fendants are not exonerated from liability to plaintiff for his damages occasioned by such negligence, by reason of the indorsement upon the pass produced in evidence.

It is evident that the court below regarded the case as one of carriage for hire, and not as one of gratuitous carriage, and that no sufficient evidence to go to the jury was adduced to show the contrary; and hence, that under the ruling of this court, in the case of Railroad Company v. Lockwood, 17 Wall. 357, it was a case in which the defendant, as a common carrier of passengers, could not lawfully stipulate for exemption from liability for the negligence of its servants. In taking this view, we think the court was correct. The transportation of the plaintiff in the defendant's cars, though not paid for by him in money, was not a matter of charity nor of gratuity in any sense. It was by virtue of an agreement, in which the mutual interest of the parties was consulted. It was part of the consideration for which the plaintiff consented to take the journey to Montreal. His expenses in making that journey were to be paid by the defendant, and of these, the expense of his transportation was a part. The giving him a free pass did not alter the nature of the transaction. The pass was a mere ticket, or voucher, to be shown to the conductors of the train, as evidence of his right to be transported therein. It was not evidence of any contract by which the plaintiff was to assume all the risk; and it would not have been valid if it had been. In this respect it was a stronger case than that of Lockwood. There the pass was what is called a "drover's pass," and an agreement was actually signed, declaring that the acceptance of the pass was to be considered as a waiver of all claims for damages or injury received on the train. The court rightly refused, therefore, in the present case, to charge that the plaintiff was traveling upon the conditions indorsed on the pass; or that, if he traveled on that pass, the defendant was free from liability. And the court was equally right in refusing to charge, that if the plaintiff was a free, or gratuitous passenger, the defendant was not liable. The evidence did not sustain any such hypothesis. It was uncontradicted, so far as it referred to the arrangement by virtue of which the journey was undertaken.

The charge actually given by the court was also free from material error. It stated the law as favorably for the defendant as the latter had a right to ask. If subject to any criticism, it is in that part in which the court supposed that the jury might find that the plaintiff was injured by the reckless misconduct and negligence of the defendant. If this degree of fault had been necessary to sustain the action, there might have been some difficulty in deducing it from the evidence. However, the condition of the track where the accident took place, without any explanation of its cause, was perhaps sufficient even for such an inference. If the defendant could have shown that the injury to the rails was the result of an accident occurring so shortly before the passage of the train as not to give an opportunity of ascertaining its existence, it did not do so; but chose to rest upon the evi

dence of the plaintiff. In fact, however, negligence was all that the plaintiff was bound to show; and of this there was abundant evidence to go to the jury. On the whole, therefore, we think that the charge presents no sufficient ground for setting aside the verdict. The charge, if not formally accurate, was not such as to prejudice the defendant.

It is strongly urged, however, that the plaintiff, by accepting the free pass indorsed as it was, was estopped from showing that he was not to take his passage upon the terms therein expressed; or, at least, that his acceptance of the pass should be regarded as competent if not conclusive evidence that such a pass was in the contemplation of the parties when the arrangement for his going to Montreal was made. But we have already shown that the carrying of the plaintiff from Portland to Montreal was not a mere gratuity. To call it such would be repugnant to the essential character of the whole transaction. There was a consideration for it, both good and valuable. It necessarily follows, therefore, that it was a carrying for hire. Being such, it was not competent for the defendant, as a common carrier, to stipulate for the immunity expressed on the back of the pass. This is a sufficient answer to the argument propounded. The defendant being, by the very nature of the transaction, a common carrier for hire, can not set up, as against the plaintiff, who was a passenger for hire, any such estoppel or agreement as that which is insisted on.

Since, therefore, from our view of the case, it is not necessary to determine what would have been the rights of the parties if the plaintiff had been a free or gratuitous passenger, we rest our decision upon the case of Railroad Company v. Lockwood. We have no doubt of the correctness of the conclusion reached in that case. We do not mean to imply, however, that we should have come to a different conclusion, had the plaintiff been a free passenger instead of a passenger for hire. We are aware that respectable tribunals have asserted the right to stipulate for exemption in such a case; and it is often asked with apparent confidence, "May not men make their own contracts, or, in other words, may not a man do what he will with his own?" The question, at first sight, seems a simple one. But there is a question lying behind that: "Can a man call that absolutely his own, which he holds as a great public trust, by the public grant,, and for the public use as well as his own profit?" The business of the common carrier, in this country at least, is emphatically a branch of the public service; and the conditions on which that public service shall be performed by private enterprise are not yet entirely settled. We deem it the safest plan not to anticipate questions until they fairly arise and become necessary for our decision.

