Court Opinion

ID: 8256988
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:32:45.328694+00
Date Added: 2024-06-11T16:43:01.664098
License: Public Domain

Handy, J.,
delivered the opinion of the court.
This was an action of debt brought by the plaintiff in error, against the defendant in error, upon a bond executed by the corporate authorities, and under the corporate seal of the city of Yicksburgh, promising “to pay to the.bearer thereof, the sum of one thousand dollars, with interest thereon, at the rate-of six per cent, per annum, payable at the end of each six months from1 the date thereof, both principal and interest to be paid at the United States Bank, in Philadelphia, in gold or silver coin, upon presentation of the scrip,” dated the 13th June, 1840. The declaration avers that the plaintiff is the lawful bearer of the instrument, and makes proferí of it.
The pleas on which the judgment of the court below was pronounced, and which are now the subjects for consideration are:
1. That before the commencement of the action, the defendants paid the debt and all interest to the Commercial Bank of Milling-ton, to which said bond was delivered and made, before the defendant received notice of any assignment or transfer to the plaintiff. And with this plea, a notice was filed that the defendants would produce as a set-off, the notes and checks of the Commercial Bank of Millington, held by them, and then produced and filed.
2. That the bond sued on was fraudulently, and without consideration, obtained from the defendant by the Commercial Bank *244of Millington, and that the defendant has never received any consideration therefor.
The plaintiff filed a general demurer to these pleas, which was overruled, and the plaintiff declining to reply, a judgment was rendered upon them for the defendant.
These pleas present two questions for consideration:
1st. Whether, .on a bond payable to bearer, and of which the plaintiff has become the bona fide holder by delivery, the plaintiff acquires the legal title enabling him to maintain an action upon it ?
2d. Whether, in such an action, a defence which may have existed against a prior holder, to whom the bond was originally delivered, is admissible in bar of the action ?
1. It is conceded by the counsel for the defendant in error, that if the bond in this case can be regarded as a negotiable security, the holder, taking it bona fide, acquired the legal title to it. But ■it is insisted that, as bonds were not assignable by the common ¡law, and as by the laws of Pennsylvania, where this bond was pay-table, and by our laws, bonds can be transferred so as to vest a legal title in the assignee, only by assignment of the obligee in writing, no such title passed by the mere delivery of this bond to the plaintiff. This is undoubtedly true, if the bond in this case be within the common law rule, or if it be such a bond as is embraced in the provisions of the statute of this State and of Pennsylvania. We have, therefore, first to determine whether this bond is within the provisions of those statutes.
Our statute provides, that “all bonds, obligations, bills single, promissory notes, and all other writings for the payment of money or any other thing, shall and may be assigned by indorsement, whether the same be made payable to the order, or assigns of the obligee or payee, or not; and the assignee or indorsee shall and may, sue in his own name, and maintain any action which the obligee or payee might or could have sued or maintained thereon, previous to assignment; and in all actions commenced and sued upon any such assigned bond, obligation, bill single, promissory note, or other writing, as aforesaid, the defendant shall be allowed the benefit of all want of lawful consideration, failure of consideration, payments, discounts, and set-offs, made, had or possessed *245against the same, previous to notice of assignment,” &c., “as if the same had been sued and prosecuted by the obligee or payee therein; and the person or persons to whom such instruments so payable are assigned, may maintain an action against the person or persons who shall have indorsed or assigned the same, as in cases of inland bills of exchange.” Hutch. Code, 640, § 9.
The object of this statute clearly was, to make assignable such instruments as were previously not assignable, and, by the assignment, to vest a legal title in the holder, which would not have passed without the assignment. Instruments which passed to the bearer upon their face, and without the necessity of an assignment, were not within its contemplation. The intention was to enable a party to sue, who must derive title as assignee ; and no reference was had to a party claiming title by the nature and terms of the contract, without any assignment. This view of the statute has been taken by this court, in Tillman v. Ailles, 5 S. & M. 373, where it was held, that “ a note payable to bearer, passes by mere delivery, and the holder claims his title to the note by virtue of being its bearer, and of the promise and contract between the maker and bearer. The circumstance of making the note payable to any person or bearer, does not compel the holder to show an indorsement by that person, since it is payable in the alternative, and not to that person absolutely. In such case, it is transferable by mere delivery.” The same construction has been put upon the statute of Alabama, which is the same as our own. 2 Stew. & Port. 312 et seq.
