Mason v. Frick

Chief Justice Mercur delivered the opinion of the Court, October 6,1884. The plaintiff declared in detinue and debt to recover a bond, or its value, in the possession of the defendant, which had been stolen from the plaintiff. The uncontradicted evidence was that the defendant obtained the bond in good faith, and paid a valuable consideration therefor. These facts were well established. The main contention was whether the bond was so far of a negotiable character as to pass a valid title thereto to the defendant. This question of law was reserved by the Court, and judgment afterwards entered thereon in favor of the defendant. The instrument was a “ Denver City Water Company ” bond. It was one of a series issued at Denver, Colorado, and made payable to ............or bearer, in the city of New York, twenty years after the date thereof. The interest was provided for by coupons attached, payable to bearer semiannually at the agency of the company in New York. The power of the company to issue the bond, and its liability to pay the same are unquestioned. The negotiability of the bond is to be decided by an inspec [167] tion of its form, and the well known purpose for which it issued. Do they give it such a negotiable character as to protect a good faith purchaser? It is true the bond is under seal, and the payment thereof secured by a first lien mortgage on the works of the company. As, however, it is payable to bearer the manifest intention was to make it transferable by delivery. Presumptively the bonds were issued to raise money to construct the works of the company. It was a private corporation, and it put these bonds in the market for sale. The clear intent of the maker was that they should pass as negotiable paper. With the language of negotiability on its face, did the seal impressed thereon destroy the negotiability of this bond ? We are not dealing with the case of an obligation under seal between individuals; nor with the case of an isolated bond of a corporation executed to secure the performance of a contract to do one specific act; but with the case of a corporation which issued 250 of like bonds to borrow money, and put them on the market for sale. It is held by the supreme court of the United States and by the courts of our sister states that the bond of a corporation of this form and character is negotiable, and that the mere addition of the seal of the corporation which issued it, does not destroy its negotiability. So where the name of the payee is left blank the holder may fill in his own name, and bring suit on the instrument. Chapin v. Vermont & Mass. R. R. Co., 8 Gray, 575; White v. Same, 21 How., 575. The bond of a railroad company to secure the payment of money, although under seal, when made payable to bearer or to order, is regarded as invested with all the attributes of negotiable paper: Zabriskie v. Cleveland C. & C. R. R. Co., 23 Id., 381; Winfield v. Hudson, 28 N. J. L., 255 ; Murray v. Lardner, 2 Wall, 120; Morris Canal Co. v. Lewis, 12 N. J. Eq., 323. So municipal bonds, made payable to bearer, are held to he negotiable. They are transferable by delivery, and the holder may sue in his own name. Taylor on Private Corporations, § 326; Commissioners v. Clark, 94 U. S., 278; Cromwell v. County of Sac, 96 Id., 51; Ottawa v. National Bank, 105 Id., 342; Thompson v. Perrino, 106 Id., 589. The early decisions of our own state do not recognize this rule to its full extent. The later cases, however, have been gradually approaching a conclusion in harmony with the decisions elsewhere. We will refer to a few cases showing the conflict which has been going on and the final conclusion reached. It was held in Frevall v. Fitch, 5 Whar., 325, and in Hopkins v. Railroad Co., 3 W. & S., 410, that an instrument in the [168] form of a promissory note, if attested by the seal of the borpó* ration was not negotiable. In Carr v. LeFevre, 3 Casey, 413, it was held that a bond issued by a corporation, payable to bearer, will pass by delivery, and the holder may sue on it in his own name. -In the opinion of the court by Mr. Chief Justice Lewis, it is said: “ We do not desire to have any doubt on the question whether the-holder of bonds issued by a corporation, payable to bearer, may maintain an action on them in his own name. Such bonds are not strictly negotiable under the law merchant, as are promissory notes and bills of exchange. They are, however, instruments of a peculiar character, and being expressly designed to be passed from hand to hand, and by common usage so transferred, are capable of passing by delivery so as to enable the holder to maintain an action on them in his own name.” This rule is recognized to be correct in Philadelphia & Sunbury R. R. Co. v. Lewis, 9 Casey, 33. It was ruled in Diamond v. Lawrence County, 1 Wright, 353, that a coupon bond of the county, under seal, should hot be treated as negotiable paper, although it was there conceded that all the courts, American and English, held otherwise. County of Beaver v. Armstrong, 8 Wright, 63, contains a very full reference to the authorities showing that corporation bonds under seal, payable to bearer in money, were negotiable. In the opinion of the court by Mr. Justice Read, it is said: “It is clear then, upon reason'and authority, that the coupons which form the subject matter of this suit, and the bonds to which they were attached, having been regularly issued by the county of Beaver, are on the footing of negotiable paper, and pass from hand to hand by delivery as the representatives of money. They may circulate-together or separatelj'-, and suits on -the coupons are sustained entirely independently of the bonds, to which they were originally annexed. It is therefore of very little consequence whether they áre promissory notes,' bills, drafts or checks, for they have the same qualit}*- of negotiability as either of those instruments, and the-holder sues upon them and recovers in his own-name.” In Bunting’s Adm’rs v. Camden & Atlantic R. R. Co., 81 P. F. Smith, 254, the case of Carr v. LeFevre, supra, is cited approvingly, and it is held that corporation bonds payable to bearer may be sued in the name of the holder. Again, in the late ease of Gibson v. Lenhart, 5 Out., 522, it was held that every transfer of railroad coupon bonds for value and without notice, gives the transferee a good title to them as against the former holder. In the opinion of the court by Mr. Justice Sterrett, he says: “Being negotiable securities, every transfer- of the bonds to a new holder, for [169] value and without notice, would give the latter a good title to them as against the former holder. That such is the status of coupon bonds similar to those in question, is too well settled by recent decisions to admit of doubt,” citing County of Beaver v. Armstrong, supra, and other cases. He then proceeds “ Like a bank note, or promissory note indorsed in blank, they pass by delivery, and • a good faith purchaser is unaffected by want of title in his vendor. The last taker is presumed to be a lona -fide holder for value, and may maintain bis possession against everybody until the contrary is successfully established by those who undertake to assail his possession.” We adopt the conclusion that a bond of the form of the one now in question, must now be held in Pennsylvania, as elsewhere, to possess the incidents of negotiable paper. The defendant having taken this bond in good faith, and having paid a valuable consideration therefor, acquired a good title: Phelan v. Moss, 17 P. F. Smith, 59; McSparran v. Neeley, 10 Norris, 17. Conceding there was technical error in the charge of the court, yet the plaintiff was not injured thereby. The conclusion at which we have arrived clearly sustains the correctness of the judgment. We do not reverse for immaterial error. Judgment affirmed.