exchange, drawn for any amount which may be advanced to the letter-bearer. 18 In such a case the promisor will be bound and any person who takes a bill on the credit of the letter will have his remedy against the person upon whom the bill is drawn in the same manner and to the same extent as though the bill had been regularly presented and accepted.1o § 19. Bonds and coupons. Bonds issued by the Federal government and by States, municipalities, corporations, and individuals have many of the attributes of commercial paper and are properly classified and treated as such. They are obligations issued to secure the payment of the sums named at the places and dates specified therein. They are generally drawn in negotiable form, are under seal, and pass by a mere delivery.20 They are sometimes issued with coupons connected therewith, which represent the interest due on the sums named in the bonds, and are payable at the times and places stated therein. Each coupon is in itself a separate instrument containing a distinct and independent promise to pay the sum named, and bears a closer analogy to a promissory note than does the bond. Coupon bonds payable to bearer possess all the qualities of negotiable paper. It is not necessary that the holder of coupons, in order to recover on them, should own the bonds from which they 21 18. See Daniel on Negotiable Instruments (4th ed.), § 1795. 19. Coolidge v. Payson, 2 Wheat. (U. S.) 66, 4 L. Ed. 185; Schimmelpennich v. Bayard, 1 Pet. (U. S.) 264, 7 L. Ed. 138; Townsley v. Sumrail, 2 Pet. (U. S.) 181, 7 L. Ed. 386; Boyce v. Edwards, 4 Pet. (U. S.) 111, 7 L. Ed. 799; Bayard v. Lathy, Fed. Cas. No. 1,131; Russell v. Wiggin, Fed. Cas. No. 12,165; Cassel v. Dows, Fed. Cas. No. 2,502; Kennedy v. Geddes, 8 Port. (Ala.) 263, 33 Am. Dec. 289; Second Nat. Bank v. Diefendorf, 90 Ill. 396; Beach v. State Bank, 2 Ind. 488; Vance v. Ward, 32 Ky. 95; Scott v. McLellan, 2 Me. 199; Wilson v. Clements, 3 Mass. 1; Banorgee v. Hovey, 5 Mass. 11, 4 Am. Dec. 17; Woodward v. Griffits-Marshall Co., 43 Minn. 260, 45 N. W. 433; Ulster County Bank v. McFarline, 5 Hill (N. Y.), 432. 20. Reid v. Bank of Mobile, 70 Ala. 199; Carr v. Le Fevre, 27 Pa. St. 413; Craig v. Vicksburg, 31 Miss. 216; Morris Canal & Bank. Co. v. Fisher, 9 N. J. Eq. 667, 64 Am. Dec. 423; Connecticut Mut. L. Ins. Co. v. Cleveland, C. & C. R. R. Co., 41 Barb. (N. Y.) 9. The bond of a railroad corporation, payable to A. B., or his assigns, is in the nature of commercial paper, negotiable by delivery under an assignment in blank, and is not a specialty, subject to equities between the corporation and the person named in the bond as the primary payee. Brainerd v. N. Y. & H. R. R. Co., 25 N. Y. 496. 21. Thompson v. County of Lee, 3 Wall. (U. S.) 327, 18 L. Ed. 177; Mercer v. Hackett, 1 Wall. (U. S.) 83, 17 L. Ed. 548; Gelpcke v. Dubuque, 1 Wall. (U. S.) 175, 17 L. Ed. 520; New Albany, L. & C. Plank road Co. v. Smith, 23 Ind. 353; Strauss v. United Tel. Co., 164 Mass. 130, 41 N. E. 57; Mason v. Frick, 105 Pa. St. 162, 51 Am. Rep. 191; Langston v. So. Car. R. Co., 2 S. C. 248. 24 were detached.22 The coupons are drawn so that they can be separated from the bonds, and like the bonds are negotiable;23 and the owner of them can sue without the production of the bonds to which they were attached, or without being interested in them.2 It has been held, however, in New York, that where coupons payable to bearer, refer to the bonds for the interest for which they are issued, and the bonds refer to the mortgage securing them, for conditions limiting or explaining them, the coupons are not negotiable.25 § 20. Certificates of stock. Certificates of stock of corporations are not contracts or promises for the payment of money, but are rather the evidence of the holder's title to his share in the franchises and assets of the corporation of which he is a member.26 As Daniels says: "A share in the capital stock of a corporation is not a debt, nor money, nor a security for money, but is a species of incorporeal personal property." Such certificates, being mere evidences of title, 22. Thompson v. County of Lee, 3 Wall. (U. S.) 83, 18 L. Ed. 177. 