gage. 17 All of the same series of bonds secured by a mortgage share ratably in the proceeds, and their holders should be paid pari passu, without regard to the amounts they paid for the bonds.18 In New York it has been held, that the interest coupons upon the bonds of a railroad corporation, received by one who has advanced the money with which they are taken up, under an agreement with him that they were to be delivered to him uncanceled, as security for the advances, were valid securities in the hands of the holder; and that the mortgage upon the corporate property given to secure the bonds might be enforced for his benefit; but as between him and the bondholders who received the amount of their coupons in ignorance of the transaction, and supposing their coupons to have been paid, that the latter had the prior equities, and if, upon foreclosure and sale of the mortgaged property, the sum realized were insufficient to pay the face of the bonds, the holder of the coupons would not be entitled to share in the proceeds.19

Trust Co. v. Monticello, etc., R. Co., 63 N. Y. 314; Broadfoot v. Fayetteville, 124 N. C. 478, 32 S. E. 804, 70 Am. St. Rep. 610.

17. Gilbert v. W. C. V. M., etc., R. Co., 33 Gratt. 599.

18. In re Regent's Canal Iron Works Co., 3 Chan. Div. 43 (1876); Stanton v. A. & C. R. Co., 2 Woods C. C. 523; Hodge's Appeal, 84 Pa. St. 359 (1877), in which case it was also held that if the holder of the bond was entitled to share in proceeds, other holders would not set up any informality in the manner of its acquisition. In Ketchum v. Duncan, 96 U. S. (6 Otto) 671, it was held that coupons had no superior equity to that of the bonds from which they were taken, or the subsequently maturing coupons. Strong, J., said: "The mortgage in this case secures no priority to the coupons past due, nor to those first due. It places all bondholders or coupon holders on the same level." See also Pennock v. Coe, 23 How. 130. Following the doctrine stated in the text, it has been held in Ohio that where bonds are secured by a mortgage on the roadway and other property of the maker, executed to a trustee for that purpose, and are issued at different times, the lien of all the bonds outstanding, in the hands of bona fide holders for value, are equal in rankthe lien of each bond dating from the record of the mortgage that secured it, and not from the time it was issued. See Pittsburg, etc., Ry. Co. v. Lynde, 55 Ohio St. 23, 44 N. E. 596.

66

19. In Union Trust Co. v. Monticello & P. J. R. Co., 63 N. Y. 311, Earl, J., said: Equity will keep the securities in life, in such cases, to promote the ends of justice; but not against any person having a superior equity." Harbeck v. Vanderbilt, 20 N. Y. 398; Robinson v. Leavitt, 7 N. H. 100; Miller v. Rutland, etc., R. Co., 40 Vt. 399; James v. Johnson, 6 Johns. Ch. 423; Haven v. Grand Junction R. Co., 109 Mass. 88. Where parts of bonds authorized by a mortgage has been illegally issued, and a part thereof legally issued, the holders of the bonds legally issued are entitled to the whole proceeds of the

If the mortgage securing bonds provides that in case of default a certain number in amount of bondholders may require the trustee to sell, and the same clause also provides that the bonds shall become one on default, it has been considered that a single bondholder could not precipitate the sale.20

$1491b. When consideration paid corporation for invalid bond may be recovered. When the transaction is not malum in se, and the parties are not particeps criminis in a violation of law, money received by a corporation, as well as by a person, for a security issued, may be recovered by the party paying it, if such security be void by reason of some technical defect or illegality.21 And if a county should repudiate a bond given in payment of an antecedent debt, the original consideration would revive.22 Where a city issued bonds falsely dated, and which were invalidated by a registry act in force at time of their issue, and received the money for them, a purchaser for value without notice, although not entitled to enforce the bond, it has been held, may recover the amount he paid with interest from time the obligation of the city to pay was denied.23

§ 1491c. The bonds of a county are debts as fully as any other of its liabilities, and though issued in pursuance of a law which authorizes a levy of a special tax to pay them, "not to exceed onetwentieth of one per cent. upon the assessed value of taxable property for each year," but contained no provision that only the funds so derived should be applied to their payment in such a case any balance remaining due after applying the proceeds of the special tax to payment of the bonds, should be paid out of the general funds of the county.