The judgment of the Circuit Court is affirmed.

ASA BIGGS died at Norfolk, Virginia, on the 6th inst., aged sixty-eight. He had been a member of Congress for several terms, United States Senator and United States District Judge for North Carolina.

MUNICIPAL BONDS.

CROMWELL v. COUNTY OF SAC.

Supreme Court of the United States, October Term, 1877.

1. MUNICIPAL BONDS-EFFECT OF OVER-DUE COUPONS.-Where to a municipal bond which has several years to run, an over-due and unpaid coupon for interest is attached, that fact does not render the bond and the subsequently maturing coupons dishonored paper, so as to subject them, in the hands of a purchaser for value, to defenses good against the original holder.

2. NEGOTIABLE PAPER BONDS PAYABLE TO BEARER.-A bona fide purchaser of negotiable paper for value, before maturity, takes it freed from all infirmities in its origin; the only exceptions being where the paper is absolutely void for want of power in the maker to issue it, or where the circulation is prohibited by law for the illegality of the consideration. Municipal bonds payable to bearer are negotiable instruments, and subject to the same rules as other negotiable paper.

3. A PURCHASER OF A MUNICIPAL BOND from a bona fide holder, who had obtained it for value before maturity, takes it equally freed as in the hands of such holder, though he may have had notice of infirmities in its origin.

4. A PURCHASER OF A NEGOTIABLE SECURITY before maturity, unless personally chargeable with fraud in the purchase, can recover the full amount of the security against the maker, though he may have paid less than its par value, whatever may have been its original infirmity.

6. WHEN THE RATE OF INTEREST AT THE PLACE OF CONTRACT differs from the rate at the place of payment, the parties may contract for either rate, and the contract will govern.

6. INTEREST-JUDGMENTS ON BONDS.-Municipal bonds in Iowa, drawing ten per cent. interest before maturity, draw the same interest, under the law of the state, after maturity, and coupons attached to such bonds draw six per cent. after maturity. Judgments in that state entered upon such bonds and coupons draw interest for the amount due on the bonds at the rate of ten per cent. a year, and upon the amount due upon the coupons at the rate of six per cent. a year.

In error to the Circuit Court of the United States for the District of Iowa.

John M. Rogers, for plaintiff in error; Galusha Parsons, for defendant in error.

Mr. Justice FIELD delivered the opinion of the court.

This case was before us at the last term, and the judgment of the court below was then reversed and the cause remanded for a new trial. 94 U. S. Rep. 351; 4 Cent. L. J. 416. Upon the new trial a special verdict was found by the jury, and the questions presented for our determination now relate to the judgment which those findings authorize.

The action was brought upon four bonds of the county of Sac, in the state of Iowa, each for $1,000, and four coupons for interest attached to them, each for $100. The bonds were issued on the 1st of October, 1860, and were made payable

to bearer on the 1st of May, in the years 1868, 1869, 1870 and 1871, respectively, at the Metropolitan Bank, in the city of New York, with annual interest at the rate of ten per cent. a year. The coupons in suit matured after the 1st of May, 1868. They were, at the option of the holder, payable at the same bank in New York, or were receivable at the office of the treasurer of Sac county for county taxes.

As a defense to this action, the county relied upon the estoppel of a judgment rendered in its favor in a prior action, brought by one Samuel C. Smith, upon certain earlier maturing coupons upon the same bonds, accompanied with proof that the present plaintiff, Cromwell, was at the time the owner of the coupons in controversy in that action, and that the action was prosecuted for his benefit. It appeared from the findings in that action that the county of Sac had authorized, by a vote of its people, the issue of bonds to the amount of $10,000 for the erection of a courthouse; that the bonds were issued by the county judge, and delivered to one Meserey, with whom he had made a contract for the erection of the court-house; that immediately thereafter the contractor gave one of the bonds as a gratuity to the county judge; and that a court-house was never constructed by the contractor or any other person pursuant to the contract. It also appeared that the plaintiff had become the holder before maturity of the coupons in controversy, but it did not appear that he had ever given any value for them. Upon these findings the court below held that the bonds were void as against the county, and accordingly gave judgment in its favor upon the coupons. Any infirmity of the bonds for illegality or fraud in their issue, necessarily affected the coupons attached to them. When that case was brought here on writ of error, this court held that the facts disclosed by the findings were sufficient evidence of fraud and illegality in the inception of the bonds to call upon the holder to show, not only that he had received the coupons before maturity, but that he had given value for them, and not having done so the judgment was affirmed.

