Union Trust Co. of New York v. Chicago & Lake Huron R.

Brown, D. J. The certificate in question is not a negotiable instrument. The order under which it was issued gave the receiver no power to make negotiable paper. The certificate contains no express promise to pay, but is a mere acknowledgment by the receiver of an indebtedness to Bowes’ order, payable out of a particular fund, if it be sufficient to pay in full all holders of such certificates, or, if it be not sufficient, then only a pro rata share with other holders. It recites an order limiting the amount of such paper to be issued, and is [515] uncertain both as to the payor and the fact of payment. The mere fact that it is made payable to the order of the payee is immaterial, unless the paper is negotiable in its nature. Railroad Co. v. Howard, 7 Wall. 415; Newbold v. P. & S. R. Co. 5 Bradw. 367, 375. It is said by the court in Baird v. Underwood, 74 Ill. 176,— “ it enters into llie definition o£ a promissory note that the money must be payable at all events, not depending upon any contingency either in regard to the event, or the fund out of which payment is to be made, or to the parties by or to whom payment is to be made.” See, also, Dcmkes v. Tomne, 3 Wil. 267. These characteristics are conspicuously absent in the certificate in question. Indeed, it lacks the most essential elements of commercial paper, and we believe the courts of this country have, -without exception, held certificates of this nature to be non-negotiable. Stanton v. A. & C. R. Co. 2 Woods, 506; Turner v. P. & S. R. Co. 95 Ill. 134; Bank of Montreal v. C. & C. R. Co. 48 Iowa, 518; Newbold v. P. & S. R. Co. 5 Bradw. 367. It results, then, that although the petitioner appears to be a holder for a valuable consideration of the certificate in question, without notice of any facts except such as appear in the order, he took it subject to all the equities between the original partios. The paper was made pay*able to Bowes, or liis order, and was delivered to him by the receiver for negotiation and sale; but it appears that Bowes was unfaithful to his trust, and never accounted to the receiver either for the certificate or for the money realized by its sale. It is insisted, however, that the receiver made Bowes his agent to sell the certificate; that Bowes indorsed it, and, therefore, presumptively received the money upon it; and that such payment to him was in law a payment to the receiver in his official capacity, and a credit to the fund; and that, as it does not appear to whom Bowes transferred it, the presumption is, from his indorsement, that he received full value .for it. It is material in this connection to inquire whether the receiver had power to delegate his authority to Bowes to sell the certificate and receive the money upon it. If he was vested by the order of June 25th, simply with a personal trust, he had no power to ap [516] point an agent; and if he assumed to make such appointment ■without authority, he would be personally responsible for the conduct of his subordinate. If, however, the trust was one which could be delegated, he would be liable in his official capacity only. The substance of the law upon this subject is thus stated in Story on Agency, § 14: “ The -true doctrine which is to be deduced from the decisions is, and it is entirely co-incident with the dictates of natural justice, that the authority of an agent is exclusively personal, unless from the express language used, or from the fair presumptions growing out of the transaction, or of the usages of the trade, broader power was intended to be conferred on the agent.” See, also, Commercial Bank v. Norton, 1 Hill, 505. That the receiver of a railroad must act very largely through servants and agents in the ordinary business of the road is evident. He is in fact the superintendent and manager of the road, and the head of an army of employes whose duties are distinctly defined by usage and the necessities of the case. There can be no doubt of the power of the receiver to appoint these agents, and if his appointments are made in the exercise of a reasonable judgment and discretion, he would not be liable personally for their negligences or misfeasances. But his authority to raise, money upon certificates stands upon a different footing. His general authority as receiver gave Mr. Bancroft no power to issue these certificates. It could only be done under the power conferred by a special order of the court. It was his duty to prepare a form of certificate in conformity with this order, and to sell the securities upon the most favorable terms he could obtain. The preparation of the certificates involved very little in the way of skill or judgment. Their negotiation and sale, and the receipt of the moneys, were the important features of the transaction. It was a personal trust which he had no right to delegate to another. It involved, not merely the sale of the certificates upon the best possible terms,, but the safe-keeping of the moneys realized by such sale. If he had.the power to authorize an agent to sell and receive the money upon this certificate, the receipt of the money by the agent would be a receipt by the receiver; and if the agent absconded with it, the receiver would incur no [517] personal liability if ho used due care in the selection of his agent. If he had the power to authorize Mr. Bowes to sell the certificate for $2,500, I see no reason why he had not the same power to put the whole issue of $50,000 in his hands, and entrust him with the negotiation and sale. Suppose this had been done, and he had embezzled the money, would it be claimed that the receiver would not be liable ? It is incredible that a court would permit an agent to be appointed for the negotiation of these certificates, and relieve the receiver to that extent, without at least requiring from such agent a bond for the faithful performance of his duties. This was apparently the view taken by the supreme court of Illinois in Turner v. P. & S. R. Co. 95 Ill. 304, though the question is not discussed in the opinion of the court. It seems to me, then, that Bowes must be considered what he purports to be, viz., the payee of the certificate, and that the party buying of him dealt with him as the owner, and that the certificate in the hands of the petitioner is open to any defence which might exist if it were still in the hands of Bowes. I am not prepared to say, even if the receiver had authority to make Bowes his agent to negotiate this certificate, that the more indorsement of Bowes creates a presumption that he received its par value; and it is conceded that the receiver had no right to negotiate it for less than par. Indeed, I am inclined to think that the mere fact that the petitioner was able to purchase it at so large a discount so soon after it was issued, and with knowledge of the order under which it was issued, was itself sufficient to put him under inquiry. Bowes is dead, and his affidavit made before death cannot be received in evidence. Lane is the most material witness in this case, and it is exceedingly unfortunate that we have not the benefit of his testimony. No reason is given why it has not been produced. Upon tho whole, it seems to me quite clear that the petitioner does not stand in a position to charge the receiver fund with the payment of the certificate, and his petition must therefore be dismissed.