COUPON BONDS.

Sec. 860. COUPON BONDS DEFINED AND EXPLAINED.-"A coupon bond is a primary obligation, in the nature of a promissory note, promising to pay a sum of money on a day certain in the future, to which are attached certain other obligations called coupons, which call for the payment of the installments of interest on the principal debt, as they fall due; each coupon representing an installment of interest, and payable when the installment of interest falls due." (Tiedeman, Com. Pap., Sec. 471.)

The coupon is practically a separate promissory note, but its payment is protected by the mortgage given to secure the primary bond; it is payable at maturity without grace, and where written in the form of a draft or bill on a banker, it need not be presented for acceptance. (Arents v. Commonwealth, 18 Gratt. 773; Beaver Co. v. Armstrong, 44 Pa. St. 63.)

Public corporations, governmental and municipal, and all sorts of private corporations may and do issue coupon bonds. The loans of the Federal and State governments are usually made in this way. (Natl. Bank v. Co. of Yankton, 101 U. S. 133.) Individuals are also held to be able to issue coupon bonds, and the only question of this power is from the fact that these bonds are executed under seal, which by the law merchant is

*Coupon is derived from the French verb, couper, to cut, since they are made detachable, and designed to be cut off when they fall due. (Daniel, Sec. 1489.)

excused in the case of corporations but not in the case of individuals. The seal being held to destroy their negotiability. Coupon bonds are negotiable notwithstanding the presence of the seal, if they contain words of negotiability. (Comrs. of Manor v. Clark, 94 U. S. 279; White v. R. R. Co., 21 How. 175; Barrett v. Co. Court, 44 Mo. 197.)

The holder or owner of the coupon bond has the same rights and privileges as regards it as he would if it were a bill of exchange, and the same rules operate to fix his position as a bona fide holder or not as in the case of other commercial paper. Thus if the coupon is overdue at the time of transfer, the purchaser takes it subject to all equitable defenses. (Bank v. Co. Comrs., 14 Minn. 79; Tiedeman, Com. Pap., Sec. 473.)

PRESENTMENT

Sec. 861. TRANSFER, FOR PAYMENT OF COUPON BONDS.-Coupon bonds may be made payable to order and transferred by indorsement, but they are ordinarily payable to bearer and transferred by delivery. (City of Lexington v. Butler, 15 Wall. 295; Roberts v. Bowles, 101 U. S. 122.) A party indorsing a coupon bond assumes the same liability as the indorser of other commercial paper, and both indorser and transferor by delivery warrant the genuineness of the bond, and would be held responsible for the consideration received if the bond was forged. (Smith v. McNair, 19 Kans. 330.)

"The bond and coupons are generally printed on paper of a very fine texture, more or less beautifully engraved. But in other respects the bond differs in form very little from a promis

For the purpose of fixing the liability of an indorser the coupons must be presented at maturity, and within a reasonable time after maturity to hold a guarantor. (Bonner v. New Orleans, 2 Woods C. C. 135; Arents v. Commonwealth, 18 Gratt. 773.) Otherwise the coupons need not be presented on the day of maturity to hold the principal obligors on the coupons. (Mayor v. Patomac Ins. Co., 58 Tenn. 296.) And interest may be recovered without presentment at maturity, unless the corporation should show that it was ready to pay the coupon at the stipulated place. (Walnut v. Wade, 103 U. S. 683; North Penn. R. R. Co. v. Adams, 54 Pa. St. 97.)

The coupons represent the interest on the bond until maturity, after maturity the bond itself draws interest if not paid. The coupon, if not paid at maturity, draws interest, and may be recovered by the holder with exchange, where exchange could be recovered on bills and

sory note. It and the coupons are usually signed by the president of the corporation, or the chief executive of the town or municipality, which issues them, and countersigned by the secretary, treasurer, cashier, or other clerk of the corporation, according to its by-laws, or the statutes 'in such cases made and provided.' These signatures may be either written or printed. The coupon may take on any form; sometimes it is a promissory note; at others a bill of exchange on the treasury of the corporation; a draft or order without naming any drawee; a check, and a mere due bill or acknowledgment of indebtedness." (Tiedeman, Com. Paper, Sec. 475, citing, Thompson v. Lee Co., 3 Wall. 327; Moran v. Comrs. of Miami Co., 2 Black 722; Mercer Co. v. Hubbard, 45 Ill. 140, and others.)

notes. (Jeffersonville v. Patterson, 26 Ind. 16; Tiedeman, Com. Pap., Sec. 477.)

Sec. 862. ACTIONS ON BONDS AND COUPONS, AND DEFENSES ON MUNICIPAL BONDS.-In case the holder is the owner of both bond and coupons he may bring an action in his own name on both bond and coupons. (Soc. for Savings v. City of N. London, 29 Conn. 175.) And the holder of the coupons may maintain his action on them independently of the holder of the bond. (Beaver Co. v. Armstrong, 44 Pa. St. 63; Bank v. Tabor, 52 Vt. 87; Town of Cicero v. Clifford, 53 Ind. 191.) So the coupons may be sued on where the bonds have been previously paid and surrendered. (Natl. Exch. Bank v. Hartford, etc., R. R. Co., 8 R. I. 373.)

Where the corporation denies its liability on bonds, the consideration paid for them by the holder may be recovered, if such holder did not participate in the wrongful issue, and the issuing was not a malum in se. (Draper v. Springport, 104 U. S. 501; Louisiana v. Wood, 102 U. S. 294.).

Since a municipal corporation in its issue of coupon bonds is limited by its charter and implied powers, and may not in any case issue them for a private end, but only for a public purpose, the holder of municipal obligations or coupon bonds must take notice that they are not issued ultra vires, that is, outside the power of the municipality. The scope of its powers is deemed a matter of public law, and every one is charged with notice of the limitations set. (Bissell v. Kankakee, 64

Ill. 249; Veeder v. Lima, 19 Wis. 298.) Where the municipality has the power to issue the bonds, the fraud or neglect of agents as to their negotiation or execution with prescribed formalities cannot be set up as a defense to the action of a bona fide holder. (Treadwell v. Commissioners, 11 Ohio St. 183; Gould v. Sterling, 23 N. Y. 463.) Sec. 863. CERTIFICATES OF DEPOSIT AS NEGOTIABLE INSTRUMENTS.-By a certificate of deposit is meant the receipt in writing given by a bank or banker in acknowledgment of money received, and which states that the amount designated therein is payable to bearer, to the order of the depositor, or a third person. The power of a bank to issue them is co-extensive with the power to issue promissory notes.*

Certificates of deposit are transferred by delivery or by indorsement according as they are in terms payable to bearer or to order. By the weight of authority they are, when possessing the essential features of a negotiable instrument, accorded all the privileges and characteristics which pertain to other forms of commercial

*Morse on Banking, 53. "They are used, instead of drawing checks on the fund deposited, whenever the depositor desires a continuing security, drawing interest, and payable on demand or at some time in the future. The certificate of deposit is supposed to have originated with the goldsmiths of England, who, in the course of their banking business, were in the habit of giving to the depositors, receipts for the money deposited, in the form of a promissory note." (Tiedeman, Com. Paper, Sec.