It is evident, therefore, that the bond in question is not within the scope of our statute, and that the title of the plaintiff does not depend upon an assignment or indorsement, under its provisions.
The statute of Pennsylvania appears to have the same scope, and to be framed with the same object as our own. It provides that all bonds, specialties, and notes in writing, signed by any person or persons, whereby such person or persons is or are obliged, or doth, or shall promise to pay to any other person or persons, his, her, or their orders or assigns, any sum or sums of money, mentioned in such bond, specialties, note or notes, may, by the person or persons to whom the same is, or are made payable, be *246assigned, indorsed, and made over to such person or persons as shall think fit to accept thereof. Laws of Pennsylvania, by Dun-lop, edit, of 1853, p. 70.
The eighth section of the act provides, that all assignments of bonds and specialties shall be under hand and seal, before two or more credible witnesses. And no other instruments-are embraced in any of the sections of the act than such as are payable to the order or the assigns of the payee or obligee.
This statute, like our own, manifestly applies to instruments, the legal title to which was necessary to be passed by assignment, and not to instruments payable to bearer.
We therefore think it clear, that neither the statute of this State nor that of Pennsylvania, has any application to an instrument like the present, payable to bearer.
We have, then, to consider what is the nature and legal effect of a bond payable to bearer, by the rules of the common law.
The leading case upon this subject is Grant v. Vaughan, 3 Burr. 1516, which was an action by the bearer, upon a promissory note, payable to the ship Fortune, or bearer; and after elaborate examination, it was held that by the very terms of the contract, any bona fide holder of such a note was entitled to maintain an action upon it, such paper being negotiable from its nature and legal effect, which was that any one who should become the lawful holder of it, was entitled to the benefit of it. It is true that Lord Mansfield refers to the statute of 3 & 4 Ann, ch. 9, as showing that such notes were placed upon the same footing with inland bills of exchange. But this is added after he had already shown the negotiability of such paper, apart from the statute, both by reason and authority. And the opinions of all the judges fully show that the right of a bona fide holder to recover upon such a note, proceeds from the nature of the contract, which right, though corroborated by the statute, necessarily arises from the intrinsic obligation to pay to whoever might be the holder. Wilmot, J., says: “This is a negotiable note, and the action may be brought in the name of the bearer. Bearer is a deseriptio personae; and a person may take by that description as well as by any other. In the nature of the contract, there is no impropriety in his doing *247so. It is a contract to pay the bearer, or the person to whom he shall deliver it, whether it be a note or a bill of exchange; and it is repugnant to the contract, that the drawer should object that the bearer has no right to demand payment of him.” And Yeates, J., said: “ Nothing can be more peculiarly negotiable than a draft or bill, payable to bearer, which is, in its nature, payable from hand to hand, toties quoties.”
In Gibson & Johnson v. Minet & Fector, 1 H. Black. 605, 606, Ch. Baron Byre, forcibly states the principles governing this subject, thus: “The title of an original payee is immediate, and apparent on the face of the bill. The derivative title is the title by assignment, a title which the common law does not acknowledge, but which exists only by the custom of merchants.” After speaking of the different nature and effect of bills payable to order and requiring indorsement, and those payable to bearer, which pass without indorsement, he adds, with reference to those payable to bearer: “The value of the writing, the assignable quality of it and the particular mode of assigning it, are created and determined in the original frame and constitution of the instrument itself; and the party to whom such a bill is tendered has only to read it, need look no further, and has nothing to do with any private history that may belong to it.”
In Bullard v. Bell, 1 Mason, 251, Judge Story says: “A note payable to bearer is often said to be assignable by delivery; but in correct language, there is no assignment in the case. It passes by mere delivery; and the holder never makes any title by or through any assignment, but claims merely as bearer. The note is an original promise by the maker to any person who shall become the bearer. It is, therefore, payable to any and every person who successively holds the note bona fide, not by virtue of any assignment of the promise, but by an original and direct promise, moving from the maker to the bearer.”
In the Bank of Kentucky v. Wister et al., it is said to be uniformly held by the Supreme Court of the United States, that a note payable to bearer, is payable to any body, and not affected by the disabilities of the nominal payee. 2 Peters, 326; Bonnafee v. Williams, 3 How. (S. C.) 574.
