
    George W. Welch, Appellant, v. Russell Sage, Respondent.
    The title of a purchaser for value of stolen negotiable paper, including bonds payable to bearer, is not impaired by negligence. It will only be defeated by proof of fraud or bad faith. Notice of such facts as would put a prudent man upon his guard will not defeat his recovery thereon.
    Plaintiff made advances upon coupon bonds of the M. and St. P. R. R. Co., which originally were accompanied by, or had attached to them, certificates, stating in substance, that upon the surrender of the certificate and bond, the holder was entitled to full paid preferred stock. These certificates were referred to in the body of the bond. When the bonds were transferred to plaintiff the certificates were not with them.—Held, that while the absence of the certificates might be a circumstance of some weight in determining the question, yet of itself, it did not prove fraud or bad faith.
    Plaintiff delivered the bonds to defendant for sale, who upon discovering they were stolen bonds, refused to surrender them, but notified the original owner. The latter brought an action to recover possession, and the bonds were taken by the sheriff, by virtue of process therein. After this action was brought for the conversion of the bonds by defendant, plaintiff was made defendant in the replevin suit.—Held, that latter suit was no defence to this action.
    (Argued December 8, 1871;
    decided January 16, 1872.)
    Appeal from an order of the General Term of the Supreme Court in the second judicial district, reversing order of Special Term and granting a new trial. The plaintiff had recovered at the circuit.
    The action was trover, to recover the value of three one thousand dollar coupon bonds of the Milwaukie and St. Paul Bailroad Company, which were payable to bearer. The bonds had been delivered by the plaintiff to Mr. Thomas, a broker, to take to the defendant, who was an officer of the Milwaukie and St. Paul Railroad Company, and to sell them to him. The defendant received the bonds, and refused to give them back, alleging they were stolen bonds. The plaintiff then went to the defendant and demanded them, and the defendant refused to give them up. The defendant made no claim himself to the bonds, but said they belonged to one Ralph, and he would hold them till he, Sage, was indemnified. This took place in July, 1868.
    Mr. Sage sent immediately to Mr. Ralph, and the next day Mr. Ralph replevied the bonds from Mr. Sage. The plaintiff, Mr. Welch, was made a party defendant in that replevin suit 20th October, 1868. On the 12th of October, 1868, this action was commenced. The replevin suit has not been tried. The plaintiff obtained title to the bonds from A. L. Mowry & Co., bankers, in Broadway. He advanced $3,500 in cash, and received from them these three bonds in question, and also a California bond. The plaintiff made this advance at the request of Mr. Thomas, the broker, who informed the plaintiff that these bonds had been hypothecated for a short time to A. 1. Mowry & Co., and that the owner had applied to him, Thomas, to raise the money for him, and would give him a commission for doing so. Plaintiff ascertained the value of the bonds from defendant and others before pnrchasing. Attached to, or accompanying each of the bonds originally was a certificate entitled “ certificate for scrip preferred stock,” as follows:
    “ This is to certify that of is entitled to ten shares of the capital stock of the Milwaukie and St. Paul Railway Company, designated as ‘ scrip preferred stock,’ in the articles of association of the company. This stock is not entitled to any dividend. It has one dollar per share paid thereon, and it is not liable or subject to any assessment. Upon the surrender of this certificate and mortgage bond, Ho, of the company, and all unmatured coupons thereon, at any time within ten days after any dividends shall have been declared and become payable on the full stock of the preferred stock of this company, the said is entitled to receive ten shares of said full paid preferred stock. .
    . This stock is transferable only on the books of the company, at their office, in the city of Eew York, in person, or by attorney, on the surrender of this certificate.”
    Which certificate was referred to in the body of the bond as follows:
    “ The said company also agree to make the scrip preferred stock attached to this bond full paid stock at any time within ten days after any dividend shall have been declared and become payable on said preferred stock, upon surrender to the company, in the city of Eew York, of this bond and the unmatured interest warrants.”
    These certificates were not attached to the bonds when they were purchased by plaintiff. The court charged the jury, that the taking of the bonds from defendant by the sheriff under the process in the replevin suit was not a defence, to which defend- ' ant excepted. The jury failed to agree, whereupon the court directed the jury to find for plaintiff $2,323.50, to which defendant excepted. The jury so found. Defendant moved for a new trial on the minutes, which was denied.
    
