34

withstanding. The like view has also prevailed in Maine.35 And in Virginia, where no seals were discoverable in a certain number of the instruments issued by the Virginia and Tennessee Railroad Company styled bonds, and having coupons attached, while on others in the same suit the seals appeared, being distinctly impressed by an instrument on the paper, it was held that those without were as valid as those with seals, there being nothing in the act of Assembly which required that seals should be used.36

1495a. Decisions of United States Supreme Court as to seals.In a case before the United States Supreme Court, it was said by Swayne, J.: "The principal securities delivered to the company were not bonds, because they were unsealed; but this is immaterial. The twelfth section, under which they were issued, expressly declared that those charged with the duty of subscribing may issue bonds bearing interest, or otherwise pledge the faith of the city." 9 37 But we do not think these remarks necessarily conflict with the views of the text.

In another and recent case before the United States Supreme Court, it appeared that the town of Springport, N. Y., was authorized to subscribe to a railroad, and issue bonds to pay for such subscription; and that the subscription was to be made by commissioners, who were to execute the bonds under their hand and seal. The bonds were duly executed with the exception that seals were omitted; and it was held that the requirement as to seals was merely directory and formal, and their omission immaterial.38

§ 1496. To whom payable. Coupon bonds are generally made payable to the party to whom they are issued, or bearer; and in

34. The People v. Mead, 24 N. Y. 124 (1861). The act provided that they should be executed under official signatures of supervisors and commissioners. Denio, J., said: "Whatever force there may generally be in the words 'bond or bonds,' which were used in the act, it is overcome by the explicit direction as to their execution which has been mentioned." The case shows in what sense the Legislature of New York used the word "bond." So in Conn. Mut. Life Ins. Co. v. Cleveland, etc., R. Co., 41 Barb. 22, the bonds had no seals. See Phelps v. Yates, 16 Blatchf. C. C. 192. So in Town of Solon v. Williamsburgh Sav. Bank, 42 N. Y. S. C. 1.

35. Augusta v. Augusta Bank, 56 Me. 176.

36. Virginia & Tenn. R. Co. v. Clay, Va. Spec. Ct. of App. (1873), unreported.

37. San Antonio v. Meharty, 96 U. S. (6 Otto) 315.

38. Draper v. Springport, U. S. Sup. Ct., Jan., 1882, Morrison's Transcript, vol. III, No. 3, p. 429.

such cases are transferable by delivery.39 By the Supreme Court of Illinois it has been said: "It is the well-settled doctrine that bonds of this character are to be treated as commercial paper; and this court has held coupons attached to them to be negotiable by delivery only without indorsement." 40 Sometimes they are payable to order, and then pass by indorsement.11 Sometimes they are payable to the holder, which term is regarded as equivalent to bearer. Any other equivalent expression manifesting an intention to make the instrument negotiable will suffice for that purpose. 42 Sometimes they are payable to a certain party, or his assign;" and in that case the party's assignment is necessary to pass title. But if he makes an assignment in blank, the title then passes by delivery. It has been held, however, that a county bond payable to a certain corporation "or its assigns was not negotiable in Virginia. A bond or coupon payable to "A. B. or bearer," is in legal effect payable to bearer, and passes

43

44

66

39. Morris Banking & Canal Co. v. Lewis, 1 Beasl. 323; Brookman v. Metcalf, 32 N. Y. 591; Eaton & H. R. Co. v. Hunt, 20 Ind. 457; Conn. Ins. Co. v. C. C. & C. R. Co., 41 Barb. 9; Carr v. Le Fevre, 27 Pa. St. 413; City of Kenosha v. Lamson, 9 Wall. 478; Mercer County v. Hackett, 1 Wall. 83; Roberts v. Bolles, 101 U. S. (11 Otto) 122; Johnson v. County of Stark, 24 Ill. 75; Supervisors of Mercer County v. Hubbard, 45 Ill. 139.

40. Town of Eagle v. Kohn, 84 Ill. 292; Roberts v. Bolles, 101 U. S. (11 Otto) 122.

41. City of Lexington v. Butler, 15 Wall. 295. See § 14996.

42. Ante, vol. I, § 99; County of Wilson v. National Bank, 103 U. S. (13 Otto) 776; Porter v. City of Janesville, 3 Fed. 619.

