$70,000, and a new note for the last named sum, payable with interest thereon, was given by the same corporation under a new name, Lake Superior Ship Canal, Railroad and Iron Company," indorsed by the bankrupt, Wild and others.

The two notes, one dated September 18, 1871, for $70,000, and interest; the other, dated February 13, 1871, for $35,111.49, and interest, constitute the claim made by the receiver of the bank against the estate of the bankrupt, Wild, who indorsed them; and it is the allowance of that claim by the district court which is appealed from by the assignee to this court.

The loan originally made by the bank was further secured by the delivery to the bank of coupon bonds of the canal company, secured by mortgage to the amount of $200,000; and it was made a condition of the loan that the canal company should purchase and receive from the bank certain bonds, amounting on their face to $237,000, of a Georgia railroad corporation, whose road had been stripped of its rails and furniture, its tracks grown up with trees and bushes, and had not been used for many years, on whose bonds no interest had been for a long time paid, and whose bonds had no market value. And their want of intrinsic value was more fully shown by a foreclosure soon after effected, on which the road, the mortgage security for the entire issue of bonds, $924,600, of which these were a part, sold at public auction to the highest bidder for $1,500. It is true that the purchaser of the road, who seems to have acted for the canal company, states that, after obtaining an act of the legislature of Georgia incorporating a new company, and an act authorizing the State to guarantee another large issue of bonds to enable the new company to reconstruct the railroad, he received a like amount of stock in the new company, $237,000, and succeeded in selling that for $47,000, which sum he paid to the canal company as and for the proceeds of the purchase which they made from the bank, and of his exertions to obtain a new charter and the pledge of State aid, without which the stock would seem of little, if any, value.

Recurring to the transaction between the Ocean National Bank and the canal company, it was made a condition of the loan of the $150,000 by the bank to the canal company, that besides paying interest at seven per cent per annum, and securing the same by $200,000 of their mortgage bonds, with power to the bank, at any time, to sell such bonds at any price not less than ninety cents on the dollar toward the repayment of the loan (which might therefore not continue for more thau a very brief term), the canal company should also purchase from the bank the before mentioned nearly worthless bonds of the Georgia railroad company, and should pay therefor the sum of $100,000, securing such payment by a like amount of their mortgage coupon bonds.

There was also a further requirement, to wit: that the trustee to whom the mortgage securing the canal company's coupon bonds was executed should be removed, or should resign his trust, and the president of the bank should be substituted in his place, and that the moneys loaned by the bank should only be drawn by the canal company from the bank by checks, countersigned by the president of the bank, as such trustee. Their president was active in the negotiation with the company, and in settling the terms of the loan; and he required of the canal company, professedly for his own benefit, $50,000 of their mortgage coupon bonds as compensation for acting as trustee.

I shall place no special stress upon this payment to the president as affecting the question of the liability of the bankrupt in this case. It, however, belongs to the history of the transaction.

The canal company having received the proceeds of the discounts of the various notes given for the loan, subsequently paid considerable sums by paying the interest coupons attached to the bonds held by the bank as collateral security, and other considerable sums derived otherwise, and it seems conceded that the two notes, indorsed by the bankrupt Wild, and the subject of controversy here, constitute the residue of the claim of the bank arising out of the said loan, assuming its entire validity and their title to the same, with interest. The assignee of Wild (appellant here) insists, that the loan was usurious, and that there is on that ground no valid claim against Wild as indorser; and further, that under the national banking act, the loan being made by the bank, reserving a compensation exceeding seven per cent interest per annum, all interest on the loan was forfeited, and that the payments made by the canal company amount to satisfaction of the principal debt, and the notes therefor, which are here presented, bearing the indorsement of the bankrupt, are without consideration and constitute no valid claim against his

estate.

In the court below the transaction was assumed to be such, that had the loan been made to an individual instead of a corporation, it was a violation of the statutes of New York regulating the subject of interest, and the securities or notes given therefor would have been void for usury. In that view of the subject I most fully concur, and must find as a fact upon the evidence that the conditions of the loan reserved to the bank in money more than seven per cent per annum. No one unaffected by interest, bias or prejudice can, I think, read the testimony without being satisfied that the bank, in prescribing the terms of the loan, made it an occasion for extorting from the canal company most onerous conditions, greatly exceeding lawful interest, and that the form of a sale of Georgia railroad bonds for a price far above their real or market value (if indeed they had any value, which is very doubtful), was only a cover and means of securing in money the excessive and illegal compensation they reserved and secured for making the loan.

