This action was brought to recover the amount due on one hundred and forty coupons originally attached to twenty bonds issued by the Columbus, Piqua and Indiana Eail Eoad Company, the payment of which was guarantied by the defendant by written indorsements on the bonds, guarantying the payment of principal and interest.
The defendant sets up in its answer that the guaranties were unauthorized and without consideration, and that the plaintiff had notice of it; also, that the bonds were purchased from the Piqua company by one William Dennison, jun. for less than their par value, and that he was at the time of such purchase a director of that company, and that, by the laws of Ohio, the bonds, for that reason, became void; and that the defendant was induced to make the guaranties by false representations made by the said William Dennison, jun. and one William Kiel, of all which the plaintiff had notice; also, that the defendant was accommodation guarantor, and that the plaintiff took the bonds with knowledge of the matters alleged by the defendant, and paid nothing except a small per centage for the bonds; also, that the original issuing of the bonds was contrary to the laws of Ohio; also, that an injunction was pending which forbade payment.
On the trial of the action at the circuit, there was a verdict for $6378.62 for the plaintiff, from the judgment entered on which the defendant has appealed to the general term.
The bonds are payable in the city of Kew York, to Elias Fassett or holder. They are negotiable, passing by delivery, and would have been had they been under seal. Their nego*22liability was assumed, if not decided, in Zabriskie v. The Cleveland, Columbus and Cincinnati R. R. Co., (23 How. U. S. Rep. 400.) Similar bonds have repeatedly been held by the courts to be negotiable. It was so held or assumed recently by the court of appeals of this state, in actions on one or more Harlem Eail Eoad bonds, under seal, I believe. (See also Redfield on Rail. § 239, and cases cited in note.) It has been repeatedly held in Ohio that affixing a seal to such an instrument does not affect its negotiability. (See Bain v. Wilson, 10 Ohio Rep. 19; Bank of St. Clairsville v. Smith, 5 id. 222.) The English decisions are, too, I think, to the same effect. This point was raised by the defendant’s first exception, on the introduction of the bonds in evidence, and subsequently by another exception when the case was submitted to the jury. Neither exception was well taken.
In my opinion the judge was right in permitting the plaintiff to recover interest on the coupons. This point is presented by the defendant’s second exception. The coupons are negotiable promises to pay a certain sum of money, on a certain day, to the holder; so made as to be cut off and circulated independently of the bonds. If not paid when due, I think interest should be allowed by way of damages, for the delay of payment. They do not contain any express promise to pay interest on the interest, and if they did, I think interest would or should be allowed, not by force of the promise, but as a compensation for the delay of payment, by way of damages.
The general rule is, that where there is a written contract to pay money on a day and at a place fixed, and the contract is broken, interest is allowed. (Williams v. Sherman, 7 Wend. 109. Still v. Hall, 20 id. 51. 52. Reid v. Rens. Glass Factory, 3 Cowen, 436; S. C. 5 id. 587.)
The chancery cases in this state are undoubtedly to the effect that compound interest can only be recovered upon a written agreement to pay it, made after the interest upon *23which it operates has fallen due. (State of Connecticut v. Jackson, 1 John. Ch. 13. Van Benschooten v. Lawson, 6 id. 313. Mowry v. Bishop, 5 Paige, 98. Quackenbush v. Leonard, 9 id. 334. Toll v. Hiller, 11 id. 228.) In State of Connecticut v. Jackson, Chancellor Kent says: “ Even an original agreement at the time of the loan, or contract, that if interest he not paid at the end of the year, it shall be deemed principal and carry interest, will not be recognized as valid. Such a provision would not amount to usury; (Le Grange v. Hamilton, 4 T. R. 613; 2 H. Black. 144;) but this court certainly and perhaps a court of law would not give effect to such a provision.” In Van Benschooten v. Lawson, (supra,) the chancellor held, that the agreement, though made after the interest had fallen due, must be prospective in its operation, as that the interest then due and payable should carry interest thereafter. In Mowry v. Bishop, (supra,) Chancellor Walworth held, that an agreement to pay interest on arrears of interest, which had already become due, is valid, and that if compound interest is voluntarily paid it could not be recovered back; that the moral obligation of the debtor to make the usual remuneration for the loss of interest sustained by the creditor was a sufficient consideration to support a subsequent agreement in writing to pay interest on such arrears of interest. I have some difficulty in seeing, if such moral obligation is sufficient to support such subsequent written promise, why it was not right to allow the plaintiffs in the principal case interest upon their coupons without any promise. In Mowry v. Bishop, the chancellor said, that the principle that an agreement to pay interest upon interest to accrue after the making of the agreement, cannot legally be enforced, was adopted merely “as a rule of public policy, to prevent an accumulation of compound interest in favor of negligent creditors who do not call for the payment of their interest when due.” The reason or ground of the general rule, that interest upon interest cannot be recovered, as thus stated, certainly does not apply to the principal case, and *24should not have prevented a recovery of the interest on the coupons. There is no danger of rail road creditors being negligent in presenting their coupons for payment, though they may run other risks. Eail road corporations certainly do not need protection from want of diligence on the part of their creditors.
