PICKENS TP. v. POST, 99 F. 659

SI MONTON, Circuit Judge (after stating the facts as above). It is contended that the act authorizing the issue of these bonds infringes

section 20, art. 2, of the constitution of South Carolina, requiring every act to relate to one subject, expressed in its title. This objection is met by San Antonio v. Mehaffy, 96 U. S. 312, 21 L. Ed. 816; Jonesboro City v. Cairo & St. L. R. Co., 110 U. S. 192, 4 Sup. Ct. 67, 28 L. Ed. 116; Town of Mahomet v. Quackenbush, 117 U. S. 508, 6 Sup. Ct. 858, 29 L. Ed. 982; Morton v. Comptroller General. 4 S. C. 430. The crucial question in this case is, does it appear from all the evidence that the plaintiff is a bona fide holder of these bonds before maturity for value and without notice of infirmity?

If he be such a holder, all controversy as to the regularity of the proceedings antecedent to the preparation, execution, and issuance of these bonds is settled by the certificate of the county commissioners which appears on each bond. Town of Coloma v. Eaves, 92 U. S. 484, 23 L. Ed. 579; Evansville v. Dennett, 161 U. S. 434, 16 Sup. Ct. 613, 40 L. Ed. 760. This is certainly the case as to every fact except the constitutional power in the legislature to pass the act: authorizing the subscription. Gunnison Co. v. E. H. Rollins & Sons, 173 U. S. 255, 19 Sup. Ct. 390, 43 L. Ed. 689.

This power in the legislature is denied. It is charged that so much of this act as creates the townships into corporations, and authorizes them to subscribe to this railroad, is in conflict with

section 20, art. 2, and with

section 8, art. 9, of the constitution of the state of South Carolina, of force at the date of the act. Floyd v. Perrin, 30 S. C. 1, 8 S. E. 14, 2 L. R. A. 242. Whether the plaintiff is affected by this decision in Floyd v. Perrin depends also upon the fact whether he be a bona fide purchaser for value before maturity, without notice. The supreme court of the United States in Folsom v. Township Ninety-Six, 159 U. S. 627, 16 Sup. Ct. 174, 40 L. Ed. 278, had before it the validity of township bonds issued in South Carolina, and the effect upon the validity of these bonds of the decision in Floyd v. Perrin.

The same bonds sued upon in Folsom’s Case were passed upon by the supreme court of South Carolina in Floyd v. Perrin. In Folsom’s Case the supreme court held the bonds valid, notwithstanding the decision in Floyd v. Perrin. No question was made a.s to the purchase of the bonds by Folsom.

As to him the court says: “There not being shown a single decision of the state court against the constitutionality of the act of 1885, before the plaintiff purchased his bonds, nor any settled course of decision upoo the sub ject even since his purchase, the question of the validity of these bonds must be determined by this court according to its own view of the law of South Carolina.” It then decided that the act, in that it created townships into corporations and clothed them with power to subscribe to railroads, was not in conflict with the constitution of South Carolina.

This decision was made November 18, 1895. But for these reasons it cannot be doubted that the supreme court would have followed the uniform current of decisions, and would have adopted the construction placed by the highest court of the state on its own constitution and statutes. Claiborne Co. v. Brooks, 111 U. S. 400, 4 Sup. Ct. 489, 28 L. Ed. 470; Norton v. Shelby Co., 118 U. S. 425, 6 Sup. Ct. 1121, 30 L. Ed. 178; Gormley v. Clark, 134 U. S. 338, 10 Sup. Ct. 554, 33 L. Ed. 909; Stutsman Co. v. Wallace, 142 U. S. 293, 12 Sup. Ct. 227, 35 L. Ed. 1018; Sioux City Terminal Railroad & Warehouse Co. v.

Trust Co. of North America, 173 U. S., at page 107, 19 Sup. Ct. 341, 43 L. Ed. 628. The evidence of the plaintiff tends to show that McCracken & Co., the contractors, got these bonds some time in 1888; that of the defendants, by the order to the Carolina Savings Bank, the bailee, shows that they were delivered to one George Potts, under an order dated 11th December, 1888. Who Potts was does not appear. As they were dated January 1, 1888, interest, and an installment on the principal, were due January 1, 1899. So they were issued before maturity.

