Lindsley v. Diefendorf

Hardin, J.

—By section 6, of chapter 8, of the laws of 1864, the bond (the proceeds of which are involved in this action) was authorized, and was issued payable April 1, 1870, and was made payable to the name of the obligee or bearer.

It was negotiable by delivery, and was of a class of securities that of later years have become very numerous, passing *359from hand to hand by delivery, and sold openly in the market daily.

It possessed all the elements of commercial paper, and is subject to ah the rules which pertain to commercial paper, and purchasers and holders thereof are entitled to all the rights which attach to negotiable instruments.

These principles are too well settled by authority in this state to admit of discussion or question (8 Paige, 527; 2 Hill, 159; 21 How. U. S., 575; 10 Bosw., 332; 19 N. Y., 20 ; 22 N. Y., 114; 25 N. Y., 496).

The principles which have been established as to commercial paper were restated, and the stringency of the rules reasserted by the court of appeals in 1866, (34 N. Y., 247).

The purchase of the bond, in question by Mrs. Eldred, being for full value, and without any notice or knowledge of an infirmity in the title, she became the owner thereof bona fide; and the question whether she took it with due care and caution does not arise (34 Barb., 436 & 443; 34 N. Y., 247).

And being a purchaser in good faith, she acquired the title to the bond, even against the plaintiff. (39 N. Y. 446 ; 40 N. Y., 456).

But the plaintiff insists that the action brought by him against Almon E. Lindsley, and the injunction order and proceedings therein, were a notice to the purchaser, and invokes the principle of pendente lite nihil innovitur, but that cannot aid the plaintiff.

By the Code, section 132, lis pendens may be filed in actions relating to real estate.

But by common law lis pendens applies to all estates, and is a general notice of an equity to all the world.

It was a rule adopted for great public utility, and its application sometimes produces great hardship, nevertheless, in all cases coming within its principles, it is the duty of the court to apply it (1 Johns. Ch., 576), and this principle is in harmony with the doctrine, th,at a purchaser.of a chose in *360action takes it subject to all the equities it was subjected to in the hands of the assignor.

Recognizing the general principle cited by the plaintiff’s counsel, and as it is fully stated in 1 Johns. Ch., 576, & 2 Johns. Ch., 541, and reaffirmed in the very learned opinion of Mr. Justice Foster in 48 Barb., 640; yet, it must be deemed inapplicable to this case. It does not apply to purchasers of negotiable paper.

No case has been cited by the learned counsel for the plaintiff where it was applied to that class of securities.

The case in 48 Bari., 640, was in reference to bank • stock. It is now well settled that stocks of that kind are not within the principles applicable to bonds like the one involved in this action. Certificates of stock do not possess the character of negotiable instruments, and the purchasers thereof take the same subject to the equities which existed and might have been available against the assignor (Mechanics’ Bank agt. New Haven R.R. Co., 3 Kern., 600).

The equities attend the title though transferred to a subsequent assignee for value and without notice (Bush agt. Lathrop, 22 N. Y., 535 ; Mason agt. Lord, 40 N. Y., 487 ; Bullard agt. Burgitt, 40 N. Y., 314; McNeel agt. Tenth National Bank, 55 Barb., 59).

Though this latter case has been lately reversed by the court of appeals, it is not upon the proposition applicable in this case (46 N. Y., 325).

It follows, therefore, that the plaintiff has failed te show actual or constructive notice to Mrs. Eldred, and that she got a good and valid title in the bond so purchased by her; and the defendants as her agents were entitled to possession of the proceeds thereof, discharged of any claim thereto by the plaintiff, and that judgment in this action must be given for the defendants.