Certain bonds of a railroad company in Louisiana, promising to
pay to the bearer either �225 sterling in London or $1,000 in New
York or in New Orleans, declared that the president of the company
was authorized to fix by his endorsement the place of payment. On
their back were printed the following words: "I hereby agree that
the within bond and the interest coupons thereto attached shall be
payable in ___." The blank for the place of payment was not filled.
The bonds were never issued by the company, but were seized and
carried off during the late war. They and the past-due coupons
thereto attached were purchased in New York for a very small
consideration.
Held:
1. That in the absence of the required endorsement, the
uncertainty of the amount payable is a defect which deprives the
bonds of the character of negotiability.
2. That the purchaser was affected with notice of their
invalidity, and does not sustain the position of a
bona
fide holder without notice.
This is an appeal by Edwin Parsons, George Parsons, E. G. Pearl,
Charles Parsons, and Scott, Zerega & Co. from the decree of the
court below confirming the report of the master disallowing as a
charge on the mortgage executed by the Vicksburg, Shreveport, and
Texas Railroad Company certain bonds held by the appellants and
purporting to have been issued by that company.
The bonds, which are mentioned by the master as forming a part
of schedule BB, are ninety-seven in number, and each for
$1,000.
The remaining facts are stated in the opinion of the Court.
Page 99 U. S. 436
MR. JUSTICE BRADLEY delivered the opinion of the Court.
This case arises out of the supplementary proceedings which took
place in the case of
Jackson v. The Vicksburg, Shreveport,
& Texas Railroad Co., reported under the name of
Jackson v.
Ludeling in 21 Wall. 616, after our decision
therein. In pursuance of the mandate issued in that case, the court
below made a further decree on the twenty-second day of March,
1875, directing, amongst other things, as follows, that is to
say:
Page 99 U. S. 437
"3. It is ordered that F. A. Wollfley be appointed special
master to take the proofs of the bonds
bona fide issued by
the said Vicksburg, Shreveport, and Texas Railroad Company and to
report the names of the owners and the amounts due to the holders
of such bonds so issued. . . ."
"He will give notice to the holders of bonds
bona fide
issued for twenty days by publication in one of the city papers
that he is ready to receive proofs of the debt aforesaid, and that
he shall hold sessions for thirty days each day, Sunday excepted,
from the date of his first publication in the paper for that
purpose."
In pursuance of this decree, the master gave the required notice
and received proofs adduced by those claiming to hold bonds
entitled to the benefit of the decree rendered by this Court. By
his report, filed the seventeenth day of January, 1876, it appears
that there were then outstanding seven hundred and sixty-one bonds
bona fide issued by the said railroad company, of which
schedules were annexed to his report. He further reported a
schedule of certain other bonds executed by the company and
presented to him as issued under the mortgage mentioned in the
decree, but which the testimony taken by him proved were never
issued by the said company, its officers or agents, but were
carried off by persons belonging to, or taking advantage of, a raid
upon the town of Monroe, La., during the late war in the month of
April, 1864. As to these bonds, the master further reports as
follows:
"None of the parties presenting these bonds or the coupons on
them has proved at what time, for what consideration, or under what
circumstances they acquired them except Francis T. Willis, Charles
Parsons, E. G. Pearl, Edwin Parsons, George Parsons, and Scott,
Zerega, & Co. in liquidation. In reference to this class, if
the bonds were complete in all their parts and no circumstances of
suspicion appeared on their face, the proof that they had not been
issued
bona fide under the authority of the corporation,
and other facts relative to the issue, would have required the
parties to prove that they were
bona fide holders for a
valuable consideration."
"In reference to the claims of Francis T. Willis, Charles
Parsons, E. G. Pearl, Edwin Parsons, and Scott, Zerega, &
Co.
Page 99 U. S. 438
in liquidation, I report that in addition to the fact that the
bonds were not issued
bona fide, but were taken by force
from the custody of the company, that there appears on the
endorsement of the bonds a material deficiency and an
incompleteness which deprives them of the character of commercial
instruments fit for circulation. I also report that the railroad
was at the date of their purchase in a damaged condition, it having
been under the control of the military power of the Confederate
States and the United States, which had been used to partially
destroy it. That there were several years of unpaid coupons on each
of the bonds, in the most of cases being contemporaneous with the
execution of the mortgage; that these bonds were sold for an
insignificant sum and apparently purchased at a hazard, without any
view to their character as commercial instruments fit for
circulation, and that neither from the date of this suit, the 1st
of December, 1866, nor in any proceedings antecedent thereto did
the holders or any of them appear to maintain any claim for
protection."
"I therefore report that the said bonds mentioned in the
schedule BB were not issued
bona fide by the said railroad
company, and ought not to be allowed as a charge on the
mortgage."
The parties above named excepted to this report, but after
hearing thereon, the court confirmed the same and made a decree
disallowing the said last-mentioned bonds, and form that decree the
present appeal was taken.
