Gould v. Town of Venice

By the Court, T. R. Strong, J. The constitutionality of the statute under which the instruments in question, called bonds, were issued, must be deemed settled by recent decisions. (The Bank of Rome v. The Village of Rome, 18 N. Y. R. 38. Clarke v. The City of Rochester, 24 Barb. 446. Benson v. Mayor &c. of Albany, Id. 248. Grant v. Courier, Id. 232.) The plaintiffs are bona fide purchasers of the so called bonds, for a valuable consideration, and if the statute authorized instruments of such a nature, and they are negotiable, like bills [451] of exchange and other commercial paper, there can be no donbt that the plaintiffs are entitled to prevail in these actions. Authority being given to the towns by the statute to issue bonds, and the instruments appearing on their face to have been executed in pursuance of that authority, and so far as appears in accordance with it—whether the prerequisites prescribed by the statute to the issuing of the bonds, beyond the organization of a rail road company, &c., and the filing in the county clerk’s office of the assent of resident tax-payers, with the affidavit attached as specified in the statute, were complied with or not—the bonds are valid in the hands of and may be enforced by the plaintiffs as bona fide holders. This doctrine is fully sustained by the case of The Farmers’ and Mechanics’ Bank of Kent County v. The Butchers’ and Drover’s Bank, (16 N. Y. R. 125,) and the cases therein cited. The utmost that purchasers of the bonds were required to ascertain was, that such a rail road company had been organized, and the assent and affidavit provided for by the statute, filed; that there was apparent authority to execute the bonds; and those things only were necessary to such apparent authority. Full compliance with those conditions to the existence of the power, before the making of the bonds, appears by the complaint. The bonds express an acknowledgment that in pursuance of the statute, and for the purpose of aiding in the construction of the rail road specified in the bonds, the towns owe, and a promise by them to pay, to____or bearer $1000, with interest at the rate of seven per cent, payable as therein mentioned. They are without seal, and are in terms negotiable ; and they contain every requisite to negotiability in the case of an ordinary instrument for the payment of money. They are a written promise by one to another for the payment of money absolutely. The statute does not prescribe the form of the bonds, nor expressly provide whether they may or shall not be negotiable ; but I think there is in its language the purpose for which the bonds were to be used, and the general [452] understanding and practice of the community in regard to similar securities, evidence that the legislature contemplated, in respect to them., the element of negotiability. In the 5th section of the statute, "provision is made for the payment of dividends on stock to the “ holders of the aforesaid bonds ;” and in the 7th section direction is given in regard to the disposition of the proceeds of a sale of shares of stock, if the “owner or owners of said bonds” will not accept the same. This language implies transferability, and is especially appropriate in reference to negotiable paper. Again, the bonds were to be used for borrowing money, several bonds were" to be issued to several individuals, and, in the usual course of business, negotiable securities would be required by lenders. Further, the bonds belong to a class of securities which have been generally understood to be, and have been treated as negotiable. They are, in popular language, rail road bonds, of which a vast number, of immense aggregate amount, have, within the last twenty years, been issued both in this country and abroad, and which have been in daily circulation from one to another by mere delivery. Aside from the authority of adjudged cases, I should not doubt the negotiability of the bonds in question; but the decisions are conclusive on the subject. In the Bank of Rome v. The Village of Rome, a case in the court of appeals of this state, decided in March last, bonds of the village corporation, although under the corporate seal, issued under the authority of a statute for the payment for stock in a rail road, were held to be negotiable, although the statute is silent on the subject. Comstock, J., says, “ The bonds were payable to bearer, and, although under the corporate seal of the village, they were negotiable instruments in such a sense as would except them, in the hands of a bona fide holder, from a defense which might be available against the rail road company.” (State of Illinois v. Delafield, 8 Paige, 527. Same case on appeal, 2 Hill, 159, 177. Mechanics’ Bank v. New Haven R. R. Co., 3 Kern. 625, 627. Fisher v. Morris Canal Co., 3 Am. Law Reg. 423. See also Gor [453] gier v. Mieville, 3 Barn. & Cress. 45; 10 Eng. Com. Law, 16; 2 Parsons on Con. 240.) The question remains, whether the bonds are in conformity to the act in respect to the securities authorized. The statute specifies “ a bond or bonds ” as the instruments which it shall be lawful for the towns to execute. In strictness, the term bond imports a sealed obligation ; and the securities in question are not bonds, for the want of a seal. But it is not probable that the legislature used the word, in this statute, in that confined sense, or as signifying more than an instrument substantially in the form of a bond, without regard to a seal. The principal object in view in regard to- the security was, that it should be a promise by the town to pay, which would be acceptable to the lenders. It is not perceived that a seal would be of any benefit to the towns ; it would benefit only the lenders. A technical bond would be a higher security than an unsealed promise to pay, and more valuable, in some respects, to a creditor, and to the same extent less desirable to a debtor. Specifying bonds instead of notes, must therefore have been with a view to the interests of the creditors only; and if they were willing to waive the proposed benefit and accept unsealed obligations, it does not seem to be just that the towns should be permitted to object that those obligations were not authorized. This view of the intention of the legislature in the use of the term bond is confirmed by the well known fact, of which we may take notice as part of the history of the state, that towns do not ordinarily have occasion for or possess a corporate seal, their corporate capacity being very lim- ■ ited. Construing the statute according to its spirit, its obvious substantial meaning, I cannot believe that the omission of a seal is a fatal objection to the bonds, as being instruments not warranted by the law. I think, therefore, that the so called bonds are valid securities against the towns, in the hands of the plaintiffs as bona fide holders, and for that reason that the judgments at special [454] term should he reversed, and judgments ordered for the plaintiffs on the demurrers, with leave to the defendants to answer on payment of costs. [Cayuga General, Term, June 6, 1859. T. R. Strong, E. Darwin Smith and Johnson, Justices.]