bonds payable to bearer (usually under a corporate seal), and which for the most part have coupons or interest warrants attached, are, by the principal case of Murray v. Lardner, and by numerous late decisions in the Supreme Court of the United States, and of State courts, put much on the foot of negotiable paper; passing by delivery and having all its qualities and incidents.(1) And the same thing has been declared true of the coupons to interest warrants themselves, detached from the bonds, if such coupons or warrants be in words negotiable.(2) The owner of them may, accordingly sue on them, as on negotiable paper, though he be not the owner of the bonds. At the same time, as matter of fact, such things as coupons, far from maturity, are so seldom or never dealt in when in a form detached from their proper bonds, that a purchaser of them would, in a case of loss or robbery from a true owner, hardly be treated with the favor due to a holder of ordinary negotiable paper, or of coupon bonds with the coupons annexed; sorts of securities that are continually on sale, and continually purchased and sold in every market where capital exists.

It is to be remarked that with a view of giving to railroad and other bonds a sort of double character-a character which will allow the owner to get the interest without the necessity of identifying himself and without signatures to receipts, or to get it through any person, a respectable servant, for example, whom he may send with his coupons, to receive it a plan has been devised, and prevails, of "registering," as it is called, the bonds at the holder's option, and of creating or destroying negotiability in the hands of different honest holders, or even in the hands of the same honest holder, at pleasure. It prevails, for example, in certain bonds of the well known Camden and Amboy Railroad, and Delaware and Raritan Canal Companies-their mortgage bonds due A. D. 1889-and may be thus described:

The bond is in the main like ordinary coupon bonds and payable, let us suppose, to W. H. Gatzmer or bearer, "his executors, administrators or assigns." The body of the instrument contains this declaration and notice:

"The holders of this bond may transfer the same, at pleasure, either in person or by attorney, either to a specified person or to bearer and by bearer to any specified person, said transfer to be made only on the books of the companies; such transfer to be entered hereon by an officer or agent of the said company, by them designated for that purpose."

(1) Mercer County v. Hacket, 1 Wallace, 95; Gelpcke v. City of Dubuque, Id. 206; Meyer v. City of Muscatine, Id. 384; Morris Canal v. Fisher, 1 Stockton, 700; Maddox v. Graham, 2 Metcalfe (Kent.), 87; Philadelphia and Sunbury R. R. Co. v. Lewis, 33 Penna. State, 38; Myers v. York and Cumberland R. R., 43 Maine, 259; Railroad Company v. Cleneay, 13 Indiana, 161; Winfield v. City of Hudson, 4 Dutcher, 255; Johnson v. County, 24 Illinois, 92; Clark v. City of Janesville, 10 Wisconsin, 136.

(2) Thomson v. Lee County, 3 Wallace, 330.

On the back of the bond are several consecutive blank forms of transfer, thus:

to

"I certify that the within bond was transferred on the books of the company

JULY 1, 1871."

Transfer agent.

Gatzmer, we will now suppose, sells the bond at the board of brokers, where one Robert Courtney buys it. If Mr. Courtney chooses to keep its negotiability alive, he holds it just as it is. If he wishes to limit the power of negotiating it to himself, he takes it, or lets the broker through whom he has bought it take it to the company's office, where, if he is known to have acquired it honestly, he or the broker transfers it on the books of the company to himself, and the transfer agent of the company registers it on the books as his; and filling up the first blank on the back of the bond with the name of Robert Courtney, signs his own name as transfer agent. No one can now dispose of it but Mr. Courtney himself. Mr. Courtney, being about to sell it, now desires to restore its negotiability. He takes it to the company's office again, where he transfers it on the books to "bearer." The transfer clerk then fills up the second blank, with the word "bearer," as the transferee, and signs his own name as transfer agent, and general negotiability is considered as restored; and so toties quoties. If the person to whom Mr. Courtney sells it, desires to have it transferred directly to himself, the transfer made by Courtney, instead of being made to bearer, can be made to him; or if it has been already made to bearer, the new purchaser can have it made to himself in the way already described. As for the coupons, these being in form mere interest warrants or memoranda, to be presented on the proper semi-annual days, and not in form negotiable notes, no negotiability belongs to them.

A bill of lading is sometimes spoken of as quasi negotiable. An endorsement and delivery of it, vest the title to the goods while in transitu in the endorsee; but the instrument is not negotiable, and suit cannot be brought upon it in the name of the endorsee. Dominy, 14 Meeson & Welsby, 403.

Thomson v.

Certificates of stock in banks whose certificates declare the stockholder entitled to so many shares of stock, which can be transferred on the books of the corporation, in person or by attorney, when the certificates are surrendered, but not otherwise, though admitted not to be negotiable paper either in form or substance, have yet been said, in a recent case in the Supreme Court of the United States, Bank v. Lanier, 11 Wallace, 377, to "approximate to it as nearly as possible," and a national bank, whose certificates were in this form, which suffered a stockholder to transfer his stock on the books of the bank, without producing and

surrendering the certificates thereof, was held liable to a bona fide transferee for value of the same stock, who produced the certificates, with a properly executed power of attorney to transfer; and this though no notice had been given to the bank of the latter transfer. However, it is not necessary to resort to the doctrine of negotiable paper to sustain such a decision. The bank, by its omission to require a surrender of the certificate on the first transfer, was guilty of negligence, tending directly as a probable consequence, to cause a loss to some one else; and the case being one where one of two innocent parties had to suffer, the loss was properly thrown on that one who was instrumental in bringing the loss about.] Letters of credit and commercial guaranties are not negotiable.(1) It is a different question, whether a general guaranty to any one *324] who shall give credit to a particular person, does not become an available contract in favor of any one who on the faith of it gives credit according to its tenor.(2)