It was, however, held below, that under the laws of the State of New York, which forbid a corporation to interpose the defense of usury, the transaction must be deemed, between the bank and the canal company, a legal transaction, the notes given by the canal company to the bank legal and binding notes, and therefore the indorsement thereof by the bankrupt as surety for the canal company, a legal and binding indorsement; and further, that the provisions of the national banking law relating to the interest which national banks may receive, and imposing penalties for charging more do not affect the transaction, because they only apply to States which have no laws fixing the rate of interest.

It was not the intention of congress when enacting the national banking law, to authorize national banks, in respect to exacting interest, to violate the laws of the States within which they might be organized; nor, as I think, to relieve them from the consequences of such violation, prescribed by the State laws, if they were guilty thereof.

This is the result of the decision of the court of appeals in the State of New York in First National Bank

of Whitehall v. Lamb, 50 N. Y. 95. Without adopting the reasoning of the opinion in that case, I deem the conclusion as above stated correct.

On the other hand it was entirely competent for congress, when providing for the organization of national banks, to place them under such restrictions in respect to the rate of interest which they might charge or receive as congress might see fit. As creatures of their own creation they could be subjected to such inhibitions as were deemed expedient, even though the privileges were far short of those enjoyed by State banks or by individuals within the several States. This would involve no conflict with State laws, nor be an attempt to regulate private and domestic affairs within the States beyond the powers of the federal government. It would be merely defining the powers and regulating the conduct of the organizations which existed only by force of federal enactment, possessed the powers congress chose to confer upon them, and exercised them subject to the restrictions and conditions of the law giving them existence. Indeed, the acceptance of an organization under the law and the enjoyment of its privileges are necessarily subordinate to the conditions upon which the powers and privileges are conferred. Hence, had congress seen fit to say that no national bank should contract for, reserve or receive more than at the rate of five per cent per annum for a loan of money, or for or upon the discounting of a note, bill or other security, it would have been a perfectly valid limitation of their powers. It would be in no conflict with any law of a State which permitted the making of loans in general at a higher rate of interest. And if congress could do this, congress could also declare the forfeiture or penalty incurred by the national bank for violating the prohibition. Such bank would still be left subject to the operation of the State law, imposing, it might be, a different penalty for violation of its own State laws, as was held by the New York court of appeals in the case above referred to.

It follows that transactions may not be condemned by the State laws, applied to individuals or to corporations in general, and may under such State laws be legal and valid, which, nevertheless, national banks may not make, and for which, if made, they may be liable to penalties or forfeitures prescribed by the law of their being.

It may be that in reference to the conduct of merely private or domestic affairs, within the States having no connection with or relation to their functions as agents of the government, congress cannot authorize national banks to do what is forbidden by State laws, nor relieve them from the forfeitures or penalties prescribed by State laws, for the doing what is so forbidden. But this concession would be far short of admitting that, within the range of what the State laws do permit, congress may not restrict national banks as it sees fit, or may not impose such penalties and forfeitures for a violation of those restrictions, as congress thinks proper.

Those latter propositions are unquestionable. How then do the laws of the State of New York and the national banking law bear upon the case under consideration? The 30th section of the national banking law (13 U. S. Stat. at Large, 108) provides that "Every association may take, receive, reserve and charge on any loan or discount made, or upon any note, bill of exchange or other evidences of debt, interest at the rate allowed by the laws of the State or territory

where the bank is located, and no more, except that where, by the laws of any State, a different rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed for associations organized in any such State under this act. And when no rate is fixed by the laws of the State or territory, the bank may take, receive, reserve or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days for which the note, bill or other evidence of debt has to run; and the knowingly taking, receiving, reserving or charging a rate of interest greater than aforesaid shall be held and adjudged a forfeiture of the entire interest which the note, bill or other evidence of debt carries with it, or which has been agreed to be paid thereon; and in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back, in any action of debt, twice the amount of the interest thus paid, from the association taking or receiving the same. Provided, that such action is commenced within two years from the time the usurious transaction occurred." * * ** The State of New York has statutes which prohibit the taking, receiving or reserving of interest for the loan or forbearance of money at a greater rate than seven per cent per annum, and making any note or bill or other contract, whereon or whereby any greater rate is reserved, void.

