Page:The Green Bag (1889–1914), Volume 16.pdf/56

 Advisability of Registering Negotiable Coupon Bonds.

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Where a permanent investment is sought, is an infirmity in the bond itself or in a prior this ready negotiability has many disadvan holder; second, where there has been some tages, danger from casual loss, theft, etc., ap'1 improper treatment or mishap to the bonds. a remedy has been sought in a simple Examples of the first class are where a bond method by which for the time being the issue is ultra vires or fraudulent; where the negotiable quality may be withdrawn. This bonds are forged, or the doctrine of /w is effected by registration of title. Before pcndens is invoked to cloud the title of the considering the effect of registry it will be holder. The second class includes the ques necessary to note some of the results that tions that arise with regard to bonds that flow from the negotiability of coupon bonds. have been burned or otherwise destroyed, or Roughly speaking, negotiability means lost, stolen or altered. Bonds that have been that the honest buyer of a bond will be pro recalled for payment sometimes raise ques tected in his interest. The general doctrine tions of this class. As a rule the holder of is that a bona fidf purchaser, before maturity, the negotiable bond is protected in his title of coupon bonds payable to bearer, takes in most of the relations that arise in the them clear from all claims against the one first class, and the maker is held liable, while from whom he purchased them, or any other in case of mishaps to the bonds or the hold prior holder, and the burden of proof is on ers, as in the second class, some bona fide him who assails the bona fides of such pur claimant is forced to bear an unmerited loss. chase.1 Some of the most perplexing questions of Mere handing over of the bonds for a the first class arise where bonds are issued price is sufficient to pass title. No record of without proper authority by a municipal cor transfer is requisite, but it is essential, as in poration, or in excess of their power by the all matters of negotiable instruments, that ¡ directors or officers of a private corporation. the transfer be before maturity, and that the The views of text writers and courts do not purchase be in good faith.2 agree in all points, and the circumstances The usual legal bona fides,—ignorance and j of an improper bond issue are capable of so honesty,—is all that is required. Given these many variations that it is difficult to lay conditions, the buyer's title is unimpeach down any strict rules. There is again, on able. Negotiability presents many widely this subject a difference between municipal differing aspects, and to test its working it will and private corporation bond?, and a some be well to consider some of the results under what more strict rule is applied to the former. various circumstances. It is agreed that where there is no authority As a rule, in considering ordinary nego for an issue of municipal bonds that the tiable coupon bonds, two parties only are to holder, however full of good faith, is not be questioned, the maker and the holder. protected, and the bonds are void in all Where bonds are lost or stolen, there is hands.3 doubt as to the identity of the legal holder, Nor can the issue of such bonds give any and the relations become more complicated. right to the holder on the ground of estoppel. Viewed with regard to the rights of the hold "The decision and certificate of the officers er or the alleged holder, questions concern of a municipality do not bind the latter, ex ing negotiable coupon bonds seem to fall cept as to those matters which are within roughly into two classes:—first, where there the jurisdiction conferred on them. Officers 'Gibson ». Lenhart, 101 }'a. St. 522; Kneeland v. never have implied authority to bind the Lawrence, 140 U. S. 209. 2 Vermilye v. Adams Express Company, 21 Wall. 138.

3 2 Daniel on Negotiable Instruments, sec. Simonton on Municipal Bends (1896), sec. 124.

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