounts.
    The allegation of the complaint is, that the defendant became a debtor for extra work, &c., on the Atlantic, from the 1st day of May, 1848, to the 8th of March, 1850. The precise time at which the indebtedness accrued is not fixed. By the evidence, it appears that the launch of the Atlantic was in the year 1849. And the extra work was among the earliest work done upon her.
    By the complaint itself, therefore, as explained by the proof, it appears that the cause of action as to the Atlantic accrued more than six years before this suit was commenced.
    The accounts were not between the defendant and Brown, but between Collins and Brown, and contained entries of notes and credit lent, with which the defendant had nothing to do.
    The action is not “ brought to recover a balance of a mutual, open and current account, where there have been reciprocal demands between the parties.” Under the facts of this case, the claim or- theory of a “balance of accounts” is an afterthought, and is wholly unsustained.

      Gerardus ■ Clark, for plaintiff, (respondent.)
    The claim or demand for which the judgment in this action was recovered was part of a large account of William H. Brown, the assignor of the plaintiff, against the defendant, for extra work on the steamship Atlantic, of which he was the builder.
    The ship was built by contract; and it appeared on the trial that all the account was paid by the defendants in March or April, 1851, except the item for the enlargement of the vessel. That item was disputed at the time, and left unsettled.
    I. The enlargement of the ship Atlantic, by order of E. K. Collins, the agent of the Company, was fully proved by the witness (Jennings,) and that Collins promised that it should be paid for.

      That Collins had the entire control, as agent of the Company, to build the ship as he pleased, is proved by Youle, the Secretary of the Company, who was their witness on the trial.
    The fact of the enlargement was also proved by the-register
    of the ship, showing that she was....feet deeper and____feet
    longer than the contract called for. The mode of calculating the price or cost of such enlargement is also proved by the witness Jennings.
    II. Although the evidence of the witness Jennings as to the directions given by Collins as to the enlargement, and as to his promise to pay for it, refers to the deepening of the vessel only, yet he proves that she was increased in length also; and it must be presumed that such increase was by direction of Collins, as the ship was built under his supervision, and he, moreover, had a superintendent constantly there. Probably the increase of depth rendered necessary the increase of length.
    III. The objection urged by the defendants, that they are not liable because they were not organized under the act of incorporation at the time the work was done, cannot be sustained:
    1. It nowhere appears that the particular work in controversy was done prior to the incorporation. The account rendered for this and other work is dated March, 1851.
    2. All the evidence shows that the several individuals whose names are subscribed to the contract, with others perhaps, had projected a Steamship Company, (usually called the Collins line,) as early as the year 1847, and had probably applied for an act of incorporation in 1848: they were actually incorporated early in 1849. The ship was commenced in 1848, and was probably finished in 1850 or 1851; and, on being finished, passed into the possession of the defendants.
    3. Collins acted as their agent from the time the Company was projected until its final explosion; -and the defendants adopted his acts, recognized their liability therefor, received the ships, assumed the contracts for building the same, and paid the bills which he had contracted on account thereof—even the bills for work done before the date of the item in controversy.
    4. Youle, the witness for the defendants, and their Secretary during the whole period of their operations, states that these bills for extra work were presented in 1850 or 1851, and that they