*248In Pierce v. Crafts, 12 Johns. R. 90, upon a note payable to William Douglass, or bearer, it is said, “Bearer is a descriptio personae of the real payee, and the note was transferable by delivery merely;” and, in reply to the objection that there was no privity of contract between the maker and the bearer, the court say, “ There is a legal privity of contract between the maker of a negotiable note and the assignee, or bearer, in this case. It is a contract to pay the money to whoever may become entitled to it by transfer, as bearer; and such privity commences as soon as the bearer becomes so entitled.”
In accordance with these authorities is the decision of this court in the case of Tillman v. Ailles, above cited; and we consider it well established, that the holder of a note payable to bearer, derives his title to the note' from the very terms of the contract, apart from the statute in relation to the assignment of such instruments, and without any necessity of an assignment from a previous holder. It is the express contract which the maker has issued to the world) that whoever should become the bona fide holder of the instrument should be entitled to receive the money therein agreed to be paid. When it comes to the hands of such a holder, the contract is complete ; and surely the maker should be bound by his own agreement. It is not founded on a violation of any principle of public policy, or of any rule of positive law, and is not against good morals. And upon reason and authority, and upon common law principles applicable to contracts, a note made by A., payable genérally to bearer, and of which B. becomes the bona fide holder, is as valid a legal obligation, and as capable of being enforced by suit by B., as if the note had been made directly to B. by name, for a valuable consideration. And it is upon this ground that contracts of 'this kind have been sustained, and not by virtue of any force derived to them from statutes in relation to the assignment of instruments not in themselves assignable.
But it is said that the authorities sustaining the title of the holder of paper payable to bearer, apply to cases of promissory notes, and not to bonds. Let us see what force there is in this objection.
It is said that promissory notes are negotiable paper, but that *249bonds are not, though both be payable to bearer. But how do such promissory notes become negotiable ? It is above shown that such notes are neither embraced in our statute, nor in that of Pennsylvania, in relation to the assignment of instruments for the payment of money; and, consequently, they do not acquire their negotiability from those statutes. Nor can it be derived from the statute of Ann, for that is not in force here, and, we believe, not in Pennsylvania. Yet it is settled by this court that such notes are negotiable, not by the statute, but by “ the promise and contract between the maker and bearer.” And they are also held to be negotiable in Pennsylvania, though not within the provisions of their statute. Bullock v. Wilcox, 7 Watts, 328.
According to the generally received opinion, promissory notes, equally with bonds, were not negotiable or assignable at the common law, so as to vest the legal title in the assignee, because they were choses in action. But all such instruments are put upon the same footing as to negotiability by our statute and that of Pennsylvania ; and whatever would be sufficient to render one class of them negotiable would be sufficient as to another class, so far as those statutes affected their negotiability. If, therefore, promissory notes, payable to bearer, derive their negotiability from the provisions of the statutes of this State or of Pennsylvania, without being specially embraced in those statutes, or coming within their purview, with equal reason, must bonds, payable to bearer, be rendered negotiable by force of those statutes.
But both of these classes of contracts are beyond the pale of those statutes, and if valid at all as negotiable instruments, they must be so on common law principles. They both stand upon the same principle as to negotiability — and that is, the promise of the maker that he would pay the holder, whoever he might be, which is the very essence of the contract, and without which it would be void for want of parties. If they derive their negotiable character from the terms and nature of the contract, unaided by the statute, we cannot perceive upon what reason a note, promising to pay money to bearer, should beheld to be valid in the hands of a bona fide holder, and a bond, payable to bearer, held to be invalid; for, by the rules of the common law, and in many respects under *250statutory regulations, the latter are held to be instruments of higher dignity than the former. It would, indeed, be strange, to hold that a party might make a valid promissory note, and give it all the force of commercial paper by simply signing his name to it, but that an instrument of precisely the same tenor and effect, with the exception that he added his seal to his name, should destroy the negotiable character of the instrument.
Many cases have been cited by the counsel for the defendant to show that bonds of this description cannot be considered as negotiable instruments. For the most part, those cases are not direct authorities upon the point in controversy, and afford but little aid in the consideration of the true points involved in this case. It appears that there are but few cases to be found in the books, in which bonds like the present have been the subject of controversy upon the points here presented. We will advert to those which are relied on as having particular application to this case.