When the present case was first tried, the court below held that the judgment in the Smith case was conclusive against the plaintiff, and refused to permit him to prove that he had received the bonds and coupons in this suit before maturity, for value, and gave judgment for the county. But when the case was brought here at the last term, we held that the court below erred in refusing to admit this proof; and that the matters adjudged in the Smith case were only that the bonds were void as against the county in the hands of parties who had not thus acquired them before maturity and for value. The judgment was accordingly reversed.

Upon the second trial, the plaintiff proved that he had received two of the bonds in suit-those payable in 1870 and 1871-with coupons attached, before their maturity, and given value for them without notice of any defense to them on the part of the county. Under our ruling there can be no

doubt of his right to recover upon them. The only questions for our determination as respects them relate to the interest which they shall draw after maturity, and the interest which the judgment shall bear. These questions we shall hereafter consider.

As to the other two bonds in suit-those payable in 1868 and 1869-and coupons annexed, it appears that the plaintiff purchased them from one Clark, on the 1st of April, 1873, after their maturity, for the consideration of a precedent debt due to him from Clark, amounting to $1.500; that they had previously been held by one Robinson, who had pledged them to a bank in Brooklyn as collateral security for a loan of money; that Clark purchased them of Robinson on the 20th of May, 1863, by paying this loan to the bank, then amounting to $1,192, and applying the excess of the amount of the bonds over the amount thus paid, in satisfaction of a precedent debt due to him by Robinson. To each of these bonds there were attached, at the time of Clark's purchase, the coupon due on the first of the month and all subsequent unmatured coupons. Robinson stated to Clark that the coupons previously matured had been paid, and that those due on the first of the month would be paid in a few days. Clark had no notice at the time of any defense to the bonds, except such as may be imputed to him from the fact that one of the coupons attached to each of the bonds was then past due and unpaid. And the principal question for our determination is whether, this fact existing, the plaintiff had, as to these bonds, the right of a holder for value before dishonor, without notice of any defenses by the county; or, as stated by counsel, whether this fact rendered the bonds themselves, and all subsequently maturing coupons dishonored paper, and subjected them in the hands of Clark and the plaintiff succeeding to his rights to all defenses good against the original holder. The judges of the circuit court were divided in opinion upon this question, and as in such cases the opinion of the presiding judge prevails, the decision of the court was against the plaintiff, and he was held to have taken the bonds and subsequent coupons as dishonored paper, subject to all the infirmities which could be urged against them in the hands of the original holder. In this decision we think the court erred. The special verdict does not show that the coupons over-due had been presented to the Metropolitan Bank for payment, and their payment refused. Assuming that such was the fact, the case is not changed. The non-payment of an installment of interest when due could not affect the negotiability of the bonds, or of the subsequent coupons. Until their maturity, a purchaser for value, without notice of their invalidity as between antecedent parties, would take them discharged from all infirmities. The non-payment of the installment of interest represented by the coupons due at the commencement of the month, in which the purchase was made by Clark, was a slight circumstance, and, taken in connection with the fact that previous coupons had been paid, was entirely insufficient to excite suspicion even of any

illegality or irregularity in the issue of the bonds. Obligations of municipalities in the form of those in suit here are placed by numerous decisions of this court on the footing of negotiable paper. They are transferable by delivery, and when issued by competent authority pass into the hands of a bona fide purchaser for value before maturity, freed from any infirmity in their origin. Whatever fraud the officers authorized to issue them may have committed in disposing of them, or however entire may have been the failure of the consideration promised by parties receiving them, these circumstances will not affect the title of subsequent bona fide purchasers for value before maturity, or affect the liability of the municipalities. As with other negotiable paper, mere suspicion that there may be a defect of title in its holder, or knowledge of circumstances which would excite suspicion as to his title in the mind of a prudent man, is not sufficient to impair the title of the purchaser. That result will only follow where there has been bad faith on his part. Such is the decision of the court, and substantially its language in the case of Murray v. Lardner, 2 Wall. where the leading authorities on the subject are considered.