      were settled in April, 1851, (except the item in controversy;) thereby showing that the Company (which had been incorporated in 1849) recognized their liability for the work done on this ship. They ratified the acts of their agent, Collins. Ratifications may be presumed from the acts or omissions of the principal, (Delafield v. State of Illinois, 26 Wend., 192;) and ratification relates back to the time of the original transaction, (Lawrence v. Taylor, 5 Hill, 107;) and a subsequent ratification is equivalent to an original authority, (id., 137;) and a ratification of a part of the transaction is an affirmation of the whole, (id.)
    IV. The only other ground of defense urged on the trial was the statute of limitations; which, for the reasons stated by the Referee in his report, cannot prevail in this case.
    1. If there was no' other reason for the statute not applying in this case, the defendant’s own account produced on the trial is sufficient to deprive them of this ground of defense—showing that there were mutual accounts between the parties to a large amount, and extending to June, 1851. The suit was commenced in 1856. (Tucker v. Ives, 6 Cow., 193; Kimball v. Brown, 7 Wend., 322; Chamberlin v. Cuyler, 9 id., 126; Sickles v. Mather, 20 id., 72; Catling v. Shoulding, 6 T. R., 189.)
    The bills (including the item in question) were rendered in March or April, 1851. It is to be presumed that they were rendered as soon as the party had a right to render them, or as soon as the period of credit expired; and, until then, no suit could be commenced; and this is the true test as to the time when the statute begins to run. (2 Parsons on Con., 370, last ed.) The exceptions taken by the defendants to the rulings of the Referee and to his report are not tenable, and the judgment entered upon the report should be affirmed.
   By the Court—Hoffman, J.

The first and important question raised for consideration is the application of the statute of limitations, which is set up in the answer as a bar to the action.

By the 2d of May, 1849, the work for which the present claim is made was fully performed. The demand consists of one separate, independent item, made up on the elements of the contract price, the contract depth and length, and the increase of the lat-. ter by a new agreement.

The action to recover this amount was commenced on the 2d of February, 1856.

When this account or item was entered on the books of the plaintiff’s assignor does nbt appear. It is not shown, and it is not probable, that the details of the item in question were entered as the work was done. Probably one general charge for the whole amount was made at one time. This account of Wm. H. Brown was simply of his charges for work done and materials supplied, without any credit or item for moneys or notes paid in liquidation, from time to time.

The account kept by Collins embraces an account of moneys and notes lent by him to Brown for his accommodation from 1848 to 1851, and of Brown’s repayment of such advances in money or notes. In this account are also contained the successive payments made by Collins on the contract price of the vessels, and a credit to Brown of such contract price, and also for the value of the extra work and supplies, which Collins allowed, he refusing to admit the item in question. The final entries, adjusting this account and closing it, are made on the 3d of June, 1851, a small credit being given; the sum of $5,000 received from Brown in cash, and a balance to charges, closing the account, of $163.89.

The analysis of this account shows, that a balance was arrived at in May, or as of May 21, 1851, of $5,436.96 against Brown, and that it was liquidated on the 3d of June, 1851, in the manner above stated.

I do not find that Collins had authority even from the Trustees, parties to the contracts, to make the loans and advances he did make, so that, had Brown failed in repayment, the loss would have fallen on them. Still less do I find anything to warrant this part of the account to be stated as with the defendants. I do find that the defendants have recognized a liability for the contract price. Two of the payments on account of the Arctic are expressed to have been received from the defendants, viz., May 2d and May 29th, 1850; and the sums for extras, which Collins allowed to Brown, have been allowed to the former in his account with the defendants, and nothing more.

So it appears to me, we are authorized to break up this account into two parts, the one properly against the defendants acting through Collins as their agent; the other personal with Collins being exclusively between him and Brown.

And thus we find that, upon an account of the defendants with Brown for contract price, for extras admitted, for payments on account of both, and premiums paid for him which he was bound to pay, Brown was found indebted in May, 1851, in the sum of $2,646.87, and so much of the cash payment of $5,000 on the 3d of June as was necessary discharged this balance. The residue and the small credit paid Collins individually, the balance owing to him.

When, in March, 1851, Collins examined and adjusted, as stated, the bills for extras, he rejected the demand in question, and Brown, in June, 1851, pays him $5,000, which, in point of fact, discharged a balance of all transactions between them, as Collins claimed.

When did the statute of limitations begin to run ? Was it from the date of the rendering of the accounts and allowance by Collins of the principal part and rejection of this item, or from the time when, by the full performance of the work, a cause of action, did in itself, undoubtedly arise, viz., on or before the 2d of May, 1849 ?

The causé of action arises when and as soon as the party has a right to apply to the proper tribunals for relief. (Angell on Limitations, 41, and cases; The East India Co. v. Oditcburn Paul, 7 Moor Privy Council Cases, 85, 14 Jur., 253; Battley v. Faulkner, 8 Barn. & Ald., 288.)

