Fox v. Hartford & West Hartford Horse Railroad

Torrance, J. In his reasons of appeal the defendant claims, in substance, that the trial court erred: (1) in holding that the title to the coupons passed to the plaintiff with the bonds; (2) in excluding certain testimony; (3) in holding that the plaintiff ’ did not take the overdue coupons — 7 — subject to the “ arrangement ” between Henney and the defendant ; (4) in allowing any interest upon the coupons. These claims will be considered in the order stated. We are of opinion that there was no error in holding, upon the facts found, that the plaintiff, as the undisputed owner of the bonds, also owned the coupons. The bonds with the coupons attached to them were voluntarily delivered to the plaintiff by the defendant, at some time prior to the making of the contract, by way of pledge for a debt. The plaintiff, from the time this pledge was made to the time the contract was made, with the full knowledge and assent of the defendant, held both the bonds and the coupons as security for Ms debt. The bonds were of uncertain market value and not readily salable. Just before the making of the contract, then, Henney owned the bonds and the coupons, and both were in the possession of the plaintiff by way of pledge. It was under these circumstances that the transaction of January 4th, 1896, took place. By that transaction it is conceded that the plaintiff became the absolute owner of the bonds wMch were then M Ms hands, subject only to Henney’s right to repurchase as provided for in the contract; and by it, also, Henney’s debt to the plahitiff was paid, and the stock notes were surrendered to Henney. At the time Henney thus transfers the title to the bonds to the plamtiff, he does not ask to have the coupons surrendered to Mm, nor does he M any way intimate that they are not to pass with the bonds, and the plaintiff, with Henney’s full consent, retains possession of them. Upon these facts the inference is well Mgh irresistible that the parties intended that the coupons should pass with the bonds. About the only fact claimed to be adverse to tMs conclusion, is the fact that nothing was said one Avay or the other about the coupons; but this fact is only one of evidential Amlue, and as such is of comparatively slight importance; certainly by itself it is by no means conclusive. Suppose the bonds with the coupons attached had been in Henney’s hands Avhen the contract was made, and pursuant to its provisions he had passed the bonds with the coupons attached over to — 8 — the plaintiff; conld there be any reasonable doubt that he intended to transfer the coupons as well as the bonds, even if nothing had been said about the coupons ? We think not. Upon the facts found, and with reference to the point now tinder consideration, the present case does not essentially differ from the case supposed. The trial court was fully justified in holding that the coupons passed to the plaintiff Avith the bonds. The court excluded evidence of the amount realized by the plaintiff from the disposition of the Light and Power Company stock, and of this the defendant complains. Upon the conceded facts in the case, it is difficult to see how the defendant had any interest in this matter. Henney might have had such an interest, but he was not a party. That evidence was admissible only on the theory that the stock when disposed of, was held merely as collateral for Henney’s debt, and that this point was in issue in the case. But the uncontradicted evidence in the • case showed that the stock was the plaintiff’s absolute property, and no evidence was offered to show that it was not; and furthermore the point was not in issue. The evidence, for all the purposes for which it was offered, was irrelevant and was rightly excluded. Plenney as a witness was asked, “Was it your intention to convey the coupons ? ” The question really called for evidence of the actual, secret, unmanifested intention of Henney, Avhich, under the circumstances, was of no legal significance. The real question was as to his manifested intention, and tins could he ascertained only from the contract read in the light of the circumstances under winch it was made. The evidence was properly excluded. Hotchkiss v. Higgins, 52 Conn. 205. The next question is whether the court erred in holding that the plaintiff did not take the two overdue coupons subject to the arrangement between Henney and the defendant company: It must be conceded that these two coupons are negotiable instruments, and that the plaintiff took them Avhen they were overdue. The fact that these two coupons were overdue'would not necessarily affect the plaintiff’s title — 9 — to the bonds, nor to the coupons not overdue. 2 Daniel on Neg. Inst. (3d ed.) §1506 a; Tiedeman on Com. Paper, § 473; nor is it claimed that it would do so; the only claim made is that it affected the title of these two coupons. It may be conceded also, as claimed by the defeixdant, that in taking these two overdue coupons the plaintiff took them subject to all defenses and equities which would have been available to the defendant against Henney. 2 Daniel on Neg. Inst. § 1505; Tiedeman on Com. Paper, § 473. The defenses and equities which would have been thus available, are confined to those which existed and attached to the coupons themselves in the hands of Henney at the time of the transfer, and do not include defenses and equities arising out of collateral transactions. Simpson v. Hall, 47 Conn. 417. In other words the plaintiff took such title to the overdue coupons as Henney had to convey. “ The indorsee of overdue paper takes it as a holder with notice that it is subject to some defense, for he takes it at a time when in due course it should have been paid. He therefore takes it subject to the defense: (1) That it was affected in its inception with some inherent vice, as, for instance, fraud, illegality, ox-duress ; or (2) that the consideration failed, or that payment had been made, or that there had been accord and satisfaction, at the time of the indorsement, or that there was some equitable defense arising out of the transaction, in which the paper was given, which disabled his indorser in whole or in part. Any of these defenses is called an equity attaching to the instrument.” 