Page:The Green Bag (1889–1914), Volume 16.pdf/57

 10

municipality by their recital concerning mat ters of law, or facts which persons dealing with them must, according to the general rules of law, ascertain at their peril. Persons purchasing the bonds of a municipality must at their peril, ascertain the laws of the State which created it, and must see that the bonds are regular on their face."1 Where there is power to issue, ¡he bond fide purchaser is usually protected, even if the issue were irregular and improper. It has been held that a bona fide purchaser was protected where a confirmatory vote had not been passed by a town meeting, as required by the statute that authorized the issue.2 Holdings of this kind rest on the doctrine of estoppel, and recitals in the bonds are con sidered to work an estoppel when made by authorized officers.3 On this principle a recital may estop a town to protest that it has issued in excess of statutory authority.4 Records of proceedings of the town, or other matters, as payment of interest, may also constitute an estoppel in all cases except where there is no power at all to issue. In general the rule would seem to be the same in regard to private corporations. Where there is no power, express or im plied, the act of the directors cannot be made obligatory on the corporation, but courts are more ready to find an estoppel in such a case than where a municipality is concerned, and in. some instances have gone far in upholding improper issues. Thus, in State г: Cobb, 64 Ala. 127, the State endorsed, bonds of a rail road, and they were then issued fraudulent ly. It was held that a bona fide purchaser obtained a title good both as against the State and the railroad. A case showing a similar doctrine is Hinckley v. Pfister, 83 1 2 Aforaweti on Private Corporations 11886), sec 614. 'Bank of Toledo т. Porter Township Trustees no U. S. 608. 3 Harrit on Municipal Bonds, p. 173. 4 Marcy v. Oswego, 92 U. S. 637.

Wis. 64, where the corporation had pledged its bonds in violation of a statute. It was held that there could be no action in equity for surrender and cancellation, without first tendering the amount due to the pledgee. It would seem that in nearly all cases where there has been an ultra vires issue, or dealing with the bonds, save where there was no au thority, that the bona fide purchaser is pro tected. The bona fide holder of a negotiable bond is not bound by equities that would cloud the title of a prior holder, nor is he affected by the doctrine of lis pendais. He is not chargeable with constructive notice of any suit in equity, action at law, or any decree or judgment rendered in them.6 Actual notice is required to harm his title, and this doctrine has been widely extended. It has been held even in the case of a pur chaser after judgment in an action in which the bonds were declared void.6 A forged bond is not the bond of the al leged obligor, and he is not bound. Cases of hardship for the holder may arise, but he is not protected by the rules of negotiability. There has been no fault or representation by the maker, and the holder must bear the loss. Illustrations of this are found where the in strument is incomplete, and filled in by the thief,7 or where the seal of corporation is forged by the thief, and afterward the bonds come to a bona fide purchaser.8 Some of the most important questions arise where the bonds were properly issued, and affected by no adverse claims, but where they have been subjected to some improper treatment or some casualty has occurred. A not infrequent occurrence, is the destruc tion of bonds by fire, or in some other way where the destruction can definitely be proved. It is necessary in such a case to 'Scotland County v. Hill, 132 U. S. 107. 'Stewart v. Lansing, 104 U. S. 505. 7 Ledwick v. McKim, 53 N. Y. 307. Maas v. Railicad, 11 Hun. (N. Y.) 8.