43. Brainard v. New York, etc., R. Co., 25 N. Y. 496, 10 Bosw. 832. 44. In Cronin v. Patrick County, 4 Hughes, 529, Hughes, J., said that the bend 'is under seal in the ordinary form of a single bill long used in Virginia. It is payable to the obligee or assignee, which latter is the old term used in bords under seal." Upon the question of negotiability he said: When there are no negotiable words in a bond, and it is not made payable to order or bearer, but is made payable to assigns, the use of that word imports nonnegotiability, and is one of the distinguishing features of a bond intended to be nonnegotiable. In Virginia it is usual, in order to find the negotiable character of a bond or promissory note, to make it. payable at a particular bank or place of business. No such place is named in the bonds under suit here, and they are payable, therefore, at the county of Patrick. Being dated in Virginia, executed in Virginia, and payable in Virginia, they can have no other character or attribute than is given to them by the laws of Virginia, and they cannot, therefore, be affected by any custom obtaining in New York. Had they been made payable in New York, then a custom of New York might have affected them; it cannot otherwise." In a subsequent case Bond, Circuit Judge, and Paul, District Judge, took the same view. See also De Voss v. City of Richmond, 18 Gratt. 338.

by delivery.45 When payable to bearer the holder is regarded as in direct line of contract with the maker, so far as to enable him to sue in the United States courts when he is a citizen of another State.46 Sometimes the place for the payee's name is left blank, in which case any holder may fill the space with his name, and thus make the instrument payable to himself; but until filled up it circulates by delivery as if payable to bearer.47

6

49

§ 1496a. In Virginia, where the act of Assembly made certain bonds "payable to the holder," it was held a sufficient indication that they were designed to be negotiable and payable to bearer. Joynes, J., said:48 "The act of March 29, 1857, in terms makes the coupons transferable by delivery,' but does not in terms make the bonds themselves transferable by delivery. This, however, is implied in the provision that they shall be payable to the holder,' the obvious intent being that they shall be payable to such persons as may, from time to time, be the holder. These bonds, therefore, as well as the coupons, pass from hand to hand by delivery." But if the bond contained no negotiable words, it would not be deemed negotiable, nor would the coupons without negotiable words, if detached from the bonds, be negotiable, as has been held in New York, where it was said of a coupon without such words, by Allen, J.: "In this, as in other contracts, its negotiability depends upon its terms; and the rule is, with certain exceptions not applicable to this case, that in instruments for the payment of money, if no one be designed as payee, either by name or as bearer, the instrument is not a promissory note. If these warrants are not promissory notes they are not negotiable. There is no usage or custom proved that would give these warrants a negotiable character, even if custom and usage so recent as one applicable to these instruments would be, could change their legal effect." 50

* *

45. See vol. I, § 633. It is different in Illinois by statute. See Garvin v. Wiswell, 83 Ill. 218, and vol. I, § 633, note; § 105, note.

46. Thompson v. Perrine, 106 U. S. 583. And see cases cited ante, §§ 10a and 729.

47. White v. Vermont, etc., R. Co., 21 How. 575; Preston v. Hull, 23 Gratt. 613. See § 1499; Memphis Bethel v. Bank, 101 Tenn. 130, 45 S. W. 1072, citing text; Lyon County v. Savings Bank, 40 C. C. A. 391, 100 Fed. 337. 48. Arents v. Commonwealth, 18 Gratt. 750.

49. City of Atchison v. Butcher, 3 Kan. 104.

50. Evertsen v. National Bank, 66 N. Y. 20, 22; McClelland v. Norfolk & So. R. Co., 110 N. Y. 475. See Jones on Railroad Securities, § 323.

1496b. Amount payable. The amount payable must be certain in order to render the bond or coupon negotiable, the same rule in this respect applying to them as to other negotiable instruments.51 This doctrine was well illustrated in a case before the United States Supreme Court, in which it appeared that a railroad company in Louisiana prepared certain bonds, promising to pay the bearer either £225 sterling in London, or $1,000 in New York or Louisiana, and declaring that the president of the company was authorized by his indorsement to fix the place of payment a blank being left for insertion of such place. This blank was never filled; and the bonds were seized and carried off during the Confederate war, and sold, with past-due coupons, for a small consideration, in New York. The court held, that in the absence of the required indorsement, the uncertainty in the amount payable deprived the bonds of negotiability; and the defect being patent, the purchaser could not be regarded as a bona fide holder without notice."