The interest stipulated was a mere incident of the debt. The holder of the bond had his option to insist upon its payment when due or to allow it to run until the maturity of the bond, that is, until the principal was payable. Many causes may have existed for a failure to meet the interest as it matured, entirely independent of the question of the validity of the bonds in their inception. The payment of previous installments of interest would seem to suggest that only causes of a temporary nature had prevented their continued payment. If no installment had been paid, and several were past due, there might have been greater reason for hesitation on the part of the purchaser to take the paper, and suspicions might have been excited that something was wrong in issuing it. All that we now decide is, that the simple fact that an installment of interest is overdue and unpaid, disconnected from other facts, is not sufficient to affect the position of one taking the bonds and subsequent coupons before their maturity for value as a bona fide purchaser. The National Bank of North America v. Kirby, 108 Mass., 497. To hold otherwise would throw discredit upon a large class of securities, issued by municipal and private corporations, having years to run, with interest payable annually or semi-annually. Temporary financial pressure, the falling off of expected revenues or income, and many other causes having no connection with the original validity of such instruments, have heretofore, in many instances, prevented a punctual payment of every installment of interest on them as it matured, and similar causes may be expected to prevent a punctual payment of interest in many instances hereafter. To hold that a failure to meet the interest as it matures renders them, though they may have years to run, and all subsequent coupons, dishonored paper, subject to all the defences good against the original holders, would greatly impair the cur

rency and credit of such securities and correspondingly diminish their value. We are of opinion, therefore, that Clark took the two bonds in suit and the subsequently maturing coupons as a bona fide purchaser, and as such was entitled to recover upon them, whatever may have been their original infirmity. The plaintiff, Cromwell, succeeded by his purchase from Clark to all Clark's rights, and can enforce them to the same extent. Nor does it matter whether, in the previous action against the county by Smith who represented him, he was informed of the invalidity of the bonds as against the county, and knew, when he purchased, the circumstances attending their issue, or whether he was made acquainted with them in any other way. The rule has been too long settled to be questioned now, that whenever negotiable paper has passed into the hands of a party unaffected by previous infirmities, its character as an available security is established, and its owner can transfer it to others with the like immunity. His own title and right would be impaired if any restrictions were placed upon his power of disposition. This doctrine, as well as the one which protects the purchaser without notice, says Story, "is indispensable to the security and circulation of negotiable instruments, and it is founded on the most comprehensive and liberal principles of public policy." Story on Promissory Notes, Sec. 191. The only exceptions to this doctrine are those where the paper is absolutely void, as when issued by parties having no authority to contract, or its circulation is forbidden by law from the illegality of its consideration, as when made upon a gambling or usurious transaction.

The plaintiff, therefore, holds the bonds and the subsequent coupons as his vendor held them, freed from all infirmities attending their original issue. Nor is he limited in his recovery upon them, or upon the other two bonds, as contended by counsel for the county, to the amount he paid his vendor. Clark had given full value for those he purchased, and could have recovered their amount from the county, and his right passed to his vendee. But independently of the fact of such full payment we are of opinion that a purchaser of a negotiable security before maturity, in cases where he is not personally chargeable with fraud, is entitled to recover its full amount against its makes, though he may have paid less than its par value, whatever may have been its original infirmity. We are aware of numerous decisions in conflict with this view of the law, but we think the sounder rule, and the one in consonance with the common understanding and usage of commerce, is that the purchaser, at whatever price, takes the benefit of the entire obligation of the maker. Public securities, and those of private corporations, are constantly fluctuating in price in the market, one day being above par and the next day below it, and often passing within short periods from onehalf of their nominal to their full value. Indeed all sales of such securities are made with reference to prices current in the market and not with reference to their par value. It would introduce, therefore, inconceivable confusion if bona fide pur

chasers in the market were restricted in their claims upon such securities to the sums they had paid for them. This rule in no respect impinges upon the doctrine that one who makes only a loan upon such paper or takes it as collateral security for a precedent debt may be limited in his recovery to the amount advanced or secured. Stoddard v. Kimball, 6 Cush., 471; Allaire v. Hartshorne, 1 Zab., 665; Williams v. Smith, 2 Hill, 301; Chicopee Bank v. Chapin, 8 Metc., 40; Lay v. Wiseman, 36 Iowa, 305.