Glyn v. Baker, 13 East, 512, was an action brought by the true owner of certain East India bonds, which were deposited in the hands of an agent, by whom they were fraudulently delivered to the defendant, under circumstances showing that he did not receive them bona fide. These bonds were payable to W. Gr. Sibley, his executors, &c., and were indorsed by him in blank. They were not negotiable by statute, and were not payable to bearer; and it was very properly held, that no action could be brought upon them except by Sibley, the payee, or by his executors; and therefore, that the bonds were not negotiable by delivery. The circumstances of the case show no analogy to this case. But it is relied on, on account of an observation made by Lord Ellenborough, in stating his reasons for his opinion, “ that any individual might as well say that he would make his bond negotiable.” The remark has but little force; and it certainly cannot be entitled to be received as a solemn decision, that an individual cannot in any form make his bond negotiable.
The only case^cited in behalf of the defendant directly in point, is that of Sayre v. Lucas, 2 Stewart, Alabama, 259. That case is in opposition to the reasoning of the many cases above cited, showing the nature and legal effect of such contracts; the views *251taken of the subject are loose and unsatisfactory; and it appears to be the opinion of but four of the seven judges. The opinion of the dissenting judges appears to be much better considered, and is sustained by the authorities and sound legal reasoning.
The last case which we will notice on this point, is that of Gorgier v. Mieville, 3 Barn. & Cress. 45; 10 Eng. C. L. R. 16. That case involved the character of a bond of the King of Prussia, acknowledging that the sum mentioned in it should be due to every person who should be for the time being the holder of it. This bond was held to be analogous to a bank-note, payable to bearer, or to a bill of exchange indorsed in blank. It was said to be distinguishable from the case of Glyn v. Baker, because then it did not appear that India bonds were negotiable, and no other person could have sued them but the obligee; and the Prussian bond was payable to bearer. It is manifest that these are the reasons which the court considered sufficient to fix the character of the instrument. But after stating them, the court proceeds to add, that it also appeared on the trial, that bonds of that description were negotiated like exchange bills. This is stated as a circumstance adding force to the reason already given, that the bond was payable to bearer, which was sufficient to determine its legal character, and which it is plainly intimated would have been sufficient to make the India bonds in the case of Glyn v. Baker, negotiable, if those bonds had contained those terms.
This case is directly in point, and is an application of the principle stated in the numerous cases in relation to promissory notes, to a bond payable to bearer, that from the nature and constitution of the instrument, it is a direct contract between the obligor and whoever may become the holder of it.
Many cases from Pennsylvania have been cited in behalf of the defendant in error, to show that in that State bonds are assignable only by statute, and in the mode prescribed by statute. But we consider those decisions as having reference to such instruments as required an assignment, to pass the legal title, and as did not pass by delivery; and consequently they are not applicable to this case, in the view we take of it.
It is worthy of observation, that the bond in this case is made *252by a corporation. It is in that form in which securities intended to circulate freely in the market are always drawn. It is for the payment of money; is payable indefinitely to bearer, and is under the seal of the corporation; and it may not be improperly considered as a money security of a higher dignity than the note or bond of a mere individual. From its nature and form, it would come to the hands of the holder, as the representative of money, and he might well conclude that it was put into the market for that purpose. These considerations appear to us to go far to make it in all respects analogous to the case of the Prussian bond, and to give great force and applicability to the authority of that case.
We are, therefore, of opinion that, under the facts stated in the pleadings, the plaintiff acquired the legal title to the bond, and was entitled to sue upon it.
2. If the conclusion to which we have come upon the first proposition be correct, there is but little difficulty upon the second.
It is settled by the authorities above cited, that if the plaintiff became the holder of this bond bona fide and for a valuable consideration, he is entitled to recover upon it without regard to any defences that might have existed against the'Bank of Millington, and of which he had not notice, either in fact or in law. It is also well settled, that, generally the holder is presumed to be, prima facie, a bona fide holder, and for value. Story, Prom. Notes, §§196,197. And it is incumbent on the defendant to show that the plaintiff became the holder of the paper under such circumstances as to show that he had notice, either actually or in law, or that he did not acquire it for a valuable consideration.
The pleas in this case show a good defence as against the Bank of Millington; but contain nothing showing that the plaintiff did not take the bond bona fide, and for a valuable consideration. If they could prevail, it would be to reverse the legal rule, and instead of the necessity devolving on the defendant, to show that the plaintiff did not become the holder, for value and without notice, the plaintiff would be required in the first instance to establish his title by evidence.
Upon a careful consideration of the principles involved in the *253case, and an examination of tbe numerous authorities in which the subject has been considered, we are satisfied that the pleas are not a sufficient defence to the action, and that the plaintiff’s demurrer should have been sustained.
The judgment is accordingly reversed, and the cause remanded for further proceedings.
A re-argument was asked for, but it was refused.