People Ex Rel. Manhattan Savings Institution v. Otis

Andrews, Ch. J. The fourth section of the act in question is, we think, plainly unconstitutional. By its terms it discharges the city of Yonkers, after the delivery to the savings bank of the duplicate bonds provided for in the second section, from all liability on the original bonds, to all persons purchasing the same, after due publication of the notice prescribed in the first section, but gives a right of action against the - bank, upon the bond of indemnity, to the lawful owner of such bonds in place of the liability of the original obligor. The effect of this section, if valid, is to take away and destroy the negotiable quality of bonds, not presented for- identificatian, pursuant to the notice in the first section, from the time of the delivery of the duplicates, although such bonds may be held by bona fide purchasers for value. The original bonds were payable to bearer, and transferable by delivery, and had all the qualities and attributes of negotiable paper. This ne *52 gotiable quality was impressed upon them by the very terms of the obligation, and was an essential element of their value. The fourth section disables a holder who has omitted to present bonds held by him from transferring his claim against the obligor, for the very act of transfer, according to that section, discharges the city of Yonkers from liability, and remits the transferee, as his only recourse, to the substituted remedy against the bank. The holders of bonds not presented may, it is true, retain them until maturity, and then enforce payment according to their terms, but meanwhile they are in the situation of having a debt which they cannot transfer. That the fourth section impairs the obligation of the contract between the city of Yonkers and the holders of the bonds, is very clear. The contract was to pay the sum stated in the bonds to bearer, and conferred upon the holder the right to transfer the debt by the delivery of the bond. The fourth section impairs this right secured by the contract, which the legislature could not lawfully do. “It is perfectly clear,” says Judge Story in his Commentaries on the Constitution, “that any law which enlarges, abridges, or in any manner changes the intention of the parties, resulting from the stipulations in the contract, necessarily impairs it” (Story on Const., § 1385), and this remark is but a paraphrase of the language of the adjudged cases. (Ogden v. Saunders, 12 Wheat. 256; Me Gradeen v. Hayward, 2 How. 612.) The section violates not only the Federal Constitution, but also the provision of the State Constitution that no person shall be deprived of life, liberty, or property, without due process of law. Depriving an owner of property of one of its essential attributes, is depriving him of his property within the constitutional provision, and a legislative declaration that upon the publication of notice, a negotiable security shall no longer be transferable, is not due process of law, working a forfeiture of the right given by the contract. Having reached the conclusion that the fourth section of the act is repugnant to the Constitution, the provision in the second section, requiring the city to issue duplicate bonds, cannot be maintained as a separate and independent portion of the act. The provision exempting *53 the city from liability to transferees of the original bonds, after the issuing of duplicate bonds, was a condition and compensation for the requirement that duplicate bonds should be issued, and it cannot be reasonably inferred that that requirement would have been made, except in connection with the exemption in the fourth section. The requirement in the act in question is a part of a connected and dependent scheme, which falls with the failure of one of its essential features. It is unnecessary, therefore, to consider whether it is competent for the legislature to compel a municipal corporation to issue new bonds in place of bonds lost or stolen. The order of the General Term should therefore be affirmed, with costs. All concur. Order affirmed.