Lord, J.
There is no doubt that the coupons, of which copies are given in the agreed statement of facts, were properly declared on as promissory notes payable to bearer. Spooner v. Holmes, 102 Mass. 503, 507. It is well settled in' this Commonwealth that, when such a negotiable promissory note is stolen from the holder before it is due, the amount of it may be recovered from the maker in an action at law,.on filing a sufficient bond for his indemnification. Fales v. Russell, 16 Pick. 315. The plaintiff is therefore entitled to recover the amount of the coupon declared on in the first count of his declaration, on filing before judgment a sufficient bond of indemnity. The condition of such [57]*57bond should be of such tenor as to save harmless the defendant against all lawful claims by any other person on account of the coupon in question, and against all costs and expenses by reason of such claims.
The question which we are called upon by the second count to decide is whether, when a negotiable promissory note payable to bearer has been lost or stolen without the fault or neglect of the owner, and is presented for payment when long overdue, the party liable to pay it is bound by previous notice of the loss to inquire into the title of the defacto holder before payment.
It has been argued for the defence that the duty of the promisor in case of the loss of a coupon is a gratuitous duty, analogous to the liability of a gratuitous bailee. We cannot take such a view of this duty. It is true, as the counsel for the defendant maintains, that the liability does not arise from the contract, but from the law outside of the contract; but whatever that liability may be, it is part of the law which governs the issue and circulation of negotiable instruments, to which the maker of such instrument subjects himself by the very act of making, and from which he derives the advantage which the negotiability of bin promise affords him.
It is conceded that the text-books declare generally that liability ensues from the payment of a lost negotiable instrument after notice of loss, and that no such payment will operate as a discharge against the loser, unless the party presenting the instrument for payment is required before payment to establish a clear title thereto. Chit. Bills, (11th ed.) 188, 278, 279; Bayley on Bills, (2 Am. ed.) 112, 113. Byles on Bills, (13th ed.) 223, 224, 379; 2 Daniel on Negotiable Instruments, (2d ed.) § 1230; Edwards on Bills & Notes, 538; 2 Parsons on Notes & Bills, (2d ed.) 81, 212, 213.
It is alleged for the defence, as a circumstance calculated greatly to weaken the force of this consensus of text-writers, that no case has been found in which recovery has actually been had, or even sought, based upon such liability. But it must be remembered that, upon a principle of law so important as this, the absence of decisions may be because of the long and unquestioning acquiescence in the rule; and certainly it is more reasonable thus to construe it than to attribute it to any doubtfulness or [58]*58uncertainty as to the rule itself. Such doubt or uncertainty would almost necessarily lead to a judicial decision. It has unquestionably been the practice of the Bank of England for more than a century to regard notices of the loss of their notes, and to delay payment for the purpose of making inquiry into the title of the de facto holder. See Solomons v. Bank of England, 13 East, 135, note; De la Chaumette v. Bank of England, 2 B. & Ad. 385; Raphael v. Bank of England, 17 C. B. 161. In Solomons v. Bank of England, the counsel for the plaintiff did not even contend that the maker of ordinary negotiable paper was not bound by notice of loss, but endeavored to establish a distinction (which was not upheld) in favor of bank-bills, saying, “ If once the bank were permitted to withhold payment upon the same grounds as would warrant it in the case of bills of exchange, the confidence of foreigners would be very much shaken, and the circulation of these notes greatly diminished.”
In Miller v. Race, 1 Burr. 452, Lord Mansfield makes the distinction between “securities or documents for debts” and bank-notes, that the latter, by commercial and business use, had become currency or money, universally regarded as such, in England and in other countries, and so were distinguishable from all other evidences of debt. Without defining accurately the rights of owners of commodities, or of choses in action, or of negotiable securities other than bank-notes, his decision is based upon the ground that bank-notes are money, and yet he holds that, even regarding them as money, “ It may be both reasonable and customary to stay the payment till inquiry can be made whether the bearer of the note came by it fáirly or not.”
