delivered the opinion of the court February 25, 1884.
It does not seem to be disputed but that the plaintiff, .James B. Kerr, the owner of the bonds upon the coupons of 'which, or some of them, this suit has been brought, is a bona fide *291holder for value, and that he was, at the time of Ms purchase, without notice of the defence now set up by the city. These bonds, with their coupons, were in the ordinary negotiable form, payable to bearer, signed by the mayor, treasurer, and clerk of the city, and sealed with its seal. In the body of these obligations we find the statement that they were issued in pursuance of the Act of the 27th of March, 1878, and of the action of the common council and authorities of the city of Corry. About the facts here stated there is no serious dispute, nor do I understand that the power of the municipality to issue this paper is called in question. Indeed, it would be useless so to do, for the Act above recited leaves no room for hesitation; by it the power is clearly conferred, and had these bonds, when issued, been applied to the lawful indebtedness of the city, as in said Act directed, there could be no room for controversy. It is, therefore, manifest that the labored argument on which the legal arbitrator bases his conclusion comes to nothing. If, indeed, his premise were correct, the rectitude of his conclusion could not be questioned. If the council of the city of Corry had no power to issue the bonds in controversy, then, without regard to their form, they would be as worthless as so much blank paper, and the operative legal principle here involved applies as well to a natural person, and private corporation, as to a municipality. If one receives the negotiable paper of another purporting to have been executed by an agent, it is not enough to show that it came to hand in the regular course of business, and that the holder gave a valuable consideration for it, for these are of no avail unless it be first shown that the alleged agent had authority to execute it. If, however, it be made to appear that he possessed such power, then may the innocent holder recover, though the paper was, in fact, issued in fraud of the principal’s right, and for a purpose not intended.
But the question we have to deal with is not one of power, but rather, as the learned judge of the court below has put it, the effect of the perversion oí: a lawful power by the application of the bonds to an unlawful purpose. The mayor and council had no power to bind tlie city by the certificate of indebtedness issued to Gibbs, Sterrett & Co., on the 24th of March, 1873; the city owed this firm nothing, and its credit could not be thus loaned, lienee, the exchange of bonds for this certificate was a void act; it was a mere gift of these valuable securities to Gibbs, Sterrett & Co., and in their hands they were no better, as evidences of indebtedness against the municipality, than was the original certificate for which they had been exchanged. The contest here, however, is not with the original holders of these bonds, but with an innocent pur*292chaser, who in good faith.took them, depending upon the representation, appearing on the face of each and every one of them, that they and their coupons, when due, would be paid to the bearer.
It follows, that the material inquiry involved in this case is, was the plaintiff bound not only to inform himself, through the Act of Assembly, of the power of the city authorities to issue the bonds, but did he take them charged with all the equities to which they were subject when in the hands of the first holders? In other words, do they oecupjr no other relation to the commercial community than do ordinary specialties, and have thejr in them no element of negotiability ? In the court below these questions, on the authority of Diamond v. Lawrence County, 1 Wr., 353, were answered adversely to the plaintiff, and the bonds were held to be nothing more than ordinary specialties, against which any defence might be set up which the city had against Gibbs, Sterrett & Co.
But we cannot agree that the case cited supports the judgment of the court below. The coupon there sued upon was from a bond which, with others, had been issued by the County of Lawrence and passed to the Northwest Railroad Company, in payment of the county’s subscription to the stock of that company. On the 5th of June, 1857, and before the railroad company had transferred the bond, afterwards held by Diamond, a bill was filed by the county against the company to prevent a transfer of the bonds, and compel a surrender of them for cancellation. On that bill a decree was made as prayed for, on the ground that there had been a direct violation, by the corporation, of the Act of Assembly in selling the bonds for sixty-four cents on the dollar. Under these circumstances, Diamond having received a transfer of his bond pending the bill, it was held that he was bound to take notice of the suit then in progress; in other words, the case was disposed of on the doctrine of lis pendens, and the assertion found in the opinion that bonds of this character are not to be regarded as negotiable securities, must be taken to mean only that they are not to be treated as paper of that strictly commercial character which relieves its holder from the effects of the doctrine of lis pendens. If we were compelled to interpret this opinion as did the court below, we would reject it altogether, for thus interpreted it is not law in this commonwealth nor anywhere else. This decision, even when applied as it was intended, is not satisfactory, since it puts us, as a court, into this anomalous condition, that by it we are made to antagonize the sentiment of the commercial world, and the doctrine of every other court, whether in this country or England. It has been repudiated by the Supreme *293Court of the United States, and held not to be the law of Pennsylvania. Mercer Comity v. Racket, 1 Wallace, 83. Under these circumstances we will not agree to carry the doctrine of this case a single step beyond the facts upon which it is based; nor are we willing to positively commit ourselves even to this extent, for in so doing we must necessarily overrule the case of Beaver County v. Armstrong, 8 Wr., 63, in which we held that municipal bonds and coupons are negotiable securities. But returning to the case in hand, we cannot see wherein it differs materially from that of the Commonwealth v. The Commissioners of Allegheny County, 1 Wr., 237, wherein those commissioners were peremptorily ordered to provide for the payment of the coupons of bonds issued to a railroad company, and, like those in the case of Diamond v. Lawrence County, were, by that company, in defiance of the Act of Assembly, sold below par. Here the very same learned Justice, who delivered the opinion in the Lawrence county case, says that the making of the bonds on their face payable to the company or bearer, was, of itself, sufficient to authorize their transfer; that this was a direction, in precise language, that the bonds should be transferable on delivery, like bank notes or bills of exchange. And all this seemed to him so clear, that lie alleges he never before heard it doubted, and probably never should again. So, also, the very same idea was expressed in the previous case of the Commonwealth v. The same Commissioners, 8 Casey, 218, as it was in the Commonwealth v. Pittsburgh, 10 Id., 496, and Carr v. Le Fevre, 8 Id., 413. Taking the cases here cited as exponents of the doctrine entertained -by this court, concerning municipal bonds, and we may summarize it as follows: They have, at
least, a quasi negotiability in these particulars; they pass by delivery, and the holder may sue in his own name; the transferee for value holds title as an original obligee; he cannot bo affected by equities existing between the previous holders and the municipality, of which he had no notice, neither can he be affected by the default of the officers issuing them, unless such default directly affects their power to make and put them upon the market.
The judgment is reversed, and a procedendo awarded.
Subsequently, on October 27, 1884, on motion of the plaintiff, the court ordered that judgment be entered for the plaintiff, to be liquidated by the prothonotary of the Court of Common Pleas, of the county of Erie, in the amount of the several coupons found due the plaintiff by the legal arbitrator, with interest on the same at the rate of seven per cent. *294per annum, from the time they severally became payable until the date of the entry of the judgment, with costs of suit.