From the evidence taken by the master, it appears that the
appellants purchased the bonds held by them in the City of New York
in November and December, 1865, at from ten to fifteen cents on the
dollar, without any actual knowledge that they were not issued by
the company. But it further appeared that none, or very few, of the
coupons had been cut off from the bonds, and that the latter were
imperfect in form.
Each bond, on its face, certifies
"that the Vicksburg, Shreveport, and Texas Railroad Company is
indebted to John Ray, or bearer, for value received, in the sum of
either �225 sterling or $1,000 lawful money of the United States of
America, to-wit, �225 sterling if the principal and interest are
payable in London and $1,000 lawful money of the United States
of
Page 99 U. S. 439
America if the principal and interest are payable in New York or
New Orleans,"
&c. This is the obligatory part of the instrument, and is
necessarily indeterminate in its character without some further
designation of the place at which it is to be paid. Each bond,
further, on its face declares that
"The president of said company is authorized to fix, by his
endorsement, the place of payment of the principal and interest in
conformity with the terms of this obligation."
And on the back of the bonds is endorsed a printed blank in the
following words, to-wit: "I hereby agree that the within bond and
the interest coupons thereto attached shall be payable in _____."
On the bonds, which are conceded to be genuine and
bona
fide issued, this blank is filled up with the name of some
place, as for example "the City of New York," or in some cases "New
Orleans, at the Citizens' Bank of Louisiana," &c. All the
endorsements have the signature of the president of the company,
but on the bonds in question, the above blank for the place of
payment is not filled up. The mortgage under which the bonds
purport to be issued and which is referred to in the body thereof
contains the same provision with respect to the place of payment.
After referring to the bonds to be issued under and secured by it,
its language is as follows:
"The principal and interest of said bonds being made payable in
New Orleans, New York, or London, as he, the said president, by his
endorsement, may determine."
The resolutions of the board of directors authorizing the
execution of the mortgage and the issue of the bonds, which
resolutions are copied in the mortgage, contain the same provision,
namely, "The principal and interest of said bonds being made
payable in New Orleans, New York, or London, as the president, by
his endorsement, may determine." These resolutions, being the
authority by virtue of which the mortgage and bonds were executed
and issued, would seem to be mandatory and to require that the
place of payment should be endorsed by the president on the bonds
independently of the necessity of such endorsement for the purpose
of fixing the amount payable thereon.
The uncertainty of the amount payable in the absence of the
required endorsement is of itself a defect which deprives these
instruments of the character of negotiability. As they
Page 99 U. S. 440
stand, they amount to a promise to pay so many pounds or so many
dollars -- without saying which. One of the first rules in regard
to negotiable paper is that the amount to be paid must be certain,
and not be made to depend on a contingency. 1 Daniel, Neg.Inst.,
sec. 53. And although it is held that
id certum est quod certum
reddi potest -- a maxim which would have given the bonds
negotiability in this instance had the requisite endorsement been
made, yet, without such endorsement, the uncertainty remains and
operates as an intrinsic defect in the security itself.
Now it is shown by the master's report, and if it were necessary
to go behind the report, the evidence shows, that these bonds were
never issued by the railroad company at all, but were seized and
carried off by a raid of soldiers during the war. They afterwards
turned up in New York and were purchased by the appellants, and the
question is whether the fact that the past-due coupons were still
attached, and that no place of payment was endorsed on the bonds,
as required to be done by the bonds themselves, was sufficient to
put the appellants upon inquiry as to their validity and as to the
bona fides of their issue -- these marks of suspicion
being supplemented by the further fact that the bonds were offered
for a very small consideration.
Our opinion is that the appellants had abundant cause to
question the integrity of these bonds; that they were affected with
notice of their invalidity and cannot be allowed to sustain the
position of
bona fide holders without notice. The presence
of the past-due and unpaid coupons was itself an evidence of
dishonor sufficient to put the purchasers on inquiry. The
imperfection as to the place of payment is another strong evidence
of want of genuineness. Of course it is not necessary to the
validity of a bond that it should name a place of payment, but
these bonds expressly declare that they are to be payable at the
place which should be determined by the president's endorsement and
that the sum payable should depend on that endorsement, and yet no
endorsement appears thereon. We do not say that this defect would
have invalidated the bonds if they had in fact been issued by the
company, and the amount had been certain, but it was a pregnant
warning to the purchasers
Page 99 U. S. 441
to inquire whether they had been issued or not. These facts,
taken in connection with the price at which the bonds were offered,
were abundantly sufficient to affect the purchasers with notice of
any invalidity in their issue. The case is so plain that it is
hardly necessary to cite any authorities on the subject. "A person
who takes a bill," said this Court in
Andrews v.
Pond, 13 Pet. 65, "which upon the face of it was
dishonored cannot be allowed to claim the privileges which belong
to a
bona fide holder without notice." The same doctrine
is reaffirmed in
Fowler v.
Brantley, 14 id. 318, and indeed is elementary law.
The circumstances in this case went farther than merely to cast a
shade of suspicion upon the bonds: they were so pointed and
emphatic as to be
prima facie inconsistent with any other
view than that there was something wrong in the title.
See
1 Daniel, Neg.Inst., sec. 796.
Decree affirmed.