Murray v. Lardner
69 U.S. 110

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U.S. Supreme Court

Murray v. Lardner, 69 U.S. 2 Wall. 110 110 (1864)

Murray v. Lardner

69 U.S. (2 Wall.) 110




Coupon bonds, of the ordinary kind, payable to bearer, pass by delivery, and a purchaser of them, in good faith, is unaffected by want of title in the vendor. The burden of proof on a question of such faith lies on the party who assails the possession. Gill v. Cubit, 3 Barnewall & Cresswell 466, denied; Goodman v. Harvey, 4 Adolphus & Ellis' 870, approved; Goodman v. Simonds, 20 How. 343, affirmed.

Lardner was the owner of three bonds of the Camden & Amboy Railroad Company, for $1,000 each. They were coupon bonds of the ordinary kind, and payable to bearer. He resided in the country about nine miles from Philadelphia, but had an office in that city where he went to transact business two days in the week, Wednesdays and Saturdays. He kept the bonds in a fireproof in this office.

Page 69 U. S. 111

Murray was a broker of character engaged in the negotiation of such bonds in New York.

On the night of Wednesday, the 23d February, 1859, Lardner's fireproof was broken open and the three bonds stolen. The theft was not discovered till Saturday, the 26th. Notices of the robbery appeared in the Philadelphia Ledger (the newspaper of Philadelphia having the largest circulation there) and in leading New York papers on Monday, the 28th. In the meantime, however, on the morning after the theft, to-wit, on Thursday, the 24th, two days before the discovery of it (Saturday, the 26th), and four days before the first notices in New York (Monday, the 28th), these bonds were negotiated to Murray at his office in Wall Street, New York, for full value. The testimony of Parker -- a broker in that city for the negotiation of loans, and a person, like Murray, of unquestionable character -- presented the history of the transaction, in substance, thus:

"On the 24th of February, 1859, a man came into my office and proposed to borrow $2,000 on the three bonds in question. I did not know him. He was quite gentlemanly in appearance; very well dressed; manners unexceptionable; quite intelligent; answered questions without hesitation. Applications of this sort -- applications, I mean, from strangers -- are not unusual; they occur often, though not every day. I asked the person who he was, and he said that he was Dr. A. D. Bates, of Milford, Sussex County, New Jersey. After some conversation with him, I took the bonds to effect a loan, and went to Mr. Murray, who I knew dealt in this particular species of security, and proposed to borrow from him $2,000 on the three bonds for Bates. Mr. Murray and I had some conversation as to the terms of the loan and as to his charge for brokerage. At this interview, I said to Mr. Murray that Bates was a stranger to me. Murray said to this that he would have to satisfy himself how Bates came by the bonds before he could make the loan, and asked me whether Bates had any city references. I told him that I had already asked Bates that same question; that he had no city references, but knew only physicians. I stated to Murray that Bates had told me that he had bought the bonds for investment, and now wanted the money to pay for some

Page 69 U. S. 112

lands which he had purchased. After a while, Bates came to my office again. I then went with him to Mr. Murray's office, where I introduced him to Murray. This was towards three o'clock. Murray asked him of whom he got the bonds. He said of Mr. Lardner, of Philadelphia; nothing else. Neither Murray nor I knew Mr. Lardner. Murray asked him if he was acquainted in the city. He replied that he supposed, if he had time, that he could find a dozen people in the city that knew him; ladies and gentlemen. Murray asked him if he knew any physicians. He said that he knew Dr. Mott and Dr. Parker, very well known men in New York; he may have mentioned others. In reply to a question from Murray whether he knew Dr. Hosack, the family physician of Murray, he answered that he did not; that Dr. Hosack was of the old school, and he, Bates, was of the new. Murray asked him if he knew Dr. Riggs, a physician of New Jersey, with whom he, Murray, had had some dealings. Bates said that he did by reputation. He told Murray what he wanted the money for. Murray told him he would lend him the money on the terms which he had named to me. The loan was accordingly made without further inquiry, Murray taking the bonds and paying the money, and Bates executing what is called a stock note."