A guaranty, endorsed or underwritten, on a negotiable promissory note, is not negotiable, and cannot be sued on by a subsequent holder in his own name; (3) though it may operate as an endorsement of the note.(4) In New York, attempts have been made to distinguish between an independent guaranty and a guaranty endorsed on a note; and to treat the latter according to circumstances, as an endorsement, or a new note, or an endorsement with a waiver of demand and notice; but these distinctions have tended only to confusion and discord ;(5) but in all the cases it seems to be agreed that as a guaranty, it is not negotiable.(6) A power of attorney to confess judgment, attached to a note, was thought in Osborn v. Hawley, 19 Ohio, 130, contrary to Overton v. Tyler, not to interfere with its negotiability; but the power itself would not become negotiable. [An assignment of a promissory note on its back, transfers to the holder the rights of the assignor. It is not negotiable, i. e., the assignor is responsible for nothing more than the genuineness of this claim.(7)]

Upon the whole, [after making proper exceptions perhaps for such

(1) Birckhead v. Brown, 5 Hill's N. Y. 635, 646.

(2) See Russell et al. v. Wiggin et al., 2 Story, 214; Carnegie and another v. Morrison and another, 2 Metcalf, 381.

(3) Lamourieux v. Hewit, 5 Wendell, 307; Hall v. Farmer, 5 Denio, 484; True . Fuller, 21 Pickering, 140; McDoal v. Yoemans, 8 Watts, 361; Snevily v. Ekel, 1 Watts & Sergeant, 203.

(4) Myrick v. Hascy, 27 Maine, 9; see, however, Tuttle v. Bartholomew, 12 Metcalf, 452.

(5) Watson's Executors v. McLaren, 19 Wendell, 558; S. C. on error, 26 Id. 425; Luqueer v. Prosser, 1 Hill's N. Y. 256; S. C. on error, 4 Id. 420; Miller v. Gaston, 2 Id. 189.

(6) And see Barber v. Ketchum, 7 Hill, 444, 449; Irish v. Cutter, 31 Maine, 536. (7) Lyons v. Divelbis, 22 Penna. State, 185.

coupon bonds as have the essential characteristics of negotiable paper, as already described,] the opinion expressed in Birckhead v. Brown, 5 Hill's N. Y. 635, 646, that in this country, no instruments are negotiable but regular promissory notes and bills of exchange, appears to be entirely correct.

[For a consideration of the question how far such bonds are negotiable, and how far negotiable instruments pass by delivery merely, see 1 Smith's Leading Cases, 5th ed., 597-610; Murray v. Lardner, and Morris Canal v. Fisher, 1 Stockton, N. J. 700.]

*NEGOTIATION OF BILLS AND NOTES. [*325

SWIFT v. TYSON.

In the Supreme Court of the United States.

JANUARY TERM, 1842.

[REPORTED, 16 PETERS, 1–24.]

The holder of a negotiable instrument, who has taken it bonâ fide, for a valuable consideration in the ordinary course of business, when it was not over-due, and without notice of facts which impeach its validity as between antecedent parties, has a title unaffected by those facts, and may recover on the instrument, although it may be without any legal validity as between the antecedent parties.

A pre-existing debt may constitute a valuable consideration within the meaning of the foregoing rule.

THIS cause came from the Circuit Court of the southern district of New York, upon a certificate of division of the judges of that

court.

The action was brought by the plaintiff, Swift, as endorsee, against the defendant, Tyson, as acceptor, upon a bill of exchange dated at Portland, Maine, May 1st, 1836, for $1,540,3%, payable six months after date and grace, drawn by one Nathaniel Norton and one Jarius Keith upon and accepted by Tyson, at the city of New York, in favor of the order of Nathaniel Norton, and by Norton endorsed to the plaintiff. The bill was dishonored at maturity.

At the trial the acceptance and endorsement of the bill were admitted, and the plaintiff there rested his case. The defendant then introduced in evidence the answer of Swift to a bill of discovery, by which it appeared that Swift took the bill before it be came due, in payment of a promissory note due to him by Norton and Keith; that he understood that the bill was accepted in part payment of some lands sold by Norton to a company in New York; that Swift was a bona fide holder of the bill, not having any notice of anything in the sale or title to the lands, or otherwise, impeaching the transaction, and with the full belief that the bill was justly due. The particular circumstances were fully set forth in the answer in the record. The defendant then offered to prove, that the bill was accepted by the defendant as part consideration for the purchase of certain lands in the State of Maine, which Norton *and Keith represented themselves to be the *326] owners of, and also represented to be of great value, and contracted to convey a good title thereto; and that the representations were in every respect fraudulent and false, and Norton and Keith had no title to the lands, and that the same were of little or no value. The plaintiff objected to the admission of such testimony, or of any testimony, as against him, impeaching or showing a failure of the consideration, on which the bill was accepted, under the facts admitted by the defendant, and those proved by him, by reading the answer of the plaintiff to the bill of discovery. The judges of the Circuit Court thereupon divided in opinion upon the following point or question of law: Whether, under the facts last mentioned, the defendant was entitled to the same defence to the action, as if the suit was between the original parties to the bill, that is to say, Norton, or Norton and Keith, and the defendant; and whether the evidence so offered was admissible as against the plaintiff in the action. And this was the question certified for its decision to the Supreme Court, whose opinion was now delivered by

STORY, J. There is no doubt that a bona fide holder of a negotiable instrument for a valuable consideration, without any notice of facts which impeach its validity as between the antecedent parties, if he takes it under an endorsement made before the same becomes due, holds the title unaffected by these facts, and may recover thereon, although as between the antecedent parties the transaction may be without any legal validity. This is a doc