491 not yet formally executed and delivered. This rule also applies to legislation which impairs or destroys the power of a public corporation to levy taxes for the payment of either principal or interest of bonds legally issued when at the time of such issue the power to levy taxes for this specific purpose existed. The power to levy taxes, it is held, is a part of the contract between the corporation and the holder of negotiable bonds which cannot be impaired by subsequent action in violation of that provision of the Federal constitution forbidding the passage of laws impairing the obligation of a contract.492 The principle also prevents the passage of legislation or other action diverting funds or property which at the time of the issue of the bonds 491 Callaway County v. Foster, 93 U, S. 567; German Sav. Bank v. Franklin County, 128 U. S. 526. Where the court in the syllabi say: "After a statute has been settled by judicial construction, the construction becomes, so far as contract rights acquired under it are concerned, as much a part of the statute as the text itself." Board of Education of Dist. No. 3 v. Bolton, 104 Ill. 220. But see Wade v. Town of La Moille, 112 Ill. 79, and Williams v. People, 132 Ill. 574; Slocomb v. City of Fayetteville, 125 N. C. 362; People v. Otis, 90 N. Y. 48; Knapp v. Town of Newtown, 1 Hun (N. Y.) 268; Dodge v. Platte County, 16 Hun (N. Y.) 285; Marsh v. Town of Little Valley, 4 T. & C. (N. Y.) 116; Gibson v. Knapp, 21 Misc. 499, 47 N. Y. Supp. 446; City of Mitchell v. Smith, 12 S. D. 241, 80 N. W. 1077; Stallcup v. City of Tacoma, 13 Wash. 141. A purchaser has the right to rely on the existing construction, a law authorizing the issue of bonds. 492 Von Hoffman v. City of Quincy, 71 U. S. (4 Wall.) 535; City of Galena v. Amy, 72 U. S. (5 Wall.) 705; Riggs v. Johnson County, 73 U. S. (6 Wall.) 166; Rees v. City of Watertown, 86 U. S. (19 Wall.) 107; Louisiana v. City of New Orleans, 102 U. S. 203; Wolff v. City of New Orleans, 103 U. S. 358; Louisiana v. Pilsbury, 105 U. S. 278; Ralls Coun ty Ct. v. United States, 105 U. S. 733; Louisiana v. City of New Or leans, 109 U. S. 285; Port of Mobile v. Watson, 116 U. S. 289; Seibert v. Lewis, 122 U. S. 284; United States v. Howard County Ct., 2 Fed. 1; Devereaux v. City of Brownsville, 29 Fed. 742; Hicks v. Cleveland (C. C. A.) 106 Fed. 459; Padgett v. Post (C. C. A.) 106 Fed. 600; Maenhaut v. City of New Orleans, 2 Woods, 108, Fed. Cas. No. 8,939; United States v. Jefferson County, 5 Dill. 310, Fed. Cas. No. 15,472; United States v. Johnson County, 5 Dill. 207, note, Fed. Cas. No. 15,489; United States v. Treasurer of Muscatine County, 2 Abb. 53, Fed. Cas. No. 16,538; Columbia County Com'rs v. King, 13 Fla. 451; Peoria, D. & E. R. Co. V. People, 116 Ill. 401; Moore v. City of New Orleans, 32 La. Ann. 726; State v. St. Louis, K. & N. W. R. Co., 130 Mo. 243; Munday v. City of Rahway, 43 N. J. Law, 338; McCless v. Meekins, 117 N. C. 34; Morton v. Comp was either devoted or to be devoted to the payment of either their principal or interest.493 The general tendency of all courts, both federal and state, is to protect the contract obligation existing in favor of the bona fide purchaser of negotiable securities issued by public corporations. The clause of the Federal constitution prohibiting a state from passing any law impairing the obligation of a contract affords a real and substantial protection to the investor. § 205. Securities of public corporations; their legal character. Bonds issued by public corporations, either with or without coupons attached, were, at first, considered by the courts as nonnegotiable instruments; later, however, they came to be recognized as negotiable paper and bona fide holders for value were protected to the same extent as holders of negotiable notes and bills under the law merchant. They are now fully and universally recognized as negotiable instruments. They are also con troller General, 4 S. C. (4 Rich.) 430; City of Memphis v. Bethel (Tenn.) 17 S. W. 191. 493 Edwards v. Kearzey, 96 U. S. 595; Louisiana, v. Police Jury of St. Martin's Parish, 111 U. S. 716; .St. Tammany Water Works v. New Orleans Water Works, 120 U. S. 64; Lehigh Water Co. v. Borough of Easton, 121 U. S. 388; McGahey v. State of Virginia, 135 U. S. 662; Sun Mut. Ins. Co. v. Board of Liquidation of New Orleans, 24 Fed. 4; Fazende v. City of Houston, 34 Fed. 95; Saginaw Gas Light Co. v. City of Saginaw, 28 Fed. 529; Willis v. Miller, 29 Fed. 238; Coast Line R. Co. v. City of Savannah, 30 Fed. 646; Maenhaut v. City of New Orleans, 2 Woods, 108, Fed. Cas. No. 8,939; Edwards v. Williamson, 70 Ala. 145; Brodie v. McCabe, 33 Ark. 690; English v. Sacramento City & County Sup'rs, 19 Cal. 172 (Sinking fund tax); Board of Liquidators of City Debts v. Municipality No. 1, 6 494 La. Ann. 21; State v. Board of Liquidation of City Debt, 40 La. Ann. 398; State v. Walsh, 31 Neb. 469; Brooklyn Park Com'rs v. Armstrong, 45 N. Y. 234; People v. Common Council of Buffalo, 140 N. Y. 300; Lilly v. Taylor, 88 N. C. 489; Goodale v. Fennell, 27 Ohio St. 426; Bassett v. City of El Paso, 88 Tex. 168, 30 S. W. 893; Terry v. Wisconsin M. & F. Ins. Co. Bank, 18 Wis. 87; Smith v. City of Appleton, 19 Wis. 468. 