In Wheeler v. Guild, 20 Pick. 545, Chief Justice Shaw reviews the authorities on the subject of transfer and payment of lost negotiable instruments, and says: “ Most of the same principles and reasons apply alike to transfers and to payments. We think the rules deducible from the cases are these: where a party takes a bill transferable by delivery, not overdue nor otherwise apparently dishonored, for valuable consideration, in the usual course of business, and without notice, actual or constructive, that the holder came by it unlawfully or without title, and has no just right to collect and receive it, the party taking it shall hold it as a valid security, notwithstanding that it has been lost by the [59]*59true owner, or stolen from him, or taken by the holder as a mere agent to keep, or for other special purpose, without any authority to collect or transfer it, otherwise he shall not be deemed to have a good title to hold and enforce payment of it, or to withhold the bill itself or the proceeds of it from the party justly entitled. Bleaden v. Charles, 7 Bing. 246. The same rule applies to payments ; if a bill be paid at maturity, in full, by the acceptor, or other party liable, to a person having a legal title in himself by indorsement, and having the custody and possession of the bill ready to surrender, and the party paying has no notice of any defect of title or authority to receive, the payment will be good.” There is here the strongest implication of the rule that, if the party paying has notice of any defect of title or authority to receive, the payment will not be good; a rule which is in accordance with other decisions of this court.
It becomes then of great importance to determine what notice is sufficient to charge the party liable to pay with a duty of inquiry into the title of the de facto holder. It is clear that such notice need not be accompanied by an offer of indemnity, since the filing of a bond of indemnity merely takes the place of the filing in court of the note or other security, and such filing, as was very clearly stated by Chief Justice Shaw in Fales v. Russell, uii supra, is not a condition precedent of the right to recover, but simply an acquittance to be made on obtaining judgment. As to the time of the notice, there can be no question that, if at the very moment of payment the payer were reminded that the note which he was about to pay had been lost or stolen, it would be his duty to delay payment till the de facto holder had established a title to the instrument.
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Lord, J.
There is no doubt that the coupons, of which copies are given in the agreed statement of facts, were properly declared on as promissory notes payable to bearer. Spooner v. Holmes, 102 Mass. 503, 507. It is well settled in' this Commonwealth that, when such a negotiable promissory note is stolen from the holder before it is due, the amount of it may be recovered from the maker in an action at law,.on filing a sufficient bond for his indemnification. Fales v. Russell, 16 Pick. 315. The plaintiff is therefore entitled to recover the amount of the coupon declared on in the first count of his declaration, on filing before judgment a sufficient bond of indemnity. The condition of such [57]*57bond should be of such tenor as to save harmless the defendant against all lawful claims by any other person on account of the coupon in question, and against all costs and expenses by reason of such claims.
The question which we are called upon by the second count to decide is whether, when a negotiable promissory note payable to bearer has been lost or stolen without the fault or neglect of the owner, and is presented for payment when long overdue, the party liable to pay it is bound by previous notice of the loss to inquire into the title of the defacto holder before payment.
It has been argued for the defence that the duty of the promisor in case of the loss of a coupon is a gratuitous duty, analogous to the liability of a gratuitous bailee. We cannot take such a view of this duty. It is true, as the counsel for the defendant maintains, that the liability does not arise from the contract, but from the law outside of the contract; but whatever that liability may be, it is part of the law which governs the issue and circulation of negotiable instruments, to which the maker of such instrument subjects himself by the very act of making, and from which he derives the advantage which the negotiability of bin promise affords him.
It is conceded that the text-books declare generally that liability ensues from the payment of a lost negotiable instrument after notice of loss, and that no such payment will operate as a discharge against the loser, unless the party presenting the instrument for payment is required before payment to establish a clear title thereto. Chit. Bills, (11th ed.) 188, 278, 279; Bayley on Bills, (2 Am. ed.) 112, 113. Byles on Bills, (13th ed.) 223, 224, 379; 2 Daniel on Negotiable Instruments, (2d ed.) § 1230; Edwards on Bills & Notes, 538; 2 Parsons on Notes & Bills, (2d ed.) 81, 212, 213.