24

mortgaged property, so far as may be necessary to constitute their bonds, and not simply to an aliquot part of the said proceeds. See Badger v. Sutton, 30 App. Div. 294, 295, 52 N. Y. Supp. 16.

20. American Nat. Bank v. American Wood Paper Co., 19 R. I. 149–155, 32 Atl. 305, 61 Am. St. Rep. 746.

21. Thomas v. City of Richmond, 12 Wall. 354; Oneida Bank v. Ontario Bank, 21 N. Y. 496; Draper v. Springport, U. S. Sup. Ct., Jan., 1882, Morrison's Transcript, vol. III, No. 3, p. 432, Bradley, J.: "If valid, a recovery may be had on it; if invalid, a recovery may be had upon the original consideration."

22. Jackson County v. Hall, 55 Ill. 444.

23. Louisiana v. Wood, 102 U. S. (12 Otto) 294, affirming 5 Dill. C. C. 122. See Travelers' Ins. Co. v. Mayor of Johnson City, 40 C. C. A. 58, 99 Fed. 663.

24. United States v. County of Clark. 96 U. S. (6 Otto) 211; Hotchkiss v. Marion, 12 Mont. 218, 29 Pac. 821.

SECTION II.

THE FORMAL PARTS OF NEGOTIABLE BONDS AND COUPONS.

§ 1492. The bond, with its coupons annexed, is usually printed upon a sheet of paper resembling in texture and style that used in the issue of currency. And the engraver's art is taxed, as a general thing, to invest the. instrument with as much attraction. to the eyes of capitalists as possible, and, as well, for the purpose of fortifying it against the ingenious imitations of the forger. The bond is usually large and showy in its lettering and its devices, while the coupons are usually small (as they must needs be on account of their number) and less ostentatious. They are generally arranged so as to be easily severable in the order of their maturity.

1492a. The signature to the bonds and coupons is generally written by the president of the corporation, or the chief executive of the municipality issuing them; and there is generally a counter signature by the secretary, or treasurer, or chief clerk of the corporation or municipality. The signature to the coupons, where the bonds are properly signed and sealed, need not be written, but may be printed in fac-simile, or otherwise;25 and if the bonds be properly executed, it is no valid objection to the coupons that they are signed by only one of the officers who signed the bonds.20

§ 1493. Wording of coupons, and various forms. It is entirely immaterial in what words the coupons are expressed, provided they indicate by whom they are due, and the amount and time of payment. Sometimes they contain words of promise, making them substantially promissory notes in themselves. Thus, in Thomson v. Lee County, 3 Wall. 327, the form was: "Promise to pay to the bearer, at the Continental Bank, in the city of New York, forty dollars interest on bond No.." Sometimes they are in the form of a bill of exchange, or draft upon the treasury of the corporation issuing them. Thus, in Moran v. Commissioners

25. Pennington v. Baehr (Sup. Ct. Cal.), Cent. L. J. of St. Louis, vol. II, No. 6, p. 92, Feb. 5, 1875; Lynde v. County, 16 Wall. 6; McKee v. Vernon County, 3 Dill. C. C. 210; Dillon on Municipal Bonds, 12, note. 26. Thayer v. Montgomery County, 3 Dill. C. C. 389.