494 Mercer County v. Hacket, 68 U. S. (1 Wall.) 83. Gelpcke v. City of Dubuque, 68 U. S. (1 Wall.) 175. "Bonds and coupons like these by universal commercial usage and consent have all the qualities of commercial paper." Meyer v. City of Muscatine, 68 U. S. (1 Wall.) 384. Police Jury of Tensas v. Britton, 82 U. S. (15 Wall.) 566. "The bonds and coupons on which a recovery is now sought are commercial instruments, payable at a future day and transferable from hand to hand. sidered chattels in so far as that character tends to relieve them from defenses and burdens incident to choses in action and to give them a merchantable character for investment and commercial purposes. 495 The legal effect of such a character is to place them on an equality before the law with ordinary negotiable paper pertaining to the commercial business of the country and to make them marketable and vendible and before maturity, free of equities between the original parties.496 Such instruments transferred before maturity to a bona fide purchaser leave behind them all equities and inquiries into consideration and the conduct of parties; and become, in the hands of an innocent holder, clean obligations to pay, on without any power the part of the municipality to demand any inquiry as to the justice or legality of the original claim, or to plead any corrupt practice of the parties in obtaining the security. This characteristic of commercial paper, which no court has more faithfully enforced than this, raises the doubt whether the power to issue it can be implied from the ordinary powers of local administration and police which are conferred upon the boards and trustees of political districts." City of Nashville v. Ray, 86 U. S. (19 Wall.) 468; Humboldt Tp. v. Long, 92 U. S. 642; Marion County Com'rs v. Clark, 94 U. S. 278; Carter County v. Sinton, 120 U. S. 517, 7 Sup. Ct. 650; County of Wilson v. Third Nat. Bank, 103 U. S. 770. The words to "bearer" or "order" are not essential to negotiability. City of Ottawa v. First Nat. Bank, 105 U. S. See note to White v. Vermont & M. R. Co., 16 L. Ed. 221; Griffith v. Burden, 35 Iowa, 138; Craig v. City of Vicksburg, 31 Miss. 216. 342. But a bond not complying with the requirements of negotiable paper lacking, for instance, a definite and certain sum to be paid, will not be considered negotiable. See Parsons v. Jackson, 99 U. S. 434; Hopper v. Town of Covington, 8 Fed. 777; Id., 118 U. S. 148; 1 Daniel, Neg. Inst. § 53; City of Memphis v. Brown, 11 Am. Law Reg. (N. S.) 629. 495 City of Memphis v. Brown, 11 Am. Law Reg. (N. S.) 629; Griffith v. Burden, 35 Iowa, 138; State v. Cunningham, 51 Mo. 479; Force v. City of Elizabeth, 27 N. J. Eq. 408. 496 Murray v. Lardner, 69 U. S. (2 Wall.) 110; Aurora City v. West, 74 U. S. (7 Wall.) 82; Marion County Com'rs v. Clark, 94 U. S. 278; Durant v. Iowa County, 1 Woolw. 69, Fed. Cas. No. 4,189; Griffith v. Burden, 35 Iowa, 138; Consolidated Ass'n of Planters v. Avegno, 28 La. Ann. 552; First Nat. Bank of St. Paul v. Scott County Com'rs, 14 Minn. 77 (Gil. 59). Where negotiable bonds bearing interest annually have attached coupons for the payment of interest and are transferred with overdue coupons still attached, the purchaser takes them subject to any infirmity of title in the seller. The fact that the coupons are by their terms payable on presentation to a particular person does not af fect this rule. Belo v. Forsythe County Com'rs, 76 N. C. 489; Boyd v. Kennedy, 38 The authorities also hold that this character makes them exempt from the defense of usury founded on the fact that they may have been issued and sold below par value,197 and also subject to the rule of damages in an action for conversion which applies to chattels rather than that which applies to private evidence of debt.498 As between parties by delivery, unless registered, the bearer has full title and the maker cannot set up against one who has taken them in good faith, equities which might be available against the original payee provided they were not utterly void in their inception. Their legal character, as thus stated, is