      A. J. Parker for appellant.
    A purchaser in good faith and for value of a stolen bond payable to bearer, or bill or other commercial paper, obtains a good title to it; and even gross negligence will not impair it. (Magee v. Badger, 34 N. Y., 247; Belmont v. Hoge, 35 N. Y., 67; Seybel v. National C. Bank, 4 Abb. N. S., 352; Goodman v. Simons, 20 How. U. S., 365 ; Lardner v. Murray, 2 Wallace, 121; Birdsall v. Russell, 29 N. Y., 249; Hall v. Wilson, 16 Barb., 548;) A broker advancing money is treated as a purchaser. (Anderson Exr. v. White, Court of Appeals, October, 1869.) The fact that the certificates were detached, no bearing on question of good faith. (Birdsall v. Russell, 29 N. Y., 249 ; Hedges v. Shuler, 22 N. Y., 119 ; 24 Barb., 68.) Possession of bond imports ownership. (Lardner v. Murray, 2 Wal., 121 ; 
      Goodman v. Simons, 20 How., U. S., 365.) The question was purely one of law, and properly decided by the judge. (Birdsall v. Russell, 29 N. Y., 249; 20 Howard, 365 ; Andrews v. Pond, 13 Peters, 65; Fowler v. Brantley, 14 id., 318; Anderson v. Parks.) Property in the hands of the bailee, who has no title, must be delivered up to the bailor on demand. (Chambers v. Lewis, 28 N. Y., 454; Hurschfeldt v. Fauton, ante N. P., 361; Paddock v. Wing, 16 How., 547; 7 Bing., 339; 2 Camp., 344; 18 Verm., 186 ; Edwards on Bailments, 305, 306.) There was no irregularity in manner of taking verdict. (Smith v. Thompson, 1 Cowen, 221; Douglass v. Tousey, 2 Wend., 351; Brown v. Hoyt, 3 John., 255 ; 4 Bosw., 503 ; Hayes v. Hayes, 38 Barb., 92.)
    
      Samuel Hand, for respondent.
    Defendant, having knowledge bonds were stolen, would have been liable to Ralph if ho had returned them, unless defendant was a bona fide purchaser. (Spraights v. Hawley, 39 N. Y., 441.) Defendant could show title in third person if he connected himself with him. (Schermerhorn v. Van Valkenburgh, 11 John. R., 528 ; Sheldon v. Soper, 14 John. R., 352; Rotan v. Fletcher, 15 John. R., 207; Hill v. Covel, 1 Comstock, 522.) Demand and refusal, as evidence of conversion repelled by proof, that compliance was impossible. (Hill v. Covel, 1 Com., 522.) So also by proof, that it would violate rights of third person. (Edson v. Weston, 7 Cowen, 278; Bates v. Stanton, 1 Duer, 79; Beach v. Berdell, 2 Duer, 327; McKay v. Draper, 27 N. Y. R., 260.) Question of good faith one for jury. (Goodman v. Simons, 20 How., U. S., 343; Murray v. Lardner, 2 Wal., 110; Magee v. Badger, 34 N. Y. R., 247; Belmont, etc. v. Hoge, 35 N. Y. R., 65.) The court erred in its charge as to replevin .suit. (Blivin v. H. R. R. Co., 36 N. Y., 403.)
   Peckham, J.

The law may be regarded as settled, that a purchaser, for value advanced, of negotiable paper, including bonds, is not bound to exercise such care and caution as wary, prudent men would exercise. Negligence will not impair his title. It is a question simply of good faith in the purchaser. Unless the evidence makes out a case upon which a jury would be authorized to find fraud or bad faith in the purchaser, it is the duty of the court to direct a verdict. (Belmont v. Hoge, 35 N. Y., 67; Birdsall v. Russell, 29 id., 249; Goodman v. Simonds, 20 How. U. S., 365; Murray v. Lardner, 2 Wall., 121; Goodman v. Harvey, 4 Ad. & El., 870.)

These cases, cited by the appellant’s counsel, abundantly establish the doctrine.

JSTotice of the defence to defeat a recovery, means substantially notice of such facts as would make a defence, or would necessarily lead the mind to believe in its existence, not merely notice of such facts as would put a prudent man upon inquiry.

The rule, after considerable hesitation, and after full discussion and deliberation, has been thus settled in the interest of commerce. It puts the consequences of neglect or misfortune upon the party upon whom they have fallen; upon those who have negligently, put such paper in circulation or from whom it is stolen. It sustains the ready and safe transfer of negotiable paper to those who honestly purchase it for value advanced.