The testimony of Murray was in the main corroborative of this so far as it related to himself, particularly as to the inquiries which he, Murray, had made of Bates as to his acquaintance with medical men, Drs. Hosack, Riggs &c. He stated, however, that he had no remembrance of Parker's telling him that he did not know Bates, which, if it had been said, Murray thought would have awakened his suspicion. Murray admitted, however, that it was always his custom to know from whom securities came before dealing, and that it was the custom of brokers generally, but he added that he did not think it necessary to inquire about Bates, "he being introduced by Parker."

"Dr. A. D. Bates, of Milford, Sussex County, New Jersey," was never seen nor could be heard of after the interviews above described. Neither could any such place as "Milford, Sussex County, New Jersey," from which place he stated that he came, be found on the maps of that state.

Page 69 U. S. 113

On detinue brought by Lardner for the three bonds in the Circuit Court for the Southern District of New York, the defendant's counsel asked the court to charge

"That there were no such suspicious circumstances attending the transaction between Bates and Murray as to put Murray on inquiry, and that Murray was not chargeable with bad faith by any omission on his part to inform himself in regard to the bonds and Bates' title to them further than he did."

The court refused so to charge, and charged as follows:

"It will be for you, gentlemen of the jury, to say whether the defendant has made out -- as the burden lies upon the defendant -- whether he has made out that he received the paper in good faith, without any notice of the defect of the title -- in other words, of the theft from the plaintiff -- or whether there were such circumstances of the character which I have described to you as would warrant the inference that there was ground of suspicion and that he should have made further inquiry as to the character of the paper."

The instruction was excepted to, and the jury having found for the plaintiff, Lardner, the correctness of the law, as thus given to them in charge, was the question before this Court in error.

Page 69 U. S. 118

MR. JUSTICE SWAYNE delivered the opinion of the Court.

The question presented by the instruction excepted to is not a new one either in commercial jurisprudence or in this Court.

The general rule of the common law is that, except by a sale in market overt, no one can give a better title to personal property than he has himself. The exemption from this principle of securities, transferable by delivery, was established at an early period. It is founded upon principles of commercial policy, and is now as firmly fixed as the rule to which it is an exception. It was applied by Lord Holt to a bank bill in Anon, 1 Salkeld 126. This is the earliest reported case upon the subject. He held that the action must fail "by reason of the course of trade, which creates a property in the assignee or bearer."

The leading case upon the subject is Miller v. Race, [Footnote 1] decided by Lord Mansfield. The question in that case also related to a bank note. The right of the bona fide holder for a valuable consideration was held to be paramount against the loser. He put the decision upon the grounds of the course of business, the interests of trade, and especially that bank notes pass from hand to hand in all respects like coin. The same principle was applied by that distinguished judge in Grant v. Vaughan [Footnote 2] to a merchant's draft upon his banker. He there said: in

"Miller v. Race, 31 Geo. II B.R., the holder of a bank note recovered against the cashier of a bank though the mail had been robbed of it, and payment had been stopped, it appearing that he came by it fairly and bona fide, and upon a valuable consideration, and there is no distinction between a bank note and such a note as this is."

In Peacock v. Rhodes, [Footnote 3] he said:

"The law is settled that a holder coming fairly by a bill or note has nothing to do with the transaction between the original parties, unless perhaps, in the single case, which is a hard one, but has been determined, of a note for money won at play."

The question has since been considered no longer an open one in the

Page 69 U. S. 119

English law as to any class of securities within the category mentioned.

What state of facts should be deemed inconsistent with the good faith required was not settled by the earlier cases. In Lawson v. Weston, [Footnote 4] Lord Kenyon said:

"If there was any fraud in the transaction or if a bona fide consideration had not been paid for the bill by the plaintiffs, to be sure they could not recover, but to adopt the principle of the defense to the full extent stated would be at once to paralyze the circulation of all the paper in the country, and with it all its commerce. The circumstance of the bill's having been lost might have been material if they could bring knowledge of that fact home to the plaintiffs. The plaintiffs might or might not have seen the advertisement, and it would be going a great length to say that a banker was bound to make inquiry concerning every bill brought to him to discount; it would apply as well to a bill for

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