. Ill this case, .Collins having directed the. specific extra work for which the action is brought, and nothing being agreed upon as to price or time of payments, there was a right to demand payment vested in Brown when the work was performed, and an implied undertaking in Collins to pay the value.

The Code (§ 73) has repealed the Revised Statutes as to the limitation of actions, and prescribed the rules which must govern the present case. In strictness it is the Code as in force in April 1849, by the amendments of that date. The provisions which bear upon the question are however identical.

By sections 76 and 91, an action upon a contract, obligation or liability, express -or implied, must be commenced within six years after the cause of action shall have accrued.

By section 95, in an action brought tt> recover the balance due upon a mutual, open and current account, where there have been reciprocal demands between the parties, the cause of action shall be deemed to have accrued from the time of the last item proved in the account on either side.

And by section 110, no acknowledgment or promise shall be sufficient evidence of a new or continuing contract, whereby to take the case out of the operation of this title, unless the same be contained in some writing signed by the party, to be charged thereby; but this section shall not alter the effect of any payment of principal or interest.

It may first be noticed that this last section is nearly a transcript of the enacting clause of the 1st section of the statute, (19 Geo. IV, ch. 14,) commonly called Lord Tentebden’s act. There is no such clause in any English act as that contained in the 95th section of the Code; and the result of the English enactment is, that although there is a running open account, items in it beyond six years are not saved out of the statute by items within six years. This was expressly decided by the Court of Queen’s Bench, in Cottam v. Partridge, (4 Man. & Grang., 271,) and it was held that the leading case of Catling v. Shoulding, (6 Durnf. & East, 189,) 'was no longer law since this statute.

Payment of principal or interest on a specific demand, is still retained by the statute as sufficient to keep it in force.

As the 110th section of the Code is identical with the English act; as there is no written acknowledgment of the demand in suit; as there is no part payment of principal or interest of this particular demand, it would appear as a necessary result that nothing can prevent the operation of the statute, unless the case is within the 95th section of the Code. It cannot, I think, be questioned that a perfect cause of action existed on the 2d of May, 1849.

The provision of the Revised Statutes of 1830, (2 R. S., 296, § 23,) was, “ that in all actions of assumpsit, debt or account, brought to recover any balance due upon an open, mutual and current account, the cause of action shall be deemed to have accrued from the time of the last item proved in such account.”

We notice that the section of the Code has introduced the additional words, “ where there have been reciprocal demands between the parties.” This is nearly the language of Denison, J., in Cotes v. Harris. (Bull. N. P,, 149.) “ There must be mutual accounts and reciprocal demands.” This case has always been treated as law.

Similar language is used in Coster v. Murray, (5 Johns. Ch. R., 522,) Spring v. Gray, (6 Pet. U. S. R., 151,) and Kimball v. Brown. (7 Wend., 322.)

What, then, constitutes mutuality of accounts and reciprocity of demands? It is not a series of items on one side of the account only. “ It never was supposed that items on one side of an account only would draw down former items.” (Ch. J. Tindal, Cottam v. Partridge, ut supra; see also Palmer v. The City of New York, 2 Sandf. S. C. R., 318; Hallock v. Lozee, 1 id., 220; Coster v. Murray, 20 Johns. R., 602; Kimball v. Brown, 7 Wend., 322.)

It may, I think, be much doubted whether, under the Code; where the account consists of items of charge to one party, and nothing but credits of payments by the debtor within six years, the account is such a one as will save items beyond six years from the statute, even if the weight of authority before the Code was in favor of the position that an indefinite payment avoided the statute, so as to keep all previous items in force as of the day of such payment, a point much controverted; the introduction of the words, reciprocal demands, appears to me intended to settle this question. (Hay v. Cramer, 2 Watts & Serg., 137; Gold v. Whitcomb, 14 Pick., 188; Lowber v. Smith, 7 Barr, 381; Penniman v. Rotch, 3 Metc., 216; Abbott v. Keith, 11 Vt., 525; Hodges v. Manley, 25 id., 210; Blair v. Brew, 6 N. H. R., 235.)

