Court Opinion

ID: 5189838
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:34:20.48219+00
Date Added: 2024-06-11T08:26:52.584099
License: Public Domain

O’Brien, J. (dissenting):
I do not concur in the views of Mr. Justice Ingraham that these coupons are not covered by the mortgage.
The mortgage which secured the bonds was dated September 1, 1889, and was acknowledged by the two companies in July, 1890, *308and recorded the following month when part of the bonds were issued. Of the 576 coupons which it is sought to have recognized as a prior lien, 393 were due March 1; 1890, before the mortgage was acknowledged and recorded or bonds were issued, and these coupons were detached by the East River Company before delivery of the accompanying bonds to the Holland Trust Company. Of the remaining 183 coupons, 90 fell due before their accompanying bonds were issued and they also were detached from the bonds before the same were delivered. The other 93 coupons were due September 1, 1890, on bonds issued August 15, 1890, which it appears were delivered to a Mr. Peach about two weeks before the maturity of the coupons, and he testifies that he allowed the coupons to be detached upon the payment of one month’s interest on his account. Had he taken the coupons, he would be getting some five months’ interest more than he was entitled to receive. The following table shows the facts as to the 576 coupons :
393 coupons due March 1, 1890, before any bonds were issued and before the mortgage was acknowledged.
93 coupons due September 1, 1890, issued August 15,1890.
90 coupons due before bonds issued but after mortgage was acknowledged and recorded as follows :
6 due Sept. 1, 1890, on bonds issued Nov. 12, 1891.
10 ÍÉ 66 « u CÍ 66 May , 6, 1892.'
9 (C March 1, 1891, <( 6Í 66 Nov. 12, 1891.
14 U it « (( U ÍÍ May 6, 1892.
9 {( ■ Sept. 1, 1891, « CÍ (Í • Nov. 12, 1891.
14 (Í <6 (C í( ' 6C a Jan. 11, 1892.
14 ({ ' March 1, 1892, ■u (( ÍÍ May 6, 1892.'
14 (( Sept. 1, 6Í << Í6 May 6, 1892.
Upon the ground that all coupons in the hands of bona fide purchasers are to be regarded in the same light as promissory notes with all the attributes of negotiable paper, I think that this judgment, which holds them all to be valid claims, should be sustained. That coupons may be sued upon and recovery had without producing or being interested in the bonds from which they are attached, has been repeatedly held. (See City of Lexington v. Butler, 14 Wall. 282; Aurora City v. West, 7 id. 82.) In the latter case it *309was said: “ Coupons are written contracts for the payment of a definite sum of money on a given day, and béing drawn and executed in a form and mode for the very purpose that they may be separated from the bonds, it is held that they are negotiable and that a suit may be maintained on them without the necessity of producing the bonds to which they were attached.” In Collins v. Gilbert (94 U. S. 753) it was said, speaking of such negotiable instruments, they “ are commercial paper in the strictest sense and must ever be regarded as favored instruments as well on account of their negotiable quality as their universal convenience in mercantile affairs. They may be transferred by indorsement, or when indorsed in blank or made payable to bearer they are transferable by mere delivery.” And in Spooner v. Holmes (102 Mass. 503) the court said “ the coupons * * * were negotiable promises for the payment of money issued by the government, payable. to bearer and transferable by mere delivery without assignment or indorsement. They are, therefore, not to be considered as goods, but as representatives of money and subject to the same rules as bank bills and other negotiable instruments payable in money to bearer.”
So far have the courts gone in considering the right to deal in coupons apart from the bonds that they have sustained actions upon coupons which matured after the bonds had been paid. As said in Miller v. Town of Berlin, (13 Blatchf. 245): “ Coupons are annexed to bonds in order that they may be severed and transferred by delivery and thereby carry to the purchaser the interest which they represent. It is not necessary that the purchaser should produce upon the trial the bond to which the coupon was originally annexed, and the surrender or cancellation of the bond after the coupon has been- transferred will not defeat the' action.” These principles are well summarized in Burroughs on Public Securities (p. 578) as follows : “ Such coupons have all the qualities of other negotiable paper; the holder is entitled to all the privileges and subject to all the liabilities of ordinary commercial paper by the law-merchant. The title passes by delivery ; the holder for value obtains an absolute title, although they may have been stolen from the true owner, if he has no notice of the theft. The holder takes them free from all equities attaching to them in the hands of the original parties, and he is unaffected by any mere irregularities in their issue.”
*310Ini this case it is admitted that all the bonds are valid and correctly issued, except that the coupons in some instances, although originally attached to the bonds, were severed before the bonds were delivered. This is an irregularity of which a subsequent holder without notice would have no means of being apprised, and it would be practically abolishing dealing in coupons if it were held that each purchaser must at his peril ascertain from the books of the company and the bonds from which' the coupons were detached that there was no informality incident to their issue and sale. These coupons were apparently as good as any others, and a purchaser would not know that No. 1 was detached prior to the issuing of the bond, while ■ No. 2 was detached thereafter. The Holland Trust Company, however, which received and receipted for the bonds, had positive notice when the bonds were delivered that the coupons had been detached, and could have accepted or rejected the bonds. This they did not do, though now it is insisted that it was the duty of the East River Company to have canceled these coupons. WhaL ever rights the trust company may have against the mortgagor for failure in this alleged duty, it is no reason for shifting their own failure to take exception to the bonds issued as they were without the coupons, or the failure of the East River Company to cancel the detached coupons to the subsequent bona fide purchasers of those coupons.
I have thus far referred to the coupons other than those due April 1,1890, on bonds issued August 15,1890. These coupons admittedly represented a valid claim, and the testimony is that they were detached as the result of an arrangement with a Mr. Peach, to whom the bonds were delivered, he agreeing to take in their stead one month’s interest. The coupons thus detached were thereafter sold. They are, at least so far as they extend over the period after the bonds were issued, as good as any other coupons and should be so recognized and paid.
I, therefore, dissent, and think that as to all the coupons the referee was right in the conclusions reached, and that the judgment appealed from should be affirmed.
Order reversed, with ten dollars costs and disbursements, 'and motion denied, with ten dollars costs.