# McMurray v. Moran/Opinion of the Court

* Court Documents
* Case Syllabus
* Opinion of the Court
United States Supreme Court
134 U.S. 150
McMurray v. Moran
It appears satisfactorily from the evidence that, when appellees purchased the 310 bonds from Moore, the latter had contracts with the railroad company, by which it was restricted in issuing bonds to $10,000, par value, for each mile of completed road. It was that feature of the several contracts between the company and Moore that gave value, in the commercial world, to the bonds delivered to him; and the benefit of that restriction upon the issuing of bonds necessarily passed to those who purchase them from Moore. The issuing of bonds in excess of those delivered to Moore, and by him sold to Moran Bros., was in palpable violation of the company's agreement with him; for, as is conceded, the 310 bonds, held by appellees, represented, on the above basis, all of the completed road. No one receiving the bonds, thus improperly issued, who had notice of the restriction which the company, by the contracts with Moore, imposed upon its authority, could be deemed a bona fide holder for value. The circumstances under which the 147 bonds were obtained by the railroad company from the trustee, the Union Trust Company, are stated, with substantial accuracy, in the finding of facts made by the court below. Those who procured those bonds to be issued by the railroad company had knowledge of the want of authority in the company to put them on the market to the prejudice of the rights of the appellees as the holders of the 310 bonds. They were used in payment of the company's debts and obligations, and in discharge of obligations assumed by some of its officers. The purpose for which they were issued and used, however meritorious in itself, as between the company and those who originally took them, cannot affect the rights of the appellees arising under the company's contracts with Moore, as the original owner of the 310 bonds.
We do not mean to say that the 147 bonds, and each of them, are absolutely void for every purpose and by whomsoever held. If the present holders paid value for them without actual notice of the restriction imposed by the company upon its authority to issue them, they would be deemed bona fide holders for value, unaffected by the agreements between Moore and the railroad company; and they would be deemed holders for value, even if they took the bonds in payment of, or as security for, the company's pre-existing debts. Railroad Co. v. National Bank, 102 U.S. 14.
The mortgage of 1881 does not contain n y provision that gives priority to some of the holders of the bonds secured by it over other bonds of the same issue. If it did, all holders of the bonds so secured would be bound to take notice of such provisions, the mortgage having been duly recorded in Nevada. Nor is notice of the rights secured to Moore, as the holder of the 310 bonds, to beimputed to the defendants because the contracts between him and the company, or some of them, were put upon record. We do not understand that, by the law of Nevada, such instruments were required to be recorded, or that the record of them carries with it notice to all the world of their contents. Gen. St. Nev. 1885, c. 18, §§ 2571, 2593. The question, therefore, is one of actual notice upon the part of the defendants, when they took the bonds held by them respectively, of the limitation upon the company's authority to issue bonds in excess of the 310. We thus limit the inquiry as to notice, because it is clear that the defendants must have known, when they took the bonds, that the 310 had been previously issued, and that that amount more than represented completed road, on the basis of $10,000 a mile.
Upon a close scrutiny of the evidence we are of opinion that the decree below is correct as to the 56 bonds held by McMurray, the 28 bonds held by the First National Bank of Reno or by Bender for Manning & Berry, and the fraction of a bond held by Bender for the last-named firm. They were received by McMurray and Manning & Berry, respectively, with actual notice, derived from their relations with the railroad company, of its agreement not to issue on the Reno division more than 310 bonds, or $10,000 of bonds for each mile of completed road, and with knowledge, when they took the bonds, that the number thus limited had been previously issued to the contractor Moore. In respect to the 13 bonds held by Wright, the like number held by Watkins, and the 5 bonds held by Schooling, the evidence shows that the present holders took them for value from the first holders, without notice as to the restriction which the company, by its agreements with Moore, had imposed upon its authority to issue bonds on the Reno division. They were entitled to share in the proceeds of the sale of the mortgaged property, in proportion to the amount of bonds held by them respectively, and upon terms of equality with Moran Bros.
As to the remaining bonds, the appeal must be dismissed, because the amount, at par value, held by each of the respective appellants owning them is not sufficient to give this court jurisdiction to review the decree below, so far as it affects them. No one of those claims, principal and interest, exceeded, at the time of the decree below, the sum of $5,000. Each claim is distinct and separate from the claims of all other appellants; and the right of each claimant to be regarded as a bona fide holder for value depends upon the special circumstances under which he took the bonds now held by him. Gibson v. Shufeldt, 122 U.S. 27, 7 Sup. Ct. Rep. 1066; Jewell v. Knight, 123 U.S. 426, 432, 8 Sup. Ct. Rep. 193.
The decree below as to H. J. McMurray, A. H. Manning, and W. F. Berry, partners as Manning & Berry, Charles T. Bender, trustee for Manning & Berry, and the First National Bank of Reno, as trustee for Manning & Berry, must be affirmed; and reversed as to the appellants William Wright, A. A. Watkins, and Jerry Schooling, and the cause, as to those parties, must be remanded for further proceedings consistent with this opinion. The appeal by all the other appellants must be dismissed. The appellants Wright, Watkins, and Schooling will recover against the appellees their costs in this court.
It is so ordered.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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