I apprehend that to meet the requisition of the Code in this particular, we must have such facts as occurred in Cutling v. Shoulding, (6 T. R., 189,) Chamberlain v. Cuyler, (9 Wend., 128,) and Chambers v. Marks. (25 Penn. R., 296.) There must be cross demands, matters of set-off, or counterclaim under our Code; something upon which the other party could sustain an action.

So in Green v. Ames, (4 Kern., 225,) the facts, as between Grant and the defendant, presented a similar case. There were mutual dealings. The causes of action or transactions were distinct. Each had an independent right of action. Most of the items on each, side were within six years, and it was conceded that the statute would not bar a recovery of the balance.

And so in Catling v. Shoulding (ut supra) the plaintiff had an account for nine years’ rent, of which only the last half year was within six years, and the defendant had an account as liquor dealers, some of the last items being within six years. (Dickinson v. Williams, 11 Cush., 258.)

Even under the Revised Statutes the case of Edmondstone, v. Thomson, (15 Wend., 554,) is a strong authority to support these views.

Viewed in this aspect the account between the defendants and Brown, treating Collins as their agent for the items in question, was nothing, but his debits for building the vessels, and for doing the extra work and supplying the extra materials, and their payments on account of this demand. There was nothing on which the defendants could sustain an independent action against him.

But again, even if this view is not sufficient there is another, in my mind, of decisive importance. The principle on which the effect of an indefinite payment on a general open account depends, is acknowledgment. A specific payment directly appropriated to a specific item in such an account, leaves the statute to its operation as to the rest. But when the debtor knows that there exists against him a general account of items, and designedly pays or furnishes something to lessen the demand on such general account without discrimination, and at that time does not deny his liability for the other previous items, the law reaches an implication of his acknowledgment of the whole account.

But how can such an argument have the least force, when the debtor making a payment, at the very time, denies entirely his responsibility for a particular item claimed, disputes its legality, and thus warns his alleged creditor to sue for it?

Without any written signed admission, and with an explicit rejection of the item claimed, it seems to me that Brown was bound to sue, within the period prescribed by law after the cause of action did in fact accrue.

My conclusion is that the statute was a bar, and that the Referee erred.

Iii placing our decision upon this ground, we must not be understood as considering other points taken by the defendants’ counsel as without force. On the contrary, those which relate to the difference between the grounds of liability of the Company, and Collins and his associates, are entitled to great consideration. ■

There must be a new trial, with costs to abide the event.

Ordered accordingly.


author: By the Court—Woodruff, J.

