54

with it, and as incident thereto, all securities for its payment," and the transferee takes the legal title and not a mere equitable interest in the obligation." So the assignment of coupon bonds carries with it the coupons,56 and the transfer of one of a series of collateral securities may carry them all.57 But the assignee of a bond takes it subject to all the equities existing between the obligor and obligee at the time of the assignment,58 also all equities which may arise up to the time of notice to the maker.59 But if the assignee has inquired of the obligor relative to defenses or set-offs and has been informed by him that none exists the assignee takes the bond free from any defenses that might in fact exist at the time. It has been held that a purchaser of interest coupons, detached from negotiable bonds, takes them subject to all defects in the title of his transferrer, and therefore subject to the claims of the true owner in case they have been stolen.1 Likewise, a second assignee of a bond takes it subject to all equities existing at the time of the assignment between the obligor and the first assignee, even though such equities existed prior to the assignment to the first assignee.62 But it has been held that the assignee of a bond takes it free from any equity of a third person, not a party to it, if he had no notice of such equity."

§3512. Payment or release after assignment.-If the obligor make payment to the obligee after the bond has been assigned, such payment is valid and discharges the debt, provided the obligor at the time of such payment had no knowledge of

Louisville, N. A. & C. R. Co. v. Ohio Valley Imp. &c. Co., 69 Fed. 431; Louisville Trust Co. v. Louisville &c. R. Co., 75 Fed. 433; Craig v. Parkis, 40 N. Y. 181, 100 Am. Dec. 469; Reed v. Garvin, 12 Serg. & R. (Pa.) 100; Taylor v. Memphis &c. R. Co., 11 Lea (Tenn.) 186; George v. Tate, 102 U. S. 564, 26 L. ed. 232. 55 Long's Exr. v. Baker, 2 Hay. (N. Car.) 128 (291); Robb v. Parker, 3 S. Car, 60.

58 Fox v. Hartford &c. R. Co., 70 Conn. 1, 38 Atl. 871.

Ruth v. Loos, 2 Woodw. Dec. (Pa.) 308

58 Cornish v. Bryan, 10 N. J. Eq.

146; Evertson v. Newport Nat. Bank, 66 N. Y. 14, 23 Am. Rep. 9; Stokes v. Dewess, 24 Pa. Super. Ct. 471; Eldred v. Hazlett's Admr., 33 Pa. St. 307; Withers v. Grane, 9 How. (U. S.) 213, 661, 13 L. ed. 109.

50 Natchez v. Minor, 9 Sm. & M. (Miss.) 544, 48 Am. Dec. 727. 60 Eldred v. Hazlett's Admr., 33 Pa. St. 307.

61 Evertson v. Nat. Bank of Newport, 66 N. Y. 14, 23 Am. Rep. 9. 62 Metzgar v. Metzgar, 1 Rawle (Pa.) 227.

63

Moore V. Holcombe, 3 Leigh (Va.) 597, 24 Am. Dec. 683

64

the assignment. So the obligor cannot be released by the obligee after an assignment of the bond of which the obligor has had notice.65 But payment of a bond to the obligee under circumstances which should have put a man of ordinary caution on inquiry, and enabled him to have ascertained that the bond had been assigned, will not defeat a recovery by the assignee in an action against the obligor."

69

70

§ 3513. Rights of assignee or transferee.-After an assignment is once made or has become complete it cannot be altered or changed except upon consent;67 nor will the cancelation of an assignment of a bond operate to divest the assignee of legal title to the bond. Where there are two obligees in a bond it has been held that one may assign his own interest therein but not the interest of his co-obligee without the consent of the latter, but one of two assignees of a penal bond cannot, by his separate assignment, transfer the legal title to his moiety to a third person.* Where the name of the payee is in blank the purchaser may fill up the blank with his own name;"1 or the name of any lawful holder may be inserted where the intent is apparent that the bond should be transferred by delivery.72 Also the holder of such a bond may fill the blank with the name of another person as payee. Likewise the purchaser of a bond assigned in blank may fill up the blank with his own name.73 Unless the vendor of a bond or coupon disclose all the facts connected with its execution and delivery, and the vendee agrees to take it at his own risk, it has been held that the vendor impliedly warrants that it is genuine and binding on the obligor. But where the bond is payable to order or bear

71

Brindle v. McIlvaine, 9 Serg. & R. (Pa.) 74; Preston v. Grayson, 30 Grat. (Va.) 496.

