now under consideration the mortgagor and mortgagee have acted so as to show their mutual intention to adopt the mortgage under consideration, by supplying everything essential to make it a valid chattel mortgage. At the date of adding to it the affidavit required by the statute, the mortgagor could lawfully have devoted any part of its property to the payment of the mortgagee, in preference to the petitioner, or could have created a valid lien to secure its indebtedness to the mortgagee. Now, if that could have been done by making and executing an entirely new instrument, there is not a single good reason for saying that the mortgage in question could not be made a valid lien on personal property, by adding to it the essential requisites of a chattel mortgage. I cannot bring my mind to assent to the proposition that this mortgage, for the lack of some of the essentials of a valid chattel mortgage, can be regarded as an unlawful thing, a soiled paper, or attainted so that no power could give it validity and vitality. It is my conclusion, therefore, that the petition must be denied.

Application for a Rehearing.

I have given careful attention to the petition for a rehearing of this case, but without discovering that any of the facts were overlooked or misapprehended, and without being convinced of having erred in the decision. This new argument admits that, although the petitioner may have given credit to the mortgagor on the faith of its ownership of unincumbered personal property, the mortgagor could subsequently give a valid chattel mortgage upon said personal property to secure an older debt, and, while making this admission, denounces the mortgage in question as being void. The whole argument is a repetition of the petitioner's contention on the former hearing, namely, that, because the mortgage was void at the time of the credit given by the petitioner, it is impossible to make it valid by subsequent compliance with the requirements of the statute. The term "void" is regarded throughout the argument as being synonymous with "unlawful," and as if the effect of the statute was to stamp a void instrument as a guilty thing, like a counterfeit coin or treasury note, to be perpetually denied recognition in legal proceedings. In this I disagree with the petitioner and his counsel. This mortgage, as a lien upon personal property, at the time the mortgagor became indebted to the petitioner, was simply void as to creditors, for lack of an affidavit, and failure to have it recorded in a particular book. But a blank piece of paper would be void, not only as to creditors, but totally void as to everybody, and not in any sense to be regarded as possessing virtue denied to this incomplete and imperfect instrument. Now, the effect, as to the petitioner, of taking the imperfect instrument, and making it a valid mortgage, is precisely the same as to have taken a blank piece of paper,—a totally void thing,—and made a chattel mortgage, by supplying all of the requisites. The mortgagee took its chances with the general creditors until the instrument was made complete, so that in this material point the case differs from the case of Willamette Casket Co. v. Cross Undertaking Co. (Wash.) 40 Pac. 729. The decision heretofore given will be adhered to.

MERCER COUNTY v. PROVIDENT LIFE & TRUST CO. OF PHILA

DELPHIA.

(Circuit Court of Appeals, Sixth Circuit.

No. 326.

March 3, 1896.)

1. RAILROAD AID BONDS-COMPLIANCE WITH CONDITIONS.

A provision, in an act authorizing an issue of county bonds in aid of a railroad, that they should not be valid obligations until the road is constructed through the county, so that a train of cars shall pass thereover, is not satisfied by the construction of the road from one boundary of the county to a point two miles short of the opposite boundary, where it connects with another road running outside the county.

2. SAME ESTOPPEL TO QUESTION VALIDITY.

Act May 15, 1886, authorizing Mercer county to subscribe to the capital stock of a railroad company, the subscription to be paid in county bonds, provided that the county judge should, after ascertaining whether the election authorized the issue of bonds, prepare and execute them, and order their deposit with a trustee; the latter to hold them in escrow, and to deliver them to the company when it became entitled to them by the construction of its road through the county. Held, that the trustee holding these bonds in escrow had no power to deliver these bonds until the actual completion of the railroad through the county from one side to another or opposite side, and that in the delivery of the bonds so held in escrow, before that condition had been complied with, he did so in violation of his duty and without authority of law. Held, that a purchaser of such bonds is chargeable with notice of the terms, conditions. and requirements of the act under which these bonds were issued, and took them with notice that the recitals of the bonds must be referred to the acts which under that permissive statute were to precede the execution of the bonds and their deposit in escrow, and could not operate as a recital of facts which could not have existed when the recitals were made. The bonds contained, therefore, no recital implying the construction of the railroad. Held that, under the proper construction of this act, the county of Mercer had no power to issue bonds until the railroad had actually been constructed "through" the county, and neither the decision of the trustee in escrow that that condition had been complied with, nor the consent of county officers to their delivery, nor the subsequent payment of interest, operates as estoppel preventing the county from showing as a defense that the condition upon which its power rested to issue these bonds had never been complied with.

3. SAME-BONA FIDE PURCHASERS.

The fact that the bonds were in form negotiable securities, and were bought on the open market by purchasers innocent as to noncompletion of the railroad, does not give such purchasers the status of bona fide purchasers for value; the bonds containing on their face no recital implying the completion of the railroad in whose aid they were issued.

Error to the Circuit Court of the United States for the District of Kentucky.

This was an action by the Provident Life & Trust Company of Philadelphia against the county of Mercer, in the state of Kentucky, on certain county bonds. There was a judgment for plain

tiff, and defendant brings error. Reversed.

