Page:Federal Reporter, 1st Series, Volume 8.djvu/142

 128 FEDERAL REPORTER. tlic four-iifths of the old bonds had signified their assent to the seheme of substitution, and that this assent was not secured until 1871. If that be so, then these bonds were used with Trenholm beforethey could be properly exchanged. But, however that may be, I am satisfied that the pledge could lawfully be made at the time it was, and that, when made, it transferred as part of the pledge the lien •which pertained to the bonds put out. This made Trenholm a holder for value, and his bona fide title protects all who claim under him, whether they be innocent or not. This is an elementary prin- ciple in commercial law. These bonds, therefore, to the extent they are required to pay the Trenholm debt, are to all intents and pur- poses part of the prior lien, subjeot to which the second mortgage is taken, and to which it is asked the sale may be made. As to guarantied bond No. 463, issued under the act of 1865, it was botaght by the company in the market before due as an invest- ment. It is clear from the evidence that the company never intended by this purchase to retire it from under the mortgage, but to keep it alive for future use if occasion might require. It was pledged to the syndicate under the agreement which will be considered further on. As it was out, in fact, when this pledge was made, the title of the syndicate is good under the principles which I have just stated. There is a claim of an overissue, however, and as it seems to be con- ceded that the other securities, if sustained, will be more than sufii- cient to satisfy any balance that may be due that association, I think the injunction against the negotiation of this bond should be continued in force until such time as it shall be found whether there has been an overissue, or, at least, until it shall be found that the other securities will not pay the debt. As to the alleged overissue, it is sufficient to say that the case is not now in a condition to enable me to determine that fact. I have already shown that the mortgage is valid to the extent of .£620,000. The bonds now out on hypothecation by the company are understood to be more tban sufficient to pay the debts for which they are held. In legal effect the amount thus issued is no more than is required for the purposes of the security. The receiver has now in his hands f 2,0 '0. Those bonds may now be retired and cancelled. It will be sufficient for all the purposes of this case to order a sale subject to a prior lien in this behalf, not exceeding £620,000 as the principal sum. The difference between that amount and the actual bonds outstanding will not be sufficient to materially affect the sale, and it will be time enough to consider what shall be doue with any excesa