delivered the opinion of the Court:
' Many of the principal facts contained in this record appear by stipulation of the parties. On May 22, 1875, under a bill *139filed by a bondholder, the Peoria and Springfield Eailroad Company was placed in the hands of a receiver, who, under the direction of the court, took possession of all the property of the company.
Application was made to the court, by the first receiver appointed, for leave to borrow money with which to make needed improvements indispensable to the preservation of the property and to the profitable running of the road, which was granted, and the receiver authorized to borrow a sum of money, not exceeding $20,000, for the purposes named in the order of the court, to be paid out of the earnings and proceeds of the property after first paying the operatives and employees of the road.
Afterwards, on the 22d day of June, 1875, by another order of the court, the receiver was authorized to borrow $34,646, including the $20,000 specified in the previous order, to be by him expended for the purposes, and no other, expressed in the order of June 14,1875, and in his concurrent application, for a period of not less than one nor more than five years, with interest not exceeding ten per cent per annum, and for which he was authorized to issue to the person or" persons from whom he should borrow the money his certificate as such receiver, the form of which was prescribed by the court, and that it should express on its face to whom it was issued, on what account, and that it was issued by order of the court,—a copy of which order was required to be printed on the back of the certificate.
The money to be borrowed by the receiver under this order was to be a first lien on the income, revenues and earnings of the railroad company after deducting therefrom the operating expenses, and on all other property of the company, real and personal. It was made the duty of the receiver from time to time to report his acts and doings to the court, and so soon as he should borrow any money to report to the court the person or persons from whom it was obtained, the time of payment, and the rate of interest to be paid.
*140On the resignation of the first receiver another one was appointed by the court, who was required to give bond in the sum of $50,000, conditioned for the faithful performance of his duties as such receiver.
It was made to appear that the indebtedness incurred by the first receiver remaining unpaid amounted to about $100,000, and that the receiver just appointed was unable to meet such indebtedness from the current earnings of the road, and thereupon it was ordered by the court that the receiver issue certificates of indebtedness for any outstanding valid indebtedness of the late receiver, or to borrow a sufficient sum of money with which to pay such indebtedness, on such time as he should deem proper, not exceeding two years, and at a rate of interest not exceeding ten per cent per annum, payable semi-annually.
The amount of such certificates was limited to the present indebtedness of the late receiver, and was not to exceed $100,000, and to be used for the purpose of liquidating such indebtedness, and for no other purposes. The form of the certificate the receiver was authorized to issue was prescribed. It was to be made payable to the party to whom it was to be delivered, or his order, and a copy of the order of the court authorizing the issuing of such certificates was required to be printed on the back thereof.
On the 7th of October, 1878, Archibald Turner and Joseph S. Decker filed their intervening petition in the original cause wherein the receiver had been appointed, in which they represented to the court that they were the bona fide holders of a certificate of indebtedness issued by the second receiver of the effects of the railroad company, dated November 20,1877, payable on or before the 20th day of August, 1878, for the sum of $5,000, payable to B. E. Smith or bearer, and that such certificate was issued on account of indebtedness incurred by the former receiver under the order of the court rendered in the principal cause. Petitioners state the manner in which they became the holders of such certificate, from which *141it appears that Benjamin E. Smith, the payee named in the receiver’s certificate, was indebted to them in the sum of $6500, for which they held his protested checks. At this time petitioners were pressing Smith for payment, when he represented to them that his draft on the manufacturing firm of H. E. Smith & Co. would be good. Thereupon it was agreed that petitioners would accept Smith’s draft on H. E. Smith & Co. at sight for $4900 and advance him $3400 in cash, which they did, and give him credit with $1500 balance when paid on his indebtedness to them, which draft for $4900 was to be and was secured by the transfer to them of the receiver’s certificate mentioned, as collateral. The draft Smith gave petitioners on the firm of H. E. Smith & Co. was protested and was never paid. Some further changes in the securities were made, but the indebtedness for which the certificate of the receiver was pledged as collateral security was never paid, and by reason of such default petitioners demand payment of the certificate held by them, and, having filed their petition for that purpose, ask an order upon the receiver of the railroad company to pay them the amount thereof out of funds in his hands properly applicable thereto.
An answer by the acting receiver was filed denying the allegations of the petition. The cause was then referred by the court to the master in chancery to take proofs and report his findings thereon. The master reported on the facts proven, about which there does not seem to be any considerable disagreement, his conclusions, as follows:
“ 1st. That the receivership has received no benefit whatever from said certificate, and that no part of it went to the payment of the indebtedness of the former receiver of this court.