text:
    The St. Nicholas Insurance Company, Plaintiffs and Respondents, v. The Mercantile Mutual Insurance Company, Defendants and Appellants.
    1. Where an Insurance Company issued to another an open policy for an amount stated, reinsuring such other Company against a certain class of risks described, at a stipulated premium expressed in the policy of reinsurance, such stipulation cannot be altered and the recovery of the premium be reduced or defeated by parol evidence of a verbal agreement, made before or at the time of issuing the policy, that the reinsuring Company would not require the payment of the full premium stipulated, but would abate therefrom fifteen per cent of the gross amount of premiums earned.
    2. To allow such proof to operate would violate the rule which makes the writing conclusive proof of the actual agreement between the parties, and forbids that the operation and legal effect of a written instrument shall be varied, altered or affected by proof of a prior or cotemporaneous parol agreement relating to the same subject matter.
    3. A written instrument may sometimes be reformed on proof that by mistake it was so drawn as not to express the actual agreement of the parties.
    4. The operation and effect of such a policy of reinsurance cannot be impaired, or the obligation to pay the full premium stipulated in it be affected, by proof that there is a usage and custom among all Insurance Companies in the city of New York by which the reinsuring Company abates a per centage from the gross amount of premiums stipulated and does not require the payment of the full amount.
    5. Nor would it operate to reduce the claim of the reinsuring Company to recover the full amount of premiums stipulated, if in addition to such proof of custom it were shown that prior to issuing the policy it was, in view of such custom, agreed by parol that fifteen per cent should be so abated and payment thereof not required.
    6. The force and legal effect of an unequivocal and unambiguous agreement between Insurance Companies cannot be altered by proof that there is a usage and custom not to require its performance.1
    (Before Hoffman, Woodruff and Pierrepont, J. J.)
    Heard, May 11th;
    decided, July 28th, 1859.
    This action was brought to recover the amount alleged to be due to the plaintiffs for premiums upon an open policy for reinsurance, to the amount of $195,000, whereby the plaintiffs reinsured the defendants for a sum not exceeding $10,000 by any one vessel or steamer at any one time, at and from London, Liverpool, Glasgow, Southampton and Havre to New York, Baltimore, &c. The policy to attach on shipments in the ports aforesaid, on and after October 1st, 1852, and prior to October 1st, 1853. The premium to be three-fourths of one per cent; and provided no loss is claimed equal to fifty per cent of the premium for the year on steamers from Havre, Liverpool and Glasgow, then there shall be a deduction of one-eighth of one per cent on steamers sailing from either of those ports on and after the 1st of March and prior to October 1st. And by the terms of the policy the plaintiffs acknowledged the receipt of a note for $1,000, “ being the premium in advance oh account of this insurance and is satisfied with the obligation of the said Mercantile Insurance Company for the payment of such further premium as may become due thereon.” This note was also set out in the complaint, with an averment that a greater sum for premiums was due. Ho question arose depending upon the form of the pleadings; nor was 'there any conflict of evidence as to the amount of the premiums on the risks covered by the policy of reinsurance at the rate of three-fourths of one per cent stipulated in the policy.
    ’ The defense was: First, that when the agreement for reinsurance was made it was agreed that fifteen per cent should be abated from the gross amount of premiums earned under the policy at the rate specified therein. That a prior policy for reinsurance for one year had been made by the plaintiffs, and upon that a memorandum that such fifteen per cent should be deducted was indorsed. But that on the policy mentioned in the complaint the indorsement was omitted by mistake.

      1 This case is published, not because it is believed to contain any new propositions, but because the proof given on the trial showed so general a prevalence of a custom among Insurance Companies, not to require the payment of the full premium for reinsurance stipulated in the policy and the general habit of relying on that custom, that the application made here of the rules of law to a case within that custom is of interest to companies effecting reinsurt nee, and may suggest the importance of expressing in the policy the true amount or rate of premium to be paid. Befoeter.