23. Ketchum v. Duncan, 96 U. S. 659, 24 L. Ed. 868; Johnson v. Stark County, 24 Ill. 75; International Improvement Fund Trustees v. Lewis, 34 Fla. 424, 16 South: 325, 43 Am. St. Rep. 209; Evertsen v. National Bank, 66 N. Y. 14, 23 Am. Rep. 9, affg. 4 Hun (N. Y.), 692; County of Beaver v. Armstrong, 44 Pa. St. 63; Philadelphia & R. R. R. Co. v. Smith, 105 Pa. St. 195; Nashville v. First Nat. Bank, 60 Tenn. 402. 24. Thompson v. County of Lee, 3 Wall. U. S.) 83, 18 L. Ed. 177; Mason v. Frick, 105 Pa. St. 162, 51 Am. Rep. 191. Where the bond on its face says that the interest is to be paid on presentation of the coupons annexed, it is equivalent to making the coupons payable to bearer. Rockmuhl v. Pittsburgh, Fed. Cas. No. 11,982. But where the coupons are in the hands of a person who took them after maturity, they are subject to all equities which properly attached to them in the hands of the first holder. Union Bank v. New Orleans, Fed. Cas. No. 14,351. In Maine it has been held that a coupon disconnected from the bond is not negotiable, where no intention to that effect, on the part of the party issuing it, appears on the face thereof, unless authorized by legislative enactment. Myers v. York & C. R. Co., 43 Me. 232; Jackson v. York & C. R. Co., 48 Me. 147; Augusta Bank v. Augusta, 49 Me. 507. 25. McLelland v. Norfolk So. R. Co., 110 N. Y. 469, 18 N. E. 237, 6 Am. St. Rep. 397, 1 L. R. A. 299. 26. Edwards on Notes and Bills, p. 61. 27. Daniel on Negotiable Instruments (4th ed.), § 1708a. See Allen v. Pegram, 16 Iowa, 173. A share in capital stock is a species of incorporeal, intangible property, in the nature of a chose in action. Vanstone v. Goodwin, 42 Mo. App. 39. And see generally the cases cited in Century Digest (Vol. 12, "Corporations," § 166), among which are the following: United States.- Tappan v. Merchants' Nat. Bank, 19 Wall. (U. S.) 490, 22 L. Ed. 189. California.- Mattingly v. Roach, 84 Cal. 207, 23 Pac. 1117. Connecticut.- North v. Forest, 15 Conn. 400. Indiana.- Seward v. City of Rising Sun, 79 Ind. 351. Kentucky.- Field v. Montlinan, 68 Ky. 455. are not negotiable in the same sense as other commercial paper, and the assignee thereof takes them subject to all equities existing against the assignor.28 They are sometimes termed quasi-negotiable instruments; but this term does not define their nature and is unsatisfactory,29 although the customs of stockbrokers and bankers, the manner in which they are framed, and the method used to transfer them, give them some of the characteristics and effects of negotiable instruments.30 Pennsylvania.- McKeen v. Northampton County, 49 Pa. St. 519, 88 Am. Dec. 515. 28. Chicago, R. I. & Pac. R. R. Co. v. Havard, 7 Wall. (U. S.) 392, 19 L. Ed. 117. In this case the court said: "Written contracts are not necessarily negotiable, simply because by their terms they inure to the benefit of the bearer. Doubtless the certificates of stock were assignable, and they would have been so if the word "bearer" had been omitted, but they were not negotiable instruments in the sense supposed by the appellants. Holders might transfer them, but the assignees took them subject to every equity in the hands of the original owner.” Citing Mechanics' Bank v. Railroad Co., 13 N. Y. 599. Usages of stockbrokers to the contrary, notwithstanding, a certificate of shares of stock is not a negotiable instrument. East Birmingham Land Co. v. Dennis, 85 Ala. 565, 5 South. 