It is alleged for the defence, as a circumstance calculated greatly to weaken the force of this consensus of text-writers, that no case has been found in which recovery has actually been had, or even sought, based upon such liability. But it must be remembered that, upon a principle of law so important as this, the absence of decisions may be because of the long and unquestioning acquiescence in the rule; and certainly it is more reasonable thus to construe it than to attribute it to any doubtfulness or [58]*58uncertainty as to the rule itself. Such doubt or uncertainty would almost necessarily lead to a judicial decision. It has unquestionably been the practice of the Bank of England for more than a century to regard notices of the loss of their notes, and to delay payment for the purpose of making inquiry into the title of the de facto holder. See Solomons v. Bank of England, 13 East, 135, note; De la Chaumette v. Bank of England, 2 B. & Ad. 385; Raphael v. Bank of England, 17 C. B. 161. In Solomons v. Bank of England, the counsel for the plaintiff did not even contend that the maker of ordinary negotiable paper was not bound by notice of loss, but endeavored to establish a distinction (which was not upheld) in favor of bank-bills, saying, “ If once the bank were permitted to withhold payment upon the same grounds as would warrant it in the case of bills of exchange, the confidence of foreigners would be very much shaken, and the circulation of these notes greatly diminished.”
In Miller v. Race, 1 Burr. 452, Lord Mansfield makes the distinction between “securities or documents for debts” and bank-notes, that the latter, by commercial and business use, had become currency or money, universally regarded as such, in England and in other countries, and so were distinguishable from all other evidences of debt. Without defining accurately the rights of owners of commodities, or of choses in action, or of negotiable securities other than bank-notes, his decision is based upon the ground that bank-notes are money, and yet he holds that, even regarding them as money, “ It may be both reasonable and customary to stay the payment till inquiry can be made whether the bearer of the note came by it fáirly or not.”
In Wheeler v. Guild, 20 Pick. 545, Chief Justice Shaw reviews the authorities on the subject of transfer and payment of lost negotiable instruments, and says: “ Most of the same principles and reasons apply alike to transfers and to payments. We think the rules deducible from the cases are these: where a party takes a bill transferable by delivery, not overdue nor otherwise apparently dishonored, for valuable consideration, in the usual course of business, and without notice, actual or constructive, that the holder came by it unlawfully or without title, and has no just right to collect and receive it, the party taking it shall hold it as a valid security, notwithstanding that it has been lost by the [59]*59true owner, or stolen from him, or taken by the holder as a mere agent to keep, or for other special purpose, without any authority to collect or transfer it, otherwise he shall not be deemed to have a good title to hold and enforce payment of it, or to withhold the bill itself or the proceeds of it from the party justly entitled. Bleaden v. Charles, 7 Bing. 246. The same rule applies to payments ; if a bill be paid at maturity, in full, by the acceptor, or other party liable, to a person having a legal title in himself by indorsement, and having the custody and possession of the bill ready to surrender, and the party paying has no notice of any defect of title or authority to receive, the payment will be good.” There is here the strongest implication of the rule that, if the party paying has notice of any defect of title or authority to receive, the payment will not be good; a rule which is in accordance with other decisions of this court.