85 Andrews v. Beecker, 1 Johns. Cas. (N. Y.) 411.

Tritt's Admr. v. Colwell's Admr., 31 Pa. St. 228.

7 Block v. Walker, 2 Ark. 4; Reed v. Nevins, 38 Maine 193.

6 Davis v. Christy, 8 Mo. 569.

69

" Boyd v. Kennedy, 38 N. J. L. 146, 20 Am. Rep. 376; White v. Vermont & M. R. Co., 21 How. (U. S.) 575, 16 L. ed. 221.

72 Hubbard v. New York & H. R. Co., 36 Barb. (N. Y.) 286, 144 Abb. Pr. (N. Y.) 275; Gourdin v. Commander, 6 Rich. L. (S. Car.) 497.

13 Aiken v. Cheesborough, 1 Hill. (S. Car.) 172.

74 'Brown v. Dickenson, 27 Grat. (Va.) 690.

70 Skinner v. Bedell's Admrs., 32 Ala. 44.

McCoy v. Barber, 37 Ga. 123; Smith v. McNair, 19 Kans. 330, 27 Am. Rep. 117; Flynn v. Allen, 57 Pa. St. 482.

er, the only implied warranty on the part of the seller is that they belong to him and that they are not forgeries." While the vendor impliedly warrants the genuineness of the bond, there is no implied warranty that it was legally issued." The mere sale and transfer of a bond is not unlike the sale of other property as respects the assignor's liability, and the consideration received is the true measure of his responsibility." However, to charge such assignor, the assignee must make demand and give notice according to law and exercise reasonable diligence to collect from the obligor. So, in case the obligor is insolvent, it has been held that the assignor is liable to the assignee; and where such insolvency is notorious, the assignee is not bound to sue the obligor before proceeding against the assignor." The above are some of the holdings of the courts upon the subject, but they are not to be applied indiscriminately to all classes of bonds.

78

§ 3514. Bona fide purchasers in general.-A bona fide purchaser or holder of a bond is one who obtains title thereto for value in the usual course of business before maturity, actual or apparent, and without notice of equities or defenses existing at the inception of his holding. Thus a bank so purchasing for value and without notice of infirmity in corporate bonds is a bona fide holder thereof.80 Also a banker who obtains bonds in good faith and without notice of fraud is held to be a bona fide holder.81 A bona fide purchaser of a negotiable bond acquires a good title thereto if he pays value for it without notice of the infirmity of his vendor's title. 82 A bond transferred to a person as a mere matter of convenience, however, not in the due course of business, nor for a valuable consideration, does not constitute the transferee

Otis v. Cullum, 92 U. S. 447, 23 L. ed. 496.

70 Porter v. Bright, 82 Pa. St. 441; Ruohs v. Third Nat. Bank, 94 Tenn. 57, 28 S. W. 303.

"Duncan v. Littell, 2 Bibb (Ky.) 424; Herwig v. Richardson, 44 La. Ann. 703, 11 So. 135; Stout V. Stevenson, 4 N. J. L. 178; Lloyd v. McNamara, 19 Pa. St. 130.

78 Ellis v. Dunham, 14 Ark. 127; James v. Nicholson, 6 Blackf. (Ind.) 288; Smallwood v. Woods, 1 Bibb (Ky.) 542.

45 CONTRACTS, VOL. 4

"Saunders v. Marshall, 4 Hen. & M. (Va.) 455.

80

Tompkins County Nat. Bank v. Bunnell &c. Inv. Co., 8 App. Div. (N. Y.) 90, 74 N. Y. St. 857, 40 N Y. S. 411, affd. 163 N. Y. 599, 57 N. E. 1126; Stainback v. Junk Bros. Lumber &c. Co., 98 Tenn. 306, 39 S. W. 530.

81 Smith v. Harlow, 64 Maine 510. 82 East Birmingham Land Co. v. Dennis. 85 Ala. 565, 5 So. 317, 2 L. R. A. 836, 7 Am. St. 73.

84

a bona fide holder.83 Again it may be said that ordinarily the title of a bona fide holder of a bond is not affected by fraud, error or mistake of which he is not aware, unless the circumstances are such as to put him upon his inquiry. Where a bona fide holder of a bond transfers his title to a purchaser such purchaser is entitled as a rule to stand upon such title, although he himself is not a bona fide holder and has notice of equities of third persons, the seller being free from notice.85 But want of good faith exists where the purchaser has knowledge of the seller's want of title. One who purchases a bond after maturity takes it subject to all the equities and defenses existing in the hands of the original holder. One may be a purchaser for value if he takes a bond before maturity in consideration for an antecedent debt;88 or where he in any way changes his position to his injury. If a bond be stolen and sold by the thief to a bona fide purchaser the original owner has no title to the bond as against such purchaser." The fact that negotiable bonds were stolen only throws upon the purchaser the duty of showing the circumstances under which he obtained them, and that such cir

83

86

89

87

"Elwell v. Tatum, 6 Tex. Civ. App. 397, 24 S. W. 71, 25 S. W. 434.

