New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1878-01-14
HYPOTHECITLD SECURITIES
THE LAW AND rER STATUTES.
TO tAe Editor Of rae Tribune.


To the EditOr Of rae Tribune.
SIR: The unfortunate cOllaDsing of Net
and OF Bonner has already raised several questions
with which Courts will be employed for some tme
and the question whether tho purchaser Of the rehypothe-
Gated cues has o good title will. III all probability,
again and again up for decision In shape or
another Ordinarily the bonadde purchaser Of so-caed
negotiable security Is protected against all claims, by
whomSoo<cr presented. and yet stock transferred
ain blank" has beon declared Dot TO be negotiable
in California But case has recently been
decide by Of the learned Justices Of Supreme
Court which is Of intense interest in this connection
bu, which has not yet become known to the public.
refer the OF Grand Rapids and Indiana Rail
road Company against Joshua g. Sanders, recently tried
before ud Van Worst the facts Of which, as given in
his opinion appear ~ be follows In 1861 the Grand
Rapids and Indiana Railroad Company a corporation
OF Michigan and Indiana, executed q mortgage
to three trustees to mortgage bonds to the
amount Of $4,500000. The president OF the company
to this city for the purpose Of negotiating the
bonds with full authority from the company TO use them
raise money by hypothecation. he should deem best
do go rather than by sale. As the bonds were I'M
known the market IL easier to borrow than To
sell and president made several loans. giving bonds
as collateral and signing, what in Wall Street parance Is
called stock-noe," giving the lender OF the money
authority cell the bonds nonpayment 90 the loan
All this done by Mr.. Lomax, the president OF the
railroad company, and as its president
Justice Van Worst finds that the ilrty-One Of these
bonds in suit pledged in this manner and that the
loan being paid tho pedgces sold them for value TO
n person whom he calls purchaser i'll good faith"
Shortly after ihs person, Mr. Duneomb, mad become
owner OF the bonds, he informed President Lomax Of his
having purchased them giving hun, at his request, their
numbers and objections to his ownership were raised
by the latter, and 10 hiDdrancc offered TO
dsposal OF them. In 1859, Mr. Sanders,
tho defendant, bought the bonds from the per-
han, vlsd sTaa
II would appear that subsequent to this purchase by Mr.
sanders, the railroad company published Hu advertise
rnent. stating that the Old bonds were Illegal and void
There evidence It would seem 10 show that ottbor
DncOnb or Sanders welo informed OF tha, anI III WOW
Of the fact that rle president had bad the nteryiew
with Duncomb, rs previously referred 70, the iufthrr
fact tina, personal notice was given Dnucomb OF an
intention to coGtcst Is not . liitlc singular. This
before purchasing. Mir. Sanders made particular
~ o the bonds, and was informed That arrangements
had lust been made Wt the leading capitalists lnsuring
completion 81 the line and payment OF all us ob
0ps. Aud such was the fact, for tho new paFes soon
ISSUED $9OO000O OF first mortgage bonds, ~AcA are on
IN, stock Exchange list today and are occasionally
quoted ana also ave noha OF li.lt inhy 10 t.e .l
tees Of ihIs S5OOJOp mortgage 10 secure tnemagahst
any claims which might he made upon them on account
Of any 81 the bands outstanding.
several wears Mr. sanders began suit against these
them tie mil amount II his hry-onc bonds and the
COUPONS, and also interest tercupun As al C.t~et ~
that jud-incn the present suit vas begun by the raI
road company Colonel scott being now president. against
Sanders, AID Tie ciai was mace that me Oonds wore
up To tie company for cahcc.lati"u, a. Pres
dent Lonlax Ony hypOthechcd them. Upon the
trlhI the facts were foEud 10y tie JUDGE ~
above stated. They may be- summc! Up as
follows: President LOmaX, having fun authority % ito 90
hyppthrcated bonds these JUndS were sold By
Pledge. III due course 10 bona dc purchaser, VINO
rc,oid Thorn. This latter purchaser j, called upon to
deliver them for cancellation. upon the plea tat the
president having pledged the bond, for u Loan TIE
vicdgoos had authority "a sell and tho purchaser ~
such sale could not acquire little. Upon these iacts
Justice Van Worst fcse5 the prayer OK tac railroad
company 10 haze tlo bonds cancelled. but luds
defendant only Tor such viii repay him Tor
amount be paid !Or .hc honos Nlth interest Oh sa
aHUIlnt
!oth The defendant and the plaintiff nave appealed,
hut il VIII prof. ably Dee ae hcGg" Any further de-
csipn viii bt reached. and IN the meantime tho pun
cLtacr hypO,Ec.atcd or relypot.. cAt,d sureiier
should be yer, cautious. Aud II tiis 'c.sOn H ALI med i
Wou!d bc easy thEg toi many ~ Our rurOad
c"Iup.Ics OtArf corporations, 10 u thcL-c'ea oi
vast mountain o. debt Oi tH-J would odJ have, accord
il 20 H. pas Iuurn smaller amount than called Tor
BIZ H.. bonds Unprotected. II would inicei bO NJ"
version OF - new VA! ip Pay pd Debts. WORTHY Ia
attention ~ many eminent " iuauci5r' EASALK.
htW-l Ork. Jan. 10, 1879.