In Van Benschooten v. Lawson, (supra,) Chancellor Kent said that agreements to pay interest on interest to accrue would not be enforced, because they were oppressive. I repeat, certainly there is no danger of rail road corporations being oppressed from want of diligence -on the part of their coupon creditors.
As to how far the general rule or principle before adverted to, as established by the chancery cases in this state, has been recognized by the courts of law of this state, see Kellogg v. Hickok, (1 Wend. 521;) Jackson v. Campbell, (5 id. 572;) Boyer v. Pack, (2 Denio, 107;) Van Rensselaer v. Jones, (2 Barb. S. C. Rep. 666, 667;) Forman v. Forman, (17 How. Pr. R. 255;) Henderson v. Hamilton, (1 Hall, [N. Y. Superior Court,] 314.) In Van Rensselaer v. Jones, Judge Willard appeared to think it by no means clear that the cases in this state would prevent a recovery of interest on interest in a case like the principal case.
There is no doubt that in several of the states the plaintiffs would have been permitted by the courts to recover interest. (See Catlin v. Lyman, 16 Verm. 45; Greenleaf v. Kellogg, 2 Mass. 548; Hastings v. Wiswall, 8 id. 455; Watkinson v. Root, 4 Ham. Ohio Rep. 373; Pierce v. Rowe, 1 Adams’ N. H. Rep. 179; Hollingsworth v. Detroit, 3 McLean, 472.)
Upon the' whole I can see no good reason nor controlling authority for saying, that the plaintiff should not have recovered interest on its coupons. From the transaction, I infer, that the Piqua company expected to pay interest on its coupons if they were not paid when due.
The judge was right in declining to instruct the jury, as requested by the defendant, that the defendant being in*25dorser or guarantor, without consideration, and for accommodation, is only liable to bona fide holders for value received, to the extent of the value paid, and the defendant showing that it is a mere accommodation indorser, the burden of proving bona fides and value is on the plaintiff. The defendant was not accommodation indorser or guarantor. There was a sufficient consideration expressed on the face of the guaranty. The words “ value received” imported a sufficient consideration. (Miller v. Cook, 22 How. Pr. Rep. 66. Douglas v. Howland, 24 Wend. 35.)
I think, too, the case shows a sufficient consideration for the guaranties outside of them. A rail road corporation must be presumed to be created not only for public convenience, but also for private profit. The arrangement which was entered into between the defendant and the other companies, of which the guaranties were a part, was entered into for the purpose of securing a uniform gauge of the connecting roads, and thus to increase its business and profits. The presumption is that the defendant has received the anticipated advantages from the arrangement. I think, therefore, that the defendant's third exception was not well taken.
In my opinion the judge was also right in declining to instruct the jury, as requested, that the guaranties were unauthorized and unlawful. No doubt the plea of ultra vires raised the question of the corporate power of the defendant to make the guaranties, as between the corporation and the state of Ohio, and not merely the question as between the corporation and its shareholders, whether the making of the guaranties was a breach of trust. A corporation is the mere creature of law, and cannot act at all without law. A contract made by it, without authority, is void, even in the hands of a bona fide holder, for value. Its legal capacity to contract cannot be enlarged by estoppel.