§ 1497. Place of payment whether it may be outside of the State. It is not unusual for the bonds of municipal and other corporations to specify a particular banking-house as a place of payment, and still more frequently is it the case that such a place of payment is specified in the coupons. The city of New York, as the great monetary and commercial center of the country, is often selected for purposes of convenience as the place of payment, and a particular banking-house designated.

But the Supreme Court of Illinois has held that, unless specially authorized so to do by the Legislature of the State, a municipal corporation cannot bind itself to pay its indebtedness at any other place than its treasury.53 The Supreme Court of the United

51. Vol. I, § 53.

52. Parsons v. Jackson, 99 U. S. (9 Otto) 434. See Jackson v. Vicksburg, etc., R. Co., 2 Woods C. C. 141; § 1501.

53. Prettyman v. Tazewell County, 19 Ill. 406; Pekin v. Reynolds, 31 Ill. 530; People er rel., etc. v. Tazewell County, 22 Ill. 151, Walker, J., saying: "It is objected that the county had no right to issue bonds or other obligations, payable at any other place than at the county treasury. This court held, in the case of Prettyman v. The Board of Supervisors of Tazewell County, 19 Ill. 406, that it was only by virtue of the act of February, 1857, authorizing the county courts of each county which had subscribed to the Tonica and Petersburg road to make the interest of their bonds payable at any place they might choose. That act only applied to subscriptions to that particular road, and can have no application to any other. And it was there

States has, however, taken a different view; and where bonds of the city of Muscatine were made payable in New York city, and objection was made that it was unauthorized, Swayne, J., said: "It was according to general usage to make such bonds and coupons payable in the city of New York. It added to the value of the bonds, and was beneficial to all parties. No legal principle forbids it. The power of a municipal corporation to make any contract does not depend upon the place of performance, but upon its scope and object." 54 This case, which seems to us correct, has been followed in subsequent ones by the same tribunal. in which it has enforced coupons payable beyond State limits. And the like course has been pursued by some of the State courts in suits on the coupons of railroad companies.55 In Illinois, where the corporation exceeds its authority by making its securities payable outside of the State, it has been held that, although that particular provision would be invalid, nevertheless the se

held that the county court had no power to issue bonds payable in the city of New York, for want of express authority by legislative enactment. States, counties, and corporations, created for public convenience only, are not required to seek their creditors to discharge their indebtedness, but when payment is desired the demand should be made at their treasury. That is the only place at which payment can be legally insisted upon, and it is the only place where the treasurer can legally have the pubiic funds with which he is intrusted. To authorize the auditor to draw his warrants on the treasurer, payable in a sister State or in a foreign country, necessarily imposes an obligation on the creditor to provide funds at that place to meet them. And his duties requiring him at the treasury, would require the employment of agents, the transmission of the funds at a risk of loss and at a considerable expense in charges, insurance, and discounts, which are not incident to its payment at the treasury. And the same reasons apply with equal force to cities, counties, and public corporations of a similar character. The Legislature has conferred no such general power upon such bodies, and in its absence they have no power to make their indebtedness payable at any other place than at their Treasury." Johnson v. County of Stark, 24 Ill. 75; Sherlock v. Winneteka, 68 Ill. 530.

54. Thompson v. Lee County, 3 Wall. 338 (coupons of Lee County, Iowa, payable at the Continental Bank, New York); Gelpcke v. Dubuque, 1 Wall. 178 (coupons of the city of Dubuque, payable at the Metropolitan Bank, New York); City of Kenosha v. Lamson, 8 Wall. 478; Lynde v. County of Winnebago, 16 Wall. 13; City of Lexington v. Butler, 14 Wall. 289 (coupons of Lexington, Ky., payable in New York); Skinker v. Butler County, 112 Mo. 332, 20 S. W. 613; Cairo v. Zane, 149 U. S. 122, 13 Sup. Ct. Rep. 803.

55. Conn. Mut. Life Ins. Co. v. Cleveland, etc., R. Co., 41 Barb. 9. The coupons were issued by the Columbus, Piqua, and Indiana R. Co. of Ohio, and were payable at the office of the Life and Trust Co., in New York city.