      Second. That it is and had long been the custom and usage of Marine Insurance Companies in New York, well known to the plaintiffs, to make the rate of premiums in the policies of reinsurance the same as the rates in the policies issued by the reinsured party, and to make an abatement or deduction in favor of the reinsured of a per centage of the gross amount of premiums, such per centage to be fixed and adjusted between the parties, and that the policies of reinsurance made by the plaintiffs were under and subject to that custom and usage, and the abatement agreed upon between the plaintiffs and the defendants was fifteen per cent of the paid premiums.
    And, finally, that abating from the gross amount of premiums' earned under the plaintiffs’ policy the said fifteen per cent, and charging the plaintiffs the losses under the policy, no sum was due to the plaintiffs, but a small balance was due from them to the defendants.
    The action was referred to the Hon. John L. Mason, as Referee, to try the issues between the parties.
    The whole controversy on the trial was whether the defendants were liable for the premiums on the various risks at the rate mentioned in the policy, three-quarters of one per cent, or were ■ entitled to an abatement therefrom of fifteen per cent of the aggregate amount.
    Proof was given tending to show that the plaintiffs had first issued to the defendants a policy of reinsurance for one year, and at the end of that year issued another, which is the one mentioned in the complaint, for another year; and that when the ' first policy was applied for, the person applying “ proposed this reinsurance to them, and that if they would make a deduction of fifteen per cent, the same as all other Companies made on similar contracts on this kind of policy, they might get it.” The witness understood them to assent to the proposal, and after that the first policy was made and executed. Other testimony rendered it doubtful whether any such agreement, even by parol, was made.
    Much proof was given tending to show that it was the uniform custom in New York, when an Insurance Company obtained a reinsurance of its risks, for the reinsuring Company to make some abatement in its charge from the premiums reserved by the Company so reinsured, so as practically to leave to the reinsured some profit on the risks taken by itself, but reinsured for its own protection.
    But the rate of abatement was shown to vary in amount, and to depend upon the agreement made between the parties.
    The Referee, subject to objection and reserving the right to determine its legal effect in deciding the case, received all the evidence the parties had to offer bearing upon the question, whether any such usage existed, and how far it was uniform or universal, and to what extent it fixed the amount of abatement, and also on the question whether any parol agreement to make any abatement from the rate of premium mentioned in the policy of the plaintiffs now in question, was made between the parties prior or cotemporaneously with the execution of the policy ; and upon the whole evidence he found and decided as follows, viz.:
    “ 1. That the defendants failed to prove an agreement between them and the plaintiffs, as set up in their answer, for an abatement of fifteen per cent from the gross amount of premiums to be earned by the plaintiffs under the policies of insurance mentioned in the complaint.
    “ 2. That there is a custom or usage among the Marine Insurance Companies in the city of New York, in case of reinsurances among themselves, to make an abatement or deduction in favor of the reinsured from the gross amount of premiums mentioned in the policies, but that there is no customary or fixed rate of this abatement, but that the same is in every instance fixed and adj usted by agreement between the parties.”
    And the said Referee did thereupon also find as conclusions of law from the above facts:

      “ 1. That evidence of a parol or verbal agreement as to the amount or rate of such deduction could not be received to contradict the written agreement as to the premiums contained in the policies.

      “ 2. That as it did not appear from the evidence'that there was any agreement between the plaintiffs and defendants respecting the rate of abatement or allowance, the' defendants could not have the benefit of an allowance, even -if evidence of a verbal agreement in relation thereto could have been received.” -
    And he further reported, “ that there is due from the defendants to the plaintiffs, for the premiums • upon the reinsurance mentioned and described in the complaint, with interest to the date of this report, the sum of $1,145.01, for which sum the plaintiffs are entitled to judgment.”
    From the judgment entered upon the report for the plaintiff, with' his'costs "of suit, the defendants appealed-to the General Term.

      A. Dickinson, for defendants, (appellants.)
    I. It appears by the testimony of all of the defendants’ witnesses, and the Referee finds, that there is a custom or usage among Marine Insurance Companies in the city of Kew York, in cases of reinsurance among themselves, to make an abatement in favor of the reinsured.
    This abatement is made in lieu of scrip.
    II. This abatement is not stated in the policies, (in which a fixed rate of premium, three-quarters of one per cent, is stipulated,) but is a matter of verbal agreement as to the amount.
    If nothing is said as to the amount, it is understood to be ten per cent.
    III. . An agreement to fix the abatement at fifteen per cent of the gross premiums was proved; an offer by the defendants accepted by the plaintiffs.
    IV. The custom or usage for an abatément was established, and the Referee so finds. (4 Phil. Ev., Cow. and Hill’s Notes, 509, and cases there cited; Wiggleworth v. Dallison, Smith’s L. C., marg. p. 300, see notes; Brown v. Byrne, 26 Eng. L. Eq. R., 247; Fulton Ins.. Co. v. Milner, 23 Ala., 420; Merchants' Mut. Ins. Co. v. Wilson, 2 Md., 217; Stultz v. Dickey, 5 Binn., 287; Burber v. Biace, 3 Conn., 9.);
    But he rejected the defendants’'claim to abatement under that custom, on the ground that the rate was fixed by verbal agreement.
    In this the Referee erred',, because,

      1st. If the custom or usage of an abatement was established,, the rate of abatement and the manner of fixing that rate was- also established as a part of that custom; and,
    2d. If a custom is established, by which the amount of premium mentioned in the policy is to be affected, then the agreement as to the rate of such abatement relates to the custom or usage, and may be shown by parol testimony..
    The judgment should be reversed, and a new trial' ordered.

