Page:Federal Reporter, 1st Series, Volume 8.djvu/137

 CLAFLIN V. SOUTH CABOLINA B. CO. 123 �the second mortgage. So far as this objection relates to the bonds held by the defendants Middleton, De Saussure, Andrew Simonds, Rose, and Drayton, pledged and in the hands of the present holders before Oetober 1, 1872, it is disposed of by what has already been said. They were all actually issued under the mortgage and accepted as such. This the company will not be permitted to deny; neither can the second mortgagees. No one has ever supposed that a taker ef negotiable paper, as collateral security for a debt contracted at the time, was not a holder for value. It follows that to the extent neces- eary to secure the debts due these defendants respectively, the lien of the bonds they severally hold is good. The same is true, also, I think, of the bonds held by the defendant Manson. The master has reported that these bonds were pledged after the second mortgage went into effect, and to secure a debt contracted at the time of the pledge. To this part of the report an exception has been filed. In my view this question is unimportant; but having looked into the evidence I am satisfied the exception is well taken. The bonds were out on pledge when the second mortgage was made, and the evidence leaves no doubt in my mind that the present debt in the hands of this defend- ant is, in legal effect, a continuation of the old one with the original pledge transferred. This exception to the report will therefore be sus- tained, and the pledge classed among those outstanding Oetober 1, 1872. �As to the bonds for £18,000, pledged to the defendant George W. Williams, it is conceded they were not and never had been out of the control of the company when the second mortgage was made. They were executed and certified in proper form as bonds secured by the mortgage, and on the ninth of July, 1868, sent with others to the company's agents in London to be exchanged for old sterling bonds pay- able there. During the year 1874:, when it was found they wonld not be needed to take up the old bonds, the company gave them in pledge to Williams, by- whom they are now held, his note having been re- newed from time to time until the commencement of this suit. �Soon after the report of the treasurer, in 1871, which has already been alluded to, the use of the surplus bonds as collateral was begun, and it is safe to say that, between that time and the date of the second mortgage, all except those in the hands of the London agents had been put out in that way. None had ever been actually cancelled, but all were kept on hand to be used as wanted. The second mort- gage trustees might have required all on hand when the second mort- gage was made to be retired, and the lien of the first mortgage con- ��� �