Brainerd v. New York & Harlem Railroad — 25 N.Y. 496

Majority

p. 496

Brainerd v. New York and Harlem Railroad Company.

Headnote

The bond of a railroad corporation, payable to A. B., or his assigns, is in • the nature of commercial paper, negotiable by delivery under an assignment in blank, and not a specialty, subject to equities between the corporation and the person named in the bond as the primary payee.

p. 497

This action was brought to recover the amount of five instruments in the form of single bonds, purporting to have been issued pursuant to a resolution of the defendant’s board of directors, and which were executed under its corporate seal, and signed by its president and treasurer, for the payment of one thousand dollars each. They were respectively dated on the first day of September, 1849, and were similar in their terms. , Each of them acknowledged the receipt of one thousand dollars from R. & G. L. Schuyler, and set forth that the corporation.thereby agreed to pay the said sum to George L. Schuyler, or his assigns, on the first day of August, 1859, with interest at the rate of seven per cent semi-annually, on the first day óf every February and August, until the principal should be paid, upon the presentment of certain interest warrants which were annexed. The complaint alleged that after the execution of the bonds, and before the maturity thereof, and before the commencement of the action, they came into the possession of the plaintiff, for value, and that he was then the lawful holder and owner thereof. The answer admitted the execution of the instruments, but denied that the plain-tiff was the lawful holder of them; and it claimed a right to set off an alleged indebtedness of R. & G. L. Schuyler to the defendants.

On the trial before a referee, the only questions litigated were, first, whether the plaintiff had acquired a lawful title to the instruments; and, secondly, whether they were of the nature of commercial paper, or were to be- considered as specialties. -The defendant’s right to set off depended upon that question. The plaintiff gave the several instruments in evidence ; and the signature of George L. Schuyler, the payee, to a blank assignment printed under each of .the bonds, was not controverted. It was as follows:

“For value received,-......assign .this obligation to.......

............. Witness......hand and seal this......of

..........IS...- . .

“ George L. Schuyler.” [l. s.]

p. 498

The plaintiff was examined in his own behalf, and testified, in terms, that he purchased the bonds through a broker, at about their amount at par, in the fall of the year 1852 or the forepart of 1853, and that he was the owner of them. The cross-examination of the plaintiff, and'some other testimony introduced by the defendant, tended to show that the fund out of which the purchase price of the bonds was paid was one in which the plaintiff’s .father, mother and sister were interested with him, and that he had been accustomed to pay to these persons a portion of the interest received on the bonds while the company continued to pay interest.

The defendant moved for a nonsuit, on the grounds that the plaintiff had not shown a legal assignment of the instruments; and that he had not made title-to them in any way; and that the evidence showed that they were the joint property of the plaintiff’s relatives mentioned in his cross-examination. The referee denied the motion. The defendant then offered to prove that R. & Gr. L. Schuyler were, in January, 1853, indebted to the defendant in a large amount. The plaintiff objected to the evidence, on the ground that he became the owner of the obligations before maturity, and without notice of the defence now set up. The referee sustained the objection, and the defendant excepted.

The referee reported in favor of the plaintiff for the principal money secured by the obligations, and for one and a half year’s interest which was shown to be in arrear; and he found, as a conclusion of fact, that the plaintiff was the holder and owner of the obligations sued on.

The judgment having been affirmed by the Supreme Court at general term, the defendant brought this appeal.

Charles W. Sandford, for the appellant.

Steam Chittenden, for the respondent.

The question of fact, whether the plaintiff ' was the purchaser of the instruments in question, or whether the purchase was by him in conjunction with certain of his

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relatives, was conclusively settled by the referee, whose judgment in that respect is not open to review by us. It cannot be said that a nonsuit should have been granted for a defect of proof on that part of the case; for the plaintiff swore distinctly that he made the purchase, and that the obligations were his property. It is, certainly, possible that, if the facts connected with the purchase were all disclosed, it might appear that other parties were interested in the purchase, and that they together took a joint title to the securities. This, if established,, would show a defect of parties plaintiff, and enable the defendant to prevail on a question of form; but the point, as has been remarked, has been settled against the defendant by the tribunal entitled to pass conclusively upon such questions.

The questions of law which the appeal presents are, whether the instruments are commercial paper, so as to be negotiable, and .whether they were legally negotiated by delivery under the blank assignment. These might, have been very grave questions in this State a few years ago. But they have been settled against the defendant in this State by a series of decisions which it is impossible, at this day, to depart from.

In The State of Illinois v. Delafield (8 Paige, 527), and the same case, on appeal, in the Court for the Correction of Errors ( 2 Hill, 159 ), it was held that the bonds of the State of Illinois, executed under the seal of that State, were negotiable securities in such a sense as that a purchaser would acquire a title superior to that of the party to whom they were originally issued,- and an injunction against transferring them was granted by the Court of Chancery, and sustained by that court and the Court of Errors on that precise ground. These cases were referred to with approval in this court in The Mechanics' Bank of New York v. The New York and New Haven Railroad Company (3 Kern., 599, 626). The Bank of Rome v. The Village of Rome, was an action brought on certain bonds issued under the defendant’s corporate seal, and they were held to be negotiable; and a defence sought to be set up against the plaintiff, who was a Iona fide holder, was excluded, though it would

p. 500

have been available against the original party. ( 19 N. Y., 20 .) The instruments in question in the cases cited were not, it is true, the bonds of a railroad corporation, but they were under the corporate seal of the maker. No distinction can be made between such corporations and those which are created for governmental or municipal purposes. The point of objection,' when it is sought to bring such securities within the law of commercial paper, is that, being under. seal, they are deeds, and commercial instruments are simple contracts. But when such obligations are issued to secure the payment of ihoney upon time, and contain on their face an expression showing that they are expected to pass from one person to another, and thus to perform the office of bills and notes or of money, as the words “bearer,” or “assigns,” or “the holder,” or the like, the courts of this country, with a single exception, and those of this State, without any exception, have concurred in attaching to them the attributes of commercial paper. The case of White v. The Vermont and Massachusetts Railroad Company (21 How. U. S., 575), was an action to recover on a bond issued by a railroad corporation, the payee’s or obligee’s name being left blank. It was. held that the instrument was negotiable, and that the plaintiff, to whom it had been transferred, might insert his own name in the blank. The exceptional case, which has been alluded to, is Diamond v. Lawrence County ( 37 Penn., 351 ). The court held that a bond like the one before us, except that it was payable to bearer, was not negotiable; but the learned judge who delivered the opinion of the court admitted in express terms that all the courts, American and English, were'against him. " Whether this admission was not rather too broad as respects some of the English tribunals, nray be questioned; but as we feel bound to follow the ' judgment of the courts of this State, it will not be useful to criticise the cases which have been adjudged 'elsewhere.

Having come to the conclusion that the instruments are negotiable paper, in the nature of promissory notes, it follows inevitably that the blank assignment signed by the payee was a sufficient transfer of them, and that the plaintiff was entitled

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to insert his own name in the blank (Van Duzer v. Howe, 21 N. Y., 531 ; Edwards on Bills, 275); and also that the defendant could not be allowed a set-off against the payee without establishing that the plaintiff was not a bona fide holder. The result is, that the judgment of the Supreme Court must be affirmed.

All the judges concurring,

Judgment affirmed.