Arents v. Commonwealth

• Decision Date: 11 June 1868
• Citation: 59 Va. 750
• Parties: ARENTS v. THE COMMONWEALTH.
• Court: Virginia Supreme Court

59 Va. 750

ARENTS v. THE COMMONWEALTH.

Supreme Court of Appeals of Virginia.

June 11, 1868

1. The acts of March 20, 1848, and of March 29, 1851, authorized the guaranty of the State upon the bonds of the city of Wheeling to pay her subscription to the stock of the Baltimore and Ohio Railroad Company, payable to bearer and transferable by delivery, though not payable to the company, but to a third person.

2. If the contract of guaranty of a coupon bond transferable by delivery is not negotiable at law along with the bond and coupons, it is assignable in equity, and an interest in it passes in equity to each successive holder of the bond or coupon.

3. To give effect to the manifest intention of the parties, the right to enforce the guaranty, unless lost by laches or otherwise, must be held to be co-extensive with the right to enforce payment of the bond or coupon. The guaranty, as an accessory to the bond or coupon, follows it and adheres to it in equity, and the right to enforce the guaranty must be determined by the right to demand payment of the bond or coupon.

4. Though in general the contract of a guarantor is to pay, if after due diligence the debt cannot be made out of the principal, yet the intention of the parties must govern, and if it was the guarantor's intention to make himself liable on the default of the principal debtor, without the use of the ordinary means to compel payment by him, or proof of his insolvency, he will be held liable accordingly.

5. In coupon bonds, the contract to pay principal and interest is in the bond, and whatever the form of the coupon, it answers substantially the same purpose, which is to afford to the holder evidence of his right to demand what is due on the bond, and a convenient mode of collecting it.

6. Though coupons are in the form of orders to pay money, they are not to be regarded as bills of exchange.

7. The degree of diligence required of the holder of a coupon is to be ascertained by reference to the relations of the parties. It must be presented for payment within a reasonable time after it becomes due and payable, so as to save the liability of the guarantor in case of any injury resulting from delay.

8. Though it is not required that a coupon shall be presented for payment on the day it becomes due, it is nevertheless regarded as due and payable on the day fixed for the payment of interest.

9. Though the coupon is made payable at a named banking-house on presenting to them the proper coupon, it is still due and payable on the day when the interest is due, as specified in it.

10. Coupons stolen after the day when they had become due and payable, though they afterwards come into the hands of a bona fide holder for value, cannot be held by him against the rightful owner.

This was a proceeding under the statute in the Circuit Court of the city of Richmond by George Arents against the Auditor of Public Accounts, to recover the amount of a number of coupons for interest due upon bonds issued by the city of Wheeling and guaranteed by the State of Virginia. They were for interest due upon the bonds, for January and July 1862, 1863 and January, 1864.

The auditor filed his answer to the petition, and objected to the payment of the amount claimed, on the grounds: First--That the coupons held by Arents were stolen or abstracted from the Second Auditor's office in the city of Richmond; and due notice thereof had been given warning all persons against trading for them. Second--That the claim of the petitioner was equally obligatory upon the State of West Virginia; and that the whole claim should not be demanded of the State of Virginia.

The petitioner, by his attorneys and the Attorney General on behalf of the Commonwealth, agreed to waive their right to a jury, and to submit the whole matter of law and fact to the judgment of the court; and the facts were agreed.

The city of Wheeling, under the authority of the act of March 20 1848, and the act of March 29th, 1851, issued her bonds to the amount of five hundred thousand dollars, in sums of one thousand dollars each, which were guaranteed by the State of Virginia, for the purpose of paying the subscription of the city to the stock of the Baltimore and Ohio Railroad Company. These bonds, with their coupons, are in the following form:

" Know all men by these presents: That the city of Wheeling, in the State of Virginia, justly owes Selden, Withers & Co., or bearer, one thousand dollars, which she hereby promises to pay in good and lawful money of the United States, at the banking house of Duncan, Sherman & Co., in New York, on or before the 1st day of July, 1872, with interest thereon at the rate of six per centum per annum, payable half-yearly at the said banking house, on the first of January and the first of July in each year, from the date of this bond and until the principal be paid, on presenting to the said banking house the proper coupon hereunto attached."

