Mason v. Frick
| Decision Date | 06 October 1884 |
| Citation | 105 Pa. 162 |
| Parties | Mason <I>versus</I> Frick. |
| Court | Pennsylvania Supreme Court |
Before MERCUR, C. J., GORDON, PAXSON, TRUNKEY, STERRETT, GREEN and CLARK, JJ.
ERROR to the Court of Common Pleas No. 1, of Philadelphia county: Of July Term, 1883, No. 195.
Bradbury Bedell for the plaintiff in error.—The bond being under seal was a specialty, and while the recent cases in this State have recognized a sort of qualified negotiability in municipal and railroad bonds payable to bearer, to the extent that the holder may sue the obligor in his own name, it has always been said that all the incidents of negotiability do not attach, and many cases hold that a transferee of the bond of a private corporation takes subject to equities of the true owner. Frevall v. Fitch, 5 Whart., 325; Hopkins v. Railroad Co., 3 W. & S., 410; Carr v. LeFevre, 3 Casey, 413; Commonwealth v. Allegheny Co., 8 Casey, 218, 231; Diamond v. Lawrence Co., 1 Wr., 353, 358; Armstrong Co. v. Brinton, 11 Wr., 367, 371, 373. Even if unqualifiedly negotiable, the title could not be passed by a thief as against the real owner unless the latter had been culpably negligent. Biddle v. Bayard, 1 Harris, 150; Broom's Philosophy of the Law, 43; Foster v. Mackinnon, L. R., 4 C. P., 704; Byles on Bills, 333.
W. Horace Hepburn for the defendant in error.—The cases chiefly relied on by plaintiff in error were decided before bonds of this character had assumed the vast importance in the business of the country which they now have. The cases referring to municipal bonds not intended for general circulation, do not apply to bonds of private corporations, such as the one in this case. Such securities have their value above all others, for the reason that they are negotiable, and pass from hand to hand in the same manner as a bank note. There is scarcely a corporation whose indebtedness is not represented by just such securities, and the citizens have invested in the same, on the faith that they were negotiable, and that a good title passed by delivery only. All the modern cases in Pennsylvania recognize this quality in such bonds. Beaver Co. v. Armstrong, 8 Wr., 69; Gibson v. Lenhart, 5 Out., 522. Also, that a bona fide holder is not affected by any want of title in his vendor. Phelan v. Moss, 17 P. F. S., 59; McSparran v. Neeley, 10 Norris, 25.
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 inspection 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 be 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. Perrine, 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 form of a promissory note, if attested by the seal of...
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