The county of Mercer subscribed for stock in the Louisville Southern Railroad Company to the extent of $125,000, and issued in payment therefor 125 bonds, each for $1,000, dated January 10, 1887, payable in 30 years, with interest payable semiannually, at 5 per cent., for which coupons were attached. These bonds, with past-due coupons detached, were received by the railroad

company in August, 1888, and 100 of them subsequently came to the hands of the Provident Life & Trust Company. This suit was brought upon 400 coupons past due and unpaid. The county denied liability upon the bonds. and presented a number of defenses, which, so far as now insisted upon, will be hereafter stated. A jury was waived, and the decision of the law and facts submitted to the Honorable John W. Barr, district judge, holding the circuit court, who made a special finding of facts, upon which he gave judgment against the county, and for the plaintiff below. The bonds were in the usual form of negotiable county bonds. The only recital concerning the authority for their issuance is in these words:

"This bond is one of a series of one hundred and twenty-five bonds of even date herewith, all of the same denomination and tenor, and numbered, consecutively, from one to one hundred and twenty-five; the same having been issued pursuant to the authority conferred upon the said county by an act of the legislature of Kentucky entitled 'An act to authorize the county of Mercer to subscribe aid to the Louisville Southern Railroad Company,' approved May 15th, 1886, and pursuant to an order entered by the county judge of said county in conformity with said act, subscribing in behalf of said county for the capital stock of the said Louisville Southern Railroad Company in the sum of one hundred and twenty-five thousand dollars ($125,000), which order was entered of record in said court on January tenth, A. D. eighteen hundred and eighty-seven (1887)."

The act granting power to subscribe for stock of the Southern Railroad Company, which is referred to in the recital above set out, was passed May 15, 1886. The first section of that statute authorized Mercer county to subscribe to the capital stock of the Louisville Southern Railroad Company, "as hereinafter provided," and that it might pay for same in the "negotiable coupon bonds of said county." The second section provided the method of applying for a subscription, and the manner in which a vote of the people should be taken upon the proposition for a subscription. The third and fourth sections were in these words.

"Sec. 3. As soon as may be thereafter, the county judge of such county shall determine if a majority of the legal votes cast at such election were in favor of such subscription, and if they were he shall thereupon enter an order subscribing in behalf of such county to the capital stock of the said railroad company in accordance with the terms of the proposition voted on, and he shall thereupon cause to be prepared and execute the negotiable bonds of such county as before mentioned, which shall be signed by him as county judge and attested by the county clerk, with his official seal affixed thereto, and the coupons shall be signed by said clerk.

"Sec. 4. The said bonds shall not be binding or valid obligations until the railway of the said company shall have been so completed through such county that a train of cars shall have passed over the same, at which time they shall be delivered to said railroad company in payment of the subscription of such county, and the county shall thereupon be entitled to receive certificates for the stock subscribed, and the county judge of such county shall order that such bonds shall be deposited with a trustee or trust company, to be held in escrow, and delivered to the said railroad company when it shall become entitled to the same by the construction of its road through such county: provided, however, that such trust company or trustee shall, before receiving such bonds, give bond, with good surety, approved by the county judge, for the faithful performance of his or its duty in the premises: and provided further, that no such subscription shall be binding unless such railroad shall pass to or through the corporate limits of the town of Harrodsburg."

Among the facts specifically found by the circuit court, and deemed essential to the proper decision of the questions now to be determined, are these: (1) That all of the requirements, provisions, and conditions mentioned in sections 2 and 3 of the act of May 15, 1886, had been duly complied with.

(2) That one D. L. Moore was selected and appointed trustee by an order of the county court of Mercer county, and entered into bond for the faithful performance of his duty under the act aforesaid; the bond being payable to the state of Kentucky, for the use of Mercer county and the Louisville Southern Railroad Company.

(3) That thereupon the bonds of the county, duly signed and sealed, as provided by section 3 of the act, were deposited with him, to be held as provided in the act.

(4) That July 3, 1888, said Moore, being unable to satisfy himself as to the proper discharge of his duties, tendered his resignation, which was accepted; and on the same day one Isaac Pearson was appointed trustee by the Mercer county court, who gave boud of like character to that which had been required from Moore.