But, I think, the defendant was authorized by the sections of the general rail road laws of Ohio, inserted in the case, to enter into the arrangement with the other companies, and to *26make the guaranties as a part thereof. These sections declare, that “any rail road company, heretofore or hereafter incorporated, may, at any time, by means of subscription to the capital stock of any other company, or otherwise, aid such company in the construction of its rail road, for the purpose of forming a connection of said last mentioned road with the road owned by the company furnishing such aid,” &c. There is another clause of these sections which authorizes any two or more rail roads, whose lines are connected, to enter into any arrangement for their common benefit. The counsel for the defendant insists, that this last provision evidently refers to arrangements as to the management of the road, price of fare, time of running, number of trains, &c. But I do not see why this limited construction should be given to the provision, particularly as against the plaintiff, who is a bona fide holder for value, there being nothing in the case showing that it had notice of any of the defenses set up in the answer. The language is broad enough to cover the arrangement which the defendant entered into with the other companies, and the guaranties as a part of it. Perhaps this question of power may be said to have been decided in Zabriskie v. Cleveland, Columbus and Cincinnati R. R. Co., (23 How. U. S. Rep. supra,) although that action was brought by Zabriskie as a shareholder.
It is not necessary to inquire or decide whether the acts of the defendant were authorized or ratified by a vote of the stockholders, in accordance with the provisos of the said sections of the Ohio general statutes, if the defendant had the general power to make the guaranties; for these provisos were intended for the protection of the shareholders, and relate rather to the mode or manner of the execution of the power; and the plaintiff had a right to presume that the defendant had done its duty, and had proceeded regularly in the execution of the power. (See Commissioners of Knox Co., Indiana, v. Aspinwall, 21 How. U. S. Rep. opinion, 545; The Royal British Bank v. Tarquand, 6 Ellis & *27Blackb. 327; and Zabriskie against this same defendant, 23 U. S. Rep. supra.)
This doctrine does not at all interfere with the principle of the limitation of the powers of corporations and its consequences, before stated. Third parties dealing with a corporation are bound to know the law; that is, they are bound to take notice of the extent of its powers, but they have a right to assume, in the absence of any thing suggesting inquiry, that it has proceeded regularly in the execution of its powers. I think, therefore) the defendant’s fourth exception was not well taken.
I think the judge was also right, in declining to instruct the jury, as requested by the defendant, that the plaintiff could not recover because the bonds were void, under the Ohio act of December 15, 1852, declaring that no director of a rail road company shall purchase any of the bonds, &c. of any rail road of which he may be a director-, for less than the par value thereof, and that all such bonds, &c. so purchased, shall be void. The supreme court of Ohio has decided that these bonds were valid securities, and upon which the holders are entitled to recover the full amount of principal and interest, without reference to the amount paid for them. (Coe v. Columbus and Piqua R. R. Co., 10 Ohio Rep. 395, 399 and 410.) In Zabriskie against these same defendants, (23 How. U. S. Rep. supra,) the United States supreme court say: “In deciding upon this contract, we deem it unimportant to settle whether Dennison was a director of the Piqua company on the 25th February, 1854, when he signed the contract with the committee of the Piqua board of directors.” I doubt, too, whether Dennison was a director on the 25th of February, 1854, within the meaning and intent of the act of December 15, 1852, although he may have been within the meaning of the Ohio act of February 11th, 1848, declaring that directors shall continue such, until their successors are elected and qualified. I think, therefore, the defendant’s fifth exception was not well taken. ¡Neither do I think that *28the defendant’s sixth exception was well taken. The judge declined to instruct the jury that, if the bonds were .void, the guaranties were void. In the case of Zabriskie, the United States supreme court held that it was not necessary to settle whether the bonds of the Piqua company were void. The court said,' “The contract of the guarantors, indorsing the bonds, is a distinct .contract, and may impose an obligation upon them independently of the Piqua company,” An indorser may be liable, though the maker’s name is- a forgery. (Herrick v. Whitney, 15 John. 240. Shaver v. Ehle, 16 id. 201. See also, 1 Parsons on Con. 494, and cases cited in notes.) . .
[New York General Term, November 30, 1863.It was decided by the general term, in this action, the bonds and coupons being payable here, that the cause of action arose here, and that this court had jurisdiction, though both - parties were foreign corporations. (The Connecticut M. Ins. Co. v. The C. C. and C. R. R. Co., 23 How. Pr. Rep. 180.) ■ ■
. My conclusion is that the judgment should be affirmed with costs.
Sutherland, Leonard and Mullin, Justices.]