But the State has a further statute (Laws of 1850, ch. 172, p. 334) which forbids that corporations shall interpose the defense of usury to their contracts. Such was the state of the law in New York when the national banking act was passed.

The force and effect of this last-named statute has been declared by the courts of the State of New York in numerous cases. Those cases are collected, carried to what is deemed their legitimate conclusions by the court of appeals, and distinctly affirmed in Rose v. Butterfield, 33 N. Y. 665.

And the doctrine of that case is, that the dealings of a corporation as a borrower, and their contracts or obligations for loans, are unaffected by any laws of the State of New York regulating interest. That, as to them, such laws, theretofore existing, are repealed. That, therefore, the rate of interest which a corporation may agree to pay is not fixed or limited, but they may agree to pay any rate they see fit, and their contract will be valid. And, also, that one who becomes surety, guarantor or indorser of such contract is legally bound to its performance. In short, that as to contracts made by corporations, whether foreign or domestic, whether made in the State of New York or elsewhere, they stand in the State of New York as if no usury laws existed. See, also, Belmont Bank v. Hoge, 35 N. Y. 65. In respect to contracts made within the State of New York, or entered into under and with reference to the laws of that State, I may accept the exposition thus given of the state of the law of New York, and it follows that there is no law in New York fixing the rate of interest which any one may take upon the loan of money to a corporation, or, in other words, any rate of interest is allowed to which the parties may agree.

As to dealings with corporations, national banks, in the State of New York, are, therefore, within the case described in the national banking law above cited, to wit: "When no rate is fixed by the laws of the State or territory, the bank may take, receive, reserve or charge a rate not exceeding seven per centum," etc.

This is a necessary and logical result. If the rate were fixed by the laws of New York, then her usury laws would apply. If the limitations in their statutes relating to interest do not apply, then no rate is fixed by her laws.

Hereupon the restriction, contained in the section of the national banking law, comes into effect, without any interference or conflict with State laws, that is to say, a national bank "may take, receive or charge a rate not exceeding seven per centum, and such interest may be taken in advance," etc. "And the knowingly taking, reserving or charging a rate of interest greater than aforesaid shall be held and adjudged a forfeiture of the entire interest which the note, bill or other evidence of debt carries with it, or which has been agreed to be paid thereon; and in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back twice the amount of the interest thus paid from the association taking or receiving the same. Provided, that such action is commenced within two years from the time the usurious transaction occurred."

It is not necessary that I should express an opinion upon the question whether this forfeiture and right to recover back can in any circumstances be applicable to the case mentioned in the previous clause of the section, to wit, when the national bank reserves or receives a greater rate of interest than is allowed by the laws of a State in which a rate is fixed and limited by the State laws; it is sufficient for the purposes of the present case, that it does apply to a case in which no rate is thus fixed and limited. By the laws of the State of New York, as expounded by her highest court, no rate of interest upon loans to a corporation is fixed or Zimited.

It follows that the transaction in question was within the prohibition of the National Banking Law, and the bank eo instanti it made the loans upon the terms exacted, incurred the forfeiture of the entire interest which the notes received carried with them, or which was agreed to be paid thereon. Discounting the notes did not render it less true that the notes themselves carried with them the principal loaned and the interest agreed to be paid, which, with the bonds also given, necessarily included all the pecuniary benefit agreed to be paid as compensation for the loan, whatever form the transaction was made colorably to assume.

The bankrupt as mere accommodation indorser or surety is, upon familiar principles of equity, entitled to all the protection which his principal (the Canal Company) would have if the notes in question were sought to be enforced against it. I do not say that he can recover back money paid by the Canal Company, but he has a right to inquire whether, in view of the forfeiture of the entire interest by the bank, there is any thing due to the bank upon the notes which he indorsed, and thereby to ascertain whether and to what extent the two notes now in question are without consideration.