(5) Concerning the provision of section 3 of the act, that the bonds thus deposited in escrow should not be valid obligations "until the railway of the said company shall have been so constructed through such county that a train of cars shall have passed over the same," the court found that the Louisville Southern Railroad Company had constructed a line of railway from the boundary line between Anderson and Mercer counties, thence to Harrodsburg; that there was a railroad known as the "South-Western Railroad," which owned and operated a line between Harrodsburg and Burgin, in Mercer county, and that this piece of old road was consolidated with the Louisville Southern; at Burgin a junction was made with the Cincinnati Southern Railroad, an independent corporation, whose line extended from Cincinnati to Chattanooga, Tenn. The precise finding as to the location of Burgin, with reference to the nearest county line, was in these words: "The nearest point to Mercer county line from the South-Western Railroad is two miles. I think that the Louisville Southern Railroad did not run from one line of the county of Mercer through to the opposite or to another line of county, but that its railroad entered Mercer county on the line of said county next to Anderson county, and ran through said county fifteen miles to Harrodsburg, and from there to Burgin, where a junction was made with the Cincinnati Southern Railroad, making in all 19.72 miles of railroad in said county of Mercer; but this line of railroad did not reach the other or another line or boundary of the county. by about two miles from the nearest point. The railroad thus constructed gave a railroad connection by the Cincinnati Southern Railroad, either northeast to Cincinnati, Ohio, or southwest to Chattanooga, Tennessee. I find that about the time of the pasage of a train of cars over said road from Louisville to Burgin, and for some time thereafter, there arose a question of whether the conditions precedent to the delivery of $105,000 of the bonds of the county had been complied with by the Louisville Southern Railroad Company. There was some difference of opinion among the taxpayers in said county upon this question, and the trustee, Moore, had doubts as to whether he could properly deliver these bonds; but there was no formal demand made upon or refused by him, for his resignation as trustee. This question of whether the railroad must be built from one line of the county to another was publicly and generally discussed. While this discussion was going on, and before Pearson, trustee, had determined that the condition precedent had been performed, and that he would deliver $105,000 of the bonds, the Louisville Southern Railroad prepared to extend its railroad toward and to the town of Danville, Boyle county, which was 7.47 miles distant from Harrodsburg, by acquiring the rights of way, with one exception, to the Mercer county line. There was a movement made to have the court of claims of said county instruct the trustee as to his duty in the premises, and that court, consisting of the county judge and the justices of the peace of said county, met on the 26th of June, 1888, and a full discussion was had before said. court, which consisted of the county judge, Hon. John W. Hughes, and all of the justices of the peace of said county. The court, after argument, declined, as a court, to instruct the trustee as to his action; but, upon motion of one of the justices, they passed, and had spread upon the records, this resolution, viz.: 'G. J. Johnson, as justice of the peace of this county, offered into court the following motion, which is ordered to be noted of record, and is as follows: "The members of this court do not believe that they have any right to enter an order directing the trustee to deliver the bonds of this county to the Louisville Southern Railroad; but, as individuals, they are of the opinion that such delivery should be made, and the construction of the railroad not forced to the Boyle county line." And, said motion being seconded, the ayes and nays were taken, and resulted as follows: Ayes, 12; nays, none; not voting, two.'"

v.72F.no.5-40

(6) The court found that thereafter "Pearson, trustee, decided that the conditions precedent had been performed by the Louisville Southern Railroad Company, and was entitled to the delivery of $105,000 of the bonds of Mercer county."

(7) The court further found that in August, 1888, said 105 bonds were delivered to said railroad company in the presence of the county judge of Mercer county, who cut off and destroyed the past-due coupons thereon before delivery, and that there was then delivered to said county judge a certificate for $105,000 of the capital stock of the railroad company, which was accepted and subsequently voted at two meetings of stockholders of said company, and that this stock had never been returned or tendered to said railroad company. (8) The court further found "that said county of Mercer regularly levied an annual tax to meet the semiannual interest on said bonds, and paid interest thereon for the years 1889, 1890, and 1891, and the interest due January 1, 1892, and have not paid any interest on said bonds since that time.

(9) The court found that the plaintiff was a bona fide holder for value of the bonds mentioned, to the extent of $100,000, with the coupons thereon, and had no knowledge or notice of any defects either in the execution or delivery of same, or of any defense the county has or might present to the recovery of

same.

J. B. Thompson and Alex. P. Humphrey, for plaintiff in error. Thos. W. Bullitt and Samuel Dickson, for defendant in error. Before TAFT and LURTON, Circuit Judges, and SEVERENS, District Judge.

LURTON, Circuit Judge, after making the foregoing statement of facts, delivered the opinion of the court.

The primary question which is to be decided is this: Were the bonds now held by the appellee corporation issued without authority of law, and in violation of the restrictions and conditions imposed by the act of May 15, 1886, heretofore set out, and under which they purport to have been issued? If they were issued in violation of the substantial provisions of the permissive act, they were void, unless they have fallen into the hands of an innocent purchaser for value, and the requisite circumstances exist to constitute an estoppel, precluding the county from showing that in fact they were issued in violation of law.

Passing for the present all the conditions precedent to the actual preparation and formal execution of the bonds under the third section of the enabling act, we shall consider the terms and conditions imposed by the fourth section, so far as the issuance of the bonds is affected by that section. Aside from the positive provision of the fourth section, it is evident, upon obvious principles of law, that these bonds, when prepared and formally executed according to the provisions of the third section, were invalid obligations, as lacking the essential element of delivery,-a step as necessary to the validity of a bond or other negotiable instrument as it is to the existence of a deed. 1 Daniel, Neg. Inst. § 63; Young v. Clarendon Tp., 132 U. S. 353, 10 Sup. Ct. 107. But whatever doubt might exist as to the obligatory character of these bonds. while still in the hands of the county officials who had prepared and signed them, the fourth section, in clear terms, resolves. No power to made delivery of the bonds was conferred upon the county judge, or any other officer of the county, and all duty and power