“ 2d. That the receiver had no power or authority to dispose of certificates save in the manner and for the purposes expressed in the order of the court set out on the back of the certificates; that neither Mr. Smith nor the petitioners were creditors of the former receiver, and that neither of them *142paid the receiver any money or other property that could be by him used in the payment of debts of the former receiver. Nor did the said certificate go to the reduction of such indebtedness in any way or manner. Hence the object of the order was in nowise carried out.
“ 3d. I find that the authority of Mr. Hilliard to borrow and receive money and issue certificates therefor, could not be delegated to another, so as to bind the fund in court.
“ 4th. I find that these certificates of indebtedness are not negotiable instruments in the sense which will cut off equities or defences as against innocent holders for value, but that the same, even in the hands of bona fide purchasers without notice, are subject to the same equitable defences which would exist between the original parties thereto.
“ 5th. This certificate in form was a certificate of indebtedness payable to B. E. Smith, and petitioner dealt with him as the owner thereof. Certainly Mr. Smith could not enforce its payment,—having paid nothing therefor, he had no title and could grant none.”
As the exceptions taken to the master’s report relate more to his conclusions drawn from the evidence than to matters of disputed fact, it will not be necessary to note them to an understanding of the case. The circuit court disallowed the claim, and on the appeal of petitioners to the Appellate Court for the Second District, that decree was affirmed. The case comes now to this court on the appeal of petitioners.
. Under the facts there can be no pretence, had the claim been presented by the payee named in the certificate, that he would have been entitled to have it paid out of any funds in the hands of the receiver. It was not issued to him on account of any indebtedness incurred by the former receiver, nor did the receivership receive the slightest benefit from him or any one else for the transfer of the certificate. Unless, therefore, the holders occupy the position, with reference to this certificate, of innocent assignees of negotiable or commercial paper, either under our statute, or at common law, *143under the law merchant, it follows that whatever equitable defences would prevail as to the original payee would prevail as against them.
The decision might be placed on the single ground that the intervening petitioners are not in fact assignees, in any sense, of the receiver’s certificate. They are simply what they represent themselves to be, viz: bona fide holders of the certificate for a valuable consideration. It was never indorsed to them by the payee by any writing on the back or otherwise. Such title as they have, passed to them by delivery. The certificate is made payable to a particular person named “ or bearer,” and the insistence is, that under our recent statute in relation to negotiable instruments, the holders may bring an action in their own names and be entitled to the same protection against defences as .an assignee of a negotiable instrument before maturity under the former statute, without the indorsement in writing of the party named as payee. That proposition can hardly be maintained. The act of 1874, relied on, provides: “Any note, bond, bill, or other instrument of writing, made payable to bearer, may be transferred by delivery thereof, and an action may be maintained thereon in the name of the holder thereof.”
In this case the certificate issued by the receiver was made payable to the party named “or bearer,” without authority from the court from which he obtained authority to act in the premises. The order of the court was, it should be made payable to such person “or order.” Of this petitioners must have been aware, for on the back of the certificate was a printed copy of the order of the court. But this is not a matter that affects materially the decision. The certificate is not made payable to “ bearer.” It is payable to a particular person by name “ or bearer.”
By our statute all notes, bonds, bills or other instruments in Avriting, made to any person or corporation, for the payment of money or articles of personal property, “shall be taken to be due and ¡payable, and the sum of money or arti*144eles of personal property therein mentioned shall, by virtue thereof, be due and payable as therein expressed.” Such instruments are only assignable, under our law, so as to enable the assignee to maintain an action in his own name, by the person named as payee, by indorsement thereon under the hand of such person. It makes no difference that such instruments contain, in addition to the name of the payee, the words “ order,” or “ bearer.” The recent statute has not repealed the former law, that made the indorsement under the hand of the payee necessary, so as absolutely to transfer and vest the property of negotiable instruments in the assignee.
But the decision may be placed on broader grounds, viz: that the certificate of the receiver, held by the intervening petitioners, is not commercial paper, and is not such an instrument as is assignable at common law or under our statute. Commercial or negotiable paper, either at common law, or under our law as declared by statute, has been so often defined that no extended discussion is necessary. An old case, declaring what instrument or writing constitutes a good bill of exchange according to the law, usage or custom of merchants, is Dawkes v. Lorane, 3 Wils. 207. The case is often referred to as an exposition of the common law as respects such paper. Although such an instrument need not be expressed in any certain form or set of words, yet it must have some essential qualities, without which it is not a bill of exchange. It is said : “ It must carry with it a personal and certain credit given to the drawer, not confined to credit upon any thing or fund • * * * he to whom such bill is made payable or indorsed takes it upon no particular event or contingency, except the failure of the general personal credit of the persons drawing or negotiating the same.”