It is claimed by the assignee of the bankrupt that treating the entire interest as forfeited, the bank have already been paid the whole of the principal of the loan. I am not fully satisfied that a small sum out of such principal is not still due. Upon the proofs taken, the account would seem to stand thus: [We omit the account.]-ED. A. L. J.

To this extent of $3,363.65, without interest, it would seem the claim of the receiver should be allowed, but the estate of the bankrupt is entitled to have the collateral security held by the receiver of the bank, or the

proceeds thereof applied to this balance in exoneration of the estate of the bankrupt on a sale of a portion of which, by order of the district court, it appears by the order appealed from $23,663.30 has been already realized. I by no means make this statement of the account as a conclusive statement; the proofs on the part of the bank do not appear to have been put in with a view to the statement of an account upon the principles affirmed in this opinion.

The value of the collateral security held by the receiver, or the proceeds of that portion thereof which appear to have been deposited in the trust company under the order of the district court, ($23,663.30,) may be, and probably are so clearly greater than any balance which a more accurate statement of the account would show to be due upon the principles of this opinion, that any further expense of taking proofs and stating the account would be improvident and wasteful.

But, if insisted upon, a reference may be had to state such account.

The order appealed from must be modified to conform to the foregoing opinion.

1. What is refusal to take pilot: review of evidence: construction of statute. - Appeal from judgment in favor of plaintiff. The justice found upon conflicting evidence in favor of plaintiff. This action is to recover pilotage fees for defendant's refusal to accept plaintiff's services. Plaintiff swore that he was within 100 feet of defendant's vessel, at a distance to have been heard on board of her; she kept on her course, the pilot boat following, and before plaintiff spoke her, both he and another witness saw a man coming aft to whom the man at the wheel beckoned to go down, and the man went off the deck. Plaintiff hailed her three or four times, asking what vessel she was and if she wanted a pilot. There was no one on deck after the man went below, except the man at the wheel, who gave no reply to plaintiff's inquiries, but turned around, and when plaintiff offered his services as pilot, and said if they did not take him they would have to pay the pilotage, something was said by the steersman, which the parties on the pilot boat could not distinctly hear or understand. A witness who was on the pilot boat swore that the offer of the plaintiff could have been heard on the schooner, and that there was no pilot on board of her.

Held, that this evidence was sufficient to warrant the finding; that the plaintiff was the pilot first speaking the vessel and offering his services, and that what occurred on board was equivalent to a refusal within the meaning of the statute. Laws of New York, 1857, p. 502. Judgment affirmed. Germond v. Martin, Master, etc. Opinion by Daly, C. J.

PLEADINGS. See Trusts.
PRINCIPAL AND AGENT.

See Railroads.

PRIORITY OF CONTRACTS. See Re-insurance.

RAILROADS.

1. Passenger has no right to "stop over" on a through ticket. By the regulations of the defendant the conductors of all passenger trains are required to punch a

hole in the passenger ticket, and if the passenger desires to stop over at any way station the ticket must be indorsed by the conductor in order to entitle him to get upon another train and resume his journey upon the credit of such ticket, and it is not good unless so indorsed. Plaintiff was a passenger on defendant's road on an eastward bound train to New York, having a through ticket, and applied to the conductor to be let off at Little Falls and asked him to indorse the ticket. As plaintiff testified, the conductor answered "that was not necessary." Plaintiff got off there and again took passage on another train, and without applying for indorsement of his ticket in that train got off at Amsterdam. The next day he resumed his journey on another train, and on presenting his unindorsed ticket the conductor refused to recognize it, and upon his refusal to pay his fare in accordance with defendant's regulations he was put off the train. No unnecessary force was used in plaintiff's expulsion from the cars, and without proof of any specific damages, he recovered $250. Appeal from judgment in favor of plaintiff.

Held, that the obligation of the contract evidenced by the ticket was for a continuous or through passage from Buffalo to New York. The contract was entire and did not provide for stopping over at intermediate stations. McClure v. Phil. Wil. & Balt. R. R. Co., 5 Alb. Law J. 13; 6 Am. R. cited. Judgment reversed. Denny v. The New York Central and Hudson River R. R. Co. Opinion by Robinson, J.