It becomes then of great importance to determine what notice is sufficient to charge the party liable to pay with a duty of inquiry into the title of the de facto holder. It is clear that such notice need not be accompanied by an offer of indemnity, since the filing of a bond of indemnity merely takes the place of the filing in court of the note or other security, and such filing, as was very clearly stated by Chief Justice Shaw in Fales v. Russell, uii supra, is not a condition precedent of the right to recover, but simply an acquittance to be made on obtaining judgment. As to the time of the notice, there can be no question that, if at the very moment of payment the payer were reminded that the note which he was about to pay had been lost or stolen, it would be his duty to delay payment till the de facto holder had established a title to the instrument. The question before us is whether notice previously given of the loss of a negotiable instrument distinguishable by number or other ear-mark is sufficient to fix upon the party liable to pay a duty of inquiry, and of refusal to pay to a holder who cannot substantiate his title. We think that such previous notice is sufficient. Whether it is sufficient to fix such duty of inquiry upon a mere transferee it is not necessary for us to inquire, because the party liable to pay a negotiable instrument bears a relation and owes duties to the holder and loser different from those of the transferee; though it has certainly never been decided in this Commonwealth that [60]*60such previous notice is insufficient to fix a duty of inquiry even upon a mere transferee; and the doctrine laid down in Fales v. Russell tends strongly the other way. For a party engaged in mercantile pursuits to keep a list of notes signed by himself which he has been notified have been lost or stolen, is neither impracticable nor burdensome, and is no more a hardship than any other precaution which the law merchant imposes upon those who make use of the benefits of negotiable paper, for the discouragement of fraud and the protection of the public. And the fact that an individual or a corporation does business on a very large scale is far from being a reason why such individual or corporation should be allowed to disregard any of the obligations laid upon those who issue only small amounts of negotiable paper. Ordinarily opportunities for fraud upon the public will increase with the increase of the business of a great corporation, and it is the duty of such a corporation to provide proportionally greater means of guarding against such fraud. If it be necessary to engage special clerks, or to devote extra time to applying the precautions imposed by the law merchant, it is no hardship, but only the natural and reasonable increase of a duty proportionate to the magnitude of the obligations of such a corporation. The statement of the treasurer of the defendant and of the secretary of the Union Trust Company has not shown that it was either impracticable or unreasonably difficult to provide for acting upon notice of lost or stolen securities; for any other purpose these statements are wholly incompetent, as is the circular letter of the United States treasury department, offered by the defendant.
There is another circumstance in this case which tends to fix more clearly upon the defendant the duty of inquiry, and that is that the coupon was long overdue. The maker of a coupon cannot be exempt from the liabilities which attach to all negotiable instruments when overdue. It is an elementary principle of commercial law that negotiable paper overdue carries with it, on its very face, notice of defective title sufficient to put the transferee on inquiry. Gold v. Eddy, 1 Mass. 1. Vermilye v. Adams Express Co. 21 Wall. 138. Although the application of the simple rule to payment would be practically of rare occurrence, since notice of the loss or stealing would be given in almost every [61]*61ease, there is no reason why a distinction should be made in this respect' between transfer and payment, and no such distinction is consistent with the language of Chief Justice Shaw in Wheeler v. Guild, before cited. After maturity, a coupon, like any other negotiable security, loses the protection of the law merchant, and becomes a mere chose in action. There is no presumption of law that the party presenting such a chose in action to the party liable to pay is the true holder. The fact that the defendant has deemed it convenient to conduct its business without regard to the application of the law in this respect, does not free it from responsibility. As was remarked by Mr. Justice Miller in Vermilye v. Adams Express Co. ubi supra, speaking of a usage to deal in government securities when overdue as if they were still current, “ Bankers, brokers, and others cannot, as was attempted in this case, establish by proof a usage or custom in dealing in such paper, which, in their own interest, contravenes the established commercial law. If they have been in the habit of disregarding that law, this does not relieve them from the consequences, nor establish a different law.”
The fact that the defendant notified the plaintiff, before this suit was brought, of the name of the person to whom and of the date at which this coupon was paid, does not affect the plaintiff’s right to recover in this action. The only payment which can be a discharge to the party paying is a payment to a bona fide holder, whose title was acquired before maturity, for value, and without notice. It may often happen that upon inquiry the title of the defacto holder will appear so plainly that the party paying will take very little risk in making the payment; but the payment of a lost negotiable instrument, after notice, overdue, and without inquiry, is a payment wholly at the payer’s own risk.
We think, therefore, that judgment should be entered for the plaintiff on both counts of his declaration, upon his filing, as to the first count, a sufficient bond of indemnity.
Judgment for the plaintiff accordingly.