As to the facts which the defendant insists- should have been submitted to the jury.

After a careful reading of the whole evidence, I am entirely clear that no case of bad faith was made against the plaintiff, unless the contents of the bonds themselves would impute it.

The defendant examined the plaintiff de bene esse some two ye&rs prior to the trial, upon all the matters involved in the suit; thus affording him opportunity for contradiction or condemnation if the truth would warrant it. There was an entire failure to establish any substantial contradiction on the trial.

The whole evidence tended strongly to establish the plaintiff’s good faith. He was a man of means. He invested and dealt in bonds, stocks, etc. Before purchasing or advancing upon these bonds, he ascertained their value from this defendant at the office of the company issuing the bonds. He took them directly after the purchase, for the purpose of selling, to the same person. If he had suspected the theft, the defendant was probably the last person to whom he would have offered them for sale.

Then, as to the certificate accompanying or attached to the bond, does its absence give notice to the purchaser of the theft of the bond, or of any other defect or defence %

This certificate constitutes no part of the bond. The bond is entire and perfect without it. (Hodges v. Shuler, 22 N. Y., 118.) The admission of the debt, and the promise to pay in the bond, are in no degree qualified by the certificate. The statement in regard to the certificate is simply an addition to the bond; a promise to make the scrip preferred stock attached to this bond,” full paid stock at a certain time “ upon surrender of the bond, and the unmatured interest warrants.”

Thus the holder of the bond has the additional remedy of surrendering it up in exchange for the stock of the company instead of the money the bond secures to him. If it were conceded that the stock of the company is worth only fifty per cent, and that there is no probability of its increase in value during the life of the bond, of what value, intrinsic actual value is the certificate ? There is no proof in the case that these certificates are of any value. It is testified that the bonds have no market value without the certificates, but the same witness says, that the bonds are good for their face. Obviously he only intended to testify that he never knew of their sale withput the certificates. ,

But if the bond is a legal, valid obligation without the certificate, and is good for its face, he certainly would not say that it was without value. The witness expressed the opinion that the bond was not negotiable without the certificate. In this he was mistaken.

Suppose the bond provided that it might, upon surrender, be converted into notes of the late confederate government. No one would probably now regard that certificate as giving any additional value to the bond. lío one would probably take much trouble to preserve that certificate. This certificate practically is usually a blank, and I believe, is not actually attached to the bond, but is kept with it.

These bonds could have been easily made negotiable only upon the transfer of the certificates as well as of the bonds. Then the transfer of one without the other would pass no title.

Under the facts of this case, the absence of the certificates would at most only put a reasonably careful man upon inquiry. It would not, of itself, prove a purchaser guilty of fraud or bad faith, although it would be a circumstance of some weight, and would require less other evidence to carry a case to the jury upon the question of bad faith.

This would be so only as it might afford some evidence that the certificate had been detached for some dishonest purpose. In the absence of other facts, the evidence of such purpose would be very slight indeed. The face of the bond states the contents of the certificate and its use. It declares that the bond may be converted into full paid scrip preferred stock, upon the surrender of the bond and unmatured interest warrants.”

If then upon looking at the market price of this preferred stock, he found it so low as to induce him to regard the convertible privilege as of no value, he might well conclude that the absent certificates were not in that respect material to his purchase. Having a legal and valuable bond without the valueless certificate, he might well inquire no further.

It would not be a legitimate inference that the purchaser would find in the certificate the true owner of the bond, when the bond itself made no such disclosure, nor gave any intimation that the certificate would afford any more light upon that point.

Had the purchaser réad this portion of the bond, and then inquired for the certificate, I do not see that it follows that he would have gained any knowledge that would have prevented a purchase or made a defence, so far as the case shows the certificates were of merely nominal value.

Had he been told by Howry & Co. that there were no certificates attached when they took them, and the bonds were good without them, or that the certificates were of no value, and believing he had purchased, it would not have been evidence of fraud in the purchaser.

There was sufficient proof of the value of the bonds. It was averred in the complaint, and not denied in the answer, and the actual value was proved by the defendant. In the absence of any proof, they are presumed to be worth their face.

The conversion was sufficiently proved.

The suit in replevin, in which this plaintiff was made a defendant after the commencement of this suit, presented no defence to this action.

The order appealed from is reversed, and the judgment of the Special Term upon the verdict affirmed, with costs.

All concur.

Order reversed.  