Page:Federal Reporter, 1st Series, Volume 8.djvu/139

CLAFLIN V. SOUTH CAKOLINA R CO. 125- �inarket and dealt in as such. They are treated as current until past due or actually retired. The mortgages provide for the security of the particular bonds they describe, and the company puis the bonds out from time to time as occasion requires. When a dealer finds such bonds not yet due in the hands of the company, with the proper certificate of the mortgage trustee upon them, it has, I think, always been understood in the commercial world that he might buy in good faith with safety. The security has been considered a continuing one, aud the bonds negotiable by the company so as to carry the mortgage security until they have become commercially dishonored, or something else has been done to deprive the company of its power of putting them out. In my opinion a subsequent mortgage is not sufficient for this purpose, unless it in terms limits the lien of the prior mortgage to bonds actually out, and provides against re-issues. As it would be within the power of the second mortgage to require that all bonds not out should be destroyed, so as to prevent their getting on the market, it may be doubtful whether, as against a bona fide holder, the limitation contained in the second mortgage would be of any avail, unless the bonds themselves had been actually cancelled, or carry on their face the evidence of an extinguishment of their lien. It is so easy for one taking a subsequent lien to protect both himself and the public against loss in this particular, that, if he fails to do 80, he should be treated as guilty of a commercial wrong, and made to sufier accordingly. �Take this case as an illustration. The first mortgage provides for an issue of £620,000. In point of fact the full amount was exeeuted, properly certified, and left with the company to be put out as wanted. According to the construction I have already given the mortgage, the most one purchasing from the company need do before the making of the second mortgage was to inquire whether there was a surplus to be sold after taking up the bonds for which this issue was to be sub- stituted. The second mortgagees voluntarily permitted the first mortgage to stand as it was. In this the second mortgage bond- holders are represented and bound by their trustees. Whatever the company could do with the first bonds before, it might do after, so far as any express limitations in the second mortgage were con- cerned. The lien of the first to its full amount was recognized, and nothing was said or done showing directly any intention to lirait the power of the company under it. Suppose, instead of a mortgage to secure bonds, it had been, under full legislative authority to that pur- pose, to secure a certain amount and description of notes, like bank- ��� �