Ronede v. Jersey City

NIXON, District Judge. The principle is well settled by the supreme court that in a suit by a bona fide holder against a municipal corporation- to recover the amount of coupons due or bonds issued under authority conferred by law no question of form merely, or irregularity, or fraud, or misconduct, on the part of the agents of the corporation can be considered. The only matters left open in this case are: 1. The authority to issue the bonds. 2. The bona fides of the holder. East Lincoln v. Davenport, 94 U. S. 801; Pompton Tp. v. Cooper Union for Advancement of Science and Art, 101 U. S. 196; Copper v. Mayor, etc., of Jersey City, 15 Vroom [44 N. J. Law] 634. 1. An examination of the charter and supplements referred to renders it certain that ample legislative authority was granted for the issue of the bonds. It is of no importance whether or not the city officials complied with all the requirements of the law in the method or manner of their issue. If there was any dereliction on their part, the rights of a bona fide holder are not to be prejudiced thereby. 2. Is the plaintiff such a holder? The burden of establishing the defence is on the ue-fendant, and unless there was something about the bonds which should have put the plaintiff on inquiry he is entitled to recover. The only fact upon which' the defendant’s counsel seemed to rely was that at the time of the purchase there were attached to the bonds eleven overdue coupons representing matured interests, amounting to $7,700. Being questioned, the plaintiff testified that having no suspicion he made no inquiries with regard to the bonds, except that, observing the overdue coupons, he asked the vendor why they had not been collected, and received for answer that “they were probably not payable yet.” Was the plaintiff’s neglect to institute further inquiries proof of bad faith on his part? In Murray v. Lardner, 2 Wall. [69 U. S.] 110, the supreme court reiterated the settled law that coupon bonds [1153] of the ordinary kind payable to bearer passed by mere delivery; that a purchaser in good faith was unaffected by want of title in the vendor; and that the burden of proof or a question of such faith lies on the party who assails the possession. “Suspicion of defeat of title or the knowledge of circumstances which would excite suspicion in the mind of a prudent man, or gross negligence on the part of the taker at the time of the transfer, will not defeat the title.” And see Cromwell v. County of Sac, 96 U. S. 58, in which case the question whether overdue and unpaid coupons attached to a municipal bond which had several years to run rendered the bond and subsequently maturing coupons dishonored paper, so as to subject them in the hands of a purchaser for value to defences good against the original holder. The court held that their presence had no such effect. In Parsons v. Jackson, 99 U. S. 434, bonds of a railway company in Louisiana had never been issued by the company, but had been seized and carried away. They were drawn payable in London. New York, or New Orleans, and the president of the company was authorized to fix the place of payment by his indorsement thereon. When stolen they contained no such indorsement. They were sold for a very small consideration, with due and unpaid coupons for several yeats attached to them. The court held that the absence of the required indorsement was a defect which deprived the bonds of the character of negotiability, and that the purchaser was affected with notice of their invalidity. Bradley, J., for the court, asserted “that the presence of the past due and unpaid coupons was itself an evidence of dishonor sufficient to put the purchaser on inquiry.” But in Indiana & I. Cent R. Co. v. Sprague, 103 U. S. 756, this expression is commented on, qualified, and restricted, and it was again held, and may now be accepted as law, that overdue and unpaid interest coupons attached to municipal bonds are not, in themselves, sufficient to put the purchaser on inquiry. Judgment for plaintiff.