The only questions remaining, which we deem of sufficient importance to require consideration, relate to the interest which the bonds and coupons in suit shall draw after their maturity, and the interest which the judgment shall bear. The statute of Iowa, on this subject, provides that the rate of interest shall be six per cent. a year on money due by express contract, unless a different rate be stipulated, and on judgments and decrees for the payment of money in such cases; but that parties may agree in writing for any rate of interest not exceeding ten per cent. a year, and that any judgment or decree thereon shall draw the rate of interest expressed in the contract.

The bonds by their terms, as already stated, bear interest at the rate of ten per cent. until maturity. The plaintiff claims that they should draw the same rate of interest after maturity, and that under the statute of Iowa the judgment should also bear ten per cent. interest. The court below allowed only seven per cent. on the bonds after maturity, that being the rate in New York, where the bonds were payable, and only six per cent. on the judgment. In this ruling we think the court erred. By the settled law of Iowa, as established by repeated decisions of her highest court, contracts drawing a specified rate of interest before maturity draw the same rate of interest afterwards. Hand v. Armstrong, 18 Iowa, 324, and Lucas v. Picket, 20 Ib. 490. A like decision has been made under similar statutes in several of the states; Brannan v. Hursell, 112 Mass. 63; Marietta Iron Works v. Lottimer, 25 Ohio St. 621; Monnet v. Sturges, Ib. 384; Kilgore v. Powers, 5 Blackf. 22; Phinney v. Baldwin, 16 Ill. 108; Etnyre v. McDaniel, 28 Ib. 201; Spencer v. Maxfield, 16 Wis. 185; Pruyn v. Milwaukee, 18 Ib. 367; Kohler v. Smith, 2 Cal. 597; McLane v. Abrams, 2 Nev. 199; Hopkins v. Crittenden, 10 Tex. 189; and such appears to be the English rule. Keene v. Keene, 3 C. B., N. S. 144; Morgan v. Jones, (Exchr.) 20 Eng. Law and Eq. 454; Pearce v. Hennessy, 10 R. I. 223; Lash v. Lambert, 15 Minn. 416; Searle v. Adams, 3 Kan. 515; Kitchen v. Branch Bank, 14 Ala. 233. There are conflicting decisions in some of the states, though the preponderance of opinion is in favor of the doctrine that the stipulated rate of interest attends the contract until it is merged in the judgment. The statutory rate of six per cent. in Iowa only applies in the absence of a different stipulated rate. As the judgment in case of a stipulated interest in the contract must bear the same rate, it could not have been intended that a different rate should be allowed between the maturity of the contract and the entry of the judgment.

The case of Brewster v. Wakefield, 22 How. 118, in this court, is cited against this view. That case came from a territorial court, and arose under a statute which allowed parties to agree upon any rate of interest, however exorbitant, and only prescribed seven per cent. in the absence of such agreement. This court, bound by no adjudication of the territorial court, and looking with disfavor upon the devouring character of the interest stipulated in that case, gave a strict construction to the contract of the parties. "The law of Minnesota," (then a territory) said the court, "has fixed seven per cent. per annum as a reasonable and fair compensation for the use of money; and when a party desires to extort, from the necessities of a borrower, more than three times as much as the legislature decrees reasonable and just, he must take care that the contract is so written in plain and unambiguous terms, for with such a claim he must stand on his bond." The statute of Iowa only allows the parties by their agreement to stipulate for interest up to ten per cent. a year-a rate which has not been deemed extravagant or unreasonable in any of the states lying west of the Mississippi. Be that as it may, the question is one of local law under a statute of a state, and the construction given by its tribunals should conclude

us.