State v. Cobb, 64 Ala. 127; Des Moines Gas Co. v. Charter Oak L. Ins. Co., 51 Iowa 705, 1 N. W. 693; Buckingham v. Board Liquidation, 39 La. Ann. 343, 1 So. 653; Leavitt v. Dabney, 7 Rob. (N. Y.) 350; Kennicott v. Wayne County, 6 Biss. (U. S.) 138, Fed. Cas. No. 7710, affd. 94 U. S. 498, 24 L. ed. 260.

85 Porter V. Pittsburg Bessemer

Steel Co., 122 U. S. 267, 30 L. ed. 1210, 7 Sup. Ct. 1206; Scotland County v. Hill, 132 U. S. 107, 33 L. ed. 261.

Washington &c. R. Co. v. Cazenove, 83 Va. 744, 3 S. E. 433. As to overdue coupons see State v. Cobb, 64 Ala. 127; Chouteau v. Allen, 70 Mo. 290; Thompson v. Perrine, 106 U. S. 589, 1 Sup. Ct. 564, 27 L. ed. 298.

89 Rockville Nat. Bank v. Citizens' Gas & Light Co., 72 Conn. 576, 45 Atl. 361. See also, Warren v. Syfers, 23 Ind. App. 167, 55 N. E. 103; infra, note 93.

89

Crump v. McMurtry, 8 Mo. 408; Varick V. Norwich Second Nat. Bank, 47 Hun (N. Y.) 639, 15 N. Y. St. 127, affd. 121 N. Y. 667, 24 N. E. 1093.

90 Greenwell v. Haydon, 78 Ky. 332, 39 Am. Rep. 234; Consolidated Assn. of Planters of Louisiana v. Avegno, 28 La. Ann. 552; Elizabeth v. Force, 29 N. J. Eq. 587; Newton v. Porter, 69 N. Y. 133, 25 Am. Rep. 152; Carpenter v. Rommel, 5 Phila. (Pa.) 34; Mason v. Frick, 105 Pa. 162, 51 Am. Rep. 191; Herron v. State, 12 S. Car. 200; Whaley v. Gaillard, 21 S. Car, 560.

cumstances constituted him a bona fide holder.91 Also a coupon bond issued by the state is a negotiable instrument, and the state incurs the same liability in issuing it as an individual. The state is liable for such bond in the hands of a bona fide holder, before maturity, without notice, surrendered for cancelation, and issued therefor under the provisions of the statute, but stolen before cancelation and put in circulation by the thief.92 Again one may be a bona fide holder for value even though he takes a bond as collateral security for a pre-existing debt;93 but this has been held to apply only to negotiable bonds payable to bearer acquired in due course.**

§ 3515. Obligation to perform condition.-Like other contracts bonds are to be construed in the light of the intention of the parties, and this intention is shown by the language used and the circumstances surrounding the transaction. So the question whether there has been a performance of the condition in a bond must be decided from the facts of each particular case.95 Important rights and obligations should not be subordinated to mere trifling and meaningless forms. If the condition performed was fairly within the contemplation of the parties to the bond it will amount to a substantial performance." Thus a condition in a bond given for the payment of a subscription for railroad stock, that the road shall be completed to a certain village before payment can be demanded, has been held sufficiently complied with if the road is made to the suburbs of the village. So, in case the condition be expressed in the alternative with the right of election in the obligor a performance of either alternative will dis

97

Bank, 146 U. S. 240, 36 L. ed. 956, 13 Sup. Ct. 66.

As to what constitutes performance in particular instances see Hoerath v. Hogan, 41 Ill. App. 472; New Orleans Nat. Bank v. Wells, 28 La. Ann. 736, 26 Am. Rep. 107; Kittrell v. Hawkins, 74 N. Car. 412; Case v. Johnson, 19 Pa. St. 174; Washburn v. Titus, 10 Vt. 306; Macfarlane v. Cushman, 19 Wis. 357.

96 Wing v. Rogers, 138 N. Y. 361, 34 N. E. 194.

97 O'Neal v. King, 48 N. Car. 517.