      E. A. Doolittle, for plaintiffs, (respondents.),
    I. The defendants not only failed to prove the custom alleged, but their own witnesses show that no uniform or fixed custom prevails among Insurance Companies,, even in the city of New York.
    Custom or usage to control or affect a contract must be established, and not casual; general, and,notpersonal or local, and known to the parties, and be constantly observed in the same manner; or, in other words, it must be uniform.. (Parsons on Con., 51-69.)
    Evidence of custom or usage is- sometimes admissible to add to or explain what is doubtful, but not to contradict or vary a written contract. (5 Hill, 437; 25 Barb., 319; Smith’s Lead. Cas., marg. ref., [307,] 405-416.)
    In this case, the policy specifies the premium, viz.: three-quarters of one per cent, and provides for a reduction upon the happening of certain events.. There is nothing ambiguous or uncertain in the language used, nor is there anything from which any implication can be raised that the agreement is in itself incomplete.
    The President and Secretary of plaintiffs knew no such custom.
    II. The charter requires and provides that all contracts of insurance shall be signed by the President and countersigned by the Secretary.
    A corporation can- act only in the mode prescribed by the act creating it, and the acts of the agent are binding only so far as done in pursuance of that law. (McCullough v. Moss, 5 Denio, 567.)
    III. The plaintiffs’ case was fully made out by production of the nóte; defendants then introduced statement of Higgins, showing the amount found by Referee to be due the plaintiffs, unless defendants proved the agreement to deduct fifteen per cent, and this was agreed upon by both parties. The defendants failed to prove the agreement set up in the amended answer, and the Referee has so found as a question of fact, and his finding is conclusive:
    IY. The Referee’s conclusions of law are correct. But if they were not, they would furnish no ground for a new trial, because all defendants’ evidence was received; and they fail because they could not prove their defense.
   By the Court—Woodruff, J.

It is to be noticed that although the amended answer herein alleges that there is a usage and custom among Insurance Companies in the city of New York to make the rate of premiums in policies of reinsurance the same as in the policies issued by the reinsured party, and to make an abatement or deduction in favor of the reinsured, of a per centage of the gross amount of premiums; yet it is also stated, in the answer itself, that the rate or amount of the abatement is matter of agreement. The custom is therefore not relied upon in the answer as itself operating to modify the express contract between the parties fixing the rate of premium to be paid by the defendants at three-fourths of one per cent; but the allegation of the usage and custom is alleged by way of inducement, or as preparatory to the averment that the rate of abatement was in this case fixed, by actual agreement between the .parties, at fifteen per cent of the gross amount of premiums accruing under the policy. The answer, therefore, including the amendment thereto, amounts to this: (1.) The plaintiffs, when the said reinsurance was made and the policy executed, agreed to make an abatementof fifteen per cent from the gross amount of premiums earned under the policy. (2.) There being a usage and custom among Insurance Companies in the city of New York, when they reinsure, to make an abatement from the gross amount of premiums earned under the policy, the rate of abatement to be agreed upon between the parties, the plaintiffs did, when the policy of reinsurance was made, agree to abate fifteen per cent from the gross amount of premiums accruing to them ■under such policy.

We might, therefore, since the whole defense set up in the answer depends on the question whether such an agreement was proved, dispose of the appeal by saying that the Referee has found, as matter of fact, that no such agreement was made; and that, on a careful examination of the testimony, we cannot say that his finding is so against the weight of the evidence that it should be disturbed.