317, 7 Am. St. Rep. 73, 2 L. R. A. 836. See generally Sherwood v. Meadow Valley Min. Co., 50 Cal. 412; Bridgeport Bank v. N. Y. & N. H. R. R. Co., 30 Conn. 231; Hall v. Rose Hill & Evanston Road Co., 70 Ill. 673; Clark v. American Coal Co., 86 Iowa, 436, 53 N. W. 291, 17 L. R. A. 557; State v. Bank of the State, 45 Mo. 528; Watson v. Sidney F. Woody Co., 56 Mo. App. 145. In New York it has been held that certificates of stock in a business corporation, indorsed in blank, do not pos sess the quality of complete negotiability accorded to commercial paper, to the extent of making a transfer to a purchaser in good faith for value equivalent to actual title, although there was no agency in the transferrer, and the certificate had been lost without the fault of the true owner, or had been obtained by theft or robbery. Knox v. Eden Musee Co., 145 N. Ÿ. 441, 42 N. E. 998. 29. Daniel on Negotiable Instruments (4th ed.), § 1708; Lewis on Stocks, § 82. 30. While corporation stock certificates do not possess all the qualities of commercial paper, they do possess some of them, and innocent parties dealing in them will be protected upon analogous principles, and, in a proper case, will be entitled to compel recognition as stockholders, where power exists to issue new certificates, or to indemnity if there is not. Jarvis v. Manhattan Beach Co., 148 N. Y. 652, 43 N. E. 68. CHAPTER II. Parties and Their Capacity. A. INCAPACITY OF PARTIES. 8 21. General Statement. a. Early restriction on parties. b. Power to contract. § 22. Infants. a. Validity of contracts. b. Obligation of persons dealing with infants. c. Contracts for necessaries. d. Commercial paper of infants. e. Note or bill for necessaries. f. Rights of infant as payee and indorsee. g. Ratification after infant becomes of age. 23. Persons of Unsound Mind. a. In general. b. Presumption of sanity; notice. c. Contracts for necessaries. d. Bills and notes by persons of unsound mind. e. Indorsement by insane person; rights of innocent holder. 24. Intoxicated Persons. a. Contracts generally. b. Promissory notes and bills of exchange. 25. Married Women. a. Under the common law. b. Enabling statutes. c. Bills and notes of married women generally. d. Indorsement by married women. e. Reduction into possession. f. Joint notes of husband and wife. § 26. Alien Enemies. B. PERSONS ACTING IN FIDUCIARY CAPACITY. § 27. Executors and Administrators. a. In general. b. Bills and notes by executors and administrators. § 27. Executors and Administrators continued. c. Rights of executors and administrators as to bills and notes of decedents. d. Indorsement by executor or administrator. e. Presentment for payment, notices, etc. f. Acts of one of two or more executors. g. Note due from administrator or executor. 28. Trustees, Guardians, Committees, etc. C. PERSONS ACTING IN REPRESENTATIVE CAPACITY. § 29. Agents. a. In general. b. Authority to make notes and accept bills. c. Liability of person signing as agent. (1) Statutory provision. (2) Liability in general. (3) How representative capacity to be indicated. (4) Disclosure of name of principal in body of instrument. (5) Parol evidence admissible to show intent. d. Signature by procuration; effect of. e. Liability of agent indorsing negotiable paper, or drawing bill of exchange. f. Negotiable instruments by public agents. 30. Partners. a. In general; what constitutes a partnership. b. Authority of one partner to execute commercial paper in name of firm. c. Presumption in favor of validity of partnership paper executed by one partner. d. Commercial paper of trading and nontrading partnerships. e. Rights of bona fide holder. f. Signing firm name for accommodation or security. g. Negotiable paper in payment of individual debts of partner. h. Partnership paper in name of individual member. i. Commercial paper given by partner for use of firm. j. Liability of dormant partner. k. Effect of dissolution. 1. Notice of dishonor; presentment. § 31. Corporations. a. Power to execute commercial paper. b. Defense of ultra vires. c. Power to make or indorse for accommodation. d. Presumption in favor of validity of corporation paper. e. Power of officers to issue commercial paper. f. Power of officers to transfer commercial paper. g. Form of notes and bills by corporations; form of indorsement. |