These bonds bore date the 1st day of July, 1852.

" Guarantee of the State of Virginia:

I, Robert Butler, treasurer of the Commonwealth of Virginia, in conformity to an act of the General Assembly of Virginia passed on the 20th of March, 1848, do hereby pledge the faith of the State for the punctual payment of the interest and the ultimate redemption of the principal sum of money appearing due by the above bond, according to the terms therein specified.

Coupon, city of Wheeling, guarantied by the State of Virginia. Duncan, Sherman & Co., of New York, will pay the bearer thirty dollars, the half-yearly interest on the Wheeling bond 269, due 1 January, 1867.

M. NELSON, Mayor. "

These bonds were negotiated and put into circulation by the city of Wheeling, and about the time of the maturity of the several coupons described in the petition, the government of Virginia at Richmond took up these coupons; and whilst they were in possession of said government, they were abstracted and taken from the office of the Second Auditor. In November, 1864, Arents, not knowing that these coupons had been so taken and abstracted from said office, bought the same, in the city of Richmond, from the Farmers' Bank of Virginia, in the regular course of business, (the said bank being in the habit of dealing in such securities,) and gave to the bank full value therefor; and then became, and has continued to be, the bona fide holder of them for value. Afterwards, on or about the , in the year 1865, the Commonwealth caused a notice to be published in a paper in the city of Richmond, forewarning all persons from trading or dealing with said coupons.

From the 16th of August, 1861, to the 3d of April, 1865, all commercial or other intercourse between Richmond and New York, at which latter place said coupons were payable, and between Richmond and Wheeling, was prohibited; and in a reasonable time after said prohibition was removed, the petitioner duly presented said coupons at the banking house of Duncan, Sherman & Co., in New York, and demanded payment thereof, which was refused. A like presentment and demand was made upon the city of Wheeling, with the like result; though it was agreed that Wheeling had paid all the other coupons held by the State on said guarantied bonds, and was only waiting to have the right to these coupons settled, when she would pay them.

The cause came on to be tried on the 2d of August, 1867, when the Circuit Court rendered a judgment in favor of the Commonwealth, with costs; and ordered that the coupons referred to in the petition of the plaintiff be delivered to the Second Auditor of the State, for the benefit of the Commonwealth. Arents thereupon obtained a writ of error to this court.

Wise & Fitzhugh, for the appellant.

Robert Johnston and Crump, for the Commonwealth.

RIVES J.

Recent decisions of the Supreme Court of the United States have regarded and treated corporation and municipal bonds, with coupons, payable to bearer, as negotiable instruments. Moran v. Commissioners of Miami County, 2 Black's U.S. R. 722; Mercer County v. Hacket, 1 Wall. U.S. R. 83; Gelpcke & al. v. City of Dubuque, Id. 175; Thomson v. Lee County, 3 Wall. U.S. R. 327. They are negotiable securities, having all the qualities and incidents of commercial paper, and imparting to the holder a perfect title by delivery. This doctrine proceeds not only on grounds of public policy, but is designed to effectuate the intentions of the parties. Justice Wayne, in delivering the opinion of the court in Moran v. Commissioners of Miami County, says, with great propriety, that such bonds, with their interest warrants, are commercial securities, though they be not in the accustomed form of promissory notes, or bills of exchange, and that the parties intended them to be passed from hand to hand to raise money upon them, so that a full title was intended to be conferred on any person who became the legal holder of them."

These bonds of the city of Wheeling, and their coupons, are conceded to belong to this class of securities. The bond itself is payable to bearer " at the banking house of Duncan, Sherman & Co., in New York, on or before the 1st day of July, 1872, with interest thereon at the rate of six per centum per annum, payable half-yearly at the said banking house on the first of January and the first of July in each year, from the date of this bond, and until the principal be paid, on presenting to the said banking house the proper coupon hereunto affixed." The coupon is in a peculiar form; it is not, as is most usual, a mere warrant, ticket or memorandum for such an amount, payable at a certain place and time. In my view of this case, the legal nature of this coupon constitutes the very gist of this controversy. I shall, therefore, be excused, for illustrating it by...