2. Authority of railroad conductors to act for company: principal and agent. The permission granted the plaintiff by the first conductor to stop over was fully enjoyed, but, on his becoming again a passenger to New York, he resumed his original status and was subject to the existing regulations of the company, without regard to what had transpired between him and the first conductor. The statement of the conductor to the plaintiff that no indorsement was necessary, was not a general statement, or, if so accepted, the conductor had no authority to make it. The acts of the conductor cannot be construed to affect the rights of the defendant, except upon the train within his control. The conductor had no power of controlling or affecting the terms of the original through contract, or the duty of the conductor on the third train. Ib.

RECORDING ACTS. See Conditional Sales.

REFERENCE.

Report of referee: rules of supreme court: cases reviewed. In an issue raised by defendants, in the pleadings upon their joint liability, the referee decided against them and stated the facts separately upon which such liability was founded. Defendants claim that there should have been a further finding of facts upon the requests made.

Held, that rule 41 of the supreme court, upon this subject, should be limited as the rule requires, to such facts as appear to be material to the issue. The facts not found are impliedly negatived, and the referee should not be required to find them in that form. The case of Cosler v. Shipman, 35 N. Y. 541, does not establish the theory that an appellant is entitled to have all the facts, those which are in opposition, as well as those that support the judgment. It is every material fact necessary to the determination of the issues that is to be found. Quincey v. Young. Opinion by Larremore, J.

RE-INSURANCE.

Privity of contract: construction of contracts: liability of re-insurers: insolvency.- The North American Fire Insurance Company issued a policy of insurance for $5,000. In October, 1871, loss occurred amounting to $4,407.62, which became payable sixty days after service of proof of loss, made on the 18th of November, 1871. In August, 1871, a contract of re-insurance was effected, and subsisted at the time of the loss, with the Allemania Fire Insurance Company for $2,500. The North American subsequently became insolvent and was dissolved by a decree of the supreme court, and plaintiff appointed receiver. Plaintiff paid upon the loss sustained a dividend of 40 per cent, and subsequently declared a further dividend of 4 per cent, which was all that could be realized out of the assets

of the company. The substantial question presented was, whether defendants were bound to pay their proportion, one-half of the loss, at the time when the original insurance called for payment, or of such sums as plaintiffs had actually paid. The contract here is similar in all its main features to that in the case of Howe v. The Mutual Safety Ins. Co., 2 Comst. 235, except that it provided, that the loss, if any, should be payable pro rata and at the same time with the re-insured." Did the contract refer to the time when the original insurance called for payment, or to the circumstance of actual payment of the loss?

Held, that no privity of contract existed between the parties originally insured and the re-insurers, even in case of the insolvency of the original insurers. (3 Barb. Ch. 63, cited.) The contract of re-insurance being made with the express reference to the original policy, must be construed as merely fixing a like time for the payment of the pro rata loss to the re-insured. Any ambiguity is to be held most strongly against the defendants as the contracting party. The contract refers to the time when the original insurers were required to make payment of the loss, rather than to the circumstance that they had made such payment, and the payment is not to be deferred until the re-insurers have made actual payment of the whole loss. Judgment ordered accordingly. Blackstone, receiver, etc. v. Allemania Fire Ins. Co. Opinion by Robinson, J.

STATUTES, CONSTRUCTION OF.

See New York City;

Pilots. (Concluded next week.)

BOOK NOTICE.

Reports of cases decided by the English courts with notes and references to kindred cases and authorities, by Nathaniel C. Moak, counselor at law. Volume IV. Albany: William Gould & Son.

This method of placing the decisions of the English courts within the reach of American lawyers deserves the hearty support of the profession. Not only are all the important decisions that appear in the English series given, but many of them have a new value from the excellent notes appended by Mr. Moak. There are several of these notes in this volume of more than usual interest and value.

The note on the custody of children (p. 267) is very elaborate, covering quite fifteen pages, and presents a very full collection of the cases. There is also a carefully prepared note on page 519, as to what are res gestae, and on page 927, as to the use in business by a surviving partner of the assets of the deceased partner.