Although I concur in the result of the decision about to be made, I cannot yield assent to the reasoning upon which it is based. The vital question in this case is whether the bonds from which the coupons in suit were clipped are negotiable instruments or not, and that depends upon several considerations which I will briefly discuss.
These bonds are part of an issue of $12,000,000 made by the Adams Express Company, which is a joint stock association, each of whose shareholders is, by the terms of its articles of association and the general law, individually liable for the debts of the company incurred in the transaction of its business. The bonds are made in the name of the company, are payable to bearer, and contain many if not all the stipulations and conditions that are usually found in corporate bonds such as are now concededly in the category of negotiable instruments. (Mercer County v. Hacket, 1 Wall. 83, and cases there cited.) These bonds also contain another clause that is not to be found in corporate bonds. They recite that, "No present or future shareholder, officer, manager or trustee of the express company shall be personally liable as partner or otherwise in respect of this bond or the coupons appertaining thereto, but the same shall be payable solely out of the assets assigned and transferred to the said trust company (the trustee named in the trust deed), or out of the other assets of the express company." As this clause is in direct conflict with the general provisions of the law and the express company's articles of association respecting the individual liability of the shareholders of the company, the real question in the case is whether the particular clause is a valid and essential part of the bonds, or whether it can be eliminated as repugnant to the general tenor and purpose of the instruments in which it is found. If the clause is valid there can scarcely be any logical escape from the conclusion that the bonds are rendered non-negotiable. If, however, the particular clause can be discarded as void, that will eliminate the only difference of substance between these bonds and other bonds which, by common consent, are classed as negotiable instruments. *Page 195
The reason why the last quoted clause of the bonds, if valid, is inconsistent with their negotiability is that they are the obligations of a joint stock association as distinguished from a corporation, and the stipulation absolving the shareholders of the company from individual liability is a distinct limitation upon the credit which is pledged in the making of the instrument. One of the cardinal qualities of a negotiable instrument is that it must pledge the general credit of the maker. This was one of the universally recognized rules of the law merchant as declared in the English decisions (Dawkes v. De Lorane, 3 Wils. 207;In re Boyse, L.R. [33 Ch. Div.] 612; Bank of England v.Vagliano, L.R. [App. Cas. 1891] 107-145; M'Lean v.Clydesdale Co., L.R. [9 App. Cas.] 95); and in the decisions of this state. (Munger v. Shannon, 61 N.Y. 251; Brill v.Tuttle, 81 N.Y. 454; Schmittler v. Simon, 101 N.Y. 554.) That rule as now tersely stated in our Negotiable Instruments Law may be paraphrased as follows: "An instrument to be negotiable * * * must contain an unconditional promise or order to pay a sum certain in money" (Subd. 2, sec. 20), "but an order or promise to pay out of a particular fund is not unconditional." (Subd. 2, sec. 22.) The cases referred to, as well as the statute, make it entirely clear that the mere indication of a particular fund from which the maker of an instrument may reimburse himself, or a mere reference to a specified account which is to be debited with the amount called for by the instrument, does not affect its unconditionality, and it is only where the order or promise is to pay out of a particular fund that it is considered conditional in such sense as to destroy the negotiability of the instrument.
The bonds of this issue are payable solely out of the assets assigned and transferred to the trustee or out of the other assets of the express company. If the express company were a corporation this would clearly be an unconditional promise for it would be a general pledge of the credit of the maker; a tender of all it had to give in satisfaction of the debt. But the company is concededly not a corporation, *Page 196 although our statutes have invested it with certain corporate attributes. It is unnecessary to enumerate these since it cannot be disputed that in respect of the individual liability of the shareholders of a joint stock company for the company debts, the common-law rule still obtains. Each shareholder is liable precisely as though he were a member of an unlimited partnership. (Townsend v. Goewey, 19 Wend. 424; Dennis v. Kennedy, 19 Barb. 517; Wells v. Gates, 18 id. 554; Cross v. Jackson, 5 Hill, 478.) Although, as we have stated, joint stock companies have been granted certain privileges and immunities peculiar to corporations, this most distinctive difference between these corporate and non-corporate creatures of the law has been consistently preserved by the legislature and recognized by the courts. (Code Civ. Pro. secs. 1919-1924; People ex rel.Winchester v. Coleman, 133 N.Y. 279; Van Aernam v.Bleistein, 102 N.Y. 360; Matter of Jones, 172 N.Y. 575.)
From what has been said it must follow that if the clause in the bonds exempting the individual shareholders of the express company from liability is valid, the bonds are non-negotiable, because they are in effect, if not in explicit terms, made payable out of a particular fund, so that the promise to pay is not unconditional. The clause under discussion is the only substantial thing that differentiates these bonds from the ordinary corporate bonds which are issued and held by the millions and are recognized and classed as negotiable instruments. The maker of the bonds is an association having a business name, which it used in making them, having shares of capital stock, indefinite succession, and a number of other characteristics which the lay public associates exclusively with corporations. These considerations lend great force to the suggestion that as a matter of public policy the exemption clause referred to should be treated as nugatory, so that the bonds may be invested with that element of negotiability which may fairly be regarded as one of the principal items of their value, and one of the most important inducements to their current sale and purchase. I deem it unnecessary to go *Page 197 quite so far as that in the case at bar, since I am convinced that the exemption clause is so repugnant to the terms, tenor and purpose of the bonds that it not only may but must be taken out of the instruments in order to preserve their negotiability, and even their validity. It would be rather difficult to explain upon what theory the obligation of these bonds could be enforced in an action at law if the exemption clause is retained as part of the bonds. The maker cannot be sued in its business name, and the officers which represent it can only be sued upon obligations for which an action could be maintained against all the shareholders. (Code Civ. Pro. sec. 1919.) We are presented, in short, with the legal paradox that a written obligation, obviously intended to be negotiable, cannot be enforced in a court of law. This is an anomalous condition so utterly at variance with the manifest purpose of the association in issuing these bonds, and so palpably destructive of the legal rights of the holders thereof, that we could hardly give the exemption clause the effect which its language imports without destroying the validity of the bonds themselves.
Since both the negotiability and the validity of the bonds may be secured by the abrogation of the exemption clause, and since there is nothing in the other terms of the instruments to prevent this manifestly just disposition of the case, I conclude this branch of the discussion with the recommendation that the exemption clause be held void, and that the bonds and coupons be held negotiable. Upon the other questions I agree with the majority.
Holding these views, I think there should be an affirmance of the order of the Appellate Division, and that judgment absolute should be rendered against the appellant, with costs, in accordance with his stipulation.
GRAY and HAIGHT, JJ., concur with HISCOCK, J.; O'BRIEN J., concurs with HISCOCK, J., in opinion; CULLEN, Ch. J., concurs in result in memorandum; EDWARD T. BARTLETT and WERNER, JJ., read opinions concurring in result.
Ordered accordingly. *Page 198