1 Daniel, Neg. Inst. § 725 a; Tiedeman, Com. Paper, § 295. The arrangement which is found to have existed betweexx Henney and the defendant is that Henney “ was not to present the coupons for payment until it was convenient for it to pay thexn.” The utmost that can be claimed for this is that it was in effect an agreement not to bring suit upon the coupons until it was convenient for the company to pay them; and it admits of grave doubt whether a collateral agreement of this kind, which so directly contradicts the language of the coupon, is not a defense or an equity aris — 10 — ing out of a collateral transaction, by which the plaintiff would not be affected. It is not, however, necessary to determine that question here, for we think that upon the facts found it is not shown that the company could have availed itself of this arrangement even as against Henney; and if so the plaintiff cannot be affected by it. It is found that Henney, who was president of the defendant company, “ had had an arrangement ” of the kind indicated, but it is not found that it was in existence when the coupons were transferred to the plaintiff. For aught that appears it may have ceased to exist long before that time. Then again it is not shown that there was any consideration for the forbearance on Henney’s part, or that he was in any way legally or equitably bound to forbear, or to continue his forbearance for any length of time. It is not even shown .that there was any contract or agreement at all, with or without consideration, on'Henney’s part, not to present the coupons for payment. For aught that appears it was merely an understanding or “ arrangement ” to last during the pleasure of Mr. Henney, and not at all obligatory upon him legally or equitably. Under such circumstances Henney could have brought suit on the coupons, and the “ arrangement ” would be no defense as against him; and we think it is equally unavailing as against the plaintiff standing in Henney’s shoes. The court allowed interest upon the coupons from the time they were presented for payment, and of this also the defendant complains. It is settled by the current of American authorities that coupon bonds, and coupons, like those in the present case, are negotiable instruments, and that the coupons maybe detached and negotiated separately by simple delivery. Society for Savings v. New London, 29 Conn. 174; New London City Bank v. Ware River R. Co., 41 id. 542; 2 Daniel, Neg. Inst. § 1509 et seq.; Tiedeman, Com. Paper, §§ 473-478. The coupon may be outstanding and suit brought upon it even after the bond has been paid and satisfied. National Exchange Bank v. Hartford, etc., R. Co., 8 R. I. 375. As the coupon may be thus detached from the bond, and by negotiation — 11 — may thus become an independent claim, existing as .well before as after tbe bond is paid, the general rule founded in good sense, and supported by the very great preponderance of authority, is that interest, at least after demand of payment, is allowable upon overdue coupons. Tiedeman, Com. Paper, § 477 and cases cited; 2 Daniel, Neg. Inst. § 1518 and cases cited. “Interest is recoverable upon coupons after their maturity; for being promissory notes, generally speaking, it is just that if not paid when due they should continue to draw interest by way of compensation for the damages incurred from the detention of the money. Interest upon overdue coupons is therefore recoverable and should be computed at the lawful rate without semi-annual or other rests.” Freeman’s Note to Morris Canal Co. v. Fisher, 64 Am. Dec. 439, citing a great number of cases; Whitaker v. Hartford, eta., R. Co., 8 R. I. 47; National Exchange Bank v. Hartford, etc., R. Co., ibid. 375; Beaver County v. Armstrong, 44 Pa. St. 63; Trustees, etc., v. Lewis, 34 Fla. 424, 43 Am. St. Rep. 209. We see no good reason why this almost universal rule as to the allowance of interest upon overdue coupons, especially after demand of payment, should not apply in a case like the one at bar. The defendant, upon this point, relies upon Rose v. Bridgeport, 17 Conn. 243. That case was decided at a time (1845) when coupons and coupon bonds, so common to-day in the markets of the world, were just beginning to come into use, and the coupons in that case were quite different from the coupons in the present case. In that case the coupon itself contained no promise to pay the interest mentioned in it. It simply acknowledged that, on a named date, there would be due to the bearer half a year’s interest on a certain bond, and that this would be payable on that date. The coupons were signed by an agent of the city—an agent to acknowledge but not to pay. In the case at bar the coupons declare expressly that the company will pay the bearer the interest at a certain bank on a certain day, and they are signed by the treasurer of the company. The decision in Rose v. Bridgeport, proceeds, in part at least, upon the view taken by the court — 12 — concerning the nature of the coupons in that case. The coupons were not regarded as conferring any right of action at all upon the holder; they were mere certificates that a half year’s interest would he due on the bond at the date specified ; and although payable to bearer, they were held to operate “ only as an order or letter from the obligee, requesting the interest upon the bond to be paid to another.” The only obligation to pay interest was held to arise from the bond alone, and not from the coupons, and the action was regarded as an action upon the bond. Viewing the coupons in this light, the court regarded the action as one brought upon the bond to recover interest, as such, upon interest, that is compound interest, as such, and held that as the case then before it did not fall within any of the classes of cases in which compound interest was recoverable, the plaintiff was not entitled to compound interest. The principles applied in that case have little or no application to a case like the present. The coupons in this case are regarded by the law as negotiable instruments, and for most purposes as being entirely independent of the bond, and as conferring a right upon the holder, whoever he may be, to the sum of money mentioned in the coupon at the very day therein specified. Cases like this seem to fall, and to have been intended by the parties to fall, within the principle of the third rule laid down by Judge Swift in Selleck v. French, 1 Conn. 32, 33, rather than within the rules applied in Rose v. Bridgeport. The rule laid down by Judge Swift is this: “ 3. Where there is a written contract to pay money or other thing on a day certain, and the contract is broken, then interest is allowed by way of damage for the breach, as in the case of notes and bills of exchange.” We are not disposed to extend the doctrine applied in Rose v. Bridgeport to cases like the present. We are of opinion that the interest on the overdue coupons was properly allowed. There is no error. In this opinion the other judges concurred.