The courts of this country have, with great unanimity, given the same general definition of negotiable instruments. This court, in Baird v. Underwood, 74 Ill. 176, said: “It enters into the definition of a promissory note, that the money must be payable at all events, not depending on any contin*145gency either in regard to the event or the fund out of which payment is to be made, or to the parties by or to whom payment is to be made.” Husband v. Epling, 81 Ill. 172; Mills v. Kuykendall, 2 Black. 47; Harriman v. Sanborn, 43 Me. 128; West v. Foreman, 21 Ala. 400; Corbett v. The State, 24 Ga. 287.
The statute of this State makes all promissory notes, bonds, bills and other instruments in writing, whether for the payment of money or articles of personal property, assignable by indorsement thereon under the hand of the payee, in the same manner that bills of exchange are; but it is essential to the negotiability of such instruments that they must be payable absolutely and unconditionally, not depending on any contingency, either in regard to the event or the fund out of which payment is to be made, or as to the parties by or to whom payment is to be made. Otherwise such instruments are -not assignable, either at common law or under our statute, so as absolutely to transfer and vest the property in the assignee and enable him to maintain an action in his own name. An instrument for the payment of money, not assignable or negotiable, as those words are used in the law, is subject to the same defences in the hands of the holder, notwithstanding he may have, in good faith, paid full value therefor, as could be made against the original payee.
Applying these well understood principles, it is apparent that receivers’ certificates, such as the one found in this record, have not the essential qualities of negotiable or commercial paper. They are of recent introduction in business transactions, and have not been the subject of much judicial construction. The most that can be predicated of them is, that they are evidence in the hands of the holder that he is entitled to receive from the fund under the control of the court that authorized its officer to issue them, the amount specified, if the fund is sufficient to pay in full all holders of such certificates, or if it is not sufficient, then on.ly a pro rata share with other holders. Nearly every quality essential to ° the negotiability of commercial paper is wanting in such cer*146tificates. In the first place, they are not payable unconditionally out of any fund. Whether, in any event, they are payable in full, depends on the question, whether the fund under the control of the court is sufficient for that purpose. That fact can not be known except upon inquiry into the amount of such certificates issued by the officer authorized to act, and as to the value of the fund to be administered. A bill of exchange is not good when drawn payable out of a particular fund that is uncertain and contingent. The fund out of which payment is to be made must be certain, as well as the obligation of the maker or drawer. Dawks v. Earl of De Loraine, 2 Blackstone, 782. Then, again, there is no personal liability upon any one for the payment of such certificates, and, as we have seen, one essential quality of negotiable paper is the personal liability of the maker.
In Mills v. Kuykendall, supra, a draft by an heir upon the administrator to pay a certain sum out of his share of the estate was held not to be a bill of exchange, and the reason assigned was, it was not drawn upon the general credit of the drawer, but was only a request to pay out of a particular fund. English cases cited are to the same effect. That is ■ precisely the case here. Certificates of indebtedness, made by a receiver under the direction of the court, binds no one personally, nor can any action be maintained on such instruments against any one. Only the fund-or property under the control of the court is bound, and that only when it is equitable to charge such fund with the payment of the money evidenced. Such instruments not having the qualities of negotiable paper, are not assignable under our statute, or as at common law, so as to bar the equities existing against the payees to whom they were issued. The same conclusion was reached by the court in Bank of Montreal v. C. C. and W. R. R. Co. 48 Iowa, 518, where an analogous question was considered.
The conclusion reached rests upon legal principles that have long been settled, but the rule deducible therefrom hasL *147the strongest equitable considerations for its support. It usually appears on the face of such instruments by what authority they were issued, and for what specific purpose. Holders, therefore, will always be chargeable with notice of these facts. Considerations of the highest concern to all parties interested in the trust property make it imperative the court that charges the fund, through its appointed officer, should have the most vigilant care that the property is not improvidently wasted. All persons dealing in such securities must know that payment can only be coerced by application to the court having the control of the trust property for an order upon its acting officer. Such certificates have not been current in commercial transactions as bills of exchange and other negotiable paper, nor are they likely to become so. It is known they are issued only for the benefit of the trust property, and usually the specific purpose is mentioned on the face, or, as in this case, on the back of the certificate. The design is only to charge the trust property, and that only so far as it is equitable to do so. While courts will be zealous to protect the rights of parties who may have furnished money for the preservation of the trust property, equal care will be observed to see that the property is not wasted by improvident acts of receivers.
In this case the certificate was issued to a party to whom the trust property equitably owed nothing. It was transferred to the intervening petitioners as collateral security for his individual indebtedness to them. Equitably, the payee had no claim whatever on the trust property, and as the holders occupy his shoes, they stand in no better position in a court of equity where the fund is being administered.
The judgment of the Appellate Court will be affirmed.
Judgment affirmed.