VOL. II-32

of Miami County, 2 Black, 722, the form was: "The treasurer of said county will pay the legal holder hereof one hundred dollars on the first day of September, 1857, on presentation thereof, being for interest due on the obligation of said county, No. 16, given to the Peru & Indianapolis Railroad Company." Sometimes they are in the form of a mere ticket, or token or "Interest Warrant," as it is called. Thus, in Woods v. Lawrence County, 1 Black (U. S.) 360, the coupon is in this form: "County of Lawrence Warrant No. -, for thirty dollars, being for six months' interest on bond No. payable on the day of at the office of the Pennsylvania Railroad Company, in the city of Philadelphia." Sometimes they are in the form of a check upon a banking-house, as in Arents v. Commonwealth, 18 Gratt. 753, where the form was: "Duncan, Sherman & Co., of New York, will pay the bearer thirty dollars, the half-yearly interest on the Wheeling bond due 1 January, 1867." 27 Sometimes they are in the form of drafts or bills, but name no drawee, as in Mercer County v. Hubbard, 45 Ill. 140, where the form was: "Six per cent. stock, Mercer County, State of Illinois, Railroad Bond No. 20. Pay the bearer sixty dollars on the first day of July, 1863, interest to that date. John Cowden, Chairman of Board of Supervisors of Mercer County." However the forms may vary, the intent and legal effect are the same. In all of the cases the coupon is furnished as evidence of a sum due on the bond for interest at a particular time and place, and as authority to the holder to receive it. And whether the coupon be assimilated to a note, bill, or check, or be a mere ticket or warrant of amount, and place of payment, the holder may sue on it without producing the bond; but in all cases he receives a sum due and payable according to the terms of the bond.

§ 1494. Payee. The fact that no payee is mentioned in the coupon an omission which would vitiate an ordinary promissory note—will make no difference, for it is sufficiently evident from the general character of the instrument that it was issued as the binding obligation of the payor to the purchaser of the bond, and was designed to be paid to him or to the bearer.28 Nor will

27. See also Mayor, etc. v. Potomac Ins. Co., 58 Tenn. 298.

28. Woods v. Lawrence County, 1 Blackf. 360; Virginia & Tenn. R. Co. v. Clay (Special Ct. App. of Va., unreported). See §§ 1496, 1499.

it matter that it contains no words of promise. For while they may be necessary to constitute an ordinary promissory note, which without them may be a mere memorandum, the very form of the coupon clearly evinces an intention that it shall be an obligation to pay the amount designated, and the intention of the payor is what the law at all times seeks to enforce.29 We have thus stated what seems to us the true theory as to coupons; but in a New York case, reported since the first edition of this work was in the press, variant views have been expressed.30 The requisite certainty in designating the payee of negotiable instruments in general has been discussed in another portion of this work.31

§ 1495. The bond not necessarily sealed. In common parlance the term "bond" is generally understood to signify a sealed instrument, in contradistinction to bills and notes of hand, which are unsealed, and need only the party's signature to their completion. And as a general rule a bond is a sealed instrument. But it does not follow that it always is or must be. It is certainly usual for the coupon bonds of States and corporations to be authenticated by the State or corporate seal; and it has been said by high authority that it is necessary they should be so authenticated, for the reason that they are executed by States and corporations.32 But the old idea that States and corporations can only bind themselves under seal is utterly obsolete.33 Their bills and notes are as binding as their sealed obligations. And it is now pretty well settled by authority, as indeed it is clear in reason, that it is not necessary to constitute a corporate obligation a bond that it should bear its seal. And the term "bond," as now applied to State and corporate obligations, is simply intended to signify a permanent investment security in contradistinction to those of an ordinary and current nature, such as bills of exchange and promissory notes. In New York, where the Legislature authorized the town of Genoa to issue " bonds," and instruments were issued with coupons attached, and formal in all respects except that they bore no seals, it was held that they were valid bonds not

29. Woods v. Lawrence County, supra, and cases cited.

30. Evertsen v. National Bank, 66 N. Y. 19, 20. See post, § 1497. 31. Ante, § 99.

32. Mercer County v. Hackett, 1 Wall. 83.

33. Dinsmore v. Duncan, 57 N. Y. 577; Connecticut Mut. Life Ins. Co. v. Cleveland, etc., R. Co., 41 Barb. 22. See § 381, vol. I.