Now, the holder of a negotiable instrument is presumed to have taken it before maturity, for valuable consideration, and without notice of any objection to which it was liable, and this presumption stands until overcome by sufficient proof. Swift v. Tyson, 16 Pet. 1, 10 L. Ed. 865; Chambers Co. v. Clews, 21 Wall. 327, 22 L. Ed. 517; San Antonio v. Mehaffy, supra; Montclair Tp. v. Ramsdell, 107 U. S. 147, 2 Sup. Ct. 391, 27 L. Ed. 431.

To impeach the title of a holder for value of negotiable paper, by proof of any facts and circumstances outside of the instrument itself, it must first be shown that he had knowledge of such facts and circumstances at the time the transfer was made. Goodman v. Simonds, 20 How. 343, 15 L. Ed. 934. Such a holder is not affected by anything which has occurred between other parties, unless he had knowledge thereof at the time of purchase. Brown v. Spofford, 95 U. S. 474, 24 L. Ed. 508.

A bona fide holder of negotiable paper is entitled to transfer to a third person all the rights with which he is vested, and the title so acquired cannot be affected by proof that the indorsee was acquainted with the defenses existing against the paper. Gunnison Co. v. E. H. Rollins & Sons, 173 U. S. 275, 19 Sup. Ct. 390, 43 L. Ed. 689. Such are the safeguards which the law throws around negotiable paper, and which protect one holding it. Thus, the burden of proof is on the defendant to show the defects in plaintiff’s title.

The defendant charges that these bonds were in escrow with the Carolina Savings Bank, and that the issuance of them by that bank was fraudulent and void. But notice of the conditions on which the Carolina Savings Bank held these bonds has not been brought home to the holder of them.

If the maker or indorser, before delivery to the payee, leave the note in the hands of a third person as an escrow, to be delivered on certain conditions only, and the person to whom it is thus intrusted violate the confidence reposed in him, and put the noie in circulation, this, though not a valid delivery as to the original parties, must, as between a bona fide holder for value and the maker or indorser, be treated as a delivery rendering the note or indorsement valid in the hands of such bona fide holder. Burson v. Huntington, 21 Mich. 415, cited and approved Provident Life & Trust Co. v. Mercer Co., 170 U.

S. 605, 18 Sup. Ct. 788, 42 L. Ed. 1156. It is also charged that (he bonds, when transferred, showed that there were coupons unpaid as well as installments of principal. But the evidence does not disclose precisely the time when McCracken & Co. got the bonds. Some time in 1888. If this be correct, neither principal nor coupons were past due. But, if they were, “failure to pay interest alone is not sufficient in law to throw discredit upon negotiable paper, upon which it is due, to subject the holder to the full extent of Ms security to antecedent equities.” Morgan v. U. S., 113 U. S. 476, 5 Sup. Ct. 588, 28 L.

Ed. 1044. It is also alleged that the case of Floyd v. Perrin was decided on ^November 30, 1888, before, or, at the least, just about the time of, the delivery of these bonds; that this was notice to the holder of their invalidity. It may well be doubted if this court can recognise Floyd v. Perrin as authority to this extent. We are controlled by the decisions of the supreme court of the United States, and that court evidently was of the opinion that Floyd v. Perrin was an erroneous

interpretation of the constitution of South Carolina. Folsom v. Township Ninety-Six, supra. Be this as it may, “the question of lis pendens, as applicable to negotiable securities, was fully considered by us in the case of Warren Co. v. Marcy, 97 U. S. 107, 24 L. Ed. 977, and we then held that a bona fide purchaser before maturity is not affected with constructive notice of a suit respecting such paper.” Cass Co. v. Gillett, 100 U. S. 593, 25 L. Ed. 585; Thompson v. Perrine, 103 U. S. 806, 26 L. Ed. 612.

In conclusion, we see nothing in the testimony which rebuts the presumption in favor of a holder of commercial paper not yet matured. The court below was not in error in instructing the jury to find for the plaintiff. The judgment of the circuit court is affirmed.