sustained at the present time by an overwhelming and universal weight of authority.499 The statutory authority to issue bonds bearing interest, running for a long time and payable to bearer or with provisions for registration, usually authorizes, by implication, the issuance of bonds fully negotiable in their character according to the usual rules of the law merchant.500 N. J. Law, 146. See Diamond v. Lawrence County, 37 Pa. 353, as an early case holding that a county bond is subject, even in the hands of innocent holders, to equities existing against them in favor of the maker. Such bonds not having, however, the quality of commercial paper in Pennsylvania. "We will not treat bonds like these as negotiable securities: on this ground we stand alone. All the courts, American and English, are against us." This holding has since been reversed. See Mason v. Frick, 105 Pa. 162. 497 Richardson v. Lawrence County, 154 U. S. 536; Woods v. Lawrence County, 1 Black (U. S.) 386, 410. 498 Meixell v. Kirkpatrick, 33 Kan. 282; Murray v. Stanton, 99 Mass. 345. R. R. Co., 66 Iowa, 385; Maddox v. Graham, 59 Ky. (2 Metc.) 56; Cecil v. Board of Liquidation, 30 La. Ann. 34, 51 Am. St. Rep. 822-861, 98 Am. Dec. 664-691; Simonton, Mun. Bonds, §§ 111-124a. 500 City of Cadillac v. Woonsocket Inst. for Savings (C. C. A.) 58 Fed. 935. "This act clearly authorizes the issuance of 'bonds' bearing a legal rate of interest for any loans lawfully made. It also empowers the council to issue 'new bonds,' to extend the time of payment of 'bonds falling due.' That this contemplates, and by necessary implication authorizes, the issue of negotiable bonds we have no doubt. The general power to issue 'bonds' must be taken to authorize 'bonds' in the usual form of such well known commercial obligations. That usual form embodies a contract and obligation negotiable in its terms." Distinguishing Brenham v. German American Bank, 144 U. S. 173. Ashley v. Presque Isle County § 206. Validity of negotiable securities. The doctrine of estoppel. Bonds possessing all of the elements and characteristics of negotiable paper, as stated in the preceding section, are not subject, before maturity, when in the hands of bona fide and innocent purchasers for value, to equities that may exist in favor of the maker of such bonds. The doctrine of estoppel has been held to apply to the maker through acquiescence in the existence of certain conditions or circumstances which might, if taken advantage of speedily, relieve it from its obligation, through the principle of estoppel by recitals, course of dealing and the payment of interest to be considered in succeeding sections. The nonperformance of conditions required to be fulfilled by the party entitled to bonds, if acquiesced in, is not sufficient to render such bonds invalid.501 A public corporation that has as such voted for and issued bonds, it has been held, is estopped from setting up as a defense against an innocent holder that it never was incorporated.502 So also is a public corporation hav Sup'rs (C. C. A.) 60 Fed. 55; West Plains Tp. v. Sage (C. C. A.) 69 Fed. 943; Howard v. Kiowa County, 73 Fed. 406; German Ins. Co. v. City of Manning, 78 Fed. 900; D'Esterre v. City of Brooklyn, 90 Fed. 586; City of Austin v. Nalle, 85 Tex. 520, 22 S. W. 668, 960; Winston v. City of Ft. Worth (Tex. Civ. App.) 47 S. W. 740. 501 Knox County Com'rs v. Aspinwall, 21 How. (U. S.) 539; Randolph County v. Post, 93 U. S. 502, and cases cited; Augusta Bank v. City of Augusta, 49 Me. 507; Deming v. Inhabitants of Houlton, 64 Me. 254; Shurtleff v. Inhabitants of Wiscasset, 74 Me. 130. In Morril v. Smith County (Tex. Civ. App.) 33 S. W. 899, it is held, however, that where the fact of the non-performance of conditions can be ascertained by an inspection of the records on the part of the purchaser, the corporation will not be estopped to set such up as a defense. 502 Aller v. Cameron, 3 Dill. 198, Fed. Cas. No. 243. See, also, National Life Ins. Co. v. Board of Education of Huron, 62 Fed. 778, where the illegality of an incorporation was set up as a defense to bonds issued by a board of education organized as a corporate body. The court in its opinion say: "It was recognized and its action was acquiesced in, by the state and by the citizens, for at least 18 months; and, as against bona fide purchasers of its bonds, its acts, as a de facto board of education, if within the powers granted to a board legally organized under this law, are binding upon the defendant corporation. It is the province of the state to question, by proper judicial proceedings, its incorporation; not that of a defendant in a private suit, when it has as |