But the case was tried upon an assumption that a defense would be established by proof of either of two facts, viz.: That there was a parol agreement' between these parties, that the plaintiffs would abate fifteen per cent from the rate of premium stipulated in the policy of reinsurance, or that there was a usage and custom in the city of New York, among Insurance Companies, to make such abatement in favor of other Companies effecting reinsurance. Without therefore reviewing the evidence in support of the finding of the Referee, that the defendants failed to prove the agreement set up in the answer and the amendment thereto, or the evidence in reference to the custom relied upon, we think proper to observe that in our judgment the proposed defense utterly fails upon strictly legal grounds applicable to both of the supposed defenses relied upon; for unless we are prepared to hold, first, that an express agreement to pay premiums of insurance, according to certain rates stipulated in writing, can be altered by proof that there is a custom in the city of New York not to require its performance; or, second, that such an agreement can be altered by proof of a parol agreement, prior or cotemporaneous with the written policy, that the defendants should not be bound to pay so much as they in fact agreed to pay, then the defense wholly fails, whatever parol proof was offered or given in support of it.

It is not necessary at this day to cite authorities to the proposition that a written instrument cannot be altered, or its legal operation or effect be impaired or modified, by evidence that the parties agreed by parol that it should not be obligator)'- according to the terms and effect of the writing. It is true that, on proof of a mistake by reason whereof the writing fails to express the actual agreement, the writing may <be reformed; and this was doubtless the idea of the pleader in the present case, when the answer was at first prepared. The proof, however, wholly fails to show mistake; and the proposition, therefore, recurs, that the parties, having expressed in writing the 'agreement which they have made, and that in terms which are clear and unambiguous, the defendants cannot be permitted to show that there was a parol agreement, antecedent to or cotemporaneous with the writing, that the defendants should not he compelled to pay so large a rate or sum for the premium of reinsurance as, by the terms of the policy, they were bound to pay. To a rule so well settled, any work upon evidence may be consulted, if authority is desired.

It is, in our judgment, no less clear that proof of a usage and custom, however uniform and universal among Insurance Companies in the city of Few York, not to require a reinsuring Company to pay the full premium which, by the policy of rein: surance, it is stipulated shall be paid, cannot legally operate to impair the effect of an agreement to pay a fixed rate settled by the policy.

A written agreement, which is in no wise of ambiguous or uncertain import, is to have effect according to its terms, and the parties are bound thereby; and the express stipulations of parties cannot be overruled or set aside by any custom hot to require their performance according to their tenor.

This is not a question regarding the mere incidents to the defendants’ undertaking, but it is a question whether a written agreement is itself binding. If the decisions in Woodruff v. Merchants’ Bank, (25 Wend., 673,) affirmed in Error, (6 Hill, 174,) and in Brown v. Newell, (4 Seld., 190,) are law, much more is it true that a defendant cannot avoid his express promise by proof of a local custom not to require its performance. (Anth. N. P., 70; Cooper v. Kane, 19 Wend., 386; Hunton v. Locke, 5 Hill, 437; Merc. Ins. Co. v. State Ins. Co., 25 Barb., 320; Machine Co. v. Partridge, 5 Fost. N. H. R., 369; Atkins v. Howes, 18 Pick., 16; Wheeler v. Nurse, 20 N. H., 220; id., 246; Barlow v. Lambert, 28 Ala., 704; 30 id., 167, 608; Cadwell v. Meek, 17 Ill., 220; 18 id., 126; Linsley v. Lovely, 26 Vt., 123; Corwin v. Patch, 4 Cal., 204; Webb v. Plummer, 2 B. & Ald., 746; Blackett v. Assurance Co., 2 Cr. & Jer., 244; Ford v. Yates, 2 Mann. & Grang., 548; Trueman v. Loder, 11 Ad. & El., 589; 39 Eng Com. Law R., 183, notes.)

We have thought it advisable to say so much upon the questions discussed on the appeal. It may, perhaps, be useful to those who have occasion to effect reinsurance to know that they are liable to pay the rate of premium specified in their policy, notwithstanding there is a custom in New York for the reinsuring Company to make an abatement therefrom, and also that they cannot be protected against a claim for the stipulated premium by proof of a prior or cotemporaneous parol agreement that a less sum only should be required.

The judgment must be affirmed.