The position of counsel, that because the rate of interest in New York, where the bonds were payable, is only seven per cent., the bonds can only draw that rate after maturity, is not tenable. When the rate of interest at the place of contract differs from the rate at the place of payment, the parties may contract for either rate, and the contract will govern. Miller v. Tiffany, 1 Wall. 298; Depeau v. Humphreys, 20 Mart. (La.) 1; Chapman v. Robertson, 6 Paige, 627, 634; Peck v. Mayo, 14 Vt. 33; Butters v. Old, 11 Ia. 1. The bonds were made with reference to the law of Iowa, as to interest, and not to that of New York, where interest above seven per cent. is deemed usurious and avoids the whole contract. The obligor is a municipal corporation of Iowa, the bonds were deliverable in that state, and proceedings to enforce their payment could only be had in courts sitting there.

With reference to interest on the coupons after their maturity, that can be allowed only at the rate of six per cent. under the law of Iowa. See as to coupons drawing interest, Aurora City v. West, 7 Wall. 105.

It follows, from the views expressed, that the plaintiff was entitled to judgment for the amount of the four bonds and the coupons in suit, with interest on the bonds after maturity until judgment, at the rate of ten per cent. a year, and with interest on the coupons after their maturity until judgment, at the rate of six per cent. a year; and that the judgment should draw interest at the rate of ten per cent. a year upon the amount found due on the bonds, and at the rate of six per cent. a year upon the amount found due on the coupons, including the costs of the action.

The judgment of the circuit court must, therefore, be reversed, and the cause remanded with directions to enter a judgment for the plaintiff, in

conformity with this opinion; and it is so ordered.

NOTE.-Upon the question as to whether the purchaser for value of unmatured negotiable paper, with overdue interest thereon, takes it as dishonored, and subject to all infirmities in its origin, there are but few reported cases in the state courts, and those few are of recent date and conflicting. Neither do the English decisions throw any light upon the point.

66

In Boss v. Hewitt, 15 Wis. 260, decided in 1862, and the earliest case in point, the defendant executed four negotiable notes, payable respectively in one, two, three and four years, with interest payable annually, for the price of sheep bought of the payees, and secured all the notes by a mortgage. One of the notes, and an installment of interest on all of them, being due and unpaid, the payees transferred the notes and mortgage to the plaintiff, who brought suit to foreclose. Defendant pleaded fraud on the part of the payees in the sale of the sheep. The court held, first: that the fact that the first note was due and unpaid at the time of the transfer to the plaintiff did not let in the defense as against the notes not then due, without deciding how it might have been if the plaintiff had bought with actual notice that all the notes were given for the same consideration; secondly, that the notes not matured were not to be treated as dishonored, and subject to all equities in the plaintiff's hands, by reason of an installment of interest being due and unpaid thereon at the time of the purchase. On the latter point the court Neither do we think that the fact that the intersay: est had not been paid makes the case equivalent to a purchase after maturity, so as to let in defenses that might have been made against the original parties. The interest is a mere incident to the debt, and although it is frequently provided that it shall be paid at stated intervals before the principal falls due, we know of no authorities holding that a failure to pay it dishonors the note so as to let in all defenses against subsequent purchasers for value, without any other notice of defects, except the mere fact that such interest had not been paid; and we do not think that it should have that effect. The maturity of the note, within the meaning of the commercial rule upon this subject, is the time when the principal becomes due." In Hart v. Stickney, 41 Wis. 630, the court held directly opposite to the decision in Boss v. Hewitt, and without any reference to that case, either in the opinion or the arguments of counsel, which are quite fully reported; but it is understood that the earlier case was in fact overlooked in deciding the later, and that the court now regards the question as an open one.

In National Bank of North America v. Kirby, 108 Mass., 497, it was held that where a note payable four years after date, with interest annually, was transferred after three installments of interest had become due, and these were not indorsed as paid, and were in fact unpaid at the time of the transfer, these facts did not subject the note in the hands of the indorsee to defences good against the payee; and though the court limit their decision to the ease where the indorsee has no notice of the non-payment of the interest other than the absence of any indorsement of payment, their reasoning is strong to show that notice of non-payment would not alter the case. It is is said in the opinion (p, 501): "It has indeed been held by this court that a note, the principal of which is payable by installments, is overdue when the first installment is overdue and unpaid, and is thereby subject to all equities between the original parties. Vinton v. King, 4 Allen, 562. Such a note is a single contract, and the party to whom it is transferred must take it with notice that as to the overdue installment the maker may have a justifiable cause for withholding payment, which may af fect the whole contract. But in its effect upon the